ProjectVRM Blog

So how do we get out of this place?

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:

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?

In response to The Trillion Dollar Market, which adds a few paragraphs to Gain of Facebook (below), which responded to How Facebook Could Create a Revolution, Do Good, and Make Billions, by Bernard Lunn in ReadWriteWeb, Nate Ritter raised some questions that I’d like to answer in detail. We begin…

…one question that needs to be solved is that if both suppliers and demanders are getting value out of the transaction why is it the suppliers are always fronting the money to make the connection?

The short answer is that we’ve done it that way ever since Industry won the Industrial Revolution. The long answer is that customer choice in the prevailing industrial system is provided by sellers. This includes telling customers what their choices are. We call this “marketing”.

At the level of simple customer choice, the industrial system is no different than it was when sellers operated out of carts and stalls at village crossroads. Such is the nature of straightforward retailing. But in our industrial system, sellers sit out at the last link of many value chains. Exchanging goods and services for money is a small part of that system. The final transaction is just the far end a process that moves from source to sale through a series of complex stages in which individual customers have little if any direct say. At the end of those stages the customer’s choice is to buy or not to buy. The customer’s job is to consume, and not to do much more than that. It’s not a bad system, but it’s one that’s open to countless improvements in a world where everybody is approximately zero distance from everybody else. That world is the Internet.

The Net makes it easy — or should make it easy — for customers to advertise their demand. That is, to find and drive supply. To a very limited degree, the supply side helps this with CRM (Customer Relationship Management) systems, but those systems are all silo’d and allow very limited input from customers themselves. Put crudely, they have ways of making you talk. And a very limited set of allowable words and phrases. If this weren’t already broken enough, many are also poorly designed or maintained.  Think about what all of us go through when we need customer service or tech support. Why should you have to give a series of call center people your account and phone numbers, even after you’ve already punched them in, time and again? These systems are lame because they put all responsibility for maintaining a “relationship” on the sell side. They exclude most forms of customer input because they don’t want more variables than they can easily “manage”. That excludes countless clues about what the market is up to, in addition to countless sums of money left on tables they can’t see through the CRM blinders they wear.

To be clear, I’m not saying CRM is inherently bad here. But it’s no closer to what we need than AOL and Compuserve were to the Internet. Or than mainframes were to PCs.

What VRM proposes is shifting appropriate relationship responsibility to customers, for the simple reason that the customer is, for many purposes, the best point of integration for his or her own data — and the best point of origination for what can be done with it.

For example, a customer’s VRM system should be able to say, globally, “I want receipts emailed to me. Here is my email address. You can do business with me if you don’t share that address with anybody, and if you don’t send me unwanted emails. Sign here (digitally) if you agree to these terms.” Yes, that may sound scary to sellers, but guess what? The customer-control horse left the seller’s barn as soon as the Internet came along. All that precious customer data that sellers think they own is a tiny fraction of what they can gain from customers in a relationship where both sides are open to whatever the other brings to the table. In other words, one in which the seller does not speak of “acquiring”, “managing”, “controlling”, “owning” or “locking in” customers as if they were slaves.

What VRM offers are better ways for sellers and buyers to relate — on terms of equal power and range of options. Yes, we’ll need open and standard protocols, data types and methodologies. Not to mention agreements that the customer (and not just the seller) asserts. We’re working on all that stuff.

Next item…

I have a feeling the culture of consumerism dissuades consumers from believing they are giving up anything (or devalues the money they are giving away for the product/service). For example, the belief that everything is free that is on the web. That’s an inherent problem that has to be solved before there will be an market that starts with the consumers. The “market’ necessitates a trade of value, and if one side is inherently told that what they want is free, then why would they give up money to trade for it?

First, what we call “consumerism” should be re-labeled “producerism”, because it’s a phenomenon driven by production. As Thorstein Veblen put it long ago (and I used to put it before discovering Veblen said it first), invention is the mother of necessity. Consumers participate, of course, but they don’t drive it. The production side does.

Of course, I’m speaking on the general scale, and of course there are definitely products and services that exist because people wanted them to. And of course they do well in charging for something because the demographic believes it’s worth the trade. But that’s not a change of the macro market. And although it’s nice and warm and fuzzy, the reality is that on a large scale people are simply being conditioned to take things for free. They don’t want to trade value for value.

