When Jugaad moves from Strength to Weakness in SMEs

As a country, India has prided herself for this unique capability - Jugaad - elevated in exalted management texts as 'frugal innovation'. There are innumerable case studies and courses to understand Jugaad. But what's the reason for Jugaad? Obviously, the need to meet a desired functionality with limited resources. SMEs usually excel at it since they are always constrained for resources. So Jugaad as a culture pervades the organisation and everyone looks for solution to a problem by expending fewer resources. Somewhere the compromise is also ingrained that with limited resources this is the best possible and not the best solution - notice the difference. But as SMEs scale, this culture becomes their biggest stumble block. Consider the following examples:

1. A client in speciality chemicals manufacturing has seen explosive growth over the last five years due to some new products clicking, international business and being a significant supplier of the product for the pharmaceutical industry. But six years back the company struggled and almost faced extinction. So in those years, Jugaad was what saved the day. Every little resource was squeezed to its last drop. The ownership team in fact prided itself for having some real Jugaad specialists in the team. Now as the business has scaled and is audited by international customers, certification agencies and other organisations, there is a problem. Non-Conformance reports are addressed in the Jugaad way and not with keeping with international norms. Staff keeps working on lowering cost despite the ownership insisting that best material be used regardless of the initial cost. As a result, many times they fail in facility audit by international organisations. So the culture that saved the day then, is the key problem.
2. A client in petrochemical additive business faces similar problem. The business has grown three times over the last eight years and has a large international exposure today compared to five years back. But the staff still cover the leaking pipe with a plastic bag rather than replace it to ensure that the vessel discharge time is not affected rather than stopping the discharge and replace the pipe. The plastic bag stays there till it gives way. That was the culture then and it still continues despite the ownership frowning on the behaviour repeatedly.

Jugaad is symptomatic of culture of survival. But growth and scale requires different culture - adherence to systems, processes and global norms. Jugaad culture, as we have seen, is usually at variance with problem prevention as is expected in good organisations because it is focussed on 'problem resolution now and then see later'.

SME owners need to address this challenge as they scale. But they usually discover this at great costs - customer dissatisfaction, employee turnover and lost sales!