Asian Journal of Technology Innovation

ISSN: (Print) (Online) Journal homepage: https://www.tandfonline.com/loi/rajt20

Frugal innovation and leapfrogging innovation

approach to the Industry 4.0 challenge for a
developing country

Chaisung Lim , Jeong Hyop Lee , Paisarn Sonthikorn & Supachai

Vongbunyong

To cite this article: Chaisung Lim , Jeong Hyop Lee , Paisarn Sonthikorn & Supachai
Vongbunyong (2020): Frugal innovation and leapfrogging innovation approach to the Industry
4.0 challenge for a developing country, Asian Journal of Technology Innovation, DOI:
10.1080/19761597.2020.1786707

To link to this article: https://doi.org/10.1080/19761597.2020.1786707

Published online: 02 Jul 2020.

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ASIAN JOURNAL OF TECHNOLOGY INNOVATION
https://doi.org/10.1080/19761597.2020.1786707

Frugal innovation and leapfrogging innovation approach to

the Industry 4.0 challenge for a developing country
Chaisung Lima, Jeong Hyop Leeb, Paisarn Sonthikornc and Supachai Vongbunyongd
a
Department of Management of Technology, Konkuk University/Korea Industry 4.0 Association, Seoul, Korea;
b
Data Alliance, Seoul, Korea; cKMUTT, Bangkok, Thailand; dResearch and International Affairs, FIBO, KMUTT,
Bangkok, Thailand

ABSTRACT KEYWORDS
There has been little discussion about solving problems in response Frugal innovation;
to the Industry 4.0 challenge to a developing country. This paper leapfrogging innovation;
focuses on those problems, including the investment dilemma Industry 4.0; developing
country; innovation policy;
caused by low affordability market, low capability of firms, and
Thailand
the fragmented stakeholder problem, in responding to the
Industry 4.0 challenge. We develop a framework for solving the
problems in responding to the Industry 4.0 challenge in Thailand,
having frugal innovation and leapfrogging innovation concepts as
theoretical bases. The examples of frugal and or leapfrogging
innovation scenarios, which could offer a new momentum of the
dynamics of industrial growth, which can be implemented under
private–public partnership, are briefly discussed, and the pilot
results of exposure of scenarios to Thai experts are discussed. The
implication is that firms and developing countries need to
consider alternative innovation approaches including the ones
suggested and other possible approaches, and serious
experimentation is required and the policy direction needs to be
found out from feedbacks of the experimentations.

1. Introduction
Industry and the market are under disruption, since landscaping change is now driven by
the ‘Industry 4.0’ phenomenon, which is driven by new product, process and business
model innovation. Competition principles go beyond the basis of cost and quality, and
are more based on speed and flexibility in the new era of Industry 4.0.
According to Plattform Industrie 4.0, Industry 4.0 is the intelligent networking of
machines, human beings, objects, and systems, and cyber and physical concurrent pro-
cesses of industry with the help of information and communication technology (The Platt-
form Industrie 4.0 web site).
Industry 4.0 is based upon the concept of factories in which machines are augmented
with wireless connectivity and sensors, connected to a system that can visualise the entire
production line, control and make decisions on its own. In this paper in essence, ‘Industry
4.0’ describes the trend towards digital data connectivity, real-time basis smart analysis

CONTACT Jeong Hyop Lee jhlee@data-alliance.com 20F, 51, Jong-ro, Jongno-gu, Seoul, Korea
This article has been republished with minor changes. These changes do not impact the academic content of the article.
© KOSIME, ASIALICS, STEPI 2020
2 C. LIM ET AL.

utilising enabling technologies that include the Industrial Internet of things (IIOT), artifi-
cial intelligence and 3D printing, among others.
This ‘Industry 4.0’ change is leading to discontinuous opportunities and threats to
firms. Even global leaders of manufacturing firms are under the pressures of radical
changes driven by global value chain reshuffling, especially with the challenges of platform
companies, such as Uber.
Reshoring manufacturing and services from overseas back to home, and relocating
them to other much cheaper countries are great threats to the cheap labour-based pro-
duction of developing countries (DCs). Roland Berger (2014) discusses the repatriation
of manufacturing from DCs due to Industry 4.0. OECD (2017) argues that production
revolution makes some production in the future less likely to be located in developing
countries. DCs need to respond to the discontinuous challenge of Industry 4.0, which is
a manufacturing revolution, by leaving the existing model of the manufacturing model
under the existing global value chain.
In the past, DCs imported foreign solutions, and made and exported products, given
the low market purchasing power of DCs. If they decide to rely on foreign solutions devel-
oped for advanced countries (ACs) in the face of Industry 4.0 challenge, as they used to do
in the FDI-based industrialisation phase, they should be able to see a positively growing
market. However, the export market prospect of the product utilising imported foreign
solution is not as high as before. In addition, there is a discontinuity of Industry 4.0 tech-
nology that widens the gap of technological capability between the advanced country (AC)
and the developing country. Industry 4.0 best practices have been led by large firms, of
ACs, which could have heavy investment in R&D, engineering and manufacturing facility.
Here the dilemma the DCs are facing is that their firms cannot invest in Industry 4.0
technology, because of the following reasons: (i) low affordability. Because of the uncer-
tainty of the export market in ACs, increasingly favouring locally delivered products spee-
dily and flexibly, the AC export market is not as reliable as before. Because of the low
affordability of the local market, the DCs would find it difficult to secure local market,
as its customers cannot afford to consume products produced out of the high capital
investment required for Industry 4.0 technology. (ii) Low technological capability: Indus-
try 4.0 technology, which is based on discontinuous digital technologies, makes existing
accumulated technological knowledge obsolete, and forces DC firms to start to learn
new technology from scratch. DC firms cannot make much progress in the productivity
improvement out of investment in new technology, due to the lack of technological capa-
bility, which could be accumulated with appropriately trained engineers and managers
based on ACs. This paper terms this the I4.0 investment dilemma. This kind of
dilemma is not confined to Industry 4.0 challenge. The similar aspects can be found
when the DC firms are exposed to the challenge of utilising new advanced technology
from ACs (Lee, 2018).
In addition, the DC’s systems of innovation have the characteristic of fragmented sta-
keholders, such as university, government and industries, who are aligned to the manufac-
turing system that is heavily reliant on imported goods, but are not tied up together for
successful response towards the Industry 4.0 challenges. Industries relying on foreign tech-
nology do not have incentives to cooperate with university. Government, politically
shaped with weak technocracy, would not cooperate effectively with firms in responding
to the Industry 4.0 challenge. This can be called the fragmented stakeholder problem.
 ASIAN JOURNAL OF TECHNOLOGY INNOVATION 3

