Technology and the learning framework

I found this article quite interesting as it has a lot to do with the current work I am engaged in. It also prompted me to write some of my thoughts on the subject and its specific influence in creating knowledge. (http://teachingthursday.org/2009/04/02/technology-and-pedagogy/)

The article talks about how technology can be used in the classroom from various perspectives – as a tool, a medium and a network. The concept of online learning has been gaining ground, especially in the corporate world, with technology playing an enabling role. However, perhaps the most significant aspect of this development is the complete rethinking of the concept of online learning. From trying to replicate a classroom environment, we have now learnt to harness the power of the medium in transforming the manner in which learning happens online. From a position of where content was king, and the classroom provided a mechanism for providing content, the new medium has significantly reduced the prominence we afforded to content. Google has rendered content ubiquitous; it brings to us a veritable cornucopia of content that we seek. In fact, perhaps a trifle too much! How often have we gone beyond the first page of search results that Google throws up?

To paraphrase a verse from one of an ancient Indian text, knowledge was:

Achaaryaath paadam aadatthe paadam sishya swamedhayaa paadam sa brahmachaaribhya sesham kaala kramena cha A fourth of knowledge is obtained from the teacher, a fourth due to the student's own intellect, a fourth from his friends and classmates, and the remaining fourth from experience.

 I think in the current context, we can translate that to the four perspectives of learning – knowledge handed down from scholars, knowledge obtained through study, knowledge obtained through interactions, knowledge gained from experience. Here, the knowledge through self-study comes to us from various sources – the content that is available online; the web 2.0 features are those that enable us interact with peers and classmates, which provide additional insight – blogs, chat, forums etc. The ability to consult the expert is one way of reaching out to scholars. However, perhaps one valuable knowledge that got passed down generations was the wisdom resident with the teachers. And the ability to harness that knowledge is perhaps the access to obtain knowledge from the teacher, and learn from the experience of someone else.

So, perhaps then, we can look at a model where learning becomes a medium for turning content into knowledge.

 As shown in the diagram above, Content gets abstracted into learning modules and through the process of learning, interactions and abstractions, help in generating knowledge. This knowledge goes back into the system as content which again goes through the process of abstraction, refinement and re-generation of knowledge. In each of these cycles, the new experience and learnings are put back into the repository thus creating fresh content, and thence new knowledge.

The ability to arrive at the right tools which will transform this content to learning will perhaps be the key to successful knowledge management systems – one which will not be viewed merely as huge electronic databases, but virtual gurukulams (schools) which will be the fountainhead for knowledge transformation. In the absence of such a process, we are more likely to end up with mere electronic databases which perhaps consume time and energy and result in KM being viewed as ineffective solutions for innovation.

Related article : http://knowledge.wharton.upenn.edu/article.cfm?articleid=1841)

Living on the edge

According to a survey of the Grameen model in Bangladesh, about 5% of all Grameen borrowers managed to get out of poverty each year.  However, what was perhaps more interesting was the fact that infant mortality rates had dropped by over 37%.  This seems to suggest that hygiene, medical care and education levels had also increased in the surveyed group. This trend gives us the hope that the next generation of these borrowers will probably live in better socio-economic conditions.  

One thing that seems to stand out in all such surveys is the fact that mere micro-credit does not necessarily help in alleviating poverty.  In a sense, to use a much-battered term, the "ecosystem" as a whole needs to improve.  The ability to de-risk the ability to earn a livelihood is as much a criterion as others in being able to create a sustainable model for microfinance.  Micro-credit alone, exposes the customer to the risk of default on repayments, thus taking him further into indebtedness.  For instance, death of the bread-winner, or an ailment that leaves the person without an income for a significant period of time can cause untold hardships on the family.  In the current scenario, since micro-credit is given primarily to assist income-generating activities, these people end up borrowing from money lenders or other sources for such unforeseen expenses.  

While covariant risks like floods and storms are difficult to cover, I think basic insurance like medicare should become an integral part of any micro-credit.  In a country like ours, where social security is absent or very poorly administered, micro-insurance to protect the breadwinner can make all the difference between eternal poverty and economic transformation.  Similarly, in the case of death of the bread-winner too, the family can come under severe financial strain; insurance to cover funeral costs, and a cover that will help some other member in the family take over the reins of the family will help in softening the death blow.

