Category: Scenarios (page 3 of 6)

CRM & VRM, Figure & Ground

Antagonyms, Social Circles and Chattering about VRM is a deep and helpful piece by Cliff Gerrish on his blog. He starts by visiting and (words that carry dual and opposing meanings) and how context tilts perception and meaning toward one side or another. By example he suggests that Google’s problems with were (at least in part) a result of internal perspective and experience (“Google launched Buzz as a consumer product, but tested it as an enterprise product”). From there he suggests that CRM and VRM also require that we consider perspective and reciprocity:

Meanwhile, introduces Chatter to the enterprise and rolls it out at no extra charge to all employees on the internal network. And while it will start inside the enterprise, Chatter will quickly expand to the boundaries and begin to cross over. From a business perspective, it’ll be used to turbo-charge collaboration and create real-time communication for project teams and business units. But very quickly you’ll see friends sending messages to each other about meeting up for lunch, and a public-personal communications channel will be opened within the enterprise. And the circles will connect and widen from there.

Here are a couple more Contranyms:

clip (attach to) – clip (cut off from)

cleave (to cut apart) – cleave (to seal together)

Salesforce.com calls itself the leader in Customer Relationship Management and Cloud Computing. Chatter may just be the communication medium that ultimately contains both CRM and its opposite number, VRM. Vendor Relationship Management is a reaction to the data toolsets belonging to the enterprise and not to the individual customer.

In a narrow sense, VRM is the reciprocal — the customer side — of CRM (or Customer Relationship Management). VRM tools provide customers with the means to bear their side of the relationship burden. They relieve CRM of the perceived need to “capture,” “acquire,” “lock in,” “manage,” and otherwise employ the language and thinking of slave-owners when dealing with customers. With VRM operating on the customer’s side, CRM systems will no longer be alone in trying to improve the ways companies relate to customers. Customers will be also be involved, as fully empowered participants, rather than as captive followers.

If you were to think about what kind of infrastructure you’d want to run VRM on, Salesforce.com would be ideal. To run the mirror image of CRM, you need the same set of services and scale. The individual Chatter account could be the doorway to a set of VRM services. I can already see developers using the Force.com platform to populate a VRM app store.

Some corporations will attempt to maximize the business value of each individual worker, stripping out all the extraneous human factors. will be erected to keep the outside from the inside, the personal from the business, and the public from the private. But when you put messaging and communications tools into the hands of people they will find ways to talk to each other— about work, life, play, the project, and the joke they just heard at the water cooler.

I’ll need to study Salesforce’s services before I venture opinions about how well they apply on the VRM side. But in the meantime I do think there is an especially appropriate optical illusion for illustrating CRM/VRM reciprocity: the :

Rubin2

As Wikipedia currently puts it,

Rubin’s vase (sometimes known as the Rubin face or the Figure-ground vase) is a famous set of cognitive developed around 1915 by the . They were first introduced at large in Rubin’s two-volume work, the Danish-language Synsoplevede Figurer (“Visual Figures”), which was very well-received; Rubin included a number of examples, like a Maltese cross figure in black and white, but the one that became the most famous was his vase example, perhaps because the Maltese cross one could also be easily interpreted as a black and white beachball.

One can then state as a fundamental principle: When two fields have a common border, and one is seen as and the other as , the immediate perceptual experience is characterized by a shaping effect which emerges from the common border of the fields and which operates only on one field or operates more strongly on one than on the other.

Says Rubin (in Synsoplevede Figurer, 1915),

One can then state as a fundamental principle: When two fields have a common border, and one is seen as and the other as , the immediate perceptual experience is characterized by a shaping effect which emerges from the common border of the fields and which operates only on one field or operates more strongly on one than on the other.

Over the next century Rubin’s vase illusion has more commonly been illustrated with a wine glass between two faces (perhaps because we’re drinking more and arranging flowers less):

I think this imagery does a better job of illustrating the figure-ground distinctions of CRM and VRM. I suggest that CRM sees the wine glass (from which they might drink from the wealth of well-managed relationships with customers), while VRM sees two faces that represent one-to-one interactions between equals.

After CRM and VRM come to be working well together, vendors and customers will still have their own tilted perspectives — one’s figure will be the other’s ground — but both will be fully present.

As of today that’s not the case. CRM is a multi-$billion industry, while VRM is just getting started. Perhaps, by thinking about CRM from a VRM perspective (and vice versa), we can build out tools and solutions better, and faster.

How VRM Helps CRM

CRM — Customer Relationship Management — is a huge business. According to this article, Forrester expected the CRM software market to hit $74 billion in 2007. This more modest Gartner report says the worldwide CRM market totalled $9.15 billion in 2008, growing at a 12.5% rate over 2007.

CRM is pure B2B: business to business. You’re not involved, except as a customer of CRM’s customers. It’s your relationship with a company that’s being managed—by the company. Not by you.

Last month Neil Davey of reached out from the CRM world to interview me on the subject of VRM. The result is Doc Searls: Customers will use ID data to force CRM change. The angle was data. If VRM gives customers more control over their data and how it is used, how does that help CRM? Wouldn’t customers want to share less of their data rather than more?

In fact data will be front and center as a topic at —

200px-Vroomboston2009_small

on Monday and Tuesday of next week at Harvard Harvard  (please come, it’s free). While most of the workshop will be organized on the open space model (participants choose the topics and break off into groups to move those topics forward), we decided to have one panel, titled Getting Personal With Data: How Users Get Control and What They Do With It. I invite local CRM folks (and everybody interested) to come and participate.

In his piece Neil sourced my new chapter (“Markets are Relationships”) in The Cluetrain Manifesto, as well as text from an interview by email. Since CRM+VRM is our topic here, I thought it would be cool to provide the long form of my answers to Neil’s questions.Here goes…

About what VRM does that CRM alone cannot…

Think of a buyer-seller relationship as vehicle that can be driven by two people: the buyer and the seller. The problem we have today is that only the seller—what in business we call the vendor—can drive. The buyer is in the passenger’s seat. She can’t drive. She can choose to spend or not to spend—or to leave the car and ride with some other vendor. But she can’t drive.