When Napster came along, and suddenly everybody’s CD collection was free for the taking, “everything is free” became a mantra. Nobody, it seemed, would ever pay for music again. Why would they, when all of it is free, and one’s chances of getting caught and nailed by the RIAA and its running dogs was so small? Then Apple created the iPod and iTunes and the iTunes store, and started charging 99¢ for medium-fi music that didn’t work on more than five “authorized” devices. And people ate it up. Suddenly music had two price points: $.00 for illegal music and $.99 for legal but crippled music. How big is the latter business? Said here two years ago that Apple had already sold 2.5 billion songs. And how much has the former non-business driven the whole music industry in a new direction? Why cry about how disruptive the Internet is, and how much it devalues every old business it touches*, when it’s an expanding planet-sized environment on which countless new businesses can be built — and built to do far more, and make money from (and for) many more people, and companies, than the old ones?

My point: it’s early. The Net is a giant zero between everything and everybody. It takes distance, connectivity and the costs of storage and distribution all toward zero. There is still plenty of money to be made at the commodity level (just ask Nick Carr, or Amazon), but that’s one more reason why the Giant Zero is a great place to build all kinds of new businesses. And why it’s still very, very early in what Craig Burton calls the “terraforming” of the Net’s new world.

The point of my two postings (in the first sentence up top) is that there is much more money to be made, in this Giant Zero world, in helping demand find and drive supply, than in helping supply find and drive demand. And that this will be much better for the supply side than the old system, where suppliers have to do it all.

I wish it weren’t that way. Perhaps some day it won’t be. But we have to start changing the message that we’re sending out there, or even better than pushing a message, finding the areas where people are indicating they’re willing to pay for a product to be created. Harder done than said.

True. But we’ve already started. If one looks at markets (or, more precisely, economies) as places where parties signal each other, we’re already well underway. Nate himself did a heroic job of putting Twitter on the map as a great signaling system on the Live Web during real-world emergencies. In his case it was the San Diego Fire. It’s conceivable that what the market learned in that experience helped save my own house during the two recent fires in Santa Barbara.

Last winter I used Twitter successfully to signal our family’s interest in a good restaurant during a layover at O’Hare. This was way less significant than what Nate did during a huge fire, but no less eye-opening for me.

Still, tweeting — microblogging — is just one early step in a direction where lies an endless variety of signals that can move from demand to supply. Creating open, standard and simple pro forma ways of doing that is what VRM is about.

* Tom Foremski is right when he says The Internet Devalues Everything It Touches, Anything That Can Be Digitized. But you have to read Tom’s points deeply to get the full implications. Losing the old will be painful. But there is far more value to be found in the new. For example, in fourth parties.

In Privacy is Relative my column in May’s Linux Journal, I wrote,

there are essentially two forms of privacy. One is the kind where you hide out. You minimize exposure by confining it to yourself. The other is where you trust somebody with your information.

In order to trust somebody, you need a relationship with them. You’re their spouse, friend, client or patient.

This isn’t so easy if you’re just a customer, or worse, a “consumer”. There the obligation is minimized, usually through call centers and other customer-avoidance mechanisms that get only worse as technology improves. Today, the call center wants to scrape you off onto a Web site or a chat system.

Minimizing human contact isolates your private information inside machines that have little interest in relating to you as a human being or in putting you in contact with a human being inside the company. Hence, your data is indeed safe—from you. It’s also safe from the assumption that this data might in any way also belong to you—meaning, under your control. It’s still private, but only on the company’s terms. Not on yours.

This mess can’t be fixed just by humanizing call centers. It can be fixed only by humanizing companies. This has to be done from both inside and out.

There isn’t enough room in a column like that to unpack that last statement. But there is in a thread like this one, if you’re game.

We’re a little more than a month away from The first ProjectVRM West Coast Workshop. It will will take place on Friday-Saturday 15-16 May, 2009 in Palo Alto. Graciously providing space is SAP Labs which is a beautiful facility at 1410 Hillview Street in Palo Alto. That’s up in the hills overlooking Silicon Valley and San Francisco Bay. (With plenty of parking too.)

It’s free. Sign up here.

