B2B / VRM / CRM 2.0

I am fascinated with the concept of VRM (Vendor Relationship Management) and have been an irregular regular (or is that regular irregular) for some years.VRM is the idea thhat the user owns the data about themselves,and uses the data inexchange for better dealsfromthe seller. Obviously, it works better if more data is given, and also if more users can aggregate their demand. Thus this play by Loopt caught my eye - Business Insider:

That's the idea behind Loopt's new "u-Deals" product, which it's rolling out first in the San Francisco Bay Area. It's sort of the reverse Groupon.

The big idea: You come up with a deal, get your friends on board, and submit it to Loopt. They'll then try to get their sales team to get the merchant to give you the deal. If it works, you get the deal.

It's an interesting idea. Will it work?

People will have to be realistic about the size and value of the deal, otherwise it's a non-starter.

And better, more desirable merchants probably have no incentive to cut their prices, unless they can fill their shops up during slow times.

I thinkthat'sapretty good summaru of the issues - in Dotcom 1.0 a number of the aggregationsites (or C2B as they were also known) were mooted (some were even floated, iirc) but it all fizzled out as it seemed that toet a bunch of "C" side people to agree on their demand proposition was like herding cats- it still seems easier for a retailer to"propose" a proposition and consumers to react.

However, the thing that keeps me interested in VRM is that part of me thinks that if (i) the power of today's web was harnessed (ii) with modular product design ansd (iii) the sheer numbers onlinenow, it may become a reality.

One to watch.

John Battelle scoffs at those who would question Groupon's business model:

In the current issue of the New Yorker, columnist James Surowiecki, who I generally admire, gets it exactly wrong when it comes to Groupon.

He writes:

" But it seems unlikely that it’s going to become a revolutionary company, along the lines of YouTube, Facebook, Twitter, and Google. ....Groupon, by contrast, is a much more old-school business. It doesn’t have any obvious technological advantage. Its users don’t really do anything other than hit the “buy” button. And its business requires lots of hands-on attention..."

Well, that's a defensible opinion, but after visiting CEO Andrew Mason this week in Chicago, and thinking about it a bit, I must say that I wholeheartedly diasagree.

Many folks think of Groupon as a relatively simple idea. A daily deal, a large sales force, and that's about it. Too easy to copy (there are scores of "Groupon clones"), and too labor intensive (the more small businesses you want to work with, the more sales and service people you need).

(That's "The Wisdom of Crowds" Surowiecki by the way). Battelle's view is essentially that Groupon is the Next Best Thing for The Little (Business) Man:

Groupon has built a new channel into the heart of the the world's economic activity: Small businesses. And it is that channel where the true power lies.

Small businesses create more than 50% of US GDP and create more than 75% of net new jobs each year. But small businesses represent a fragmented, maddeningly difficult sector of our economy - 23 million small pieces loosely joined. Any platform that has connected them and added value to their bottom line has turned into a massive new business.

Battelle thnks Groupon will be better than the Yellow Pages and better than Google at unifying and selling to this market, and he goes on to tie Groupon to Mobile goodness too. The Holy Grail of being the single server to a massively fragmented market is clearly what is driving the Groupon groupies, but is this even viable, never mind is Groupon going to do the task? John eulogises the growth, but brushes off the increasing volume of complaints emerging that it doesn't actually make economic sense:

Sure, some of them buy too much of it, or fail to do the math and lose money on the come. They'll adjust, and if they don't, smarter SBOs will eat their lunch, and the world will move on.

So to summarize, I think those who claim Groupon's business is too simple are focused on the wrong things. Sure, there are other deal sites. But none have Groupon's scale. Sure, Groupon's model of one deal in one city on one day is limited, but it's easy to see how the product scales against category, zip code, time of day, and many other variables. And sure, Groupon has a lot of people who have to touch a lot of businesses and a lot of customers every day. But to me, that's the company's strength: SBOs are in the people business, and therefore, so must Groupon be.

