Chapter Four

Principle Three

Think and Act Flexibly

One cannot alter a condition with the same mindset that created it in the first place.

—Albert Einstein

With an estimated sixty-two million diabetics—a statistic expected to increase to a hundred million by 2030—India now has the second largest number of people with diabetes in the world, after China.¹ The disease is being diagnosed particularly frequently in Indian villages, where 70 percent of Indians live. One person who has successfully responded to this alarming trend is Dr. V. Mohan, a globally renowned diabetes expert and chairman of Dr. Mohan's Diabetes Specialities Centre based in Chennai, capital of the South Indian state of Tamil Nadu.

Dr. Mohan operates a mobile telemedicine clinic in some of the remotest villages of Tamil Nadu. Care for rural patients is provided by a network of primarily urban doctors who are supported by rural technicians and grassroots community health care workers. These technicians travel in a van equipped with telemedicine technologies that permit transmission of diagnostic tests via satellite uplink even in areas too remote for Internet connectivity. From their offices in Chennai, Dr. Mohan and other doctors can see and communicate remotely in real time with patients through video monitors, while tests conducted in the van, such as retinal scans, are transmitted within seconds for immediate evaluation.

“Why should patients come to the doctor when it could be the other way around?” Dr. Mohan explains. “I asked myself: What if I can come up with a service that allows physicians to remotely consult patients without either group having to travel?”²

Turning this vision into reality required Dr. Mohan to improvise new solutions for the various obstacles he faced along the way. For instance, he decided not to use regular doctors and nurses to run most of the operations in his mobile clinic. Doctors and city technicians are expensive; employing them in his van would have strained his frugal business model. Even if he could bring in health care providers from the city, retaining them would be hard. So Dr. Mohan recruited young people from small towns with only a high school education (or less) and gave them highly focused training so they could carry out specific functions, such as using the equipment in his van. Meanwhile, Dr. Mohan also trained local people in villages to provide simple follow-up care for his diabetes patients. They could, for example, go from home to home enquiring whether a patient is reducing daily sugar intake or has visited the van for follow-up care. Because Dr. Mohan could not afford to pay these young people for their work, he convinced them instead to volunteer by appealing to their sense of goodwill for the community and their pride in being able to help. To that end he gave them crisp white uniforms as well as formal recognition, including the title “Dr. Mohan's Diabetes Ambassador.” All these actions enhanced their status in their communities and boosted their employability. Finally, unlike other health organizations that have access to expensive communications technology from vendors like Nokia and Cisco, Dr. Mohan had to improvise a way to equip his van with cost-effective communication capability. To do so, he partnered with the Indian Space Research Organization (ISRO, India's equivalent of NASA)—which has produced and launched dozens of satellites for socially relevant applications—to get free satellite communications for his ingenious telemedicine service in remote areas where neither mobile nor wireless services are available.

Jugaad innovators like Dr. Mohan constantly employ flexible thinking and action in response to the seemingly insurmountable problems they face in their economies: they are constantly experimenting and improvising solutions for the obstacles they face, and adapting their strategies to new contingencies as they arise. In this chapter, we delve into the minds of jugaad innovators to understand why and how they think and act flexibly. We then examine what constrains Western companies from thinking and acting flexibly—despite the growing pressure to do so—and what they stand to gain by overcoming such constraints. We end the chapter with a discussion of how Western companies can adopt such flexibility in their own innovation initiatives.

Jugaad Innovators Adapt to Survive

Anyone who has attempted to negotiate street traffic in India (or in any other emerging market, for that matter) knows instinctively the importance of thinking and acting flexibly. The sheer unpredictability and diversity of life on the road demands such flexibility. Vehicles come in all shapes and sizes and travel at a range of speeds. Animals and pedestrians compete with buses, trucks, cars, scooters, and cycles. The terrain can be of varying quality and topography: roads, such as they are, may be dug up or undergoing repairs. Vehicles are likely to veer in and out of lanes (if there are any), and all this with the liberal aid of horns (though not necessarily with any other type of signaling). Paradoxically, a linear and orderly approach to driving in such an environment would lead to an accident. The only way to survive is, ironically, to accept the unpredictability of everyone else on the road and to respond by being similarly adaptable—in both thoughts and actions.

As with the roads, so too with the economic environment in emerging markets. The sheer diversity, volatility, and unpredictability of economic life in emerging markets demands flexibility on the part of jugaad innovators. It demands that they think outside of the box, experiment, and improvise: they must either adapt or die. In many ways, this diversity, volatility, and unpredictability also enables flexible thinking and action on the part of jugaad innovators.

Through our interactions with jugaad innovators, we have identified four crucial ways in which they think and act flexibly in response to the environment they face. We explore each of these in detail.

Jugaad Innovators Think the Unthinkable

There is mind-boggling diversity in emerging economies. The heterogeneity of populations in these markets demands unconventional, nonlinear thinking. Traditional approaches and cookie-cutter solutions to complex challenges are unlikely to work. Jugaad innovators therefore dare to challenge many ingrained beliefs and turn conventional wisdom on its head. Dr. Mohan, for instance, questioned a convention of the medical industry. Why should patients come to visit the doctor, when it can be the other way around? That radical question then led him to consider an original solution that allows physicians to remotely consult patients without either party having to travel.