VRM gives her a way to drive.

To mix metaphors a bit, CRM systems are designed to operate what in the tech world we call “silos” or “walled gardens.” It doesn’t matter how nice a company makes its walled garden—it’s still owned and run by the company as a habitat for customers. The company makes all the rules, sets all the terms, provides all the means for everything the customer does with the company. The customer’s only choice is to take the whole deal or leave it.

Every one of CRM’s walled gardens is also different, and most treat the customer as if he or she has no other business relationships, save those to the government or to credit card companies. As a result customers have no common means for relating with multiple vendors. Thus, as CRM system adoption goes up, so do complications for customers.

Perfect example: loyalty programs. Most of these burden the customer with cards and key-ring tags—all to “increase switching costs,” to obtain a higher “share of wallet” or to impose other inconveniences. I know one guy who carries around a key ring with dozens of little tags. In my own case I recently counted fifteen different loyalty cards populating my wallet, my key chains and my glove compartment. None make me feel loyal. All increase my resentment more than “loyalty” by any measure.

Limiting customer choices amounts to wearing blinders. Companies can’t see what they won’t let themselves see. For example, they can’t see customers who choose not to shop at a store because the store only gives discounts and benefits to loyalty card holders. In my own case I buy groceries at Trader Joe’s. rather than Stop & Shop because Trader Joe’s doesn’t require that I carry a loyalty card to get a “discount” that I believe is nothing more than a regular price—while the non-card price amounts to a surcharge and a punishment for non-card-carrying customers. Whether or not this is true, it’s a legitimate perception, and an unintended negative consequence of the loyalty card system. Stop & Shop can put the world’s best data-collection behind its loyalty cards, but one thing they won’t find in that data is why I don’t buy at their store.

Being customer-driven means a company knows what customers actually want and what they actually feel. Wouldn’t it be better to know directly when a customer wants something, rather than to guess at it? Wouldn’t it be better to have whatever market intelligence the customer can provide, willingly, rather than to give the customer a limited set of choices, which may exclude the one thing that might cause a sale or make a better customer?

Friends of mine who have worked in the CRM business, and studied it over many years, tell me that in many — perhaps most — cases, customer-centricity is secondary to organization-centricity. They know of few cases where customers actually drive the company.

In the beginning CRM was about building a “single customer view,” with lots of talk about better understanding the customer’s needs, and how that should be become part of “integrated” marketing, selling and customer service. Over the years, however, this ambition was compromised by minimal data and cost-cutting requirements.

My wife, a business veteran with a long history in retailing (both at the store level and as a supplier) has observed that the trend in recent years has been to out-source support to the customer herself. “Go to our website,” the call center says. Yet typical websites are so poor at customer support that the customer is left to seek help from other customers, or from websites other than the company’s own. This is why so many customers now support each other, rather than bothering with companies’ own support sites and services.

The problem here isn’t bad CRM. It’s that there is nothing yet on the customer’s side to carry some of the relationship weight — other than what CRM systems provide. That means the whole responsibility lies with the vendor. With VRM we want to give the customer means for carrying some of the burden herself.

About VRM and its community…

The current VRM community is a convergence of several formerly separate efforts. In the UK, the Buyer Centric Commerce Forum came together in 2003. In the U.S., VRM grew out of the Internet Identity Workshops, which started in early 2005 — as a workshop discussion subject that broke off and acquired a life of its own. In my own case, VRM started as a sense of unfinished business after Chris Locke, Rick Levine, David Weinberger and I wrote The Cluetrain Manifesto in 1999. Listen to what Chris was saying (in the original manifesto posted at Cluetrain.com) with “we are not seats or eyeballs or end users or consumers. we are human beings and our reach exceeds your grasp. deal with it.” That is the voice of the customer, energized by powers granted by the Internet but not understood by sellers there.

After Cluetrain came out, I realized that Chris’s statement wasn’t quite true, because if customer reach truly did exceed vendor grasp, loyalty cards would be pointless. Customers would have native means for expressing their own wants, needs, terms of engagement and loyalties. Thus I came to realize that relationship was the next frontier. Something had to be done to liberate both sellers and buyers from the belief that a free market is “your choice of captor.”

We didn’t call it VRM, however, until Mike Vizard suggested it during a Gillmor Gang podcast in October 2006. Before that we had called it CoRM (for Company Relationship Management) and other names. As a new fellow at Harvard’s Berkman Center, I needed a project. So I titled mine ProjectVRM, and the rest is history.

On how customers control personal data and its exposure…

The short answer is that customers will disclose data on an as-needed basis, within the context of a secure and genuine relationship, and not a coerced one where the vendor does all the asking.

The longer answer is that this requires a new system on the customer’s part and a modified one on the vendor’s part. That’s how VRM + CRM will work together.

Both systems need to recognize that the individual, and not the organization, should be the point of integration for his or her own data, the point of origination for sharing that data, and the authority about what gets done with that data.

The ‘single customer view’ is naturally that of the customer, not the company. If a working relationship is in place, the customer will share required information when the right time comes — and do it, when need be, for many relationships at once, and in consistent, standardized ways. For example, the customer can issue a trusted change of address just once for many companies, rather than many times and many ways for many companies. In the absence of a customer-driven data-sharing system, we have companies constantly running after the customer for updates and becoming increasingly invasive of privacy over time (Phorm being just one familiar example.)

VRM enables personal data management by the individual, in ways that work for the individual and which can also enable selective disclosure to companies. There are various ways of achieving that, many of which are being actively worked on at present. The plumbing part is easy. Processes and business models are harder, but those are being worked on too.

The challenge lies in developing a more granular view of what data is shared, by whom, how, where and why. For CRM today that equates to WHO, bought WHAT, WHERE, WHEN and HOW it was offered to them. These are all data that can be derived from a system if it is built well enough. These data can then be used to make good guesswork about WHY customers bought products, and then make educated guesses about what customers will buy next.