And this, to my mind, is why Facebook or Google can't compete with Groupon. Imagine Facebook or Google with 1,000 people who do nothing but talk to customers all day long? Yep, I can hear the laughter from here....

Those 1,000 salesmen cost real money though, and they do not give added scale benefits, which is why these sort of businesses are low margin ones when they grow up, and low margins means low free cash, which (in real world economics) means utility valuations.

I recall reading his book on Google and thinking that he was writing it at Google's zenith, as it was getting to the end of it's "S" curve growth phase, and that he was making the mistake of assuming the future will look exactly like the past. But, given that John is brave enough to put his predictions out there though, I clearly have to come up with mine. So what do I think is the likely outcome (after the hyped IPO, that I can guarantee - but I still have the nagging sense that it could be Pointcast 2.0).

Well, actually the commentors to the post already have it taped in my view - its a nice, viable business - but not the New New Thing that it is being hyped up to be:

- Harry: There are literally thousands of categories in the yellow pages, not all of them are "Groupon-able" whereas Google still has a considerable advantage for the classifying, mapping and rating of all SMBs (ie, plumbers, divorce lawyers). Flyers, Entertainment Book and Valpak are the ones getting kicked in the pants here.

- Kevin: Groupon's margin is way way way way lower than google's, so revenue is not a good metric. Groupon has yet to build a massively profitable business with a giant core of repeat customers. I think you're wrong, John. To be like google, you need massive, high margin, and repeat customers. Groupon has one of these three.

Once the hype is over - Smaller market, lower margins, back to Coupons 2.0, as another commentator puts it.

We first explained how Free Consumer Web Services would be funded by datamining you data 2 years ago in our paper "FreeConomics II - Why your data is free but everywhere in chains" and readers of his blog will know we have been steadily warning people of privacy erosion over the last 2 years. But we are a small and specialist blog, talking manly to early users of these technologies. We have often wondered on these pages when the abuse of Privacy will "go mainstream" - in fact we thought it would be 2009 after the Beacon fiasco, but we were overoptimistic. Now however, a Wall Street Journal article yesterday laid it all out for the first time for a larger audience - to summarise:

The Journal conducted a comprehensive study that assesses and analyzes the broad array of cookies and other surveillance technology that companies are deploying on Internet users. It reveals that the tracking of consumers has grown both far more pervasive and far more intrusive than is realized by all but a handful of people in the vanguard of the industry.

• The study found that the nation's 50 top websites on average installed 64 pieces of tracking technology onto the computers of visitors, usually with no warning. A dozen sites each installed more than a hundred. The nonprofit Wikipedia installed none.

• Tracking technology is getting smarter and more intrusive. Monitoring used to be limited mainly to "cookie" files that record websites people visit. But the Journal found new tools that scan in real time what people are doing on a Web page, then instantly assess location, income, shopping interests and even medical conditions. Some tools surreptitiously re-spawn themselves even after users try to delete them.

• These profiles of individuals, constantly refreshed, are bought and sold on stock-market-like exchanges that have sprung up in the past 18 months.

The new technologies are transforming the Internet economy. Advertisers once primarily bought ads on specific Web pages—a car ad on a car site. Now, advertisers are paying a premium to follow people around the Internet, wherever they go, with highly specific marketing messages.

In between the Internet user and the advertiser, the Journal identified more than 100 middlemen—tracking companies, data brokers and advertising networks—competing to meet the growing demand for data on individual behavior and interests.

Of course, the defenders of privacy abuse will come leaping to its defence - here is Jeff Jarvis:

I just don’t understand Julia Angwin’s scare story about cookies and ad targeting in the Wall Street Journal. That is, I don’t understand how the Journal could be so breathlessly naive, unsophisticated, and anachronistic about the basics of the modern media business. It is the Reefer Madness of the digital age: Oh my God, Mabel, they’re watching us!