Harish Hande is another jugaad entrepreneur who dared to think the unthinkable, and succeeded. Hande, who founded India's Solar Electric Light Company (SELCO) in 1995, set out to provide solar energy to the rural poor of India with the intention of debunking three popular myths: (1) poor people cannot afford sustainable technologies, (2) poor people cannot maintain sustainable technologies, and (3) social ventures cannot be run as commercial entities.³ Having installed his solar energy solution in more than 125,000 rural households in India, Hande has successfully busted these three myths by demonstrating his flexible thinking in three particular areas: (1) financing his business, (2) pricing his services, and (3) distributing and maintaining his solution.

Take financing: Hande started his business in 1995 with very little seed money, as conservative banks and cautious venture capitalists deemed his unproven business model in an unproven industry (solar energy) too risky. Undeterred, Hande bootstrapped SELCO with his own money—$30, to be precise. With it he purchased his first solar home lighting system, which he then sold. With the revenues, he then bought additional systems, which he also sold, and so on.

Hande, however, soon hit a wall. As he penetrated deeper into rural India, he learned that his potential consumers—many of whom earn $1 to $2 a day—could not afford the up-front costs of buying and installing his solar lighting systems. Even if these systems somehow got installed, there was no economical way for him to maintain them for rural consumers scattered across multiple villages. To overcome these twin problems, Hande applied flexible thinking to improvise a truly creative solution that involved a network of small-scale entrepreneurs in rural communities. These grassroots entrepreneurs would own and maintain the solar panels as well as the batteries they could charge in their stores. The entrepreneurs would then rent out the batteries to end consumers daily on a pay-per-use basis—and collect payment every day. This ingenious business model made SELCO's solution affordable and accessible to scores of rural customers who couldn't make an up-front investment in SELCO's solution. These customers included mom and pop storeowners, small-scale farmers, and women who work from home. SELCO's approach also created an incentive for local entrepreneurs to distribute and maintain the equipment over time. Using this approach, SELCO was able to scale up the distribution of its solar lighting system to over one 125,000 households within a few years. It now aims to serve 200,000 households by 2013.⁴ For thinking the unthinkable—that is, that poor people can indeed afford and maintain renewable energy solutions—Hande was awarded the World Economic Forum's Social Entrepreneur Award in 2007 and, in 2011, the Ramon Magsaysay Award, considered by many to be Asia's Nobel Prize.

Jugaad Innovators Don't Plan—They Improvise

Emerging markets are characterized by high volatility. Economic circumstances are constantly changing. Growth rates are often in double digits, and the competitive landscape is often shifting. New laws and regulations are constantly being put into place, and policy is constantly evolving. So jugaad innovators need to experiment as they go along and be willing to try multiple options, rather than adopting one approach at the start and sticking to it thereafter. Unlike their counterparts in Silicon Valley, jugaad innovators do not attempt to work everything out in advance or rely on a business plan to determine the mid- to long-term roadmap for their new ventures. Instead, they improvise their next course of action as circumstances change, and they do so from within a framework of deep knowledge and passion. Their approach is in fact more akin to a jazz band than to an orchestra: everything is improvised, fluid, and dynamic. As such, their strategies are organic and emergent rather than predetermined. Jugaad innovators' flexible thinking—their ability to improvise—serves them especially well when confronted with adversity.

Given their propensity for improvisation, jugaad innovators don't rely on forecasting tools like scenario planning, as many Western companies do, to assess future risks. They believe in Murphy's Law—anything that can go wrong will go wrong—so what's the point of anticipating every single obstacle that might appear down the road? Jugaad innovators don't have a Plan B, let alone a Plan C. Rather, when confronted with an unexpected hindrance, they rely on their innate ability to improvise an effective solution to overcome it, given the circumstances at that time.

A good example is that of Tata Motors, the maker of the $2,000 Nano car. The Nano was the brainchild of Ratan Tata, chairman of the Tata Group (Tata Motors' parent company), who conceived it as an affordable, comfortable, and safe alternative to the perilous two-wheelers that often carry entire families on Indian roads. In 2006, Tata Motors announced that the Nano would be manufactured in Singur, West Bengal, an East Indian state. The factory was to be built on land acquired from farmers by the state government in a bid to boost local industry. Tata Motors intended to roll out its first Nanos from the Singur plant in late October 2008.

