My first impression: It’s still early in the game. Very early. We’re still wrapping our head around the whole concept of VRM. Since the idea was to bring together visionaries/practitioners of VRM and CRM, the discussion often reverted back to CRM and how to monetize the customer/data. Clearly, all of us have problems transitioning from the old marketing/advertising paradigm into a new world where advertising is pure demand creation, driven by the attention economy, and relationships between brands and people fall under the VRM umbrella, purely intention driven.

CRM was designed to control customers even better. VRM is an added layer to provide customers with controls. To create an ecosystem that delivers value to all parties. Value doesn’t necessarily mean monetary value. To build all these systems to get $1 off on a deal doesn’t seem worth all the effort. The value is in creating real relationships between people and brands. By collaborating and co-creating value with customers. The future of business is in creating something more valuable and meaningful than just pure shareholder value.

As Umair Haque says in his “Smart Growth Manifesto”,

“21st century economies will be powered by smart growth. Not all growth is created equal. Some kinds of growth are more valuable than others. Where dumb growth is unsustainable, unfair, and brittle, smart growth is sustainable, equitable, and resilient.

Here are the four pillars of smart growth – for economies, communities, and corporations:

1. Outcomes, not income. Dumb growth is about incomes – are we richer today than we were yesterday? Smart growth is about people, and how much better or worse off they are – not merely how much junk an economy can churn out. Smart growth measures people’s outcomes – not just their incomes. Are people healthier, fitter, smarter, happier? Economics that measure financial numbers, we’ve learned the hard way, often fail to be meaningful, except to the quants among us. It is tangible human outcomes that are the arbiters of authentic value creation.

2. Connections, not transactions. Dumb growth looks at what’s flowing through the pipes of the global economy: the volume of trade. Smart growth looks at how pipes are formed, and why some pipes matter more than others: the quality of connections. It doesn’t just look at transactions at the global, regional, or national level — how much world trade has grown, for example — but looks at how local and global relationships power invention and innovation. Without Silicon Valley’s relationships powering the development of personal computing and the internet, for example, the volume of trade between Taiwan, Japan, and China, would be a fraction of what it is. Smart growth seeks to amplify connection and community — because the goal isn’t just to trade, but to co-create and collaborate.

3. People, not product. The next time you hear an old dude talking about “product”, let him know the 20th century ended a decade ago. Smart growth isn’t driven by pushing product, but by the skill, dedication, and creativity of people. What’s the difference? Everything. Globalization driven by McJobs deskilling the world, versus globalization driven by entrepreneurship, venture economies, and radical innovation. People not product means a renewed focus on labour mobility, human capital investment, labour market standards, and labour market efficiency. Smart growth isn’t powered by capital dully seeking the lowest-cost labour — but by giving labour the power to seek the capital with they can create, invent, and innovate the most.

4. Creativity, not productivity. Uh-oh: Creativity is an economic four-letter word. Why? Because it’s hard to measure, manage, and model. So economists focus on productivity instead — and the result is dumb growth. Smart growth focuses on economic creativity – because creativity is what let us know that competition is creating new value, instead of just shifting old value around. What is economic creativity? How many new industries, markets, categories, and segments an economy can consistently create. Think China’s gonna save the world? Think again: it’s economically productive, but it’s far from economically creative. Smart growth is creative — not merely productive.”

While many VRM initiatives will be driven by innovative divisions within enterprises, the real change agent will be customers. They will be the enzyme in the evolution of VRM. We have to help them understand that tools will be soon available that give them equal footing with brands, that give them power to engage with brands on their terms. That’s a powerful message. Especially in this new normal economy, people want to extract more value out of brands than just a coupon or a silly loyalty program.

And, that’s just the tip of the iceberg. If done right, VRM tools will revolutionize all aspects of our lives: health care, government, education – you name it.

From what I gathered from the workshop so far:

• We’re close to achieve data portability
• While Doc Searls believes VRM code should be open source, I heard some dissenters
• The value proposition for people is still too vague to excite people outside of our bubble
• We’re too focused on transactions. Instead, we should focus on value exchanges
• We still have to identify the change agents within organizations. Marketing? Customer Service? (Gulp) IT?
• How can fourth parties create stakeholder value?
• How can VRM complement legacy VRM systems?

I don’t think anybody was expecting comprehensive answers for all these questions in a workshop. On the contrary, I hope for more questions to arise on Day 2. My goal for this workshop was not to get all the answers. My goal was not to stop questioning.

Below a few Twitter highlights from Day 1:

@jyarmis: 1995: the invention of the cookie. the end.

@missrogue When we solve problems for individuals, we actually end up solving problems for businesses in the process.