If I were a conspiracy theorist — and I’m not, because I’ve found the world is rarely organized enough to conspire (and I found this to be especially true of News Corp. when I worked there, at TV Guide) — I’d imagine that the Journal ginned up this alleged exposé as a way to attack everyone else’s advertising business just as its parent company skulks behind its pay wall and surrenders its own ad business. But I’m not a conspiracy theorist. That’s why I’m confused.

The rest of the piece carries on in the same ad hominem vein ad nauseam. Great rational argument there, way to go Jeff! (But then this is the man who wrote the original Google Hagiography, so he would say that, wouldn't he ).

Pushing Out Choice to Consumers

The Intenet Advertising Board (IAB) is being a bit more subtle, as Adriana Lukas explains

Here are the important bits - the reservations about HR 5777, the Best
Practices Act proposal:

1. concept of first party data usage - "when consumers go to an online
website they understand there is going to be a certain amount of data
exchange by that first party site to serve them content and services
and yes, advertising. We think that clearly the first party (data)
usage should be exempted out of this. Choice mechanism not notice - we
should always do better around giving consumers notice to about thow
their data is collected and used

2. 3rd party data sharing - the internet is nothing but a series of
3rd party relationships. Virtually every website requires those 3rd
party data sharing whether is to customise content, to run your
analytics on the backside to make sure you know who's coming to your
site to get paid or whether it's for relevant advertising. have an opt
out ??? empowering consumers to exercise their choice when they have
legitimate concerns around privacy. You need to give them good notice,
you need to empower them and you need to educate them...

"I think, it's impossible to take information out of information age.
because if you do that you are going to get less relevant advertising
and less relevant advertising by definition is spam. And I don't think
anybody wants that - it is not good for consumers and not good for
business."

In fact its probably the HR5777 Best Practices bill draft that is starting all this kerfuffle as the lobbyists and apologists gird their loins.

Getting a Cluetrain

A reasoned riposte to all this comes from Doc Searls:

Here’s what’s delusional about all this: There is no demand for tracking by individual customers. All the demand comes from advertisers — or from companies selling to advertisers.

For now.

Here is the difference between an advertiser and an ordinary company just trying to sell stuff to customers: nothing. If a better way to sell stuff comes along — especially if customers like it better than this crap the Journal is reporting on — advertising is in trouble.

Here is the difference between an active customer who wants to buy stuff and a consumer targeted by secretive tracking bullshit: everything.

Two things are going to happen here. One is that we’ll stop putting up with it. The other is that we’ll find better ways for demand and supply to meet — ways that don’t involve tracking or the guesswork called advertising.

I’ve said it before: Improving a pain in the ass doesn’t make it a kiss.

The frontier here is on the demand side, not the supply side. Advertising may pay for lots of great stuff (such as search) that we take for granted, but advertising even at its best is guesswork. It flourishes in the absence of more efficient and direct demand-supply interactions. The idea of making advertising perfectly personal has been a holy grail of the business since Day Alpha. Now that Day Omega is approaching, thanks to creepy shit like this, the advertsing business is going to crash up against a harsh fact: “consumers” are real people, and most real people are creeped out by this stuff. Rough impersonal guesswork is tolerable. Totally personalized guesswork is not.

Searls (one of the Cluetrain Manifesto authors) some time ago started to work on VRM, which could act as an alternative to this sort of "Sales By Privacy Abuse" approach by creating tools for the customer's desies to flow to providers without the need for datamining etc.

Granted a piece in the WSJ is not yet a mass market coverage, but that will now come, when organs such as the WSJ and FT pick things up, the Qualities and then the Mass media sart to echo them. Also, the emergence of HR5777 signals that the legislative wheels are starting to turn, and that too will raise the ante from now on. I would predict that this ball has now started to roll, and the by the end of 2010 we will start to see "Respect for Online Privacy" become a major issue.

About time.........