The investment dilemma and fragmented stakeholder problem seem to be insurmoun-

table problems. If DCs do not invest in utilising new technology, the countries remain
lagging in up-to-date technology. DC is facing frustration in responding to the Industry
4.0 challenge. Industry 4.0 technology would enable firms to substitute human labour
with machines and would make firms to relocate factories in a DC to other foreign
countries (Lee et al., 2019).
But if this problem is not solved, then the gap between the DC and the advanced county
is expected to widen, and this widening gap is not desirable for sustained global economic
growth.
However, there has been little literature that has sought to find solutions to these pro-
blems. This paper approaches the problem from the perspective of innovation manage-
ment and innovation policy, which holds the view of a holistic governmental approach.
Therefore, the research question is ‘what is a framework that could solve the DC’s I4.0
investment dilemma and fragmented stakeholder problem?’
This paper intends to answer that question, starting from understanding the innovation
patterns of Industry 4.0, and reviewing the frugal and leapfrogging innovation literature as
a possible basis of the framework, discussing the framework advanced, and sharing some
of the pilot progress made in the case of Thailand.
This paper firstly defines the three concepts of product, process and business model inno-
vation as a solution for the AC market in line with Industry 4.0, which requires intensive
investment in technology and advanced technological capability; secondly, we offer theoreti-
cal conjectures of solving DC’s I4.0 investment dilemma: a new type of Industry 4.0 inno-
vation for DCs, local firm led innovation, by integrating globally available resources.
We develop a framework for frugal and leapfrogging Industry 4.0 innovation for local
firms, which includes integrating globally available resources through public–private part-
nership linking fragmented stakeholders. The framework could offer a momentum for the
sustainable dynamics of industrial growth, and which can be applied in Thailand. We
verify the framework through creating strategic scenarios for the creation of Industry
4.0 dynamics in Thailand, with detailed examples of the pilot implementation. Finally,
we draw out the implications.

2. Product/process/biz-model innovations: Industry 4.0

The differentiating point of Industry 4.0 is that the company runs a computerised factory
with a cyber physical system (CPS), which is virtually connected with customers, horizontal
partners and suppliers, not to speak of connecting machine, component, human and facili-
ties of a factory. The CPS links the cyber space with the actual world. The system allows mass
personalised production and value creation, which are distinct from the third industrial
revolution. The term ‘Industry 4.0’ was first used in 2011 by the German government.
‘Industry 4.0’ here represents the ‘Fourth Industrial Revolution’ relevant to the manu-
facturing sector.
The term ‘revolution’ in the fourth industrial revolution suggests the existence of a
differentiating pattern of product innovation, process innovation and possibly business-
model innovation (that is, a digital business model). Specifically, radical changes occur
in a network of value chains, digitalised products and services, and digital business
model, which is a crucial and important part.
4 C. LIM ET AL.

The differentiating patterns of product innovation and process innovation are as

follows. The smart product has an element of physical objects and a smart element that
receives data, analyses that data, and responds, which is made possible by connecting
parts. So there are components for connections, components for analytics or responses,
and elements of physicals. Some analytic operations are possible at the level of a
product, but some other operations must be performed within the cloud. Smart products
and services must be viewed in two domains: efficiency (where engineers and product
designers are involved), and experience (where people can enjoy new kinds of value)
(Figure 5) (Schaeffer, 2017). This product is connected with the business model.
A key differentiated aspect of process innovation is the manufacturing process inno-
vation that makes a factory smart. The key aspect of smart factories is the cyber physical
system (CPS), meaning the cyber system copies the physical system interacting with the
physical system on a real-time basis. Note that a smart factory is different from an auto-
mated factory. While the distinct features of the automated factory are (a) mass pro-
duction, and (b) automated factory control, the smart factory has the following
features: (a) personalised mass production; (b) self-organising factory based on the real-
time data analytic with extended connectivity; (c) close interaction between CPSs and
(d) removal of the assembly and moulding processes.
The business model is the business model creating value for the individual problem of a
customer with offering a product combined with service utilising Internet connectivity.
The revenue creating business model is Internet business revenue generation, like an
engine company, such as GE or Rolls Royce, which rents an engine, and gets revenue
by offering service, such as predictive maintenance service, by analysing the Internet con-
nected data generated from the engine.
All of the above innovations are made possible by the technological innovation capa-
bility, which includes not only engineering capability on information technology and
operation technology, but also innovation management capability of managing the
process of linking market with technology development and strategy, which would be
far from the capability of the DC firms. The innovations discussed above emerge from
ACs. The product innovation, process innovation and business model innovations are tar-
geted at customers of ACs that have higher income than those of DCs.
Being without capability to innovate, DC manufacturing firms need to import new
machines, devices and components in the face of Industry 4.0 challenge. The problem
is the new manufacturing industry driven by Industry 4.0 innovation does not allow
‘low wage’ to be as strong source of competitiveness of DC firms in manufacturing ‘expor-
table’ products as before, because the Industry 4.0 technology reduces the advantage of low
wage. Because of this, local firms cannot rely on AC export market with ‘wage advantage’,
as discussed above. In moving on to Industry 4.0 innovation, DCs face the I4.0 investment
dilemma and fragmented stakeholder problem.
This paper argues that in order to solve the DC’s problems, DC’s should seek alternative
paths of industrialisation emphasising a new type of innovation, rather than continuing imi-
tative production of forging innovated products, and offers a framework for that innovation.
The following part discusses a conceptual framework that has (i) a new type of Industry
4.0 innovation that would be friendly to local market and local capability, and (ii) local
firm led innovation by integrating globally available resources through a public–private
 ASIAN JOURNAL OF TECHNOLOGY INNOVATION 5

global partnership linking fragmented stakeholders for creating sustainable industrial

dynamics, which can be applied in Thailand.

