The World Bank’s PSD blog wonders whether the Hype Cycle applies to microinsurance, observing that microcredit appears to have been passing through one. We think so yes – the Hype Cycle does apply to this type of market model innovation. The microcredit ‘invention’ dates back to the work at Grameen Telecom in the early 1990s but the real innovation ‘trigger’ came when major companies started to experiment with the associated business ideas – for example P&G’s single serve and Hindustan Unilever’s experiments. Following on from there, we see clear peak-hype milestone events for microcredit such as the publishing of C.K. Prahalad’s excellent book ‘The fortune at the bottom of the pyramid’, the operation of a UN International Year of Microcredit 2005 and the award of a Nobel prize to Mohammed Yunnus in 2006. Here’s another example of why hype isn’t simply ‘bad’ – such radical ideas for poverty alleviation required very widespread socialization – perhaps almost saturation coverage – to break through and achieve critical mass. However, the reality of mass microcredit delivery over the last couple of years has not been all plain sailing. A revelatory article in Harvard Business Review late 2007 by Steve Beck & Tim Ogden at Geneva Global called ‘Beware of Bad Microcredit’ pointed to several weaknesses and disappointments. (Tim, by the way, who has since moved on, was at Gartner a few years ago and helped us to get the Hype Cycle book started.)
If Beck and Ogden are even half right then the ‘trough of disillusionment’ would appear to be setting in but that’s OK. The trough is an inevitable and necessary evolutionary stage for an innovation – it’s when the practicalities get ironed out through the experimentation and learning of many players. The Hype Cycle applies to microcredit because this is an innovation that must be adopted by a market and evolved by that market. It cannot be delivered as a perfect model for all situations and applications out-of-the-box. But quite reasonably it generated high initial excitement – after all, truly great new ideas for addressing global poverty do not appear often.
It seems to us quite reasonable to assume that microinsurance will have a hype cycle. It will be interesting to track.