(Hmmm - article saying much the same as this one is over here - came out after us, I claim firsts )

We first explained how Free Consumer Web Services would be funded by datamining you data 2 years ago in our paper "FreeConomics II - Why your data is free but everywhere in chains" and readers of his blog will know we have been steadily warning people of privacy erosion over the last 2 years. But we are a small and specialist blog, talking manly to early users of these technologies. We have often wondered on these pages when the abuse of Privacy will "go mainstream" - in fact we thought it would be 2009 after the Beacon fiasco, but we were overoptimistic. Now however, a Wall Street Journal article yesterday laid it all out for the first time for a larger audience - to summarise:

The Journal conducted a comprehensive study that assesses and analyzes the broad array of cookies and other surveillance technology that companies are deploying on Internet users. It reveals that the tracking of consumers has grown both far more pervasive and far more intrusive than is realized by all but a handful of people in the vanguard of the industry.

• The study found that the nation's 50 top websites on average installed 64 pieces of tracking technology onto the computers of visitors, usually with no warning. A dozen sites each installed more than a hundred. The nonprofit Wikipedia installed none.

• Tracking technology is getting smarter and more intrusive. Monitoring used to be limited mainly to "cookie" files that record websites people visit. But the Journal found new tools that scan in real time what people are doing on a Web page, then instantly assess location, income, shopping interests and even medical conditions. Some tools surreptitiously re-spawn themselves even after users try to delete them.

• These profiles of individuals, constantly refreshed, are bought and sold on stock-market-like exchanges that have sprung up in the past 18 months.

The new technologies are transforming the Internet economy. Advertisers once primarily bought ads on specific Web pages—a car ad on a car site. Now, advertisers are paying a premium to follow people around the Internet, wherever they go, with highly specific marketing messages.

In between the Internet user and the advertiser, the Journal identified more than 100 middlemen—tracking companies, data brokers and advertising networks—competing to meet the growing demand for data on individual behavior and interests.

Of course, the defenders of privacy abuse will come leaping to its defence - here is Jeff Jarvis:

I just don’t understand Julia Angwin’s scare story about cookies and ad targeting in the Wall Street Journal. That is, I don’t understand how the Journal could be so breathlessly naive, unsophisticated, and anachronistic about the basics of the modern media business. It is the Reefer Madness of the digital age: Oh my God, Mabel, they’re watching us!

If I were a conspiracy theorist — and I’m not, because I’ve found the world is rarely organized enough to conspire (and I found this to be especially true of News Corp. when I worked there, at TV Guide) — I’d imagine that the Journal ginned up this alleged exposé as a way to attack everyone else’s advertising business just as its parent company skulks behind its pay wall and surrenders its own ad business. But I’m not a conspiracy theorist. That’s why I’m confused.

The rest of the piece carries on in the same ad hominem vein ad nauseam. Great rational argument there, way to go Jeff! (But then this is the man who wrote the original Google Hagiography, so he would say that, wouldn't he ).

Pushing Out Choice to Consumers

The Intenet Advertising Board (IAB) is being a bit more subtle, as Adriana Lukas explains

Here are the important bits - the reservations about HR 5777, the Best
Practices Act proposal:

1. concept of first party data usage - "when consumers go to an online
website they understand there is going to be a certain amount of data
exchange by that first party site to serve them content and services
and yes, advertising. We think that clearly the first party (data)
usage should be exempted out of this. Choice mechanism not notice - we
should always do better around giving consumers notice to about thow
their data is collected and used

2. 3rd party data sharing - the internet is nothing but a series of
3rd party relationships. Virtually every website requires those 3rd
party data sharing whether is to customise content, to run your
analytics on the backside to make sure you know who's coming to your
site to get paid or whether it's for relevant advertising. have an opt
out ??? empowering consumers to exercise their choice when they have
legitimate concerns around privacy. You need to give them good notice,
you need to empower them and you need to educate them...

"I think, it's impossible to take information out of information age.
because if you do that you are going to get less relevant advertising
and less relevant advertising by definition is spam. And I don't think
anybody wants that - it is not good for consumers and not good for
business."