In 2007, however, local farmers began protesting against the acquisition of land for the factory. The dispute rapidly escalated into a political issue—and caught Tata Motors off guard. As the protests intensified through 2008, Ravi Kant, then managing director of Tata Motors (and later its nonexecutive vice chairman) made a bold decision. He set aside his firm's prior manufacturing plans and swiftly shifted the production of the Nano to Sanand, in the investor-friendly state of Gujarat, on the other side of the country. He didn't hire a management consultant to advise him on the move; he just trusted his instinct that this was the right thing to do, given the circumstances.⁵ In just fourteen months (compared to the expected twenty-eight months for the Singur plant), Tata Motors built a new factory in Sanand, Gujarat. The new factory began production of Nanos in June 2010.⁶

One year later, Ravi Kant and his team had to demonstrate the ability to adapt to rapidly changing circumstances yet again: the Nanos weren't selling as well as expected. Monthly sales had fallen well below the optimistic forecast of twenty thousand units. Rather than being disappointed by the Nano's lackluster performance, Tata Motors' leadership used this early market feedback to improvise a plan to shore up sales. Ratan Tata originally envisioned a distributed supply chain model whereby Tata Motors would dispatch flat packs to local entrepreneurs across the country, who would do the final assembly of Nanos close to customers—thus creating gainful employment in local communities. With flagging sales, however, this original vision had to be revised: Tata Motors' executives went back to the drawing board and quickly revamped Nano's logistics network to a more straightforward one, which involved manufacture and assembly at one site in Gujarat, and distribution through a traditional dealer network throughout the country. But again Tata Motors hit a snag: rural customers—such as farmers—were not venturing into Tata Motors' showrooms in small towns. Among other things, they felt intimidated by dealers dressed in suits and ties.

This setback led Tata Motors' management to redesign their rural showrooms to make them more informal—for example, by staffing them with casually attired salesmen who could pitch the Nano to farmers over a cup of chai. Tata Motors also launched a nationwide TV campaign and began offering consumer financing at highly attractive rates to lure frugal Indian consumers. By constantly adapting and refining its business model—and implementing changes within weeks, not months—Tata Motors invigorated sales of the Nano, which, although still lower than expected, are gradually beginning to pick up.⁷ Indeed, it is very likely that the future success of the car will depend on more such quick adaptation and flexible thinking by the managers of Tata Motors.

Jugaad Innovators Experiment with Multiple Ways to Reach a Goal

Unpredictability is the norm in emerging markets. Because of diversity and rapid change, it is hard to predict how consumers will respond to new products and services—and how new business strategies will perform in, say, rural markets. Jugaad innovators may have a single-minded vision of where they want to get to, but they must be willing to try different paths to get there. Specifically, they must be willing to keep experimenting in order to attain their goals—and they must be flexible enough to quickly switch from one path to another along the way.

Dr. Mohan, for instance, experimented with a number of different ways to frugally yet effectively engage rural communities both as consumers (patients) and employees. When he first sent his expensive technicians from his city hospital to work in remote villages, he found that these technicians—although highly competent—would soon leave, wanting to return to city life. Learning this, he developed a training curriculum in his city hospital to impart to young men and women from villages the basic skills they need as health care workers. After about three months, these newly trained health care professionals would return to their rural homes, where they were more likely to want to remain. This in turn helped reduce costs and turnover in Dr. Mohan's model. Dr. Mohan had a similar experience with his attempts to work with nontraditional partners to develop a cost-effective telemedicine platform. Although he initially contemplated partnering with more typical—and expensive—technology providers, Dr. Mohan eventually linked up with ISRO, which provides his roaming telemedicine van with a free satellite uplink to his clinic in the city of Chennai.

Jugaad Innovators Act with Speed and Agility

In emerging markets, new threats and opportunities can emerge from out of the blue. This forces jugaad innovators to not only think but also act flexibly. By demonstrating agility, jugaad innovators can deal with unanticipated challenges faster and seize unexpected opportunities—such as changing customer needs—more swiftly than their competitors. Zhang Ruimin is one such jugaad innovator who thinks and acts quickly.

Zhang, introduced in Chapter One, is the CEO of Haier, a Chinese consumer goods company that is making appliance manufacturers like GE and Whirlpool nervous. Under Zhang's leadership, Haier has, in the space of a decade, made huge inroads into North American and European markets by selling quality appliances at lower prices than those of Western suppliers like Whirlpool and GE. Armed with its “value for money” strategy, Haier is disrupting the consumer goods market not only in mainstream segments like air-conditioners and washing machines but also in niche segments like wine coolers. For instance, Haier launched a $704 wine cooler that is less than half the cost of industry leader La Sommelière's product. Within two years of this launch, Haier has grown the market by a whopping 10,000 percent and now controls 60 percent of the U.S. market by value.⁸

What makes Haier so innovative is not just its cool products, but also its flexible organizational structure. Zhang believes that in the Internet era, appliance makers like Haier need to shift from mass production to mass customization—and start thinking and acting nimbly, as Facebook and Google do. As Zhang explains: “The focus on promoting your cost or price advantage has shifted to a focus on service differentiation, mostly centering on customer experience.”⁹

To sense and respond to his retail customers' needs faster than rivals can, Zhang came up with a jugaad innovation: he radically redesigned Haier's organization, which currently employs over fifty thousand people worldwide. Specifically, he replaced Haier's organizational pyramid with a loosely coupled network of more than four thousand self-managed, cross-functional units (including R&D, supply chain, sales, and marketing) that interact directly with customers and autonomously make decisions. Each unit operates as an independent profit center and is evaluated as such. Zhang refers to this organizational innovation—which empowers autonomous units of frontline workers to sense and respond to consumer demand—as “making a big company small”—that is, allowing a big company like Haier to maintain the unique flexibility of a small startup.¹⁰ To make this bottom-up, customer-centric organizational structure work, Zhang shifted the role of managers from being commanders and supervisors into being supporters and providers who ensure that the independent units have the resources they need to meet customer demand as promptly as possible. He doesn't want managers to be in charge, as they aren't directly in touch with customers.¹¹