3. Theoretical conjecture 1: a new innovation approach to respond to the

Industry 4.0 challenge in DCs
3.1. Frugal innovation: meaning, example and market implication
Frugal innovation is the innovation reducing a currently established unit cost (that is,
price) significantly (e.g. ‘by more than half’) with acceptable product performance (that
is, quality) (Figure 1) in Lim and Fujimoto (2019). Hence, delivering frugal innovations
may require frontier engineering.
For example, consider a 2500 USD Tata Motor Nano (Figure 1). When it was invented,
it was conceptualised as a vehicle for customers with low affordability. The Tata Motor
Nano has a two-cylinder engine at the back of the car, and no air conditioning. Indeed,
this design results from frontier engineering in vehicle design and production.
In addition to high local affordability, frugal innovation provides global scalability for
marketing, due to being lucrative in emerging markets in DCs globally (such as China,
India, Indonesia) from two aspects. Firstly, its better cost/performance serves a new
segment of lower-income customers. Secondly, as the annual income of the whole popu-
lation in the DCs globally increases over time, the market of frugal innovation expands
further (Figure 2) (Prahalad & Mashelkar, 2010; Prahalad & Hart, 2002).

Figure 1. Frugal innovation and the shift of cost-performance frontiers.

6 C. LIM ET AL.

Figure 2. Frugal innovation in emerging markets.

With the frugal innovation approach, the price of existing products or services that
have been created or are being created as Industry 4.0 innovations shall be substantially
lowered enough to be suitable to low-affordability local customers. The frugal innovation
achieved by simplification or removal of functions can more likely be achieved by local
firms with technological capability lower than that of AC firms.

3.2. Leapfrogging innovation: meaning and examples

Leapfrogging presents either path-competition or path-creation innovation development
(Lee & Lim, 2001). By hindsight, developed countries as forerunners have followed a linear
series of development stages (Stages A, B, C and D in Figure 4). For example, assume DCs
have developed through Stage A and Stage B, and are now in Stage C. Leapfrogging
suggests two other development paths, instead of the linear development: (a) a
competitive path named ‘Leapfroggingcom’, and (b) an alternative path named
‘Leapfroggingalt’.
For competitive leapfrogging (the middle stage-series of Figure 4), a DC firm devel-
ops a competitive innovation by going to Stage CC, instead of Stage C. The correspond-
ing innovation of the DC in Stage CC competes directly with those of developed
countries in Stage C. On the other hand, for alternative leapfrogging (the third stage-
series of Figure 3), a DC firm develops an alternative innovation, by going to Stage
CA, instead of Stage C. Instead of competing directly with the innovations of developed
 ASIAN JOURNAL OF TECHNOLOGY INNOVATION 7

Figure 3. Leapfrogging innovation with two paths: (a) a competitive path, and (b) an alternative path.

countries in Stage C, the corresponding innovation of the DC in Stage CA produces an

innovation with a different technology or architecture for a different market, and poss-
ibly with a different business model.
Korea’s decision to become the first country in the world to adopt code-division-mul-
tiple-access (CDMA) (regardless of all the problems with CDMA technology at that time)
was a successful example of competitive leapfrogging. On the other hand, when car man-
ufacturers from developed countries did not pursue electric car mrket, BYD’s decision to
produce electric cars for a high-end market (and remain to produce gasoline for small/
medium-price markets) in China is a good example of alternative leapfrogging.
Note that this paper focuses on alternative leapfrogging, which allows concentration on
formulating an alternative leapfrogging strategy for accessing a different technology or
market. On the other hand, the competitive leapfrogging strategy can be explored
further when (a) young competing technologies (such as CDMA in the example) with
potential markets are identified and accessible; and (b) demanding leadership (such as
the Korean government and collaborating private conglomerates, during those years of
developing and deploying CDMA) is sufficiently ready to develop and deploy the technol-
ogies to capture the markets.

Figure 4. Conceptual framework conditions of Thailand Industry 4.0.

8 C. LIM ET AL.

By investigating the expected trajectory of Industry 4.0, one can think of alternative
paths of the journey towards Industry 4.0.