The event will go from 9am to roughly 5pm on both days, and come just ahead of the Internet Identity Workshop (IIW2009a), down the hill in Mountain View, at the Computer History Museum. If things go the way they have for the last couple years, VRM conversation and sessions will continue at the IIW.

The tags are vrm2009 and vrm2009a.

As with earlier VRM gatherings, the purpose of the workshop is to bring people together and make progress on any number of VRM topics and projects. The workshop will be run as an “unconference” on the open space model, which means session topics will be chosen by participants. Here is the Wikipedia page on open space. In open space there are no speakers or panels — just participants, gathered to get work done and enjoy doing it. VRM Workshop 2009 wiki is now set up and ready for more detailing.

Our previous workshop was held last summer at Harvard Law School. Here’s the wiki for that. Here are some pictures as well. Those give a good sense of how things will go.

I just recorded my call with Apple Support to improve customer service:

How to hang up on a Mobile Me customer.

Apple can come to this web site to receive assistance.

So, with the help of vangeest and Twitter Search for #vrmevent, I’m addressing questions tweeted from the virtual floor here at the VRM Event in Amsterdam. Here goes…

vangeest: @dsearls: retweet @vangeest: #vrmevent: what is the relationship between the good old B2B marketplaces like Ariba and VRM?

As an idea VRM owes something to B2B, for the simple reason that B2B relationships tend to be between equals. Thus they can be rich and complex as well. B2C tend to be simplified on the B side, mostly so maximum numbers of templated Cs can be “managed”. Iain Henderson has talked about how there are thousands of variables involved in B2B VRM, while only a handful with CRM, which is B2C.

VRM essentially turns B2C into a breed of B2B — to the degree that both terms no longer apply. VRM equips individuals to express their demand in ways that B2C never allowed, and B2B never included.

But VRM is not a site, or a marketplace. That makes it different from Ariba, eBay, or online marketplaces. VRM may happen inside of those places, but VRM is not about those places.

Most importantly, VRM is not something that companies give to customers. It’s something customers bring to companies.

zantinghbozic: #vrmevent ichoosr: vrm is socialism 2.0 – http://mobypicture.com/?pcg0qr

This reports a provocative tease by Bart Stevens of iChoosr in his opening slide. I don’t agree with the statement, but his deeper point rings true: it involves a shift in power in the marketplace, from producers to consumers. Except I wouldn’t use the word consumers. I’ll explain that later.

PGreenburg: should we call CRM 2.0….duh…..VRM?

Bart Stevens: VRM vrs the “I waste a 1 billion dollar/year industry, and The wheel, fire and… VRM.

Nick Brisbourne: VRM – requirements of a good service.

Keith Hopper:  Empowering the individual creates beneficial outcomes and cultivates an environment where these contributions are most valuable. Since the best participatory environments exist to serve individuals and address their interests first and foremost, the heavy-handed, centralized actions or exploitation of participants corrupts an online collective environment irreparably. Ideally, participants develop a feeling of ownership over the environment, and providing such an atmosphere is indispensable to ensure the environment’s continuance.

Martin Kuppinger: For me, VRM, infocards and technologies like U-Prove are the pieces of a puzzle which, when ready, shows personalization and profiling as the picture.

Nilhan: The Web 2.0 Social VRM impact on Insurance and Financial Services.

I’ve just been pointed to this open letter to Google and Microsoft. Just taking public notes here.

What would happen if network speed was driven by usage rather than fixed provisioning?

That’s the question on the floor of the Berkman Center Fellows meeting I’m attending right now. (Or the ceiling, which is where I am, via teleconferencing speakers.) We’re so used to thinking of connectivity, and bandwidth, as something entirely controlled by the supply-side.

But what happens when we actually respect the power of the marketplace? What happens when the supply side listens to, and responds to, and provisions against, individual customer demand? Instead of broadband, call it…um, flexband.
The supply side would get a lot more business, wouldn’t ya think?
Rather than the few uses suppliers can imagine (TV, voip, downloads), there would be an infinite variety of uses (games, offsite storage, business services, whatever).

Obviously, this requires VRM equippage.

What would that be?

Project VRM is a research and development project of the Berkman Center for Internet and Society at Harvard University. Its purpose is to study and support the development of tools that provide customers with both independence from, and engagement with, vendors. Think of VRM as the way customers relate to vendor CRM (customer relationship management) systems.