Haier's organizational agility enables it to react swiftly to rapidly changing—or unexpected—customer needs, and to innovate faster, better, and cheaper than its rivals. For instance, in China, any call placed to Haier's national customer service center is answered within three rings and a technician is dispatched to your house within three hours—even on Sundays. A few years back, one such call came from a farmer in a remote village in Sichuan province who complained about the constantly clogged drainpipe in his washing machine. The Haier technician who went to investigate found that the farmer was using the machine to wash the mud off his freshly harvested potatoes; it was this mud that was causing the clogging. “Most companies would react by saying ‘This machine is not designed for this purpose,’ ” explains Philip Carmichael, Haier's president, Asia-Pacific, “but Haier's approach was to say, ‘This guy (farmer) isn't the only one who's tried to wash potatoes. Is there a way to adapt this product to this requirement? Maybe we can make a machine that actually washes potatoes and clothes.’ ”¹²

Haier's flexible thinking was spot on: it turns out that millions of farmers across China routinely use their washing machines to clean their vegetables. Sensing a big market opportunity, Haier's cross-functional teams quickly acted on their intuition by developing a washing machine with larger pipes that could also handle vegetables. The product was a big hit among farmers. But Haier's creative teams didn't stop there. They also invented a washing machine that can peel potatoes and even designed a model for herders in Inner Mongolia and the Tibetan Plateau to help churn yak milk into butter! These inventions eventually inspired Haier to introduce, in 2009, a washing machine able to wash clothes without detergent. That groundbreaking innovation helped propel Haier to the number one position in the laundry equipment market not only in China but also around the world.¹³

Jugaad innovators—such as Haier's employees—are highly adaptable. They are capable of thinking on their feet and acting with great agility. Being nimble-minded and nimble-footed serves them well in the context of emerging markets, which are characterized by extreme unpredictability. Western leaders confronted with increasing volatility and uncertainty in their own business environment must also learn to think and act flexibly—but, as we discuss next, that's easier said than done.

What Makes Western Firms So Inflexible?

Being flexible and coming up with new business models—as Dr. Mohan, Harish Hande, Ratan Tata, and Zhang Ruimin have done—is increasingly critical for Western firms, not only to enter and grow their businesses in emerging markets but also in Western markets. However, many Western companies continue to operate their businesses as usual, paying little attention to the impending upheaval in their home environments. We believe that Western firms' inability to think and act flexibly in response to change has five chief causes: complacency; binary logic; an aversion to risk; disengaged employees; and rigid, time-consuming product development processes. Let's look at each in detail.

Complacency

As we discussed in Chapter Two, according to Carol Dweck, a professor of psychology at Stanford University, individuals typically have one of two mindsets:¹⁴

• A fixed mindset—that is, they believe their qualities and others' are carved in stone
• A growth mindset—that is, they believe that their basic qualities can be nurtured and improved through effort¹⁵

Every corporation also has one of these mindsets, and many Western companies tend to suffer from the fixed type. Such a rigid mindset often comes from structured innovation processes and, ironically, past successes, which can breed complacency and sow the seeds of failure. Specifically, the complacency that comes from past successes blinds companies to the fact that every challenge is unique and requires a different approach for success. Consequently, when faced with new challenges, companies tend to reapply “tried and true” solutions rather than develop radically new ones. As Prasad Kaipa, a CEO coach and leadership expert explains, “The same core competence that made Western companies so successful in the early stages of their lifecycle eventually also becomes their Achilles' heel—or their ‘core incompetence’ that eventually brings them down.”¹⁶

Shashank Samant, president of GlobalLogic, a company that provides R&D services to large technology vendors, observes that

GlobalLogic recently partnered with a U.S. tech company to overhaul its fifteen-year-old product, which was invented before the web era. This technically superior product was very successful in its early years but eventually lost its edge when younger users, who prefer the cleaner interface of Facebook and Google, deemed its user interface clunky. The company hired GlobalLogic to give its product a facelift so that it would appeal to a new generation of users. GlobalLogic's developer team—made up of twenty- and thirty-something software programmers from India and Ukraine—designed a user interface that was as easy to use as Facebook's. Their demo wowed top managers of the U.S. tech firm. However, one middle manager anxiously raised his hand and said: “This new user-interface looks great. But it doesn't comply with our fifteen-year-old software development standard back in the United States.” He didn't realize that the very purpose of partnering with the IT outsourcer was to get rid of that clunky old standard and introduce a new one fit for the twenty-first century. In the end, the tech company stuck to its old user interface—forgoing an opportunity to reinvent its product for adoption by Generation Y and Z users. Complacency often leads to an inability to get rid of old thinking patterns and entrenched behaviors. This often sounds the death knell for individuals and organizations, especially when they are confronted with complexity.