4. Theoretical conjecture 2: local firm led innovation by integrating

globally available resources
It has been known that DCs are unable to innovate, because the local firms do not have the
capability of innovation. Also, fragmented stakeholders of government, governmental
research institutes, and universities might not be prepared to support DC firms’ inno-
vation, which have been influenced by the ‘foreign technology imported’ production
economy. The DC firm can complement its weakness by collaborating with competent
global partners in terms of strategy, resource and processes if there can be resource and
strategic ‘fit’. If a local firm has a governance of controlling its firm, then it can innovate
by interacting with global partners, and by integrating globally available resources through
collaboration with global partners on the many divided items (Lee, 2018). This is made
possible only if the local firm keeps governance of controlling all of the steps of building
the capability. In the case of Hyundai automobile as an example of a Korean firm, when it
entered into the production of its own model in 1976, in spite of not having any capability
of product innovation, it developed the PONY model by integrating foreign designers,
machine supplier, engine supplier, component suppliers and others. The global partners
were invited to the much divided work for developing a car, developing and installing a
factory, and even consultation on the process of integration. Not having the capability
of integration, the company also consulted with foreign automobile makers on the
process of integration. This capability can be termed ‘learning by integrating’ globally
available resources. In the case of shipbuilding, Korean shipbuilder, Hyundai Heavy simi-
larly could start designing and building a ship by integrating the outsourced design of
shipbuilding, machine supplier, engine supplier, component suppliers and others,
without any experience of building a single ship (Amsden, 1989: 276). This was the
approach of the Korean company that differentiated it from other AC approaches
(Kodama, 1991; Kash, 1989).
The challenging issue is whether there will be global partners who would be willing to
work with the DC firm, because if the DC size is not as big as China or India, the local
market would be limited. The global companies are willing to work with the DC firm,
if the firm targets a global market. Therefore, the company aiming at learning by integrat-
ing should aim at a global market. This kind of learning by integration is a learning that
brings about technology fusion in ACs (Kodama, 1991). Korea was also successful in
learning by integration in catching up with other ACs (Kodama et al., 2016). This kind
of learning should be based on global partnerships (Kim & Inkpenb, 2005). The DC
can implement ‘learning by integration’ of globally available technology for solving the
local problem through global partnerships. This is for building the capabilities of manu-
facturing, and also innovation, which can be achieved by combining globally available
knowledge with local knowledge. Another challenging issue is that local firms relying
on foreign firms should have governance of controlling the integration process. The
local firms can learn to integrate by implementing projects in collaboration with global
partners. If a firm divides the whole work to be done into pieces, and outsources the
pieces to foreign partners, then the firm can accumulate the technological capability of
 ASIAN JOURNAL OF TECHNOLOGY INNOVATION 9

integrating the whole pieces, and can find a direction of the next step to implement the
outsourced pieces.
The following part discusses the application of theoretical conjectures in the Thailand
context: Thailand’s problems in the face of the Industry 4.0 challenge.

5. Application of theoretical conjectures in Thailand context 1: Thailand’s

problems
This section applies theoretical conjectures in the Thailand context. We discuss ‘DC’s pro-
blems’ in the face of the Industry 4.0 challenge in Thailand.
Thai firms face an investment dilemma. For example, while there are a few large Thai
private and public companies with Narrowband technology and with LoRa technology
who have invested in offering IoT network infrastructure, they have been suffering
from a lack of customers. These potential customers either could not afford to buy IoT
network service, or do not appreciate the value of the network. Another dilemma is the
lack of supply capacity. The DC does not have a tradition of innovation, and has
instead focused on imitative production. In response to Industry 4.0 challenge, local
firms have been trying to import and apply robots and other new technology for imitative
production. However, there is no guarantee that the firms will have the capacity to deliver
competitive offering to the local market, not to speak of the global market, out of invest-
ment in robots (Figure 4).
In addition, Thailand has fragmented stakeholders, of an economy that relies on imi-
tative production on the basis of imported technology, different from collective stake-
holders who collaboratively interact to create innovation in ACs.
In Thailand, partial and silo approaches of government are discouraging a coherent and
whole public–private partnership, which approaches are not relevant and sufficient to
overcome the structural gaps of supply, demand and stakeholder fragmentation (Figure
5). The Ministry of Digital Economy and Society (MDES) is mainly focused on digital sol-
ution deployment, especially in a few smart cities and local villages, of which the solutions
mostly come from foreign vendors. The Ministry of Industry (MOI), which is mainly in
charge of the industrial robot adoption of local SMEs and industrial/service robot industry

Figure 5. Partial and silo approaches of relevant ministries.

10 C. LIM ET AL.

development, promotes a few system integrators who mediate between local demands and
foreign robot vendors. The Ministry of Science and Technology (MOST), which is tasked
with developing technologies and human resources for future industrial development, is
familiar with push style technology and infrastructure development, which is hardly
aligned with industrial demand. The startups currently promoted through the ‘Startup
Thailand’ initiative mostly use cloning business models for their businesses. They are
inclined to copy ACs’ successful business models and solutions, given the natural barriers
of the language and culture of Thailand. Their solutions are hardly embedded in the local
market problems and cannot be scaled up to export market.
There does not seem to be a clear and coherent mechanism through which startups
with locally developed solutions and technologies can be geared up to meet the industrial
and societal demands of the country (Figure 5).
There is a structural mismatch between universities and research institutes and indus-
try. Thai industries are mostly locked in short-term profit-seeking, and dependent on
foreign technologies. Then Science, Technology, Engineering and Mathematics (STEM)
job market is hardly created in Thailand, which leads to poor cultivation of qualified
human resources. This means that there exist structural problems in Thai human resource
system (Lee, Preittigun, et al., 2017; Lee, Charoenchongsuk, et al., 2017). A typical case is
the mobile industry and related job market in Thailand. As major Thai mobile service pro-
viders have used imported machinery and equipment and foreign engineers and tech-
nicians for their operation and management, the new mobile industry has created only
a handful of management and marketing jobs, little jobs for local engineers. Engineering
degree employees are given tasks that lie outside their engineering majors (Lee & Gunta-
sopatr, 2018). Then the Thai science community of universities and research institutes is
isolated from industry, and their technology and human resource are not aligned with the
current and future industrial demand of Thailand, which has resulted in a lack of entre-
preneurship in Thailand (Figure 6).
Due to firms seeking short-term profit and relying on foreign technology, local indus-
tries paradoxically fail to provide sufficient quality jobs for qualified engineers and

Figure 6. Industry and academia mismatch and vicious cycles in Thailand.

 ASIAN JOURNAL OF TECHNOLOGY INNOVATION 11

scientists. This also consequently entails the brain drain of S&T graduates to other
countries or unrelated occupations.
There is an industry-science mismatch caused by the lack of entrepreneurship and indus-
try-science relationship. Because university R&D is carried out to publish papers in inter-
national journals, R&D commercialisation to support local industries is not active. Thai
firms in major industries have heavily relied on imported technology and low interest in col-
laboration with universities. Universities also have low interest in R&D collaboration with
firms or technological transfer activities. The weak collaboration between universities and
industries leads to weak STEM education capacity and poor S&T workforce cultivation.