@mjayliebs Search is really the entire set of activities i perform, including talking to friends, neighbors, trusted sources,oh, and google

@nitinbadjatia User driven search (VRM search) – control over input, control over output and control over who gets to help you

@glfceo enterprises trying to predict customers intents will fail

@joeandrieu John McKean: the real challenge is the behavioral one: will individuals move from a CRM-directed world to a self-directed one?

@joshuakahn yeah, a lot of the stuff I’m hearing here is early, but actually alot farther along than I thought.

@missrogue With VRM, I have the opportunity to say, “You earn my trust and I’ll give you the key to all of my information.”

@kevinmarks Josh Weinberger: who are the best communicators in your org? your support people. Why get them off the phone to customers?

@mkrisgman Business is based on exchange of value, power, expectation, and degrees of valuation.

@mjayliebs VRM and CRM are whole lot closer to each other than people think – the gap is culture and understanding as much as principle

@DeanLand For VRM enterprise level uptake: leverage data, show benefits (aka: enable the information) create a VRM ecosystem.

@nhbaldwin vrm offers the vendor a b2b relationship, tighter personalization, with the consumer

@candres this is the confluence of intention and solicitation.

@joshuakahn cookies; designed to be low level machine ID’s, not useful for human ID’s, no matter how you bake ‘em. <- Craig Burton

@jyarmis privacy is only as good as the number of people you can be confused for

Looking forward to Day 2

I was just reading Nicholas Carr’s “The Big Switch”, especially intrigued by the chapter discussing Edison and Insull. As a brief reminder:

Unlike many inventors, Edison didn’t just invent individual products; he created entire systems. This sets him way above lesser inventors who focused on products first before they tackled integrating these new inventions into the overall system. Edison first imagined the whole, then he built the necessary pieces, making sure they all fit together seamlessly. Edison talking about the vision of his electricity system:

“It was not only necessary that the lamps should give light and the dynamos generate current. but the lamps must be adapted to the current of the dynamos, and the dynamos must be constructed to give the character of current required by the lamps, and likewise all parts of the system must be constructed with reference to all other parts, since, in one sense, all the parts form one machine.”

To develop this system, Edison had to pursue technological breakthroughs in every major component of the system. He had to pioneer a way to produce electricity efficiently in large quantities, a way to transmit the current safely to homes and offices, a way to measure each customer’s use of the current, and finally, a way to turn the current into controllable, reliable light suitable for normal living spaces. And he had to make sure that he could sell electric light at the same price as gaslight and still turn a profit.

Despite his visionary genius, Edison couldn’t see beyond his licensing and components business. It took an employee of Edison, Samuel Insull, to perfect the economics of the technological system. What Insull understood was that utility-supplied electricity could serve a far greater range of needs than it had up to then. Electricity could become a true general purpose technology, used by businesses and homeowners to run all kinds of machines and appliances. But, for electricity and electric utilities to fulfill their destiny, the way power was produced, distributed and consumed would need to be transformed. Insull’s biggest challenge would lie in convincing industrial businesses that they should stop producing their own power and instead buy it as a service from central plants.

Which brings me to VRM.

Doc Searls just posted a few blog posts, discussing the state of VRM. Check them out here, here, here and here.

We’re in the early stages of VRM. In Edison terms, we’re about to invent indascent light. We’re still far away from developing systems and even further from integrating these systems for Fortune 500 companies, dramatically changing their business model. That leaves us with some time to think through and discuss what systems need to be developed to make this a smoother transition. Much smoother than the disruption experienced in the music and overall publishing industry.

Advertising/Marketing

According to PricewaterhouseCoopers, global ad revenue will climb to a half trillion dollar business by 2014. That’s a lot of revenue. A lot of jobs. And, even more important, deep integration into the overall fabric of our global society. What will happen to all of that when VRM takes off and becomes the dominant expression of the marketplace? What will advertising transform into? How can advertising support the VRM concept? Doc Searls states that “the amount of advertising that does nothing for customers is usually close to one hundred percent.” (I don’t agree with that statement at all. Good advertising still delivers value to people and creates demand. And always will. Unfortunately, good advertising is rare these days.) How, as a community can we bridge this gap between Doc Searls statement and the advertising industry? I’m concerned that pushing advertisers into a partisan corner might lead to obstruction and pointless territory fights. Instead, we should work collaboratively with advertisers how to make the VRM model work for each stakeholder.

It might be my own bias as a life-long marketer but I don’t believe the attitude “Marketing messes everything up” is productive and won’t get us where we want to be.