In fact its probably the HR5777 Best Practices bill draft that is starting all this kerfuffle as the lobbyists and apologists gird their loins.

Getting a Cluetrain

A reasoned riposte to all this comes from Doc Searls:

Here’s what’s delusional about all this: There is no demand for tracking by individual customers. All the demand comes from advertisers — or from companies selling to advertisers.

For now.

Here is the difference between an advertiser and an ordinary company just trying to sell stuff to customers: nothing. If a better way to sell stuff comes along — especially if customers like it better than this crap the Journal is reporting on — advertising is in trouble.

Here is the difference between an active customer who wants to buy stuff and a consumer targeted by secretive tracking bullshit: everything.

Two things are going to happen here. One is that we’ll stop putting up with it. The other is that we’ll find better ways for demand and supply to meet — ways that don’t involve tracking or the guesswork called advertising.

I’ve said it before: Improving a pain in the ass doesn’t make it a kiss.

The frontier here is on the demand side, not the supply side. Advertising may pay for lots of great stuff (such as search) that we take for granted, but advertising even at its best is guesswork. It flourishes in the absence of more efficient and direct demand-supply interactions. The idea of making advertising perfectly personal has been a holy grail of the business since Day Alpha. Now that Day Omega is approaching, thanks to creepy shit like this, the advertsing business is going to crash up against a harsh fact: “consumers” are real people, and most real people are creeped out by this stuff. Rough impersonal guesswork is tolerable. Totally personalized guesswork is not.

Searls (one of the Cluetrain Manifesto authors) some time ago started to work on VRM, which could act as an alternative to this sort of "Sales By Privacy Abuse" approach by creating tools for the customer's desies to flow to providers without the need for datamining etc.

Granted a piece in the WSJ is not yet a mass market coverage, but that will now come, when organs such as the WSJ and FT pick things up, the Qualities and then the Mass media sart to echo them. Also, the emergence of HR5777 signals that the legislative wheels are starting to turn, and that too will raise the ante from now on. I would predict that this ball has now started to roll, and the by the end of 2010 we will start to see "Respect for Online Privacy" become a major issue.

About time.........

(Hmmm - article saying much the same as this one is over here - came out after us, I claim firsts )

Post by Jeremiah Owyang on The Future of Twitter: Social CRM (abridged):

Manually tracking a large brand within Twitter isn’t scalable

It’s important to first realize that managing a large brand on Twitter isn’t scalable, with hundreds –maybe thousands of tweets about a marketplace a day, individuals will have a very difficult time managing, Brian Solis has some relevant stats on growth. The next challenge? determining who these people are, and if they are a potential customer is important, who are these people, are they important, where do they live? Lastly, responding in near real time is going to be key –as some users may ask their peers for product recommendations during point of sale, right in the store.

Twitter has two of the three key features of a CRM system

First, let’s break down why Twitter is going to be a Social CRM, let’s start by analyzing what entails Customer Relationship Management:

1) Customers: Yes, they got that. More than that, they have prospects, which to some marketers is far more valuable. However the challenge is mapping which Twitter ID is which customer –many don’t use their real names.

2) Relationships: Got that too. Now I realize that the intended definitions of CRM meant the relationships between customers and employees of a brand, but now you can see how people in Twitter are connecting to each other, and those that follow a brand, their indicating affinity towards them. The interesting thing is they don’t just offer affinity towards your brand, but also competitors, which helps in segmenting your market, and can help with poaching.

3) Management: Here lies the opportunity Twitter has no management tools to support this, as a result, their data is being whisked away in the API and being aggregated by two types of companies.

Jeremiah's argument is that this is a good opportunity for CRM companies to import twitter data into their listening platforms, and then offer simple workflow and task management (no doubt this article is written to tie in to the Salesforce.com announcement of Twitter support). He suggest they go down Facebook's route:

Twitter can go further than this, they could be their own CRM system, by perhaps offering their own analytics system to brands, that will help them to track and manage the conversations within the 140 sphere. This has tremendous opportunities for Twitter should they create their own brand management system that they can resell to the world’s companies to monitor, alert, track, prioritize, triage, assign, followup, and report on the interactions with brands.

