I attended an NMK seminar on vendor relationship management (VRM) last night (thanks to Ian Delaney for organising a great event).  This is an area I have been getting excited about recently, and I posted some early thoughts here (the comments are also worth a read).

Unfortunately I had to leave the seminar early so I’m not sure how the debate finished, but for me the striking thing about the first part of the discussion was the motivations of the key proponents of VRM.  Their agenda was mostly about consumers taking control of their data – i.e. taking it back for themselves away from the silo CRM systems of their suppliers.

I have been thinking of VRM slightly differently – as a more efficient way of managing the information flow between suppliers and (potential) customers.  For me the beauty of VRM is that it eliminates the waste on both sides of the advertising equation – most adverts that suppliers pay for hit people outside their target market, and as consumers most of the ads we watch are not interesting to us.  With VRM suppliers get to focus their communications 100% on people who are interested in their message (a key enabler of conversations).  Similarly as a consumer I can be more engaged with vendors messages as I know they will be relevant for me (admittedly this part feels further out).

In the vision of Adriana Lukas at least the promise of VRM lies more in having our personal data in a single place and being able to mine it ourselves.

That sounds great as well, but from an investment perspective it doesn’t feel like the same scale of opportunity as the VRM vision I described above.  In a related point there are strong ties between the open source and VRM movements which lends a further non-commercial air.

Nothing wrong with that of course, it just means that VRM might fall outside of what I’m paid to focus on.

It is early days, but it feels to me like there is a lot of potential in this concept, but big new companies are only going to come out of the VRM movement in the next three to five years if the agenda is more avowedly commercial than I heard last night.

The interesting question for me is whether that is on the agenda.

Speakers at the event last night were:
Adriana Lukas, Alan Patrick and Jeremy Ruston.

  • Nic, pity you left early – I waxed lyrical on what I would call “Pragmatic”, as opposed to “Theoretic” VRM – for exactly those issues – I will have to blg it I think!

  • Nic, pity you left early – I waxed lyrical on what I would call “Pragmatic”, as opposed to “Theoretic” VRM – for exactly those issues – I will have to blg it I think!

  • Bart Stevens

    Nic,

    I missed my train (eurostar from Brussels) to attend the event … ;(

    Interesting to see a “money man” was there. I agree with you on the point of open source.
    I’m working on the concepts/business model as described at http://www.replacegoogle.com which describes the change in the advertisement model and the availability of 33% (of the advertisement budget) for a VRM business model.
    Contact me at my email to discuss further if you have any interest.
    Cheers,

    Bart (dot) Stevens (at) ichoosr (dot) com

  • Nic,

    I missed my train (eurostar from Brussels) to attend the event … ;(

    Interesting to see a “money man” was there. I agree with you on the point of open source.
    I’m working on the concepts/business model as described at http://www.replacegoogle.com which describes the change in the advertisement model and the availability of 33% (of the advertisement budget) for a VRM business model.
    Contact me at my email to discuss further if you have any interest.
    Cheers,

    Bart (dot) Stevens (at) ichoosr (dot) com

  • Nic – there are indeed two sides to the proposition. The first half is the data store (OSS, free-as-in-beer, run by a foundation, probably not very interesting to Esprit – though support would put you in a great position for…) The second half, which is the tools and business opportunities around that. In particular, businesses will need their own feed readers and information aggregators – and those present excellent opportunities for investors, I think.

    There’s also the hosted consumer store of information. Most consumers don’t want their own server – so they’ll place it with someone else. cf. email

    The first half needs to get off the ground before the second half is worth anything, of course. Which is why these early meetings are so exciting, perhaps. And, from what I have read, the implementation, given a couple of willing hackers, is relatively simple. (see the Feeds-Based VRM Implementation paper – but I am a development muppet so feel free to disregard).

  • Nic – there are indeed two sides to the proposition. The first half is the data store (OSS, free-as-in-beer, run by a foundation, probably not very interesting to Esprit – though support would put you in a great position for…) The second half, which is the tools and business opportunities around that. In particular, businesses will need their own feed readers and information aggregators – and those present excellent opportunities for investors, I think.

    There’s also the hosted consumer store of information. Most consumers don’t want their own server – so they’ll place it with someone else. cf. email

    The first half needs to get off the ground before the second half is worth anything, of course. Which is why these early meetings are so exciting, perhaps. And, from what I have read, the implementation, given a couple of willing hackers, is relatively simple. (see the Feeds-Based VRM Implementation paper – but I am a development muppet so feel free to disregard).

  • FWIW, I am interested because it gives power back to the customer (me). So count me among the idealists, but I can certainly see very interesting businesses coming out of this.