Sunk-Cost Fallacy

Rob Knight wrote brilliantly about the challenges of persuading companies happy with the current Status Quo to consider VRM as a viable concept. Larger enterprises have invested billions in CRM systems they expect to improve their ROI for decades to come. Executives have put their career on the line believing in these systems, convincing boards to spend a pretty dime. For VRM to become more than a niche concept, we need to convince Fortune 50 companies to buy into this concept. We can’t just rely on small companies with limited resources for CRM systems to create a groundswell that will force global enterprises to participate. We have to develop systems that help CRM-centric enterprises to transition into the VRM world. For many companies, Social Media was just another Second Life until the big boys (Ford, Best Buy, etc.) showed up. Doc Searls makes a good argument that VRM gives CRM systems more to relate to, and we’re not fighting a religious fight of CRM vs. VRM. Still, as we experienced with the advent of digital marketing and its challenges to be a partner on the marketing table, there are struggles ahead with people staying on the pure CRM side as long as they can. And we should be prepared for it.

Human Nature

One of the pillars of VRM is the ability of individuals to take charge of their data instead of managing them via a platform and exchanging that data for the functionality that the platform might provide. For VRM to succeed, adoption rate has to be huge. And that concerns me. We rely a lot on the willingness of individuals to participate and co-create these new systems. Let’s not forget: intelligent people post their full birth date on Facebook and check frequently on Foursquare into their own homes. My point: We can’t just rely on the individual. We have to take into account human nature which often includes laziness and carelessness. We need to invite anthropologists and behavioral psychologists into the discussion and allow them to help us in the effort. Some of this will happen organically since the VRM discussion starts to flare up more and more. But some organic planning for a more collaborative development wouldn’t hurt.

Warren Bennis once said:

“Innovation – any new idea – by definition will not be accepted at first. It takes repeated attempts, endless demonstrations, monotonous rehearsals before innovation can be accepted and internalized by an organization. This requires courageous patience.”

Right about now, we need the courageous patience of Samuel Insull.

Image: Courtesy of 13.media.tumblr

People don’t care about “CRM” or “Social CRM”. Sales, Marketing and Customer Support departments do. People care about great customer experiences. Since Social CRM is just an extension of CRM, I’m not sure this model will be able to answer the desire of customers for better experiences.

Clearly, Social CRM is a dramatic improvement from current CRM models, adding new features, functions and characteristics to the mix. Social CRM understands the communication revolution we’re all living each and every day, and its effect on peer trust. Social CRM helps businesses also to move their sole focus away from transactions, and incorporate initiatives that improve interactions between businesses and people. At best, Social CRM will change value metrics from Customer Lifetime Value (CLV) to Customer Referral Value (CRV) – measuring how valuable people are when they tell others about their experiences with a company.

This is all nice and dandy but most of the Social CRM discussions revolve (once again) around technology implementations. Call it E2.0, Social Business, Social Business Design, Social CRM – most of these monikers describe integration of new technologies and not how the core needs of all stakeholders can be satisfied and, thereby, improving the overall performance of the enterprise.

Enterprises have to align their whole organizational model around helping people to achieve their goals.

Let’s face it, whatever you call it, all CRM systems are based on a company’s perspective of reality. You can add social as a spice or main ingredient, everything still revolves around the company. Relationships are still managed by the company, to benefit the company. We see encouraging signs where enterprises let people in to co-create and collaborate: on product development, improving company processes, solving customer service issues. It’s a good step from the old CRM model that tracked what a company assumed the customer wanted to the Social CRM model that focuses on what customers are saying they want.

The problem with Social CRM: It’s still a crapshoot

The ability of companies to do something useful with social intelligence still lags light years behind their ability to gather it. We have great technology how to gather social intelligence but no scalable processes to utilize this intelligence. And, let’s just say, we suddenly lived in a perfect world and had access to actionable insights, we tend to forget that human beings are social primates, not rational decision-making machines. The rational actor assumption is so hard to give up, and many still argue this idea to death. Humans are ruled by motivated and unmotivated biases. We apply what we want and expect to see, ignoring what we don’t expect or want to perceive. In addition, humans are motivated by effort justification. The more effort and resource humans have spent on a situation, the more likely we continue our spending, despite losses or harm. Motivated/unmotivated biases and effort justification influence how we first perceive information. There are several more factors which affect how we process our already tainted information, thus altering the way we frame situations even further. Meaning: We all make short cuts in the way we process information. We use “rules of thumb” (heuristics) to focus on necessary information to make decisions. There’s the representative heuristic, where we make a judgement call based upon how much something resembles a situation, and the availability heuristic where we base everything upon how easily we can come up with a similar example. Last but not least, we have to take into account the risky shift (the tendency of a group to be more risk acceptant than an individual) and group think, where a group’s collective voice masks and oppresses the ideas of the individual. Looking at all these factors influencing decision-making, how can we expect an incremental improvement aka Social CRM to tap into all these motivations and be anything more than a sophisticated Magic 8-ball?