A well designed VRM system will eliminate much of the the guesswork that CRM currently involves. For example, VRM can provide customers with tools to say “Here’s what I’m in the market for,” or “Here’s my current circumstances. What have you got that is relevant?” — in ways that prevent that data from being used later against the individual, or to inform guesswork that wastes both the vendor’s and the customer’s time and money. The customer also needs to be able to assert his or her own terms of engagement, rather than being forced to accept those required by the vendor. Customer-driven terms would naturally include commitments to pay and otherwise behave honorably; but they might also include preferences (such as “send no junk mail” or “email my receipts”). They might even include expressions of willingness to pay for good service.

On the personal data side, this system will involve what we call “volunteered personal information.” In effect this is a new class of data. Right now that data lives mostly in the heads of customers, because they don’t have the tools or systems to express any of it on their own.

Companies need to be willing to engage with this new type of data. While this may seem scary — giving up control always is — in practice it is just a more highly qualified sales lead and a smoother customer interaction than the current system allows.

On how VRM will influence vendors who don’t want to give up control…

Money talks. Consider one form of VRM we call the Personal RFP. This is where the customer advertises his or her desire to buy a product or service at a given place and time. (And not just through a walled garden such as Facebook or eBay.) For example, “I need a stroller for twins in Grand Rapids in the next 5 hours.” Data with money behind it will fund all kinds of changes in data collection systems.

On other appeals to the CRM side…

A core purpose of VRM is to eliminate the guesswork that has wasted enormous sums of money and energy for marketing and sales — while also wasting the customer’s attention and time. We can save that money, energy and time by giving customers the means to control means of engagement with companies, and to do it in standard ways that work across the board.

It is not possible to see how any of this will work if you look at it only from the supply side of the marketplace — from the standpoint of the seller. You have to take off your seller’s hat and be the other self you’ve always been: a customer.

No customer wants to be “acquired,” “retained,” “managed” or “owned” by any seller. Customers want to be respected on their own terms, and not those of a company that seeks constantly to maintain the advantage in a relationship that actually isn’t.

In other words, they want a real relationship. Not something that is a relationship in name only.

The new dynamic is a green field. We’ve never had it. I believe that if we create the means for enabling good will as well as easy sales, real relationships will follow.

On how “realistic” VRM is…

How realistic was the Internet in 1985?

Look at networks in the 80s and early 90s. If you wanted email, or instant messaging, you had to join a walled garden called AOL or Compuserve or Prodigy. If you were an AOL member and wanted to send an email to a Compuserve member, you couldn’t. Just as today you can’t use a Costco loyalty card at a Best Buy.

The Internet changed all that, by providing new protocols for communication that weren’t owned by anybody, but could be used by anybody and improved by anybody.

VRM will likewise change buyer-seller relationships by providing new means for engagement that aren’t owned by anybody, but can be used by anybody and improved by anybody.

Customers are resigned to stuff they hate when they think there are no alternatives. Once the alternatives show up, they will get energized. “Invention is the mother of necessity,” Thorstein Veblen said. What we’re doing with VRM is inventing protocols for buying and selling that will mother many new market necessities. One of those will be reforming CRM so it can respond to real customer demand, along with much better data than was ever before possible.

About where data lives, and how…

Some VRM folks (e.g. Mydex.org) are working on “Personal Data Stores” that can be replicated with trusted “fourth parties“. Some are working on ways of representing personal data (e.g. Azigo.com, Kynetx.com). Some are working on ways of consolidating loyalty data on the customer side and reforming loyalty programs from the outside in (e.g. Scanaroo from Cerado.com). All the many digital identity systems and communities have VRM components and constituents (e.g. Kantara.org, IdentityCommons.org, InformationCard.net, OpenID.org, XDI.org). Some are working on simple customer-held means for organizing one’s own data and relationships (e.g. TheMineProject.org). Some are working on means for logging one’s own media usage, and providing means for putting the pricing gun in customer hands (e.g. ProjectVRM and its friends in various media businesses). Some are working on customer-driven terms of service (e.g. ProjectVRM and friends at Harvard Law School and elsewhere). Some are working on patient control of their own health care data and relationships with health care providers (too many efforts to name, but Google and Microsoft are on this list). Some are working on user driven search, outside the walled gardens of Google and Bing (Switchbook.com). I am probably insulting many by ending the list there, but that should be enough.

About ProjectVRM.org

ProjectVRM is a research and development project at Harvard’s Berkman Center for Internet & Society. The project was created in 2006, and has focused mostly on development over the following three years. This next year we will be doing much more research as well.

I am a fellow at the center, and I run the project. The vast majority of the development work is going on among members of the VRM community. For them ProjectVRM serves as a central clubhouse, with workshops several times per year, a mailing list, a wiki and other supportive services. The idea isn’t to create a central VRM body, but rather to focus disparate VRM efforts on common goals.

I want to say before closing that we do not mean to give CRM a hard time. The problem CRM has had from the start is that it carries the full burden of systematizing relationships with customers. All VRM does is give customers means for carrying their end of the relationship. We won’t succeed unless it’s VRM + CRM, rather than VRM vs. CRM. If VRM succeeds, it will improve CRM enormously.

Hot Fodder for next week’s VRM Workshop

A few weeks ago I was interviewed by Neil Davey of MyCustomer.com, a major voice in the CRM (Customer Relationship Management) field. The results are up at Doc Searls: Customers will use ID data to force CRM change. Much of what Neil sources for that piece come from my new chapter (“Markets are Relationships”) in the latest edition of The Cluetrain Manifesto (Now with 30% more clues!). In that chapter, Neil says,

Searls sticks the boot into customer relationship management. And even though CRM has become accustomed to bruising encounters, some of these blows hurt – perhaps because there are some painful truths being delivered. CRM, as Searls sees it, would rather have captive customers rather than free ones. To demonstrate this, we only have to examine the language organisations use when referring to customers – how they try to ‘lock in’ customers and ‘retain’ them after they have been ‘acquired’.

Later this week, after I’ve looked more closely at what did and didn’t make it into Neil’s piece (what I said to him, by emai, was quite long), I’ll post some of what was missed.

Meanwhile, a little summary for VRM newbies arriving from the lands of CRM…

The purpose of VRM is to improve markets by enlarging what customers can do, not just what vendors can do. The latter is necessary too; but that’s what all good sellers have always been doing. And there’s a limit to how far that can go.