I'm not sure this is a Good Plan, as Facebook has been involved in some pretty noisy episodes regarding doing various flavours of this, as has Phorm, and even Do-No-Evil Google is increasingly distrusted for just this sort of thing.

I wonder if a better play might be for Twitter to reverse this and build tools to let users manage their own data, a la VRM principles. In many ways Twitter facilitates this as:

- Asymmetric following goes both ways, users can as easily follow brands they want

- The 140 character limit is a great tool for semantic ontologies - initiating easily understood coded convos in this solution space would be relatively easy and lightweight

- you could put in lightweight clientside apps to manage customer / server interactions automatically

- Its realtime, so when required one can step up to conversation in an instant

- It should be possible to complete a transaction (and take a %) via the platform or a proxy service

VRM is also a less intrusive and potentially a more valuable system as:

- in this case there are a variety of business models (from producer pays to consumer pays, with various inbetweens)

- the "endgame" for VRM is to reduce the spend on unnecessary advertising and stock to mitigate demand uncertainty. This requires trust built over many lightweight "moments" of truth.

Realtime Unified Comms is a nice platform to run these sort of services off.

Not so long after a piece of research showing that display Ads are more effective than previously thought, comes this one from Barron's noting at display ads may be less so:

In a fascinating series of reports today, new Canaccord Adams Internet analyst Jeff Rath takes a close look at the Internet advertising sector, and concludes that the CPC model is more vulnerable than some people might believe. Rath launched coverage today on 7 Internet stocks today, starting 5 of them with Neutral ratings - Google (GOOG), IAC (IACI), Marchex (MCHX), Local.com (LOCM) and Answers Corp. (ANSW). He has a Sell rating on ValueClick (VCLK), and his sole Buy rating on BankRate (RATE).

For Google, he has a price target of $300, below the current level.

“We believe the tide on performance-based advertising as a counter-cyclical ad format better able to weather a downturn has shifted, and we expect to see CPC pricing and the density/volume of clicks to decline,” he writes. “Our checks support the thesis that while Google continues to have various levers at its disposal to meet estimates, revenue estimates estimates could be at risk with search representing the company’s primary source of revenue.”

He goes on to assert that Google could be reaching “the inflection point of its product cycle,” and that “margin contraction could be significant.” He writes that Google “has tremendous alternative product opportunities in its pipeline that could reinvigorate the product cycle,” but that he does not expect any of those to contribute materially in the near term.

Here are few of Rath’s other observations about the Internet ad environment:

- He sees CPM rates dropping “precipitously” in Q1, with prices potentially falling by 15%-20%, “as checks indicate budget cuts around branding campaigns are the first to be pulled.” (That would be bad for Yahoo, among others.)
- He expects CPC rates to be weaker than expected; he thinks CPC growth could turn negative over the next several quarters due to weaker demand; he says pricing could come down due to “weak bid density on keywords.”
- December quarter and 2009 consensus estimates “are potentially at risk due to recent foreign exchange volatility that has seen the U.S. dollar strengthen materially.”
- He thinks 2009 EPS for the sector could show modest to zero EPS growth.
- Another risk, he says, is reduced interest income, with cash balances yielding next to nothing.
- The ad network space is over-crowded, with more than 300 players. He expects them to see “severe competitive pressures,” and notes that increased integration of DoubleClick by Google and aQuantive by Microsoft could place further pressure on the independent networks and lead to “aggressive consolidation.” (Ergo, the Sell rating on VCLK.)
- He expects TAC, traffic acquisition costs, to trend higher due to competitive pressures from competing search engines.