Binary Logic

Western companies and their leaders often operate in a black-and-white world that confers a sense of predictability on things. Competitors are “bad” and partners are “good.” Regulations are typically “bad for business,” whereas protectionist policies are “good.” And although some companies may like “doing good” as part of their corporate social responsibility (CSR) initiatives, they worry primarily about “doing well” in their core for-profit businesses. Such binary thinking—anchored in deep-seated assumptions—prevents companies from reconciling polarities, a process that could, ironically, yield disruptive innovation. Doreen Lorenzo, president of the global design and innovation consultancy frog, points out: “We are entering a ‘gray world’ where things are no longer black or white—as yesterday's competitors can become tomorrow's partners—but exist in multiple shades of gray. So many shades can be disconcerting at first, but then you realize they represent as many opportunities for disruptive innovation.”¹⁸

An instance in which shades of gray were at first disconcerting but later recognized as an opportunity is the case of Big Pharma. Many Western pharmaceutical companies have traditionally ignored the low-income segments in emerging markets because these consumers were too poor to afford their drugs. But these companies failed to adapt to changing circumstances and recognize a truth we pointed out in Chapter Three: although the poor are low earners, they are also high yearners—a counterintuitive fact of life in emerging economies.¹⁹ Unlike Harish Hande of SELCO, in the past Big Pharma didn't take the time to experiment with for-profit business models that would allow them to cost-effectively manufacture and deliver drugs to the four billion low-income consumers worldwide.²⁰ Only now, as Western markets have become saturated and increasingly regulated, is Big Pharma scrambling to find innovative ways to reap the “fortune at the bottom of the economic pyramid”—a fortune that continues to elude them.²¹

Risk Aversion

Many Western companies do not attempt to develop radically new products, as they are afraid that these products will cannibalize the market for their existing offerings. Even if they do develop such products, many companies fail to commercialize them, even as nimble competitors encroach on their core markets. This is such a common phenomenon that Clayton Christensen of Harvard Business School has dubbed it the “innovator's dilemma.”²² This problem is compounded by the fact that the tenure of CEOs is shrinking, forcing them to deliver short-term results rather than drive long-term transformational changes. For instance, the average tenure of the CEO of a hospital is less than six years—not enough time to invest in bold innovations like Dr. Mohan's initiative, which may take several years to show results.²³

Perhaps the most obvious example of the “innovator's dilemma” is Kodak. Over a ninety-year period, the company succeeded by selling cheap analog cameras and making most of its revenues from selling and processing photographic film. Even though Kodak actually invented the digital camera, it failed to adapt its old business model, suited for the analog world, to the world of digital cameras, a world in which users could easily print their photographs at home or store and distribute them digitally, online. Similar rigidities in thinking and action—shaped by risk aversion—are responsible for the failure, if not the actual demise, of brick-and-mortar book retailers like Borders in the face of the breakthrough business models of online retailers like Amazon.com.

Disengaged Employees

Some Western companies dabble in “intrapreneurship” (also known as “skunkworks”) and “jamming”—initiatives that encourage employees to think flexibly and come up with unconventional ideas for new products or processes. Unfortunately, the bright ideas that come from these initiatives are rarely implemented, because of either management's lack of commitment to them or their fear of cannibalization. Worse, employees may even be punished when their ideas fail commercially. As a result, employees grow cynical or fearful: they begin to feel that their flexible thinking is underappreciated, and they start playing it safe. All this further encourages groupthink, and nobody dares to question or change the status quo. Over time, everyone is content with incrementally innovating existing offerings, rather than investing time and effort in truly disruptive innovation. Employee disengagement grows and cripples the firm's innovation engine.

In support of this view, a Gallup survey in late 2011 found that only 29 percent of American workers feel engaged in their jobs, meaning only 29 percent work with passion, feel their input is appreciated, and have a deep connection to their company. A full 52 percent say they don't feel engaged in their jobs. Most worrisome of all, the remaining 19 percent say they are actively disengaged.²⁴ This widespread employee disaffection is both the symptom and the cause of the rigid, inflexible approach to innovation in many Western firms.

Rigid, Time-Consuming Product Development Processes

Of course, several Western companies do think flexibly—and come up with truly innovative ideas. But even these companies struggle to commercialize their trailblazing ideas fast enough, for two reasons. First, they take a long time to conduct market research to validate their idea and an equally long time planning and developing a product to get it “right.” Second, they are paralyzed by rigid go-to-market processes like Six Sigma and the fact that departments such as R&D and marketing, whose cooperation is needed for innovation, tend to work independently of each other in corporate silos. Eric Schmidt, Google's executive chairman, points out that employees who work too long at any company get inculcated in a repeatable development process that eventually becomes too rigid and stifles their creativity and innovation. Schmidt says: “Real innovation is hard to do when you have a process culture with Six Sigma [that is, extremely low-defect manufacturing]. Risk management is around the process, keeping it the same.”²⁵