I am curious to know if there are any studies which show a correlation between non-payment or default of loan repayments and medical expenses of borrowers.  

The meek might just inherit the earth!

The concluding remarks of Jacques Attali, President of PlaNet Finance summarized the two-day Microfinance and New Technologies Summit '08 very succinctly. "People working in the Microfinance industry need to ask themselves at the end of each day – what have I done today to alleviate poverty?" This should probably be the first tenet that should rule the direction and objective of all microfinance institutions. He then proceeded to caution about the risks – the first is the risk of regulation (or the lack of it). Microfinance is not about just credit – it is about providing financial services towards income generating activities. Only such services can promote transformation among this segment of the market. We have already witnessed the effects of poor regulation in the developed economies (The sub-prime crisis), and to avoid this we need to ensure that appropriate regulation is in place. While, we acknowledge the fact that this is a growing industry and should not be fettered by over-regulation to the point of it becoming unviable to operate the business, we definitely need to have sufficient checks and balances in place, to ensure that the trust reposed by this segment of the people is safe-guarded.

The second aspect of risk is the lack of credit bureaus. We will need to establish credit bureaus in order to be able to identify the good borrowers from the not-so-good ones. Decisioning and disbursement of loans can happen speedily and effectively only when credit bureaus are in place. If we ignore this, then we are likely to witness a phenomenon similar to the sub-prime crisis, where poor quality loans, unchecked, were disbursed. While the volumes or ticket size may not be so high, it is certainly bound to push progress of this sector several steps backwards.

Echoing the sentiments of several Microfinance Institutions, he also cautioned against the indiscriminate and blind faith reposed in technology as a panacea for all the challenges faced by MFIs. Technology is an enabler and an integral part of the overall business strategy…and only so much. No technology is going to compensate for deficiencies of either sub-optimal processes or under-skilled people; any technology implemented in such an environment can likely cause more harm than benefit to the organization. It is very important to understand what technology can do…and what it cannot. Do not implement technology you do not understand. Perhaps the recent crisis triggered by the derivative markets, which was understood only by the nerds who wrote the algorithms for them are an example of the devastating effects of technology being applied blindly.

My own take on this: It certainly has been an eventful two days – not the least because of the networking opportunities it generated. It was interesting to see the kind of work that is happening in the field; and even more heartening to see technology failures being shared so openly – something that very few For-profit companies might venture to do. It was also interesting to see innovation in action in the midst of poverty and resource scarcity….perhaps an indication of why we require skunk-works for innovation and not plush offices!

I also got to see a lot of people with passion – the zeal and commitment for a cause clearly showing in their attitude and actions. There is still hope that the millennium goals might turn out to be a reality.

For those who missed the event, Microfinance Insights – the media sponsor of the event had a very interesting and useful blog going, which captured the day's events in great detail.

The Base of the Pyramid

The Harijans of the financial world have just had their lexicon upgraded. Jerry Rao, at a recent seminar, proposed that the term "Base of the pyramid" be used to refer to the "around the poverty line" clients. IBM's initiative for this sector is called "Banking the unbanked" (a la Untouchables). Whether that makes any difference is a moot point, though. In any case, with the top of the pyramid crumbling and the falling debris impacting the middle of the pyramid too, even the large financial institutions and software players seemed to have suddenly found the base of the pyramid an attractive option. The spotlights are now focused on this segment of the market, which until now had been a rather unattractive option.

Microfinance has seen a gradual shift from a socialistic "not-for-profit" initiative to more recent efforts by organizations that have driven these initiatives quite successfully as capitalistic ventures. With the success of the Nobel prize-winning Grameen Model, microfinance has suddenly found favor among banks and bigger financial institutions as a means of profitably deploying funds. In combination with philanthropic NGOs and Corporate Social Responsibility initiatives by large organizations, microfinance now has a better than never before chance of actually causing socio-economic transformation. As pointed by Prof. Satchidananda Sagala, sustainability is the key to successful transformation for any microfinance institution. As one of the keynote speakers at the Microfinance and New Technologies Summit he remarked: "Unless, an MFI is able to run its programs in a sustainable manner, there is not even a glimmer of hope that we will be able to transform the lives of the people that we wish to serve under these programs". The real question then is whether technology can help in bringing about that sustainability. And for technology to be able to do that, the cost of such technology needs to be affordable.