Better selling alone can’t make better buying. Better marketing alone can’t make better markets. Better CRM alone can’t make better customers. At a certain point customers have to do that for themselves.

That point came when the Internet arrived. It was announced by Chris Locke in The Cluetrain Manifesto, with this very graphic:

notThere was an equipment problem with that statement. Customers were not yet self-equipped with the means for reaching beyond the grasp of old-school marketers and sellers—a school that is still very much in session.

VRM (Vendor Relationship Management) is about equipping customers with their own ways of of relating to vendors. In the larger sense, it’s also for equipping individuals with their own ways of relating to any organization.

Thats the mission of ProjectVRM.org, which I lead as a fellow at Harvard’s Berkman Center. It’s also the mission of a variety of related projects and companies: The Mine! Project, PAOGA, The Banyan Project, MyDex, ListenLog, EmanciPay, Scanaroo, Kynetx, r-button and SwitchBook, to name a subset of the whole community.

Adriana Lukas, who started The Mine! Project, has something new at Market RIOT (Relationships on Individuals’ Own Terms): MINT, for My Information, Not Theirs. She calls it “a movement to redress the balance of market power between vendors and customers, institutions and individuals, web services/platforms and users.” Its obectives:

  • “to create an ecosystem where customer data belongs to the customer, is freely available to individual customer or user, in open formats
  • ‘to help the individual to become the point of integration for his or her transactional data
  • “to encourage development of applications that enable individuals to enjoy the value they can add by managing and analysing their own data (buying behaviour, purchasing patterns and preferences) and potentially benefit vendors, when such information is voluntarily shared by customers.”

This should bring up plenty of discussion at the VRM East Coast Workshop next Monday and Tuesday at Harvard Law School. It’s free. The agenda will be set by participants (on the “open space” model). In addition I am working right now on lining up an opening panel on Tuesday to lead off discussion of user control of data. Stay tuned for more on that.

Meanwhile, if you haven’t signed up already, go here to register for the workshop.

Dawn of the Living Infrastructure

So how do we get out of this place?

infrastructure_of_living_dead

Let’s face it. Mike Arrington’s problem with the iPhone, Om Malik’s problem with AT&T, the FCC’s problem with Apple + AT&T together, my own problems with Cox, Dish Network and Sprint, David Pogue’s problem with the whole freaking cell phone industry … all of these are a great big WAAAH! in the wilderness of industrial oblivity to what customers want. We’re in the graveyard of what Umair Haque calls the zombieconomy. We’re living in Night of the Living Dead and complaining that the zombies want to eat us alive.

What they really want is to strap us down while they bleed us for small change—tiny amounts of ARPU. They do this, for example, by forcing us to sit through “The … number … you … have … dialed … eight … zero … five … seven …” until a small ka-ching happens somewhere deep in their billing system, so you get bled whether or not you’ve left (or received) a message. David Pogue:

Is 15 seconds here and there that big a deal? Well, Verizon has 70 million customers. If each customer leaves one message and checks voicemail once a day, Verizon rakes in — are you sitting down? — $850 million a year. That’s right: $850 million, just from making us sit through those 15-second airtime-eating instructions.

It was JP Rangaswami (disclosure: I consult JP and his company, BT) who first pointed out to me that the primary competence of phone companies isn’t technical. It’s financial. They’re billing machines. That’s their core competency. And it was r0ml who pointed out, way back when he was with AT&T Wireless (before it became Cingular, and then the AT&T we all know and hate today), that phone companies arrived at the holy grail of micropayments decades ago. They don’t charge small amounts, but they know how to add them up, and round piles of microminutes into billions of dollars.

A better movie metaphor is The Matrix. We’re all wet cell batteries inside giant phone company billing systems. The machines took over a long time ago, and they’re still running the world.

Not that acting like machines does them much good in the long run. Umair Haque:

Profit through economic harm to others results in what I’ve termed “thin value.” Thin value is an economic illusion: profit that is economically meaningless, because it leaves others worse off, or, at best, no one better off. When you have to spend an extra 30 seconds for no reason, mobile operators win — but you lose time, money, and productivity. Mobile networks’ marginal profits are simply counterbalanced by your marginal losses. That marginal profit doesn’t reflect, often, the creation of authentic, meaningful value.

He adds,

The fundamental challenge for 21st Century businesses — and economies — is learning to create thick value. We’re seeing the endgame of a global economy built to create thin value: collapse. Why? Simple: thin value is a mirage — and like all mirages, it ultimately evaporates. In the 21st Century, we’ve got to reconceive value creation.

Constructive Capitalists are disrupting their rivals by creating thicker value. Thick value is sustainable, meaningful value — and a new generation of radical innovators is wielding it like a strategic superweapon.

Rick Segal thinks Mike Arrington‘s CrunchPad is one of those superweapons. Here’s what the Crunchies say will look like:

crunchpad-near-final-design

Sez Rick,

No, this probably isn’t the next Apple or Motion Computing, but here’s the secret.

Let’s assume there are just 1000 people out of all the TechCrunch people in the world that want this device.  If this device gets made and sold to 1000 happy people and the result is a manufacturing world and process which can now do these “one off” type devices, the game changes.

That’s why I want this device to get made. It begins a high profile (and positive) disruption at the point of manufacture and that can mean exciting things to you.

One way to blow up silos and walled gardens is de-verticalize industry itself. Not by making it horizontal (that’s too abstract), but by making it personal. Rick’s angle here is to go all the way to the source, and make manufacturing personal.

That’s what Rick thinks Mike & Co. are doing here. I also think the Crunchpad is compliant with what Dave says in this post here:

I’ve been through this loop many times, this is Mike’s first. The only platform that really works is a platform with no platform vendor, and that’s the Internet.

Right. The Crunchpad, as I understand it (and the Crunchies have explained it) is a Net-native device. Standards-based. Commodity parts. Full of open source stuff. The platform is the Net. The vendor is TechCrunch, but trapping users isn’t their game. They’d rather have thick value than thin.