In a fast-moving business environment that is ripe with ambiguity, where customer needs shift overnight and product lifecycles get truncated by aggressive competitors, it's not enough to think flexibly—companies must also act flexibly. Tim Harford notes in his book Adapt: “The world has become far too unpredictable and profoundly complex … We must adapt—improvise rather than plan, work from the bottom up rather than the top down, and take baby steps rather than great leaps forward.”²⁶ For instance, it takes Western cellphone makers like Nokia and Motorola many months to plan, develop, and launch what often is an “overengineered” cellphone. In contrast, agile Chinese and Indian rivals like HTC, Huawei, and Spice rely on rapid experimentation: they crank out “good-enough” models within weeks and keep improving their design with each subsequent model using real-time market feedback.²⁷ The secret weapon of these Asian innovators is their organizational flexibility. HTC, Huawei, and Spice routinely employ cross-functional development teams that eliminate communication gaps among the key players responsible for product development and launch—much like Haier, as discussed earlier. Similarly, Google has organized itself as a flexible and dynamic network of small teams that can quickly react to market needs—by building and launching new products in rapid-fire fashion. “[At Google] we don't have a two-year plan. We have a next week and a next quarter plan,” explains Eric Schmidt, Google's executive chairman.²⁸

Learn to Improvise

To break free from the constraints that keep Western companies inflexible—complacency, binary thinking, risk aversion, disengaged employees, and rigid processes—Western companies must learn to improvise, experiment, and adapt their business models to changing circumstances. But breaking free is not easy: pressures to deliver strong short-term quarterly results often deter management from thinking radically. Still, there are many strategies that Western companies—knee-deep in traditional, structured processes and approaches to innovation—can employ to cultivate and sustain flexible thinking and action.

Break Rules and Shift Values When Necessary

Even conventional beliefs and values have a shelf life: there is nothing eternally wise about them. Breakthrough innovation occurs when commonly held beliefs and values are challenged, not reinforced. For instance, in many companies, flexible thinking is sacrificed at the altar of “corporate values.” These companies often fail to realize that their corporate values have lost their value as the times have changed—and need to be overhauled to reflect new market realities and major societal shifts. In July 2003, to prevent such ossification from setting in, IBM's then-CEO Sam Palmisano organized “ValuesJam”—a three-day-long online brainstorming session in which all employees were invited to renew and update IBM's century-old value system.²⁹ This collaborative exercise recontextualized the very notion of innovation—IBM's core value—as something measured not by the number of patents filed or products shipped but by the impact that IBM makes on society. This ability to reassess where the company stands and this willingness to change its direction led IBM to embark on its Smart Planet initiative, which uses technology to build sustainable communities worldwide.³⁰

Don't Let Inflexible Investors and Customers Dictate Your Innovation Agenda

Because external stakeholders often tend to be conservative or lack the perspective to appreciate vision or foresight, it is probably best not to seek their validation for bold new products and services. Recall what Henry Ford famously said: “If I had asked customers what they wanted, they would have said ‘faster horses.’ ” More recently, Apple didn't do extensive market surveys to come up with the iPad. This may have been just as well, given that many consumers, analysts, and media experts were convinced that there was no market for the product. Yet the iPad turned out to be a breakthrough innovation now eagerly copied by Apple's rivals.³¹

Create Time and Space for Employees to Improvise and Experiment

Companies can hardly expect employees to think flexibly while they maintain their regular routine and operate in their usual work environment. To be able to think and act flexibly, employees need dedicated time and an inspiring space to experiment with new ideas. Google is a good example of a company that allows employees ample time for improvisation. It employs a 70/20/10 model for organizing work: its employees spend 70 percent of their time on core business tasks, 20 percent on related projects, and 10 percent on projects totally unrelated to their core work. Many of Google's commercially successful innovations such as Google Maps and Google Mail were developed by employees during the 20 percent of the time spent outside their day-to-day activities—when they were able to unleash their outside-the-box thinking.³²

Recognizing the company could do still more to encourage such creative thinking, Google launched a new experimental incubator in January 2011 dedicated to building mobile, social, and location-based applications. The incubator is located in San Francisco—an hour away from Google Headquarters in Mountain View—and operates with a small team of twenty people empowered to think flexibly and to “hatch new startups” in Google. Heading the team is John Hanke, who ran Google Maps for six years. “Our goal will be to pump out prototypes quickly and see what sticks,” says Hanke. Of course, many of the ventures conceived at this incubator will fail, but some will succeed and evolve into billion-dollar businesses for Google. By giving its employees a safe place to experiment—and fail—Google can sustain the flexible thinking that leads to truly breakthrough innovation.³³

Get Outside Your Comfort Zone to Gain New Perspectives

To truly think flexibly, managers need to be taken out of their comfort zones and exposed to new situations that challenge them to think differently. DuPont sent its senior executives to rural India, where they received a somewhat humbling revelation. None of their expensive technological solutions, designed for Western urban markets, seemed relevant to low-income Indian villagers. This experience forced these DuPont executives to go back to the drawing board and cocreate with local communities a whole new set of affordable and sustainable solutions designed for fast-growing emerging markets like India.³⁴