There have been several initiatives from a technology perspective that have sought to bring down the cost of operations (per-transaction cost) and increase outreach. Some of them are beginning to show signs of pay-offs while others have drifted off into new directions. FINO, for example, which started off by being a pure-play technology company began to realize that this was perhaps a non-starter and transformed itself into a services company. Today, they have begun to see results as a service provider to banks which are implementing Financial Inclusion initiatives and for the National Rural Employment Guarantee Scheme. Technology, as always, has not been very successful in bridging the last mile. In the microfinance world too, the human intervention is becoming inevitable in bridging this gap. Banking correspondents and animators are playing a significantly large role in reaching out to the rural poor.

Another aspect of this problem seems to land us in a catch-22 situation – that of literacy levels. One of the reasons why this segment has not been viewed as commercially viable in the past has been the low levels of literacy among this section, and the consequent cost of training and associated cost of distribution (higher media, marketing and distribution costs). A corollary to this is the lack of knowledge about the customer (lower KYC compliance) resulting in these institutions being unable to assess the risk adequately. I don't know if technology can play a role in this very effectively. There is going to be a cost associated with increasing levels of literacy, and educating this segment about the usage of technology, which in turn can help in lowering the costs of operations. However, there is an upfront capital expenditure involved…and until someone bells this cat, the slow rate of progress is going to be a challenge.

From a software perspective too, the tendency of most players has been to retrofit existing solution to the perceived needs of the market. However, this is unlikely to work because of the above mentioned reasons. Implementation of these solutions will pose huge challenges and the return of investment is quite unlike what is obtainable when implementing solutions for cash-rich financial institutions. The solution will need to be designed and developed to meet the specific market needs of this segment. More importantly, it will need to solve the twin challenges of high ease-of-use (low literacy levels) and low cost (low spending power among MFIs). This is a still-evolving segment, and therefore the processes too are going through various stages of evolution and maturity. Any software, to be successful, will need to accommodate a level of flexibility that reflects this evolution.

Lastly, I think we are still grappling with the issue of what the customer actually wants. The bouquet of products and services that are on offer leave a lot to be desired; and this is inextricably linked to an understanding of the customer's environment. As we get better at acquiring knowledge about the customer and her environment, we stand a better chance of offering appropriate products and services. In the end analysis, if the intention is to cause socio-economic transformation, then it cannot be an isolated effort at just providing him with credit or addressing his economic concerns. To be able to witness a next generation that is truly emancipated, the transformation needs to address social concerns (education, hygiene and medicare are top on my list) along with provision of financial services. Only then can we actually say that this has been a sustainable operation.

Micro-insurance in the Indian context...contd.

After my pilgrimage to Sabarimala (in Kerala), I had to board a bus from Pampa to Nilackal, a place about 25 kilometers from Pampa. All vehicles other than cars and jeeps are required to park at Nilackal; pilgrims after reaching Pampa board a state-run bus to reach Nilackal. I was amazed to see that the conductor was using a hand-held e-POS (Point-of-Sale) terminal for dispensing tickets. I guess the number of trips he had to make up and down ferrying passengers from the banks of the river to this parking lot did not give him time to tot up the tickets sold and reconcile it with the cash in his bag. However, with this handy device he knew exactly how many tickets he had sold, and for what value; handing this amount over to his cashier, he could then proceed almost immediately for his next trip (after a stop-over for a chai at his favorite tea shop, of course)!!! Synchronizing this hand-held device to some accounting system sitting in far-off Trivandrum or Kottayam was probably only a small step away!!!

From pampa, we reached Chengannur; as I sat at the railway station waiting to board the train to Chennai, a news item on Television caught my interest. The Indian Finance Minister, Mr. P Chidambaram was talking at a press conference after a meeting which he had attended; there he was exhorting insurance companies to sell insurance through post-offices and thereby extend the reach of their products and services to the rural segment. This was pretty much along the lines of my previous blog on micro-insurance; I, therefore decided to pursue that line of thought a little further.

With connectivity becoming ubiquitous, infrastructure and technology costs becoming affordable, it is now becoming increasingly possible to address some segments that were previously economically unviable. As is evident from the bus conductor's example, technology is available and affordable too! So what then are the important ingredients for a successful implementation of micro-insurance?