So how do we contribute, besides paying cash for goods? By being constructive customers, rather than passive consumers. That’s what Rick is calling for here, and why we, as free and independent customers, can choose to support something that uses the Net as the platform, and is built to be user-driven.

Think about it. Is the Crunchpad crippled by any deals with a major vendor of any kind? Is it locked into any phone company’s billing and application approval systems? Is it locked into any one industry’s Business-as-Usual? No.

So who is in the best position to contribute to its continued improvement, besides the Crunchies themselves?

You. Me. Users. Customers.

We can drive this thing. Even if what Dan Frommer says is right, and Apple comes out with the world’s most beautiful pad ever, and pwns the whole category, there’s more vroom for improvement in the Crunchpad, because Apple’s device will be closed and the Crunchpad will be open. Or should be.

You listening, Mike?

Gain of Facebook

In How Facebook Could Create a Revolution, Do Good, and Make Billions, Bernard Lunn of ReadWriteWeb has put forth a generous and highly understanding take on VRM. Sitting here in a big house amidst countless members of two extended families, on the morning of my daughter’s wedding, is not the ideal place to post at length on what Bernard and his many commenters have put forth, so I’ll keep it to a minimum now and pick up the thread next week when I’m back home in Santa Barbara.

The two most important questions Bernard brings up are,

  1. What will it take for VRM to succeed?
  2. What big companies are in the best positions to step up and make billions by serving VRM-equipped customers?

His initial focus is on Facebook as a company well-positioned to step up. And I agree with him. I also agree with him on the “the three horsemen of the consumer-clypse” (phone companies, health care providers and credit card companies) — plus Joshua Hall’s suggestion of ISPs as a fourth horseman. (Of course, phone companies are ISPs too.)

Of course we need big companies of many kinds to step up. I think in general the biggest winners will be companies doing Fourth Party Services. Facebook could easily do that. So could others among the many “horsemen.” The problem for all of them is that they see their “consumers” as an asset to “monetize,” rather than seeing themselves as services to be driven by users. For more about that distinction, see Joe Andrieu’s postings that begin with this one on User Driven Services.

To drive services, users need code. Standards. Implementations. These take time, and there are a number of projects underway. Check out The Mine! Project, including Alec Muffett’s latest — his slides from a recent Google Tech Talk. Check out what Iain Henderson says about his work with VPI (volunteered personal information) and what he calls the personal data ecosystem. Check out Media Logging, Listen Log and EmanciPay, all of which move toward providing an additional source of revenue for media that cost nothing but have values that exceed $0 (or €0, ¥0 or £0).

All this and much more work has been done voluntarily, by the way. None of these are businesses. Yet all of them can make a lot of money for businesses, once they’re in use and adopted. Which some or all of them (plus others, not mentioned or not yet discovered or adapted) will be.

Okay, I need to go rehearse for this afternoon’s wedding. Happy 4th, ya’ll.

Off base but still kinda relevant

I suppose you’ve succeeded when people start making fun of what you’re up to. That might be what’s going on with The Vendor-Client Relationship, a YouTube video I found via markfonteijn. In this video the clients — diners at a restaurant, a customer at a hairdresser — bargain over costs. I suppose this is to point out the oddities of doing the same kind of thing in a B2B world.

It’s not about VRM at all, but it does bring up an occasional misunderstanding about VRM: that it’s about negotiating on price. It’s not. It’s about relationship; or more precisely, about relating. If price negotiation isn’t on the table, or shouldn’t (or can’t) be on the table — as would be the case at a restaurant, a hairdresser, or most retail establishments — it’s outside VRM’s scope. VRM is about enlarging the table, not turning it over.

EmanciPay does put the pricing gun in the hands of the customer, but only for goods that cost nothing and are worth more than that. Which is why our likely first deployments are with public radio.

It helps organize our understanding to divide market activities there into three categories: transaction, conversation and relationship. Of those three, the least developed in our “developed” economy is relationship. (And it’s the most developed in the less-developed world.) The most developed in our familiar settings is transaction. With VRM we are trying to create more balance between the three by concentrating on relationship, even when the relating required is minimal. We’re doing that by better equipping the buyers’ side with tools that will serve both sides.

The kind of interaction we see in that video is about as far from VRM as you’ll get.

EmanciPay: A Content Monetization Plan for Newspapers

Yesterday I reported hearing that the New York Times was thinking about putting its editorial behind a paywall again. Today James Warren gives substance to the rumors:

Here’s a story the newspaper industry’s upper echelon apparently kept from its anxious newsrooms: A discreet Thursday meeting in Chicago about their future.

“Models to Monetize Content” is the subject of a gathering at a hotel which is actually located in drab and sterile suburban Rosemont, Illinois; slabs of concrete, exhibition halls and mostly chain restaurants, whose prime reason for being is O’Hare International Airport. It’s perfect for quickie, in-and-out conclaves.

There’s no mention on its website but the Newspaper Association of America, the industry trade group, has assembled top executives of the New York Times, Gannett, E. W. Scripps, Advance Publications, McClatchy, Hearst Newspapers, MediaNews Group, the Associated Press, Philadelphia Media Holdings, Lee Enterprises and Freedom Communication Inc., among more than two dozen in all. A longtime industry chum, consultant Barbara Cohen, “will facilitate the meeting.”

I can see the headline already: Newspaper Bigs Form Trust To Set Content Prices.

Just kidding.

We do need to be serious here. The Situation is dire. Humpty Dumpty is reaching terminal velocity.

But don’t bother wishing the king’s horses and men luck with the fix. They can’t do it. No newspaper trade group, no collection of top newspaper executives, will come up with a creative solution to problems that have already earned Top Rank status in the innovators dilemma casebook. The best these execs can do is make Humpty’s fall a drop into cyberspace. They have to make Humpty Net-native. They can’t do that just with better-and-better websites, or with “monetization” schemes such as “micropayments” or other scarcity plays with a net-ish gloss.