Partner with Flexible Thinkers

Sometimes the best way to develop a new mindset is to seek inspiration from outside your company. Thus one way to nurture flexibility is to partner with other companies that are already flexible and agile. For instance, electronics retail giant Best Buy has deep ties with Silicon Valley start-ups that tend to innovate faster and better than the large electronics vendors that supply Best Buy. As a result, Best Buy is able to bring groundbreaking technologies to market much faster than even its large electronics suppliers can. For instance, after getting an early look at Sling Media's Slingbox (a technology that lets consumers pipe TV programming from their homes to their mobile devices wherever they are), Best Buy brought this innovation to market months ahead of its competition.³⁵

IBM is another company that partners with nimble thinkers. Although it employs three thousand in-house research scientists and engineers and files more patents annually than any other company, IBM has nevertheless opened “collaboratories” in leading universities worldwide. In these collaboratories, IBM technologists work closely with agile-minded university researchers to cocreate cutting-edge technologies. These technologies include smart electricity grids, resilient transportation networks, and cost-effective health care delivery solutions with the potential to have a big social and economic impact globally.³⁶

Experiment with Multiple Business Models

Often companies become too attached to a successful business model and find it nearly impossible to let go of it, let alone to explore alternative options. But competition can spring from unexpected corners and disrupt your business model overnight. Flexible thinkers keep all options open—and experiment with multiple business models simultaneously. The Indian biotech company Biocon, for instance, has developed an insulin treatment for diabetes that it commercializes through direct channels in emerging markets but licenses to Pfizer for deployment in Western markets.³⁷ Similarly, Amazon.com, aware of the potential for its own online model to be disrupted by digital e-readers, has been flexible in developing and promoting a new business model around its own e-reader, the Kindle, while maintaining its dominance in online retailing.³⁸

Fail Cheap, Fail Fast, Fail Often

A corollary of the willingness of jugaad innovators to continually experiment is their willingness to fail cheap, fail fast, and fail often. Fernando Fabre, president of Endeavor, a global nonprofit that supports high-impact entrepreneurs from emerging markets, highlights the fact that jugaad entrepreneurs typically do not take large risks. Based on a detailed study it conducted on fifty-five high-impact entrepreneurs across eleven countries, Endeavor found that, unlike Silicon Valley entrepreneurs—who, backed with venture capital, go for broke (it's either the next Facebook or it's not worth doing)—emerging market entrepreneurs start with what they have (not much) and who they know (friends and family). They rarely do something so rash as mortgaging their houses. Consequently, they have small initial budgets to work with—which, rather than cramping their style, forces them to experiment in a frugal manner that does not result in large losses (that is, they fail cheap). Their initial budgets also force them to change tack as soon as one means to achieving their goal shows any signs of not working (that is, they fail fast). Finally, given their willingness to try out different means to reach their goals, they are willing to do so several times over in an iterative fashion (that is, they fail often).³⁹

Western innovators have much to gain from adopting these practices of jugaad entrepreneurs. They can look to Google and Best Buy for inspiration. At Google, failure is widely celebrated—especially if you fail fast and cheap. For instance, in June 2011 Google pulled the plug on two high-profile projects—Google Health and Google PowerMeter—which were launched, respectively, in May 2008 and February 2009. The company mentioned its “inability to scale” as the main reason to shut down these two projects.⁴⁰ Similarly, in early 2011 Best Buy shut down its big-box stores in China a mere five years after entering the country—citing stronger-than-expected local competition and the fact that its Westernized store format failed to appeal to Chinese consumers. “We experimented with a new approach in China,” explains Kal Patel, former president of Best Buy's business in Asia. “It was worth trying—given the sheer size of the Chinese consumer market. But it didn't work—so we pulled the plug before we incurred too much loss. We tried to be flexible in both entering and exiting China. It's vital that you fail early and cheap in unpredictable markets like China.”⁴¹ In contrast to Best Buy, other Western manufacturers and retailers continue to pump billions of dollars into expanding their presence in China even though they are steadily losing their market share to local rivals.

Break Down Organizational Silos to Gain Speed

Flexible thinking must go hand in hand with flexible action. In today's fast-paced environment, with product lifecycles growing ever shorter, companies need to break down organizational silos so they can convert breakthrough ideas into breakthrough products faster. Facebook understands this: although its subscriber base has grown to more than eight hundred million users, the company still employs only about thirty-five designers, using a flat organizational structure.⁴² These designers work closely with marketing executives, engineers, writers, and researchers in multidisciplinary teams that can convert bright design ideas into new user experiences within hours. Soleio Cuervo, the second designer that Facebook CEO Mark Zuckerberg hired in 2005, says, “When I started, it was only a handful of product designers. Now, engineers work with us directly. We don't throw documents at them with specs. We all focus on the site's user experience versus the code.”⁴³