1. Technology
2. Infrastructure
3. Trained resources as correspondents and facilitators
4. Insurance products
5. Insurance underwriters / micro-finance companies
6. Information / knowledge of customers
   

This list is not in any particular order. However, it occurs to me that the information technology provider who has strong product and services capability is probably going to be the linchpin for a successful implementation. In conjunction with an insurance company / micro-finance institution which can provide the financial backbone to this business model, the technology company would play an important role of integrating the various components to make it a seamless offering.

From a technology and infrastructure stand-point, we are looking at a centrally deployed back-end software that can talk to these hand-held POS terminals either online, or offline. In most cases, connectivity would be offline. What would probably work is to have hand-held devices with insurance software products loaded on them. These could then be taken from doorstep to doorstep for collection of premiums (or even settling of claims). At the end of the day, we would have them synchronized with the back end system through a dial-up connection (or even GPRS). The e-POS terminal could also use biometric authentication to identify customers (especially useful in regions where literacy rates or low and as a means of identifying customers uniquely in a country where there is no SSN). A thermal printer attached to the hand-held device could be used to print out receipts (quite similar in concept to the bus ticket on that Pampa-Nilackal bus)! Assuming we have a group insurance scheme where a Self-Help Group is involved, then we can print out one policy covering all the Group members and not have to bother about printing separate schedules and policy covers for each member. In addition, given the irregular income streams of this customer profile, it may be necessary to issue installment premiums (and even probably waive the 64-vb rule). All of this will require the regulator's special approval; in turn insurance companies will need to provide auditable data to ensure compliance with regulations.

In addition to all this, we require relevant and good insurance products that are suitable for this market segment. We also need information about customers; information gap relating to customers, and this market segment is a huge barrier that insurance companies face in being able to offer the right kind of products for this market. With the help of a strong team of facilitators and correspondents, and the right KYC norms in place, it should soon be possible to bridge this information gap. In fact, this is perhaps the most significant role technology will play in this solution.

What is also becoming evident is that the back-end insurance system needs to have a very strong SOA orientation and will be deployed in the SaaS model. The ability to configure products specific to this customer segment is a key capability requirement for this product. Equally important is an open architecture that will allow interface to hand-held devices and be able to integrate with back-end accounting systems, and provide the required compliance-related information to regulators and statutory bodies. In addition, this will have a strong business intelligence module that will be the backbone of all the data analysis and reporting. Ensuring availability of infrastructure, connectivity and software reliability across so many geographically dispersed is a key challenge that needs to be surmounted.

There has been so much interest in micro-finance in the country in recent times. While this is certainly a huge opportunity, it also presents some really daunting challenges; this is not something one company can venture into alone! It will require a strong consortium of like-minded organizations backed by strong technology. And an organization that has the project management skills to get all of these players to work together as one team.

64 V B: In India premiums have to be paid before coverage can begin and the insurer can be 'at risk', a provision under section 64 V B of the Insurance Act.