As disruptive technologies go, it’s hard to beat the Interent. The Net didn’t just push Humpty off the wall. It blew up that wall and the whole world on which both sat. In that wall’s place is a wide-open space where abundance is not only the prevailing condition, but a severly reproductive one that’s especially suited to interesting “content.” As Kevin Kelly aptly puts it, The internet is a copy machine. One measure of content’s worth is how much it gets copied and quoted. How the hell do you monetize that?

In a New Yorker piece this week, Bill Keller, the Times‘ Executive Editor, said, “There’s a crying demand for what we do and, sadly, a diminishing supply of it. How we get the demand to pay for the supply is the existential question of newspapers in general and the Times in particular.” He’s right in all but one respect: that first person plural we. Unless he’s referring to a population of sufficient generality to include readers. Or, more importantly, hackers. Geeks bearing gifts.

As it happens, we (the geeks) have one. It’s called EmanciPay. It hands the pricing gun over to the customers (readers in this case) and then makes it easy for them to pay as much as they like, however they like, on their terms. Or at least to start with that full set of options. Whatever readers decide to pay, the sum of it won’t be $0, which is what readers are paying now. (Online, at least, in nearly all cases.)

Evidence:::

Peter Kafka reports this from the D7 conference today (over a Wall Street Journal AllThingsDigital blog):

Time for some polls! No surprise: People like to read newspapers online. Also no surprise: But people don’t pay for it. Somewhat of a surprise: People say that they are willing to pay for some kind of news.

My boldface.

I conduct similar audience polls often, though my subject is usually public radio. “How many people here listen to public radio?” Nearly all hands go up. “How many of you pay for it?” About 10% stay up. “How many would pay for it if it were real easy?” More hands go up. “How many would pay if stations would stopped begging for money with fund drives?” Many more hands go up, enthusiastically.

So the market is there. The question is how to tap it.

At ProjectVRM we propose tapping it from the customers’ side: for newspapers, from the readers side. We also propose doing it one way for all readers and all newspapers, rather than X different ways for X different papers, each designed by each paper for their own readers. In that direction lies a field of silos, all with their own scarcities, their own frictions, their own lock-ins. We need one way to do this for the same reason we need one way to do email.

Remember back when AOL, Prodigy, Lotus Notes, MCIMail and the rest all had their own ways of making you correspond? That’s what we’ll get if we leave content monetization up to the papers alone. They’ll all have their own ways of locking you in, just like retailers all have their own “loyalty” programs, each with their own cards, their own barcodes for you, their own reward systems, their own special ways of inconveniencing you for their own exclusive benefit.

EmanciPay will be simple and straightforward. It will make it easy for you to pay what you want (which may be what the papers want you to pay … or more … or less), and to do it on your terms and not just theirs. This doesn’t mean that the papers can’t have terms of their own. Maybe they have a suggested price, or a minimum they’re willing to accept. Whatever they come up with, however, will be informed by interaction out in the open marketplace, rather than their own private ones, where they make all the rules.

Think of EmanciPay as a way to unburden sellers of the need to keep trying to control markets that are beyond their control anyway. Think of it as a way that “free market” can mean more than “your choice of captor.” Think of it as a way that “customer relationships” can be worthy of the label because both sides are carrying their ends of the relationship burden — rather than the sellers’ side carrying the whole thing (as CRM systems do today).

EmanciPay is an open source project. When it rolls out, it will be free and open to anybody.

Want to help? Let me know. (firstname at lastname dot com) I’m serious.

The only problem is that development work on EmanciPay is just getting started. (I haven’t wanted to publicize it, because I wanted it to be ready to go — or at least to vet — first.) But that’s also an opportunity.

What matters for the papers is that there’s at least one answer to their challenge out there. And it’s free for the making.

(Cross-posted here.)

On not belonging

The other day my kid and I were driving around Santa Barbara, keeping an eye out for cheap gas, when we spotted a Vons gas station at an intersection. The price was indeed cheap, but only for Vons Club card holders.

Vons is a grocery store. That’s how it’s “branded”, or “positioned”, as the marketerati like to say. Or just how it is, actually. Far as I know, this is Vons’ only gas station. Every other Vons I’ve seen sells food, not fuel.

Anyway, I bring it up for two reasons. First, because we didn’t buy gas there, since we were not members of Vons Club. That club is exclusive, because we were excluded. Second, because the kid and I goofed on the company. “Where does their Club meet?” the kid wondered. “Do they have a secret handshake?” “Is gas a kind of food?” “Do they have a gas aisle at the store?” “Can only Club members go there?”

So, from a VRM angle, I wonder how much business Vons prevents with its Club card. I mean, besides ours? Does anybody have any figures on that kind of thing?

VRM and the Four Party System

I think we can get some clarity about VRM — and growth of customer power in the marketplace — by re-positioning what we’ve been calling “parties.”

Among numbered parties the best-known one today is the third party. Wikipedia currently defines a third party this way (at least for the computer industry):

  • Third-party developer, hardware or software developer not directly tied to the primary product that a consumer is using
  • Third-party software component, reusable software component developed to be either freely distributed or sold by an entity other than the original vendor of the development platform

In general, a third party works on the vendor’s side of the marketplace. However, the vendor is not generally called the “first party” (except in the game business, as Wikipedia says here). In fact, the most common use of the term “first party” in business is with insurance, where the term refers to the insured. (The insurer is the second party.)

So I see this as an opportunity. Let’s give numbers to parties involved in customer relationships, starting with the customer. In the process we can unpack some distinctions between categories of work within the VRM development community.

The first party is the customer:

The second party is the vendor:

The third party is vendor-driven, and on the vendor’s side:

The fourth party is customer-driven, and on the customer’s side:

Together, they look like this:

Here’s how the r-button might represent both sides of the marketplace, and how those sides are attracted to each other:

There are lots of ways one can look at this.

For example, on the left half is VRM, on the right half is CRM.

VRM is about enabling the first party. It is also about building fourth-party user-driven (and within that, customer-driven) services, which make use of first-party enablement.

We can also substitute user for customer, and organization for vendor, since the scope of VRM far exceeds the vendor-customer relationship continuum. Thus fourth parties are user-driven and not just customer-driven. The picture here would look like this:

Fourth parties will provide many services for first parties. In fact, VRM should grow large new fourth party businesses, and give new work to large old businesses in the same categories. (Banks, brokers and insurance companies come to mind.) Native enablements, however, need to live with first parties alone, even if fourth parties provide hosting services for those enablements.