The only thing Google makes margin from at present is search Ads, so if margins reduce on these then this will put a lot more pressure on their other operations. Early signposts will be closure of more marginal services, and effors to reduce YouTube losses. Funnily enough, thats what they've been up to recently........

On Monday the London VRM (Vendor Relationship Management) Hub put together a first half day workshop, looking mainly at User & Supplier issues (though of course it rapidly broadened into all sorts of other topics). I couldn't make it till later, but reading the blogs it seems a good time was had by all. For my bit in the Great VRM Endeavour, I've been looking at the economics and business models for VRM, and on Monday a number of the key issues it faces emerged. I've tried to summarise the key ones below:

Firstly, the economics of Conversational Markets



Doc Searls, one of the Authors of the Cluetrain manifesto, is the spiritual father of VRM, and one of the key tenets of Cluetrain is all markets are conversations. To a large extent this has been taken on board as a VRM core tenet, and is one of the features that gives it it's unique flavour.

However, the immediate comeback from commercially experienced people is that there is clearly a whole raft of relationships where the transaction costs are high, and / or the surplus value in the product is so low (see diagram above) that any conversation more than "Visa - that will do nicely" is impossible to cost justify. What we will therefore need to show going forward is that VRM can push these barriers back, in 2 ways:

- that VRM allows a sustained conversation such that the cost over a series of transactions are bearable

- that VRM can facilitate additional types of value via conversation (reduced churn, say)

Secondly, there is a debate about whether VRM can be executed by the users alone, or whether it needs to tempt suppliers to collaborate (ie either the gross value of serving all those VRM'ers is sufficienly alluring, vs. There has to be a giveaway to make suppliers use it). Any supplier will have to invest in new equipment /processes to serve VRM customers, so will be looking at +ve ROI. To answer this issue I looked at where the benefits are to the supplier, and they lie in 3 key areas:

Firstly, revenue increase:

- Increased Sales Volumes - if there are enough VRM'ers, then catering to them increases sales volume vs competitors that don't

- Increased Average Revenue per Customer - in theory having a deeper relationship should allow higher prices for higher service values, and higher trust can increase on-selling and cross-selling

Secondly, OPEX reduction:

- Relationships should also transalte into loner customer lifecycle / reduced churn

- Reduced OPEX - advertising becomes more predictable so teh 50% that doesn't work can be reduced, and better customer knowledge allows reductions in production and distribution waste, since more certainty allows better Lean Operation techniques to be used

Thirdly, CAPEX reductions:

- more productive use of existing assets via more efficient understanding of demand

- reduction in future CAPEX via better use of existing services and/or better targeting of future investment

While we can see that VRM can potentially address all these areas - even a small % improvement in each area yields huge increase in value - we are still very much in the "prove it" phase. We need some pilots!

Which brings me on to the third model issue - STL's Martin Geddes was there on Monday (see Doc Searls's summary of some of Martin's thinking over here), we have worked together on 2 sided business models elsewhere in the online service space. Martin's view is that VRM is potentially likely to need a 2 sided model (ie a transacting party in the middle), whereas others in the VRM space feel it is far simpler buyer/supplier relationship.

I suspect there will need to be space for both approaches (and others), in the early days at any rate. There will be a huge wave of experimentation across all the VRM axes in the early days, and we need to run a broad ecosystem so that darwinian evolution can occur. In fact, I chatted about this with Doc Searls the next day, he noted that in his view the "best of breed" solutions to VRM could easily come from a direction nobody has yet imagined, as it does so often in new emerging areas.

An excellent day, with excellent commentary, conversation and creative thoughts - as someone said, this is the coffee houses of London all over again. Kudos to Adriana Lukas for driving it....

On November the 3rd 2008, London's VRM scene is putting up the first London VRM Conference starting at 2pm and on to drinks and discussion. Details are on the VRM Hub site.