6. Application of the theoretical conjectures to Thailand 2: framework

Here we present a framework for solving the problems: a framework for frugal and leap-
frogging Industry 4.0 innovation, through local firm led innovation by integrating globally
available resources through public–private partnership linking fragmented stakeholders,
which could offer momentum for the sustainable dynamics of industrial growth (Figure 7).
With a programme enabling frugal innovation and leapfrogging innovation solutions,
market affordability problem can be reduced. Lack of supply capacity can be solved by a
global strategic public–private partnership to address local market problems with unique
solutions enabled by new architectures for solutions. Local firms can build capabilities
from learning to integrate various solutions or technology offered by global partners, by
participation in designing new architectures, and learning to develop solutions that are
complementary to the solutions or technology offered by global partners. Industry 4.0

Figure 7. Conceptual frameworks of strategy scenario and the two proposed programmes.
12 C. LIM ET AL.

club collective action is required for strategic technology harness and industrial accommo-
dation for solving the common problems of firms (Figure 8).
In the Eastern Economic Corridor of Innovation (EECi) Forum on 14 June 2016, which
was organised by the National Science and Technology Development Agency (NSTDA),
the FTI proposed an industry club or association as a vehicle to overcome market uncer-
tainty, stakeholder complexity and strategy equivocality driven by Industry 4.0 and a lack
of local supply capacity (Figure 7). With the vehicle, formerly individually behaving public
and private stakeholders can build a collective system for solving common problems.
Through a process of establishing a feasible programme of frugal innovation or leap-
frogging innovation for initiating a momentum of creation of Industry 4.0 dynamics, frag-
mented local stakeholders are expected to cooperate to create a journey to Industry 4.0
growth, overcoming the present frustration.
The candidate solution to be developed by frugal or leapfrogging innovation should be
reviewed by firms, and by governmental and relevant organisations. Once the candidate
solution is decided, the global test-bed consortium for innovation is proposed and
screened by a global organisation that deals with test beds for Industry 4.0. Over the
process of the test beds, the global partnership and collaborative partnership between gov-
ernment and organisation is formed. Once the successful result of test beds has been
achieved, further advancement of frugal innovation or leapfrogging innovation can be
implemented by firms participating in the global partnership.
So if successful, the local capability to design architecture of a product or manufacturing
process or business model including platform could be advanced, because the programme for
creating frugal innovation and leapfrogging innovation solutions led by the governance of the
local firm is designed to build the capability under global strategic public–private partnership.
The local firms build technological capability by creating frugal innovation/leapfrogging
innovation product, manufacturing process, or business model through integrating technol-
ogy or platform offered by global collaborating partners.
If a solution from Thailand is successful, the market accessed by frugal innovation or
leapfrogging innovation product can be scaled up to the ASEAN market, because of
market similarity, and because of the Internet-connected system. The scalable market of

Figure 8. FTI proposal of collective system development in Thailand.

Note: This is based on The Federation of Thai Industries (FTI), NSTDA forum on EECi, 14 June 2017.
 ASIAN JOURNAL OF TECHNOLOGY INNOVATION 13

successful frugal or leapfrogging innovation would offer the creation of Industry 4.0
dynamics of securing market and creating businesses and building capabilities, and the
ecosystem of firms and other institutions.
In order to verify the feasibility of the framework, concrete programme examples for
offering the needed momentum are offered, and also the responses of Thai experts are
discussed.

7. Frugal innovation and leapfrogging scenario as a global strategic

public–private partnership programme
This chapter proposes two programmes through which the investment dilemma and frag-
mented stakeholder problem can be effectively addressed and proposes a strategic scen-
ario. The programmes are the solutions that could offer the momentum to create a
virtuous circle of creation of products or service for serving people or companies and
achieving success in the market and reinvestment in revenue. The scenario is based on
the assumption of government’s holistic policy for supporting and changing the behaviour
of firms for the circular cycle of this success. As a part of the scenario, the implementation
milestone of public partnership implementation is presented. The whole process of scen-
ario development and programmes design is anchored in the two theoretical blocks of
frugal innovation, and leapfrogging.
The investment dilemma and the fragmented stakeholder problem can be addressed
through two anchor programmes: frugal innovation style extreme retrofit, and leapfrog-
ging innovation style ‘service-driven manufacturing’. The two anchor programmes are
chosen and formulated through intensive stakeholder interviews, and subsequently a
few rounds of brainstorming discussions with Thai stakeholders of universities, research
institutes, governments and companies in line with the two theoretical building blocks
between August and December 2018.1 The two programmes need to be aligned with a
global strategic partnership by which local market problems can be addressed with
unique solutions. Thai firms are expected to build their capability to design architec-
ture/platform of products or services, through global partnership, of which the market
can be scaled up to the ASEAN market. From the successful result of securing market
out of newly created products or services, Industry 4.0 dynamics can gain the momentum
to start a virtuous cycle. Along the way, the DCs’ problems (investment dilemma, frag-
mented stakeholder problem) can be overcome.
The two programmes will be elaborated in the following sections with framework con-
ditions, goals, strategies and major activities. A tentative milestone is also proposed to
guide the implementation process in the last part of the chapter. Targets, international
partnerships and government support by three phases of foundation building, domestic
architecture/platform development and ASEAN scale-up are included in the milestone,
as a part of the strategic scenario.

7.1. Frugal innovation: extreme retrofit programme

7.1.1. Framework conditions
A total of 85% of factories constitute potential factory automation market in Thailand.2
The retrofit sensor solution is helpful to firms which intends to generate data from a
14 C. LIM ET AL.

device. The retrofit sensor can be critical for securing data from the device. Since most
factory machines are old, and replacement by new machines is not affordable, frugal inno-
vation in the retrofit solution which can be significantly cheaper than any of current
retrofit solutions, but sufficient for Industry 4.0 transition is required. The solution
would have high impact on collecting data from the factory of Thailand.

