Many organizations try to spark innovation by imposing artificial constraints like tight deadlines or hackathons, hoping to replicate the ingenuity born of necessity. Yet research shows these often fall short. This article contrasts “authentic scarcity”, conditions of irreversible consequences and existential urgency, with artificially imposed constraints. Only the former reliably activates the psychological, cultural, and systemic drivers of transformative innovation. Through case studies of Mumbai’s Dharavi slum and Silicon Valley’s frugal innovation labs, we show how real constraints foster resilience and radical problem-solving, while artificial ones yield superficial creativity. We present a strategic framework for leaders to engineer purpose-driven missions with real stakes, collaborate with necessity-driven ecosystems, and cultivate high-stakes leadership. The paper concludes with a theory of authentic scarcity, explaining how genuine constraints uniquely drive breakthrough innovation by triggering focus, cohesion, and urgency, offering crucial insights for innovation management in resource-rich settings.

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