  • FWIW, I am interested because it gives power back to the customer (me). So count me among the idealists, but I can certainly see very interesting businesses coming out of this.

  • nic

    Ian – thanks for the comments and also the event. My first instinct is that the personal data store will not be that simple. For it to grow beyond a few idealists it needs to combine easy set up, easy data capture, a great GUI for controlling how information is exposed, and finally something that makes it worthwhile before the second half arrives (to Adriana’s point that could be personal data mining a la Wesabe and Kublax).

    Right now I’m a little skeptical that open source can deliver on this sort of consumer proposition. For sure the infrastructure and architecture behind it, but not the consumer proposition.

  • nic

    Ian – thanks for the comments and also the event. My first instinct is that the personal data store will not be that simple. For it to grow beyond a few idealists it needs to combine easy set up, easy data capture, a great GUI for controlling how information is exposed, and finally something that makes it worthwhile before the second half arrives (to Adriana’s point that could be personal data mining a la Wesabe and Kublax).

    Right now I’m a little skeptical that open source can deliver on this sort of consumer proposition. For sure the infrastructure and architecture behind it, but not the consumer proposition.

  • Several points.

    First, VRM is commercial. As a means for providing customers with better tools for engaging sellers, what else could it be? It will also be used for non-commercial purposes as well. Yet, just as the nature of markets is commercial, so is the nature of VRM.

    Second, VRM indeed should improve both sides of many equations by which buyers and sellers engage, advertising among them. But it is not just about improving advertising. While it will do much to reduce the guesswork that advertising by nature involves, its purpose is to improve markets fundamentally by equipping the demand side with tools of engagement that should help improve many kinds of relationships between companies and customers. Those include sales, marketing, distribution, retailing, R&D, manufacture and much more.

    Third, VRM is required to build an Intention Economy, which will be based on demand doing a much better job of finding and driving supply. See http://www.linuxjournal.com/node/1000035 (written before the term VRM was applied, which is why you don’t find it in that article). A sample:

    “The Intention Economy grows around buyers, not sellers. It leverages the simple fact that buyers are the first source of money, and that they come ready-made. You don’t need advertising to make them.

    “The Intention Economy is about markets, not marketing. You don’t need marketing to make Intention Markets.

    “The Intention Economy is built around truly open markets, not a collection of silos. In The Intention Economy, customers don’t have to fly from silo to silo, like a bees from flower to flower, collecting deal info (and unavoidable hype) like so much pollen. In The Intention Economy, the buyer notifies the market of the intent to buy, and sellers compete for the buyer’s purchase. Simple as that.

    “The Intention Economy is built around more than transactions. Conversations matter. So do relationships. So do reputation, authority and respect. Those virtues, however, are earned by sellers (as well as buyers) and not just “branded” by sellers on the minds of buyers like the symbols of ranchers burned on the hides of cattle.

    “The Intention Economy is about buyers finding sellers, not sellers finding (or ‘capturing’) buyers.

    “In The Intention Economy, a car rental customer should be able to say to the car rental market, ‘I’ll be skiing in Park City from March 20-25. I want to rent a 4-wheel drive SUV. I belong to Avis Wizard, Budget FastBreak and Hertz 1 Club. I don’t want to pay up front for gas or get any insurance. What can any of you companies do for me?’ — and have the sellers compete for the buyer’s business.”

    The intention Economy will emerge when we have what John Deighton (a professor here at the Harvard Business School) calls a “demand chain”. We need to build a demand chain that pulls as well as the supply chain pushes. That’s what VRM will do.

    Fourth, VRM is about relationships that go both ways, on the buyers’ as well as the sellers’ terms. Current CRM systems barely contemplate this, but they will once VRM engages them from the customer side. (By the way, I’ve seen VRM referred to lately as the “opposite” of CRM. That’s like referring to men as the opposite of women. The two are complementary, and need to engage with each other, and indeed will become necessary to each other.)

    Fifth, we have an enormous amount of open source infrastructure already. Since 1995 the “LAMP stack” (Linux, Apache, MySQL, Perl, PHP, Python, et. al.) has grown from a handful of code bases to more than half a million. We depend on them every day. They include the protocols and standards that define the Net and the Web, plus XML, RSS and countless other means by which we can communicate our wants and needs, and scaffold new relationships. In no case is any open source code base anti-commercial. We need them to build out commercial products of all kinds.

    Sixth, open source requires that we recognize “because effects” in economics. These are ones where we make money *because of* something, rather than just *with* it. Far more money is made because of open source code than with it. And again, that includes the Net itself. If the Net were built to be owned by anybody, it never would have happened, and today we would not be able to derive its benefits, which are abundant beyond measure. This is why the base protocols and standards of VRM need to be open.