7.1.2. Goals
Public (gov. and industry club): Industrial and market dynamics creation with extreme
retrofit solutions for the local and global market
Firms: securing market with new product (retfrofit solution makers)

7.1.3. Strategies: public org and private firms

To align with the frugal innovation strategy, firstly develop retrofit solutions with market
affordability and acceptability for industrial 4.0 transformation, which is called the
extreme retrofit solution through global strategic public–private partnership; and sec-
ondly, facilitate its own dynamics to continuously upgrade its solution with cheaper
price and better quality, until it competes with more expensive retrofit solutions, and
even new machines.
Activities

. Market demand specification of cost and functions for extreme retrofit solutions
. Strategic partnership to design architecture to integrate enabling technologies with
foreign technology suppliers. The Thai market and ASEAN market need to be leveraged
to offer incentives to foreign architecture designers and technology providers to join the
local capacity development process.
. A few activities of local training programmes and business development workshops can
be arranged to facilitate the development process.
. For this purpose, Thais may create a (local and international) task force team to develop
a global test-bed programme for extreme retrofit solution in a globally influential com-
munity of Industry 4.0. The Industrial Internet Consortium (IIC) is a potential
candidate.
. Industrial and market dynamics creation programmes of technology localisation and
development, human resource cultivation, new business model design and others.

7.2. Leapfrogging innovation: service-driven manufacturing programme3

7.2.1. Framework conditions
Thailand is lacking in specific capacities of mechanical engineering, perception solutions
and cognitive technologies with connectedness to properly address Industry 4.0 challenges
and opportunities, though Thailand firms have a leading position in a few service sectors
of tourism, hospitals, department stores and others. Service-driven manufacturing is leap-
frogging innovation, in that firms jump into service-driven manufacturing, even though
the factory is not as mature as the factory of the firms in Germany and other ACs with
full-fledged automation. This could be a simplified factory combined with services. The
example of the products is service robots, offering services in department stores for
 ASIAN JOURNAL OF TECHNOLOGY INNOVATION 15

tourists, which robots are produced under a simplified smart factory. The producers sell
services with robots through collaboration with companies belonging to tourism industry.

7.2.2. Goals
Public (gov. and industry club): Service-driven manufacturing Industry 4.0 dynamics cre-
ation leveraging competitive local service sectors and cognitive technology-based data
ecosystem
Firms: Securing market with new services combined with product sales.

7.2.3. Strategies
To align with the leapfrogging innovation strategy, firstly develop service robots with sim-
plified smart factory design through global strategic public–private partnership; and sec-
ondly, facilitate its own dynamics to continuously upgrade its solution with cheaper price
and better quality, until it competes with more expensive service robot and services.
AI technologies are leveraged to build data business ecosystem in partnership with
globally competitive local entrepreneurs in the areas of hospital, premium consumer
goods sales, tourism, luxury condo development and others. The ecosystem will enable
the harnessing of relevant technologies of sensing solutions and mechanical engineering
capacities to promote local manufacturing industries.
Activities

. Consortium of AI based service robot development as a platform for a data-driven

business ecosystem in partnership with global technology providers and local service
entrepreneurs.
. Capacity localisation and industrial application programmes on perception and mech-
anical engineering capacity.
. Programme for making service robots with simplified smart factory design with cheap
investment in digital production equipment.
. For this purpose, Thais may create a task force team under global partnership to
develop a global test bed for tourism or other industry focused service robot platform
in a globally influential community of Industry 4.0. The IIC is a potential candidate.

7.3. Proposed implementation milestone of public partnership implementation

The milestones consist of three phases of foundation building the capability to design
architecture/platform development under global partnership and ASEAN scale-up
(Table 1).
The first phase of foundation development can be enabled with two proposed anchor
programmes in target areas of a few globally competitive domestic sectors, such as manu-
facturing, tourism, hospital, department store and others. Global test-bed programmes can
be leveraged to harness the enabling technologies and capabilities that Thai industry and
public stakeholders need to build. The biggest problem can be the lack of capability to
design. The extreme retrofit is a good case. From the experiments, the engineer could recog-
nise the specifications to be developed, and could have rough concepts of the products to be
developed. These ideas need to be verified in the market. If these solutions are to be the world
16 C. LIM ET AL.

Table 1. Proposed milestones.

Foundation building
Targeting A few globally competitive
domestic sectors
Proposed strategic Global test-bed programmes
international in global organisation, such
partnership as the Industrial Internet
Consortium
Government International consortia Local
supports collective network
Architecture/platform
development ASEAN scale-up
Architecture/platform to ASEAN market leveraging regional
develop unique solutions platform leadership to match
to address local market global tech suppliers and
problems regional market demand
Architectural design Alliance with global platform
capacity licencing joint leaders
venture partnership
Technology localisation and Regional product and service
development customisation

best solutions for a market, they need to follow global best practice innovation processes,
and need to be supported by world best pools of existing knowledge. This can be possible
through the test-bed approach and global partnership approach. World-leading companies
and organisations have been experimenting with test beds. So by inviting the world’s best
experts, under the control of the project leader in the DC, this can be achieved. These
kinds of discussion and test beds and sharing among the developing income countries
are expected to contribute to solving problems in policies and company best practices.
The extreme retrofit programme in strategic partnership with international associ-
ations, such as the IIC, is a proposed partnership programme. Government may facilitate
the international consortia and local collective network development with leveraging sec-
toral clubs of the Federation of Thai Industry (FTI) in partnership with local stakeholders,
such as the Center of Robotics Excellence (CORE), and the Thai Automation and Robotics
Association (TARA).
The second phase of architecture/platform development can target unique solution
development. Those solutions need Thai capability to design the architecture/platform,
by integrating various globally available enabling technologies under global partnership,
to effectively and efficiently solve local market problems. A kind of joint venture style part-
nership to transfer the architecture design capacity to local partners or joint development
projects with foreign partners can be implemented with the support of government tech-
nology localisation and development programmes. In the third phase, the whole ASEAN
market can be leveraged to match global technology suppliers and regional market
demand through Thai platform leadership. The Thai platform can make alliances with
various global platform leaders, while government supports product and service customi-
sation of global stakeholders’ solution in the context of the ASEAN market.
Along the milestone phases, various government programmes of technology and human
resource development, financial schemes, and regulation need to be aligned. In particular,
the multi-year spearheading programmes can be utilised to create international consortia,
technology localisation and customisation in the targeted areas of each milestone phase.