The Long Tail of PREMIA

Recently, while making a presentation of the powerful product configuration features of PREMIA™– insurance software from 3i Infotech, I was rendered speechless by a question from the IT head of a public sector insurance company – he wanted to know if we could configure a “product-less” product! He had me stumped there; I quite didn’t know how to answer that one. I looked at him for a while…not sure if he was serious, then realizing that he indeed was, went on to “create” a description of the features of the product-less product. I’m not sure if he quite understood what I was saying; I frankly didn’t!!!
Well, the question has not gone away from the mind! Although it sounded quite ludicrous at that time, the more I thought about the question, the more differently I have been interpreting it. And it was when I was reading Chris Anderson’s “The Long Tail” that I’ve finally hit upon a meaning that makes imminent sense!
Now, what has the Long Tail got to do with this? The Long Tail is all about the almost unlimited choice created in the market because of the digital age – more importantly the evolution of the internet. The new economics is about niches, where the sum of the niches is almost as big, if not bigger than the “mainstream” products. According to Chris Anderson, the three major forces that have made this possible are:
1. Democratization of the tools of production
2. Democratization of the tools of distribution
3. Lower costs of connecting supply and demand
What exactly does this mean? I intend to write about the impact of each of these forces in greater detail; for now, let me get back to my story!
I presume what he probably was asking was if our product configuration tool was powerful enough to create virtually any kind of product; in essence, had we democratized the tool of production. It then occurred to me that perhaps the “product-less” product was perhaps the niche market! I found myself extending the concept of localization – the process of creating products / variations for a specific geography or market – further down the line: to the level of an insurance company! The niche regional market had just expanded to a lot of niches. From a software company’s perspective, we could focus on developing the core insurance products while allowing the IT departments of the insurance companies, or for that matter, their customers to develop the rest. By providing a mechanism to create the product by assembling the components, while ensuring that proper business rules were in place, we could in effect, extend the development team right across to the users. By providing this as a service, we would now be able to extend the reach far beyond what was otherwise thought possible. And finally, in allowing these products to be classified and tagged across many categories, we would be in a position to make this offering easily accessible to the customers. And this, is the beginning of the Long tail of PREMIA! (rather, my long tale on PREMIA)!!!
Viewed from an insurance company’s perspective, the solution is infinitely more powerful! They no longer need to depend on the software company to create their insurance products – they can start creating products on their own. More importantly, they can now treat each customer as a niche and work on creating products specific to his individual needs! Or, give him the tools to create his own product – personalize it to his specific needs! This is truly a “product-less” product. While a large chunk of their customers would perhaps still opt for their standard products, they will still be able to cater to the needs of a customer who has special needs. The ability to configure the various components of the product and define rates at the element- level will give the insurance company, the ability to quote extremely competitive rates, instead of a single flat rate. Combined with some intelligent data about the customer, it can become a extremely powerful mechanism of very focused rating – one that takes into account generic factors as well as customer-specific ones.
The ability to personalize a policy by selection of appropriate coverage and limits, applicable clauses and conditions provided the freedom to the customer to choose the policy that best suits his needs at the most economical rate. He is no longer strait-jacketed into selecting from within a limited set. If nothing meets his requirement, he can now create his own product. This benefit gets further amplified when an aggregation engine that will pull data from several vendors is made available!
The introduction of better KYC (Know Your Customer) policies within Banks and Insurance companies is now giving the required impetus for the third force of the long tail to kick into action – that of bringing the customer and supplier closer! We are progressing from the information era into what is now being termed the suggestion / recommendation era. The intelligence gathered about the customer and his special requirements, needs to get translated into suggestions of the most appropriate product. For example, knowledge that the driver is educated, married with a family, living in an upwardly mobile neighborhood, and with no previous record of accidents is information that can be used to suggest a policy with rates reflecting the lower risk. Further, from past experience of selling policies to similarly-profiled people, the system can also recommend an additional personal accident cover, or a homeowner’s policy. Information that his spouse also drives to work will now prompt him to select a special package policy that provides coverage to the couple at a discounted rate. And this is just the tip of the iceberg!
PREMIA, as I am given to understand, is now poised to move to the next stage of evolution – making the transition from the classical role of being a software product to becoming an integral part of the insurance company’s business. This transformation will require it to adopt a “Software as a Service” (SaaS) model, where the lower costs of distribution allow it to tap markets and niches, which were hitherto considered uneconomical. More importantly by democratizing the tools of production and distribution, it will be able to serve a larger customer base than what was previously possible. Further, breaking up a single monolithic product into multiple services allows the customer greater choice in using only those aspects that are required / used by him. Effectively, what this means is that the customer now has the ability to opt, and pay for only a claims module or policy administration module; taking this one step further, if the insurance company was to pay on the basis of usage, the revenues to the software company would be based on the usage of the software – the more policies issues, the greater the revenue, the fewer claims, the lesser the usage of the claims module. Similarly, the ability to integrate external / secondary data with the primary data generated by the system and offer recommendations would make business intelligence-based solutions a lot more meaningful.
In intend to delve deeper into this and look at each of the above aspects and see how they would have an impact on the business. Meanwhile, let me have your comments on this.
PREMIA ™ is the brand name of 3i Infotech’s insurance software. The registered trademarks of proprietary software components of other software vendors used in the article are hereby acknowledged.
Read “The Long Tail” by Chris Anderson, Random House UK, 2006 for a better understanding of the theory of the Long tail.