    A good model for the ecology of computing and networking is the construction industry. At its base construction depends on an absence of secrets and ownership regarding essential building materials and methods. The periodic table, from which all building materials are made, is open and free. Nobody owns any of it. Nor does anybody own the design for an oak tree, or the forms of basic building materials and designs. Yet construciton is filled with countless proprietary products, from door latches to fabricated floor joists and trusses. What matters is that there is no need to depend on one company’s “platform” for building a house.

    What we see today is a maturing of the software industry toward something that ever more resembles the construction industry, with architects, designers and builders working with mixes of open and closed, proprietary and public domain materials and methods.

    Seventh, you’re right, Nic, that VRM needs to “combine easy set up, easy data capture, a great GUI for controlling how information is exposed, and finally something that makes it worthwhile”. Without good GUIs, VRM can’t work. That statement, however, is true regardless of whether the code used to create those GUIs is closed or open. Today we use Web browsers with GUIs that have been created and improved almost entirely by open source processes. Yet again the money made with browsers is miniscule compared to the money made because of them. Such will also be the case with the base materials from which we make VRM.

  • Several points.

    First, VRM is commercial. As a means for providing customers with better tools for engaging sellers, what else could it be? It will also be used for non-commercial purposes as well. Yet, just as the nature of markets is commercial, so is the nature of VRM.

    Second, VRM indeed should improve both sides of many equations by which buyers and sellers engage, advertising among them. But it is not just about improving advertising. While it will do much to reduce the guesswork that advertising by nature involves, its purpose is to improve markets fundamentally by equipping the demand side with tools of engagement that should help improve many kinds of relationships between companies and customers. Those include sales, marketing, distribution, retailing, R&D, manufacture and much more.

    Third, VRM is required to build an Intention Economy, which will be based on demand doing a much better job of finding and driving supply. See http://www.linuxjournal.com/node/1000035 (written before the term VRM was applied, which is why you don’t find it in that article). A sample:

    “The Intention Economy grows around buyers, not sellers. It leverages the simple fact that buyers are the first source of money, and that they come ready-made. You don’t need advertising to make them.

    “The Intention Economy is about markets, not marketing. You don’t need marketing to make Intention Markets.

    “The Intention Economy is built around truly open markets, not a collection of silos. In The Intention Economy, customers don’t have to fly from silo to silo, like a bees from flower to flower, collecting deal info (and unavoidable hype) like so much pollen. In The Intention Economy, the buyer notifies the market of the intent to buy, and sellers compete for the buyer’s purchase. Simple as that.

    “The Intention Economy is built around more than transactions. Conversations matter. So do relationships. So do reputation, authority and respect. Those virtues, however, are earned by sellers (as well as buyers) and not just “branded” by sellers on the minds of buyers like the symbols of ranchers burned on the hides of cattle.

    “The Intention Economy is about buyers finding sellers, not sellers finding (or ‘capturing’) buyers.

    “In The Intention Economy, a car rental customer should be able to say to the car rental market, ‘I’ll be skiing in Park City from March 20-25. I want to rent a 4-wheel drive SUV. I belong to Avis Wizard, Budget FastBreak and Hertz 1 Club. I don’t want to pay up front for gas or get any insurance. What can any of you companies do for me?’ — and have the sellers compete for the buyer’s business.”

    The intention Economy will emerge when we have what John Deighton (a professor here at the Harvard Business School) calls a “demand chain”. We need to build a demand chain that pulls as well as the supply chain pushes. That’s what VRM will do.

    Fourth, VRM is about relationships that go both ways, on the buyers’ as well as the sellers’ terms. Current CRM systems barely contemplate this, but they will once VRM engages them from the customer side. (By the way, I’ve seen VRM referred to lately as the “opposite” of CRM. That’s like referring to men as the opposite of women. The two are complementary, and need to engage with each other, and indeed will become necessary to each other.)

    Fifth, we have an enormous amount of open source infrastructure already. Since 1995 the “LAMP stack” (Linux, Apache, MySQL, Perl, PHP, Python, et. al.) has grown from a handful of code bases to more than half a million. We depend on them every day. They include the protocols and standards that define the Net and the Web, plus XML, RSS and countless other means by which we can communicate our wants and needs, and scaffold new relationships. In no case is any open source code base anti-commercial. We need them to build out commercial products of all kinds.

    Sixth, open source requires that we recognize “because effects” in economics. These are ones where we make money *because of* something, rather than just *with* it. Far more money is made because of open source code than with it. And again, that includes the Net itself. If the Net were built to be owned by anybody, it never would have happened, and today we would not be able to derive its benefits, which are abundant beyond measure. This is why the base protocols and standards of VRM need to be open.