8. The empirical evidence: results from pilot exposure of the idea

Over the period October 2018–March 2019, the above approach was firstly presented on 12th
October, 2018 at a seminar including the audience from the Thai government’s Office of Indus-
trial Economy (OIE), and companies from the Federation of Thai Industries (FTI). The
 ASIAN JOURNAL OF TECHNOLOGY INNOVATION 17

presentation was invited to the OIE on the 7th November. It was invited to the board meeting
of the Electronic and Electric Cluster of Federation of Thai Industries on the 22nd December.
From the positive feedback, the above presentation was made at the Talk show on Industry 4.0
organised by the Electronic and Electric Cluster of Federation of Thai Industries on the 22nd
January 2019. With the positive response, a CEO training programme on the basis of the above
suggestion was implemented on 15th Feb., 2019 in Bangkok, and 25th–26th March in Seoul.
There has been progress by Thai experts on frugal innovation, though not in leapfrog-
ging innovation. Here are the examples of the initial stage of the implementation stage.
The following is the result of the work of a Thai author who presented his work on
frugal innovation on the 12th October over a roughly 20-day preparation (from 21st Sep-
tember), after listening to sections 1–3 of this paper (Lim, Lee and Vongbunyong, 2018).
The presentation included frugal innovation as a ‘proof-of-concept (POC)’ stage example
for implementation.
There are at least five retrofit solutions, including total system replacement (X), which
completely replace old machines with new machines that support Industry 4.0 activities.
The other four retrofit solutions, which enable control (read/write) and monitoring (write)
of the machines, are the official controller unlocking (A), controller change (Backing exist-
ing controller (C) and added-on module (D)) (Figure 9).
Table 2 shows typical characteristics of retrofitting solutions. For the factory where
affordability is not an issue, the transformation to Industry 4.0 by acquiring all new
machines (x) is an ideal solution. The new generation machines with full functions of
status monitoring, operation and appropriate communication protocol can enable fac-
tories to capture the opportunity of Industry 4.0 effectively. The machines can be selected
according to compatibility of the desired production system. Therefore, high-quality oper-
ation can be guaranteed. This solution can be considered to be the best solution in terms of
performance and quality. However, cost is a great barrier that prevents the majority of
companies in Thailand from choosing these solutions.
The retrofitting methods are solutions to the aforementioned problems. However, a
number of limitations and risks can be observed. Official unlocking of the controller
(A), which is also highly costly, can be done by the manufacturers for certain machines.
The controllers are usually locked by hardware and/or software means. The manufacturers
can unlock them in order for external agents to communicate with, monitor and/or
control the machines upon the manufacturer’s permission. The risk of the solution is
low, and the operation of the machine functions can be guaranteed, as the machines
are still working under the original design condition of the manufacturers.
In many cases, official unlocking is not an option. For example, old generation
machines are not controlled by PLC- or PC-based controllers; the manufacturers do
not provide the unlocking service; custom-made machines; and others. Replacing the
original controller with the new generation controller (B) should be considered. This
solution is accompanied by certain levels of risk, due to the compatibility issue. The con-
troller is programmed to replicate the functions of the existing machine. However, it
cannot be guaranteed that the machine will be able to operate normally, and with full
functions. The difficulty of the method mostly results from the complexity of the
machines.
There are a few methods to read and write the data in the controller, in order to operate
machines. Hacking or modifying the controller (C) is one of the risky, yet possible options.
18 C. LIM ET AL.

Figure 9. Retrofitting solutions (A–D).

The equipment cost might not be high in comparison to other methods, since it usually
does not need extra devices. However, this depends on the system.
The added-on module is one of the feasible solutions with low risk. The added-on
module can be designed to perform certain actions on top of the original controller.
Machines can be monitored and controlled through the module without modifying the
original controller, which is called an invasive approach.
Among the five solutions, new machines (X) and official controller unlocking (A) are
qualified enough to transform the factories according to Industry 4.0 guides, but they
are beyond market affordability. The other three retrofit solutions (B, C and D) are
cheap enough to deploy in Thai factories, but they do not have market acceptability to
enable full Industry 4.0 capability.

Table 2. Summary of the typical characteristics of retrofitting solutions.

Approach Quality Cost Difficulty Other Risk
(X) Acquire new machines ●●●●● $$$$$ Low . Low Risk
. New machine installation

(A) Official unlocking controller ●●●●● $$$$ Low . Low risk

. Limitation due to manufacturers’ permission

(B) Change the controller ●●●●○ $$$ Medium . Medium risk

. Incompatibility issue

(C) Hack the existing controller ●●○○○ $ High . High risk

. Legal/Ethics/Technical issues
. Warranty void

(D) Added-on module ●●●○○ $$ High . Low risk

. Incompatibility issue
 ASIAN JOURNAL OF TECHNOLOGY INNOVATION 19

The alternative solution is an extreme retrofit with improved added-on module sol-
ution, by which the Industry 4.0 transformation quality can be met with lower price
than other retrofit solutions (Figure 12). In particular, the incompatibility of the
modules needs to be properly improved. The solution can easily address the middle
end market, and trigger its own dynamics of solution upgrade, until it leads the global
market. The researcher considers that he and his colleague who has a similar module in
the building control system can work together to find out the solution (Figure 10).
In addition to the above, there is a frugal innovation case of the ‘automation simplifica-
tion approach’, which was recently released in Thailand (Greigarn, 2019).
It introduces three examples of the automation of production lines with similar pro-
cesses (soldering, glue fixing, assembly and testing) with different complexity of manufac-
turing processes, which were implemented between 2018 and 2019. The examples show
that the frugal production line, ‘simplified automation line’, had better performance
than the conventional automation production line.
The ‘simplified automation line’, the most recent production line started at the begin-
ning of 2019, is a production line combined with high complexity processes and medium
complexity processes (soldering and glue fixing, assembly and tests), adopting a simplified
automation principle, which substitutes simple manufacturing operation processes with
automated processes by adopting simple and low cost automated machines, while
leaving complex processes to skilled workers. It reduced the number of workers from
eight to four with three simple robot sets.
It had better performance with lower investment cost than a production line (soldering
and glue fixing), ‘fully automated production line’, which would have adopted the conven-
tional approach of substituting both complex and simple processes with fully automated
processes, especially for mass customisation. The production line was with fully auto-
mated processes: reducing the number of workers from eight to one with one robot set
and feeders. In order to justify the high investment cost of full automation, the output
rate was designed to be high, but it failed to overcome the precision complexity issue.
The yield was low, and finally, the total cost was higher than manual work.