Fourth parties also need to be substitutable. They need service portability, just as the customer needs data portability between fourth (and other) party services. That way whatever they can provide can be swapped out by the user, if need be.

A good example of how this works is email. Before the Net took off in the mid-’90s, there were many email services. Customer choice was between silos:

None of the email companies could crack the interoperability problem. That had to come from the user’s side, by way of geeks who defined email via protocols that saw workstations as the units that mattered. While servers were involved, they could also live anywhere. Both SMTP (which appeared first in RFC 821) and POP (which first appeared in RFC 918) were born in the early 1980s, out of the need for workstations to communicate with each other.

What matters for our purposes is that email enables individuals to do two things that are VRM hallmarks: 1) be independent of other entities (including both providers and vendors), and 2) be better able to engage with those entities.

Even to this day, anybody can host a mail server — or even a Web server — on their own device. Yet there are big businesses in hosting email, and most users opt to host their email on those services out in various clouds. So, just as mail and Web servers and services are Net-native, so should VRM enablements be Net-native.

Silo mentality is mostly gone from Net-native businesses. But it’s still going strong in lots of brick & mortar business categories. For example, the hotel business. Right now that business still looks like your-choice-of-silo:

With the customer in charge, it should look more like this:

Here’s how all four parties fit together:

For travel, third parties include Orbitz, Travelocity and other intermediaries operating mostly on the vendor side of the marketplace. They wouldn’t have to stay there, of course. They could become instruments of customers as well. There can be blurring between third and fourth parties.

But, as customers get more power, fourth parties are bound to flourish — and not just because they’re located on the side of the customer and his or her money. Fourth parties will flourish because they will help more intelligence flow into the marketplace, and help the customer both manage and apply that intelligence.

Fourth party business will bloom for every company that wishes to be user-driven and customer-driven. This will include countless new companies, of course. But there will also be fresh work for existing companies that already side with the individual in some way. This group includes banks, real estate agents, travel agents, insurance companies… any business that wants to side with free customers, because they know in their bones that free customers are more valuable than captive ones.

Even traditionally locked-down monopolies, such as phone and cable companies, are in good positions to provide, or help provide, fourth party services — simply because these companies already have relationships with millions of customers. (Not to mention old and in some cases dying core businesses.)

What will keep fourth parties from turning on customers, and becoming essentially third parties for the big silo-maintaining vendors — in other words, wolves in sheeps’ clothing?

The only answer is native individual power. This is why it is critical to provide individuals with tools that enable their independence. A tool such as PayChoice‘s “pricing gun” cannot be something provided by only one company. It has to belong to nobody and therefore to everybody, just like the existing suite of native Internet protocols. In fact, these native capabilities should enlarge the roster of protocols and other enablements that comprise the Internet’s suite of benefits for everybody.

Kinds of work

There will be many new development projects and organizations involved in making VRM happen. Some are already underway and have moved far downstream. In the course of this, there is a need to distinguish types and scopes of development efforts, and types and scopes of organizations.

I want to leave the latter open for now, and concentrate just on development work. Here the challenge is reconciling closed and open source work — and to help migrate some of the former into the latter.

There are now perhaps a million or more open source code bases in the world. Most are small. Some, such as Linux, Apache, MySQL, Perl and Python, are large and familiar. Nearly all are not run by companies, or even by .orgs. The programmers who contribute to the code base are inherently independent, even if they work for a company with an interest in the project. Such is the case with the many Linux kernel programmers who work for IBM, Red Hat and Oracle. It’s also true of Monty Widenius and David Axmark, who founded MySQL and came with it to Sun.

Open source code essentially belongs — in the sense that somebody has control over it — to the individual developers who contribute to it. The closest expression to ownership is usually the license. Developers on a free software or open source project like to pick a license and move forward without any further concern about legalities, including issues of ownership. “Intellectual property” is anathema to them. The only form of intellectual property that interests them much is copyright — which is why the free software folks invented copyleft, which carries forward with open source as well.

Both free and open source software possesses qualities we call NEA: Nobody owns it, Everybody can use it, and Anybody can improve it. These qualities make that code generative: that is, maximally supportive of the largest variety of uses. In his book The Future of the Internet — and How To Stop It, Jonathan Zittrain shows how generative code and standards work by locating them at the waist of an hourglass with many possibilities both below and above:

While all code is in some ways owned, it is controlled by those who write it. These include contributors, committers and maintainers. Some projects use just one or two of those terms. A good example of one using all three is here. Some small projects just use one term or none at all. Practice varies widely It is always understood, however, that somebody, or some small group of people, decide which code gets added to the base. The Mine! Project is one open source effort within VRM. ListenLog will be another. There will be many more.

What matters for VRM purposes is that free software and open source projects are inherently independent. Even if a company hires programmers to write code, both the code and its authors will be independent of those paying for it. This means the employed programmers, or anybody, can work on the code, and do whatever they want with it — provided it passes muster with the maintainers (or whoever decides what code gets into the base).

Closed source code for which there are no open source ambitions will play roles in many fourth party services and applications. Where we face challenges with VRM is with closed source code that does have open source ambitions. If we want to open closed source code, how do we do it? Craig Burton uses this illustration in his discussions of various options:

These options are faced where companies already have code under intellectual property burdens, and where code development is already far downstream and decisions about what to release and where to put it (such as in code repositories, with choices about versioning, etc.) impact administrative as well as developmental overhead. There are existing organizations that can help with this kind of thing. Work has already begun on our own as well.

A Personal Note

While I’m not a developer (the only code I know is Morse), I’ve been covering open source development for the better part of two decades, and have been working toward VRM for most of my adult life. I’m 61 years old, and most benefits of VRM won’t appear until after I’m gone. So I take a long view, even though I am as impatient as anybody to make things happen soon.

What I want for VRM is maximal enablement of first parties, and maximum business for the other three parties — especially the fourth parties that will grow on top of the enormous because effects of first parties in the world.

