Frugal and Reverse Innovation: Pathways to a Future-Proof EU ⁄ Visionary Analytics

The European Commission’s Competitiveness Compass, which sets out the EU’s five-year economic strategy, identifies innovation, decarbonisation, and strategic autonomy as its three core action areas. Building on insights from the Draghi Report, it reinforces the idea that a greener and more competitive Europe is also a more secure Europe. In a political climate marked by persistent social and economic shocks, particularly those driven by COVID-19, climate change, and the ongoing war in Ukraine, the EU must strengthen its competitiveness to stay resilient in the face of crises.

Innovation is a key enabler of competitiveness because it accelerates technological advancements, creates new market opportunities and drives sustainable growth. Frugal and reverse innovation, also present key opportunities bolster strategic autonomy, competitiveness, and adaptability in a rapidly evolving global landscape.

Frugal innovation, the development of simple, more economically designed, cheaper, and sustainable products or services strive to do more with less, prioritising cost-effective no-frills solutions that make for more accessible and affordable solutions. Reverse innovation, when an innovation originating from a less-established innovation market is later successfully introduced into more a more advanced market, goes against the traditional flow of innovation and can work to bring solutions from resource-constrained environments to more established markets. Frugal and reverse innovation are interrelated concepts, with frugal principles often forming the foundation of reverse innovations

By leveraging frugal innovation principles, the EU can foster high-impact, low-cost solutions that drive economic efficiency and sustainability. Meanwhile, reverse innovation, takes advantage of less-established innovation markets, new pathways to strengthen Europe’s industrial base and economic resilience. As the EU seeks to future-proof its economy in light of socio-economic instability, embracing these innovation models could help strengthen the EU’s global competitiveness.

Our study

Recognising the growing relevance of these innovation models, our recently published study—commissioned by the European Innovation Council and SMEs Executive Agency (EISMEA) and implemented by Visionary Analytics, Max von Zedwitz, 4Front, Open University of the Netherlands and Jaideep Prabhu, explores the role of frugal and reverse innovation in shaping the EU’s economic future. The study, Mapping and Scoping of Frugal and Reverse Innovation in Europe, provides a timely analysis of how these unique innovation approaches can strengthen EU competitiveness and resilience.

The study maps examples of frugal and reverse innovation across the EU and Horizon Europe associated countries by mapping relevant examples, evaluates the degree to which these innovation types are supported within this innovation ecosystem, and provides policy recommendations to further their development.

Opportunities of frugal and reverse innovation

Frugal and reverse innovations are uniquely positioned to address social challenges and advance key priorities of the EU agenda, including green transition, healthcare, and digitalisation. By emphasising cost-effectiveness, frugal and reverse innovations provide resource-conscious solutions that enhance sustainability, expand access to essential services, and foster inclusive economic growth. In this way these innovation types not only promote growth across a wide range of sectors but also serve as a powerful tool in advancing the EU’s broader strategic objectives.

Frugal and reverse innovations help advance the EU’s climate goals by providing more sustainable alternatives to conventional technologies. A notable example are the innovative fog water collectors developed under the Life Nieblas project, which provide a sustainable solution for ecosystem restoration. Traditional irrigation methods used in restoration projects often rely on carbon intensive approaches, such as tanker trucks or helicopters, to transport water to remote areas. The innovative fog collectors have a significantly lower environmental impact. As a low-tech analogue solution, this technology relies on the wind to capture moisture from the air, eliminating the need for external energy sources and allowing them to operate entirely without emissions. By prioritising efficiency and resourcefulness, frugal innovation offers practical pathways toward sustainability and climate resilience.

The ability of frugal and reverse innovations to deliver resource-efficient solutions extends beyond environmental applications. Their emphasis on core functionality makes them equally valuable in sectors that demand rapid and flexible response, such as defence. Their utility in this sector is made apparent by the Lithuanian initiative LITUA Kartu, which supplies quick-assemble modular furniture for military barracks, field hospitals and shelters in Ukraine. Designed for rapid deployment, each unit can be assembled or disassembled in under 10 minutes without the need for tools or specialised skills. Beyond ease of assembly, LITUA furniture is highly adaptable, its modular design allows for efficient transport and reconfiguration. The same qualities that make LITUA furniture a frugal innovation are also what make it well-suited for military applications.

These two examples illustrate the significant role of frugal innovations in the green and defence sectors. Our study examines many more cases, highlighting the diverse opportunities that frugal and reverse innovation offer the EU, including opportunities in healthcare, construction, and crisis response.

Challenges in development, scaling and implementation

Despite proving relevant to a range of sectors, frugal and reverse innovations face significant barriers to their development and implementation. Key challenges include limitations in policy support, regulatory constraints, financial exclusion, and cultural biases. Existing policies often favour high-tech, capital-intensive solutions, making it difficult for frugal innovators to access funding, public procurement, or certification. Financially, limited public support forces startups and NGOs to rely on private funding, while risk-averse investors hesitate due to thin profit margins. Additionally, cultural biases that perceive frugal and reverse innovations as inferior hinder their ability to attract a strong customer base.

One reason for the limited policy support is a lack of awareness at the policy-level. Few policies explicitly recognise frugal and reverse innovation models, requiring most initiatives to seek funding and recognition through broader policy frameworks. For example, the innovative fog collectors developed by Life Nieblas receive support through the EU’s LIFE Programme, a programme which primarily funds environmental and climate action projects rather than specifically targeting frugal solutions. However, some initiatives, such as the Innowwide programme, acknowledge the value of frugal innovation, in their support of user-friendly, cost-effective, and functional innovations. The Innowwide programme actively promotes frugal innovation, asking beneficiaries to consider frugal innovation in their project proposals. Nevertheless, to fully take advantage of the opportunities that frugal innovation and reverse innovation can bring to EU competitiveness and resilience, wider inclusion of frugal principles could be adopted at the policy level.

Addressing these barriers through inclusive policies, targeted funding, and greater recognition of frugal innovation’s potential is essential for fostering more sustainable, accessible, and resilient solutions.

Recommendations

Based on the study findings, policy recommendations focus on three key actions to raise the profile and support of frugal and reverse innovation within the EU: awareness-raising, policy incentives, and learning from global best practices.

Raising Awareness Among Policymakers
A limited understanding of frugal and reverse innovation among policymakers at the EU, national, and regional levels presents a major barrier to its adoption. To address this, initiatives such as establishing a European Frugal Innovation Centre or introducing prizes and awards for outstanding innovations could help increase visibility and credibility.

Incentivising Frugal and Reverse Innovation
The current policy and investment landscape favours conventional high-tech, high-profit innovation, making it difficult for frugal and reverse innovation to thrive. To counter this, policymakers should consider technology- and material-neutral policies, integrating frugal principles into existing frameworks, and introducing dedicated funding incentives to support resource-efficient innovation.

Learning from International Best Practices
Countries such as India, China, and Brazil have well-established models of frugal innovation, offering valuable insights for the EU. By monitoring global developments and adapting successful approaches, the EU can strengthen its competitiveness and resilience in this emerging innovation landscape.

Together, these recommendations provide a strategic pathway for embedding frugal and reverse innovation into the EU’s broader competitiveness agenda, ensuring it remains an integral driver of inclusive, sustainable, and cost-effective solutions.