Figure 10. Extreme retrofit model.

20 C. LIM ET AL.

The production line adopting ‘automation simplification principle’ can be a good

example of frugal innovation.
These works are the result of POC of frugal innovation in Industry 4.0. This POC needs
further advancement through investment in resources through public–private partner-
ship. In addition, because these concepts expand the cost-performance frontier, the
further work advancing the POC needs to be implemented through global partnerships
inviting world frontier companies. If this kind of innovative solution is explored for creat-
ing a new business model of opening up the world market for the expandable market of
mid-income countries and lower-end market countries, the frontier companies are likely
to be invited to pursue for securing market. From success, the virtuous circle of the change
of fragmented stakeholders is expected to start, and the circle could offer aggressive plan-
ning and implementation of the dynamics of Industry 4.0.
As for the leapfrogging innovation, there has not been a case for which Thai experts
have experimented with over the last two years. The validity of the approach needs to
be examined in the future.

9. Conclusion
Even though Industry 4.0 is discussed with respect to the discontinuity of production
being the threat of sustainability of the DC’s industrialisation path, there has been little
discussion on solving the problems.
The contribution of the paper is to offer a framework for solving the problems, which
are (i) the investment dilemma caused by low affordability market and low capability of
firms, and (ii) the fragmented stakeholder problem, in responding to the Industry 4.0 chal-
lenge The paper is one of the first in the literature to link frugal innovation and leapfrog-
ging innovation discussion with the Industry 4.0 challenge (Lee & Lim, 2001; Wooldridge,
2010; Radjou et al., 2012; Lim et al. 2013; Zeschky et al., 2014; Soni & Krishnan, 2014; Lim
& Fujimoto, 2019).
In order to verify the feasibility of the framework, the programme and scenarios from
the framework were suggested. The framework was based on the global strategic public–
private partnership that can be achieved by adoption of the strategy of frugal or leapfrog-
ging innovation by local firms and the government, and also the group of firms’ collective
actions for the formation of industry clubs for solving common problems. The feasibility
needs to be checked with further experimentation and discussions. One of the most crucial
points is that it is necessary to check whether the DC firm and government officers will be
allowed to initiate the programme. The biggest hurdle of the DC firm is that there has not
been any successful case of frugal or leapfrogging innovation in the DC. The DC govern-
ment officer does not have a successful case for initiation. The industry club organiser of
the DC as well does not have an industry club for innovation in the Industry 4.0 challenge.
The global partnership can be useful in overcoming the hurdle. The biggest rationale for
global partnership would be capturing opportunities to build innovation capability
through integrating technology offered by global partners, and starting a momentum
for initiating the dynamics of building technological capability and capturing market
opportunities through innovation. In the partnership, in this case, the global test-bed
approach would be useful. The global test-bed approach is expected to allow room for
the cooperation of local firms and government and industrial clubs for innovation for
 ASIAN JOURNAL OF TECHNOLOGY INNOVATION 21

solving the problem of the DC. This initial step at the practical level would be extremely
useful for checking the feasibility of the concepts. If this step is initiated, then the next step
for the verification can be made all the way up to gaining local market, and expanding to
gaining ASEAN market.
Because this paper offers an exploratory framework for solving the problem of a DC,
the framework’s feasibility needs to be experimented with by the firms and government
of the DC. This paper is not just the result of theoretical conjectures, it is the result of
the application of the concepts in the real world in Thailand. The initial response from
the experimentation in Thailand was positive. However, it needs to be further experimen-
ted with.
The theoretical concepts suggested, as one of the first generation of the concepts for
solving the problems, could have limits in solving the Industry 4.0 problems. The chal-
lenges of Industry 4.0 are so serious that it can be a great challenge, enabling the DC to
have a path towards industrialisation. Therefore, there need to be alternative concepts
of theoretical conjecture, and practical experimentations need to be discussed.
The implication is that firms and developing countries need to consider alternative
innovation approaches including the ones suggested and other possible approaches, and
serious experimentation is required and the policy direction needs to be found out
from feedbacks of the experimentations.

Notes
1. Two times meeting with Robot experts on 21st Sept., 9th Oct. (at the Robot Research Institute
of Kong Mongut University of Technology on Thornburi) and 12th Oct. Seminar presenting
the framework and scenario of this paper on the 12 Oct (STIPI seminar), Visit to the Office of
Industry Economy on the 7th November, Meeting with CEOs of Federation of Thai Indus-
tries on the 12th of December. Meeting at the talk show on Industry 4.0 on the 22nd January
2019. Workshop on Industry 4.0 on Thailand template on the 15th Feb. 2019 (Bangkok) and
25th and 26th March 2019 (Seoul).
2. Survey on 94 entrepreneurs, Thailand Robotics Cluster with Thai Automation and Robotics
Association (TARA) and Center of Robotics Excellence (CORE), Strategy for improving
competency of Thai industry with manufacturing automation system (2015).
3. This programme was partly advised by Prof. Siam Charoenseang, the FIBO director,
KMUTT.

Disclosure statement
No potential conflict of interest was reported by the author(s).

Funding
This work was supported by Konkuk University in 2016.

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