For those not aware, VRM stands for Vendor Relationship Management - the ‘flipside’ of Customer Relationship Management. Customers and vendors are in a locked see-saw with one side hugely outweighing the other. Like with a real world see-saw in such position, the fun is spoiled for both. VRM supports creation of tools that equip the individual and minimize the control one party has over another in a relationship. It aims to create a more efficient and balanced relationship between business and their customers, markets and companies, demand and supply.

Adriana Lukas, chief organiser, has deliberately made it Users and Suppliers only, talking about the practicalities of VRM, so no venal consultancies, experts etc will be on stage This should give some fantastic insight to the real world issues VRM needs to address to succeed.

It's FREE as well!

So don't delay, register here today!

Article in Read/Write Web about an interview with (Sir) Tim Berners Lee (points to a more complete transcript on ZD Net as well):

“There’s an awful lot of data out there. And I think, one of the huge misunderstandings about the Semantic Web is, ‘oh, the Semantic Web is going to involve us all going to our HTML pages and marking them up to put semantics in them.’ Now, there’s an important thread there, but to my mind, it’s actually a very minor part of it. Because I’m not going to hold my breath while other people put semantics in by hand… So, where is the data going to come from? It’s already there. It’s in databases…”

Our hypothesis is that the Semantic Web will be initially implemented in verticals, where the the total number of terms used is smaller and thus manageable (See earlier posts here and here), and I think this is also an implicit recognition of that, because most databases are in verticals. Some verticals are far more advanced in using common terms (eg EDI) to communicate than others

In fact I'd go so far as to say the Semantic Web is here, now - just very unevenly distributed

In addition, there was an allusion to the area we think will most drive the semantic web, ie the needs of machines on the 'net - they are just not smart enough to understand context, and thus will need a simple taxonomy (an Esperanto for sensors - the Pidgin protocols?) to function.

Incidentally, this could also have huge benefits for people, eg making it easy to have one identity and not have to sign in multiple times with names, addresses etc onto multiple systems.

Update - Paul Miller has a vodcast interview on the subject over on Nodalities (my RSS reader too is unevenly ditributed )

Its Friday night, and the weekend approaches - so what does a gentleman do in London Town? Thats right, he goes across town in the rain and dark, and approaches a dark dive deep in a basement - but not to partake of the sins of the flesh. No, dear reader, one goes to talk about Vendor Relationship Management (VRM) with other plotters of the Customer Revolution, including one Doc Searls, who having written part of the Cluetrain Manifesto was here in London to spread sedition this Guy Fawkes week.

(Aside to clarify - VRM as used here is the concept of turning CRM on its head, not to be confused with the ERP based module attached to Purchasing Management)

We (along with many others I suspect) have been working on some aspects of what is emerging as the "VRM thang" for several years, so it was very interesting to meet fellow plotters from various walks of life and compare notes, as it has become apparent to us over the last few months that the full articulation of the VRM concept taps into a number of parallel universes (Customer aggregation, C2B thinking etc, Social Networking), needs to understand complex Transcation Theory, the Semantic Web - or at least M2M comms - and has to deal with the emerging Digital Trinity (Privacy, Identity, Security). Plus there is enough cryptography and smart database design to keep even the Broadsight geeks happy (Quadruple-play real time OSS systems being pretty geeky, let me tell you...)

And be simple and instinctive to use, of course....

The net present value of the customers' future spend is a large number, and to return proper value to the user it has to be under the user's control. And right now nearly all the commercial interest is in building tools to disenfranchise the users, not empower them. (Despite the official blurb, many of the Web 2.0 sites are designed to monetise your work and content and hand you back very little value in return).

So, this Guy Fawkes week made it a very timely soiree - as you may have observed reading this blog, we are more than a bit concerned with the more Orwellian aspects of what players like Facebook and Google can do with data, and we feel that the customer needs a more coherent form of defence. If we don't hang out together, we will most certainly be hung out to dry separately.

Thanks also to Adriana Lukas for organising the soiree, the pizza, and the beers. If Guy Fawkes had had Pizza, who knows what turn history may have taken.