SaaS and Micro-insurance

Software as a Service, a.k.a SaaS has gained greater recognition and attention as its impact on the long tail of the market is getting better understood. Although ASPs and hosted environments have been around for a while now, this concept has gained greater relevance as companies figure out newer and more efficient methods of reaching out to their customers. However, what I think is significantly different this time around, is the far greater integration of Information Technology into mainstream business processes and business strategy. Apart from lowering costs through shared infrastructure, the ability to create new and probably more efficient revenue streams has made IT an integral part of the business.
The ASP model has met with relatively lower levels of success; the problem has been the lack of preparedness for such a model. Firstly, the architecture required for a hosted model has not been fully understood! Most first-generation applications that were hosted were traditional client-server architectures in the garb of n-tier hosted applications. This resulted in performances that were far below customer expectations. Secondly, customers themselves have been wary of hosted applications because of security considerations. More importantly, the level of customization for each instance (read customer) resulted in higher levels of maintenance making it quite unviable for the application service provider to pursue such a model. Software as a service, through appropriate application architecture is now becoming the linchpin that binds the operational infrastructure to the business model.
I thought I’d use micro-insurance as a concept to explain the impact of SaaS on the long tail of the market; micro-insurance, in a sense, represents that spectrum of the market which has not been addressed by the traditional insurance. This segment is characterized by:- a) low-income groups with irregular income streams, b) low levels of awareness of products and services c) geographic inaccessibility and other factors like language and literacy, to name a few. A solution that is appropriately technology-enabled and has the right kind of business facilitators who can service this market segment has a higher likelihood of making economic sense than what can be achieved by traditional methods. I outline below some of the key ingredients for this solution:
a) The insurance company, in alignment with the regulator will identify products that are well-suited for this market segment. Typically, this segment is likely to have an agrarian demographic profile, and therefore insurance products that address the rural markets like crop insurance, poultry insurance and weather insurance are likely to figure over other kinds of insurance. Also, the product structure and premium ratings need to be designed keeping the irregular income streams and / or poverty levels in mind.
b) A concept similar to motor pool insurance (prevalent in India) will need to be adopted; this means that more than one insurance company (by choice or by mandate) will need to be co-opted into serving this segment. Having partners reduces risk and lowers cost of operations.
c) Business facilitators who can provide the logistical and distribution support. A model similar to e-Choupal (ITC’s rural initiative – http://www.echoupal.com) which enlists the support of the local populace is perhaps the most effective method of addressing issues relating to reach, language, culture and even for creation of awareness.
d) A strong and robust application architecture that is scalable, configurable and preferably multi-tenant; the required infrastructure, to allow centralized delivery, deployment and maintenance of the application.
e) A SOA-based insurance application that is component-based and can be configured to meet market requirements; this is especially important since most products may be non-standard, and it should be possible to configure these products without having to custom-build them from scratch; the workflows are also likely to be different, as are the business rules that will govern them. Hence, an application that can accommodate these changes through configuration, rather than custom-development is more likely to be successful.
f) Mobility-based solution that can work asynchronously with the core application. Typically, due to geographical inaccessibility in these regions, the application is loaded onto a hand held device that can be used by business facilitators to offer services to customers. This solution will communicate to the core application in offline mode (as well as on-line mode, where possible), to update the transactions at the end of business day (or as required to ensure regulatory compliance)
g) Human interface devices like biometric identification and smart cards that will ensure secure transactions. This is especially significant in market segments (regions / countries) where unique identification of customers is an issue and / or customers are illiterate.
h) Business Intelligence tools to provide the right kind of customer analytics for further refining the product and bridging the information gap. Given the lower levels of awareness of this market, capturing customer information and using this information proactively is of paramount importance.
Of course, what has been presented above is a generic and simplistic model. However, what I think is most significant here is the fact that this whole business model can become viable and feasible only if the right kind of software service is in place. The fact that such a market has been ignored for so long, but is now gaining significance is perhaps proof that technology is enabling and opening up such possibilities. While this is at the far right of the long tail, closer to the “hits” market, SaaS will have a far greater role to play – one that will make it almost mainstream.
This article has been significantly influenced by the success of ITC’s rural initiative e-choupal (http://www.e-choupal.com) and more recently by the launch of FINO (a similar initiative by ICICI Bank – http://www.fino.co.in)
Financial inclusion has become a key thrust area in a number of countries. Financial inclusion has become a buzzword in the financial services sector, and several initiatives are afoot to reach out to this segment.