Because effects are positive externalities of public goods that support boundless economic activity. Think of them as private benefits of public goods. The Internet Protocol, for example, is a public good. While nobody makes money with the Internet Protocol, the whole world can make money because of it.

We want the same kind of leverage from first-party enablement of VRM. None of us will make much, if any, money with the native enablements of customers, and users, in the marketplace. (Though we will save much money and hassle.) Perhaps $trillions will be made because of those enablements.

In respect to what happens with first and fourth parties, I locate my interests primarily with the individual, and with enabling the individual. For that reason I look for minimal organizational restrictions on how that happens. I just want to see as much open source development as we can possibly bring in. This also means I welcome all kinds of organizational activity outside the VRM “kernel,” in the fourth party space. In fact I think we need that very much, and have for a long time.

My perspective here is something like that of Linus Torvalds, who makes a point of only caring about kernel development, and not about what’s done with the kernel. When asked about what happens outside the kernel, Linus often says, “That’s user space. I don’t care about user space.” (The distinction is explained at that last link.) The scope of my interests, however, is much larger. I do care about what happens outside the individual’s “kernel space.” I especially want to see business grow in the fourth party space, which to me is analogous to Linux’s “user space.”

But I don’t have the time or the inclination to care about everything. I need to focus. And what I want to focus on is enabling individuals, and getting enormous because effects out of that. So I rely on others to do the organizing outside of the individual’s “kernel space.” This does not involve giving up power on my part, but locating power outside my own immediate interest area, out where others are more interested and competent than I am.

In respect to those, I see my main job as helping make clear where “kernel space” ends and “user space” begins. Hence this draft. Hope it makes sense to all of you.

Bonus Links: Making a New World — my chapter in O’Reilly’s Open Sources 2.0; and Net Worth, the 1999 book by John Hagel and Marc Singer that introduced the infomediary concept (a fourth party, basically), way ahead of its time.

And special thanks to Hugh McLeod for the fun images used here.

Is VRM radical?

In this post at ReadWriteWeb, Bernard Lumm interviews Richard de Silva of Highland Capital Partners (a neighbor of ours here in the Boston metro’s northwest quarter). It’s about advertising, primarily. Richard and Bernard both agree that advertising is moving more toward “performance-based” models. “Closer to the sale.”

It’s a sell-side conversation, framed by the need to sell goods, move inventory, do branding, and all that. Which is good. Advertising needs all the help it can get, and both Bernard and Richard are clearly ahead of the curve on the topic.

I’m less comfortable with these remarks in Bernard’s post:

Some recent blog chatter says that online advertising is doomed. The best reasoned case for this is made by Doc Searls (of ClueTrain Manifesto fame), who is touting his radical Vendor Relationship Management (VRM) as an alternative. Searls is an academic (Harvard Berkman Center). Another academic, Eric Clemons, Professor of Operations and Information Management at the Wharton School of the University of Pennsylvania, kicked up a storm with his guest post on TechCrunch titled “Why Advertising Is Failing on the Internet.”

Academics are often right, if you don’t mind waiting an eon or two for their pronouncements to be realized. In business, you need a more pragmatic view.

First, I didn’t say that advertising is doomed. I said it was a bubble, and has been for a long time. I explained that in After the Advertising Bubble Bursts, and among the comments below it. (As well as in many prior posts, to which I linked in that one.)

Second, while I’m flattered to be called an academic, technically speaking I’m a fellow at two university centers. What got me those fellowships was my work as a writer and a tech activist, not as an academic (by any definition). For most of my adult life I’ve worked in the private sector, including many years in the advertising business. From the mid-80s to the late 90s, Hodskins Simone & Searls was one of the top tech advertising agencies in Silicon Valley, much of that time occupying a whole building in downtown Palo Alto. So I know a few things about the topic.

Third, and most importantly, if VRM is radical, it’s not in an oppositional way. It’s not against advertising, or CRM. It’s merely an effort to equip customers with better tools for expressing their wants and needs, and for engaging with sellers. I think VRM can eliminate the need for much guesswork in the marketplace, and — as I said in my post — most advertising is guesswork. But that doesn’t mean guesswork, or advertising, goes away. But it does change. If you don’t believe me, listen to Bob Garfield of Advertising Age:

There is no longer a need to warn of a gathering Chaos Scenario, in which the yin of media and yang of marketing fly apart, symbiotic no more. There is no need to seed doubt about the internet’s prospects as an advertising medium, nor otherwise be a prophet of doom.

Chicken Little, don your hardhat. Nudged by recession, doom has arrived.

The toll will be so vast — and the institutions of media and marketing are so central to our economy, our culture, our democracy and our very selves — that it’s easy to fantasize about some miraculous preserver of “reach” dangling just out of reach. We need “mass,” so mass, therefore, must survive. Alas, economies are unsentimental and denial unproductive. The post-advertising age is under way.

This isn’t about the end of commerce or the end of marketing or news or entertainment. All of the above are finding new expressions online, and in time will flourish thanks to the very digital revolution that is now ravaging them. The future is bright. But the present is apocalyptic. Any hope for a seamless transition — or any transition at all — from mass media and marketing to micro media and marketing are absurd.

The sky is falling, the frog in the pot has come to a boil and, oh yeah, we are, most of us, exquisitely, irretrievably fucked.

ReadWriteWeb is a micro medium. So is Digg, in which Highland is an investor. They may be big on the Web, but they’re micro next to the giants of mass marketing that have kept Madison Avenue in business.

What keeps ReadWriteWeb and Digg in business isn’t Madison Avenue. It’s Highway 101.

My point: VRM is also about Highway 101. It’s one more stage in the not-very-seamless transition to whatever succeeds mass marketing.

What Bernard misses here is that VRM is also pragmatic. This is why I’m very insistent that VRM be built on strong open source foundations. Open source work is always pragmatic. That’s its nature.

But VRM is also unproven. People can knock it all they want and not be wrong. Yet.

Our job is to make the pudding that proves our ideas. I beg the patience of Bernard and others while we do that. I promise it won’t take eons.

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