    A good model for the ecology of computing and networking is the construction industry. At its base construction depends on an absence of secrets and ownership regarding essential building materials and methods. The periodic table, from which all building materials are made, is open and free. Nobody owns any of it. Nor does anybody own the design for an oak tree, or the forms of basic building materials and designs. Yet construciton is filled with countless proprietary products, from door latches to fabricated floor joists and trusses. What matters is that there is no need to depend on one company’s “platform” for building a house.

    What we see today is a maturing of the software industry toward something that ever more resembles the construction industry, with architects, designers and builders working with mixes of open and closed, proprietary and public domain materials and methods.

    Seventh, you’re right, Nic, that VRM needs to “combine easy set up, easy data capture, a great GUI for controlling how information is exposed, and finally something that makes it worthwhile”. Without good GUIs, VRM can’t work. That statement, however, is true regardless of whether the code used to create those GUIs is closed or open. Today we use Web browsers with GUIs that have been created and improved almost entirely by open source processes. Yet again the money made with browsers is miniscule compared to the money made because of them. Such will also be the case with the base materials from which we make VRM.

  • nic

    Thanks for the comment Doc, and good to hear the commercialism running through your thoughts.

    A couple of responses – firstly, I’m familiar with your writings and didn’t mean to reduce the benefits of VRM purely to advertising. I guess I just see that as the first big pot of money to go after.

    Nor did I mean to trivialise the importance of open source, which as you describe has made an awesome contribution to everything we see on the web (and indirectly to our fund…) – but that has been at an infrastructure level. I agree that it doesn’t matter if the code used to create the VRM web app/GUI is open or closed, but my instinct is that what we need here is the kind of vision, design, drive and PR that is most often found in private companies with at least an element of proprietary code. For me the analogy is more with Skype or Facebook than the browser.

    best,
    Nic

  • nic

    Thanks for the comment Doc, and good to hear the commercialism running through your thoughts.

    A couple of responses – firstly, I’m familiar with your writings and didn’t mean to reduce the benefits of VRM purely to advertising. I guess I just see that as the first big pot of money to go after.

    Nor did I mean to trivialise the importance of open source, which as you describe has made an awesome contribution to everything we see on the web (and indirectly to our fund…) – but that has been at an infrastructure level. I agree that it doesn’t matter if the code used to create the VRM web app/GUI is open or closed, but my instinct is that what we need here is the kind of vision, design, drive and PR that is most often found in private companies with at least an element of proprietary code. For me the analogy is more with Skype or Facebook than the browser.

    best,
    Nic

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  • Iain Henderson

    Hi Nic,

    Whilst ‘VRM’ is a good term for evangelism, my own view is that we need to go one or more levels down from that to really understand where and how it becomes commercial.

    i.e. just as CRM has many sub-components, so will VRM.

    And, just like CRM (which is built on the proverbial ‘single view of the customer), some of the VRM components will be ‘infrastructure’ (e.g. personal data stores, feeds/ data portability), and others will be commercial (VRM applications that typically tap into/ interface with the underlying plumbing).

    I think both VRM infrastructure and VRM applications can and will both be commercial, but the earliest incarnations of the personal data store are likely to be run as social enterprises (co-ops etc). Commercial versions of the infrastructure will then emerge over time once the case has been made.

    But VRM applications are likely to be highly commercial from the start – tapping into the whole gamut of improvements that can be made across the current seller-centric processes. A more detailed breakdown of likely ‘VRM applications’ can be found at http://www.rightsideup.net/buyercentricbasics2.htm

    Cheers

    Iain

  • Iain Henderson

    Hi Nic,

    Whilst ‘VRM’ is a good term for evangelism, my own view is that we need to go one or more levels down from that to really understand where and how it becomes commercial.

    i.e. just as CRM has many sub-components, so will VRM.

    And, just like CRM (which is built on the proverbial ‘single view of the customer), some of the VRM components will be ‘infrastructure’ (e.g. personal data stores, feeds/ data portability), and others will be commercial (VRM applications that typically tap into/ interface with the underlying plumbing).

    I think both VRM infrastructure and VRM applications can and will both be commercial, but the earliest incarnations of the personal data store are likely to be run as social enterprises (co-ops etc). Commercial versions of the infrastructure will then emerge over time once the case has been made.

    But VRM applications are likely to be highly commercial from the start – tapping into the whole gamut of improvements that can be made across the current seller-centric processes. A more detailed breakdown of likely ‘VRM applications’ can be found at http://www.rightsideup.net/buyercentricbasics2.htm

    Cheers

    Iain

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