Breaking down internal silos is even more critical when you are trying to quickly bring to market brilliant ideas from external sources. For example, Procter & Gamble has established a mechanism called Connect & Develop to fast-track the sourcing and commercialization of bright ideas from creative external partners. Now P&G can launch promising products within months rather than years. One such product is the Pulsonic toothbrush, which P&G codeveloped with a leading Japanese firm. P&G brought this product to market twice as fast as it would have if it had tried to build the product on its own. In October 2010, Bob McDonald, CEO of P&G, set a bolder target for his company: to triple the impact of Connect & Develop so it can potentially contribute $3 billion to the company's annual sales growth. “We want the best minds in the world to work with us to create big ideas that can touch and improve the lives of more consumers, in more parts of the world, more completely,” explains McDonald.⁴⁴

All the News That's Fit to Digitize

The New York Times Company (NYTC) has successfully demonstrated its ability to think and act flexibly by providing dedicated space and time for its creative employees to experiment with radical new ideas. From 2007 to 2009, U.S. newspapers saw an estimated 30-percent drop in revenues from online and offline circulation and advertising. With the Internet slowly killing print media and sucking away advertising revenues, NYTC decided to reinvent itself.⁴⁵ In January 2006, it set up an R&D department—the first ever in the media industry—staffed with thirteen members whose primary focus is to anticipate the future—and imagine the unthinkable.

The department identifies emerging consumer and technology trends, such as social media, e-readers, and mobile devices, and formulates strategies for NYTC to proactively embrace them, rather than being disrupted by them. “It is not a product development group,” clarifies Michael Zimbalist, vice president of research and development operations at NYTC, describing his team's mission. “It is much more focused on monitoring trends and identifying opportunities.”⁴⁶

Foreseeing the potential of Facebook, in 2007 the R&D team launched an application to push content (including a daily quiz as bonus material) onto the social networking site. Today, the Times boasts far more followers than any other newspaper on Facebook and Twitter. NYTC's jugaad innovators also linked Times content to Google Earth maps to show locations mentioned in stories. Recently, they created Cascade—a data visualization tool that provides a time-based view of how Times stories and op-eds virally spread in Twitter's social universe as soon as they go live. Cascade helps NYTC identify critical information such as influential Tweeters and determine the best times of the day to publish a story online.⁴⁷

Zimbalist strongly believes that newspapers need to go beyond the print and even basic web and use platforms such as social networks, smartphones, TV, and even smart cars of the future to reach all users. His team seeks to gain insight into how people consume media content on different platforms and helps NYTC make forays into new platforms.

Predicting an imminent future when all devices will be connected via the Internet, Zimbalist's team of jugaad innovators is working to enable readers to access the newspaper's content across multiple interconnected platforms. Here is one possible scenario that NYTC's jugaad innovators are trying to enable: In the future, a reader may start an article on the Times website on her desktop at the office in the late afternoon, continue reading it on her iPhone as she leaves works, listen to an embedded podcast in her car on her way back home, watch an accompanying video on the HDTV in her living room, and finally forward the article to friends via her personal laptop. “[We are] investigating the ideas at the edges of today and thinking about how they're going to impact business decisions tomorrow,” notes Zimbalist.

In addition to its adaptable and creative R&D team, NYTC has found other ways to encourage flexible thinking among all its four thousand employees. It now hosts internal technology and innovation challenges to encourage employees to think flexibly and come up with a jugaad way to use technology to address a vexing business issue. Recently, NYTC launched beta620.newyorktimes.com, a public website described as “a springboard for the creativity of our software developers, journalists and product managers, who will use it as a platform to showcase new and exciting ideas for the Times.”⁴⁸ Its readers are strongly encouraged to provide feedback on the jugaad inventions showcased on this site.

By harnessing the ingenuity of all its employees, NYTC is building an army of jugaad innovators who can conquer the increasingly complex and unpredictable publishing world—by improvising cutting-edge solutions that can sustain the firm's growth in the highly connected web economy. In the process NYTC is reinventing itself as a nimble, social-media-savvy, multiplatform digital content provider.

Conclusion

A baffling number of uncontrollable and unknowable forces determine the future of our increasingly complex business world. In the midst of this uncertainty, long-term plans become toothless—even dangerous—and rigidly structured processes prevent us from coming up with the next big thing and responding quickly to competitive threats. To thrive in this volatile world, the ability to think and act flexibly is crucial.

In emerging markets, jugaad innovators facing daily uncertainties have become masters of flexibility: frequently challenging conventional thinking, coming up with entirely new value propositions, experimenting with various ways to achieve their goals, quickly responding to changing circumstances, improvising new solutions, and modifying their plans as they go. Western companies and entrepreneurs have much to gain by adopting such flexibility and using it as a foil to their own more structured approach to innovation.

Jugaad innovators like Dr. Mohan and Harish Hande aren't just flexible thinkers and doers, however. They are also masters of simplicity. Facing mind-boggling complexity in their daily lives, they are driven to simplify their products and services to make them more affordable and accessible to their customers, and to simplify their customer interactions to deliver a superior user experience. Yet, jugaad innovators' simple solutions are not simplistic. Quite the contrary: adhering to Leonard da Vinci's credo that “simplicity is the ultimate sophistication,” jugaad innovators pursue what mathematicians call “elegance” in their solutions. Keeping it simple is the subject of the next chapter.