The need for revolutionary change

Most of us agree: We live in revolutionary times. Consumers transformed into producers. People can easily produce and distribute content. If the story is worth telling, it will be heard. Creating large communities is no more limited to big institutions, each one of us can create communities. Some of them large, some of them small. Institutions can’t control anymore what they want us see, read or listen to; each one of us has control over our own destiny.

History should tell us that revolutionary times call for revolutionary changes, not evolutionary improvements. Case in point: East Germany. In 1989, people were fed up. They were fed up with travel restrictions and limitations in communicating with the outside world. People were out on the street demanding drastic changes. And the East German government responded incrementally: Ok, you can travel to Hungary whenever you want. But not to France. Ok, we’ll replace Honecker with another blockhead, Egon Krenz. But not with a new way of governing. A few weeks later, the Wall came down and the whole idea of East Germany disappeared forever.

Sure, nobody is protesting on the street, asking companies to let go of their stranglehold of data and customer relations. This is a much more subtle revolution. YouTube video by Facebook update, tweet by message board activity; people are building their own world, relieved from the stranglehold of MSM, people are creating their own reality. Social CRM feels like a catch-up strategy, not anything remotely revolutionary, game-changing enough.

What to do

Don’t regard Social CRM as a panacea, rather consider it as a bridge to VRM. Since VRM tools are still in development, use Social CRM for three purposes:

1. Support: Tap into the power of social networks to improve your customer support program. Develop tools and platforms to enable people to help each other, tap into existing networks to add your expertise and syndicate your knowledge throughout the Social Web.
2. Communities: Use current communities (especially the ones out of your brand control) to gather feedback for each division of your enterprise. Use a mix of branded communities (Passenger, Communispace, etc.) and organic communities.
3. Listen: Create a Voice of Customer program, understanding the desires and needs of your customer base. Don’t just listen, listen actively. Be part of the conversation to fend off small issues that can turn into major fires very quickly.

Tired already? Better get an energy drink, because the real work is ahead of us.

The road to CRM

1. Give up control already: Give people tools to manage their relationships with institutions. Don’t try to own the tools, the data, the relationship. Nobody owns a relationship. Give people as much control over the relationship as you have and personalize these tools for the needs of the individual.
2. It’s my data: Help people to control their own data. When they want their personal information deleted, allow them to do it. Without any opt-outs or other fancy road blocks to continue a dismal relationship. Develop tools that let people selective share their own data, determine their own “Terms of Service” and ensure that the privacy debate of now turns into a people data control story.
3. Let’s stop the guesswork: Instead wasting millions of dollars on useless advertising, help people express their demand. Lunch on my mind? Why bother firing up the Yelp application and looking for appropriate places?Instead, let people express their desire and allow brands to answer in time. No BT or CRM segmentation needed. I share with brands what I think is needed to get a good response. Period.

It’s now. Or too late.

These VRM tools are in the making. My company is working on it. Many others are developing solutions. Once they’re implemented, they will change everything: the way people deal with institutions, the way marketing and sales works, the way company spend their budgets – basically everything enterprises do.

While companies pay a lot of lip-service to customer-centricity, they still focus on themselves first and foremost. Institutions have to take off their divisional hat first, then the brand hat. Move closer to customers and understand where they are coming from. And together build tools that improve markets and add value to each stakeholders balance sheet.

“Revolution is not the uprising against preexisting order, but the setting up of a new order contradictory to the traditional one.”

Jose Ortega y Gasset.

Image: Courtesy of Coralie Bickford-Smith

I took this journey of 13 blog posts to better define the model of Human Business Design. It was necessary to walk through the ideas of systemic thinking, introduce various systems, introduce the idea of interactive management, planning for the apocalypse, pie in the sky models, gap and assets, how to develop a community enterprise based on market principles, design a multidimensional organization, stay away from quick fixes and develop leadership for organizational evolution.

The model of Human Business Design is based on above foundation and rooted in the belief that all human interactions inside and outside of your organization matter now. They way human beings are motivated to connect and realize value has fundamentally changed. We’re seeing a fundamental reset in the nature of work due to drastic changes all of us are experiencing in how people communicate, coordinate and collaborate. And the Enterprise 2.0 “movement” tries to capture this changed behavior by applying Web 2.0 principles to the “command-and-control” needs of the enterprise. In addition, we see a mere obsession with tools for tools sake without much understanding of the socio-business context. The old problem of throwing software solutions at organizational problems is just being re-invented in the social networking arena.

Instead, we need to focus our attention on the shifting nature of work itself and how enterprises need to evolve in a rapidly changing world, Organizations need to dig deeper, define new principles around which work itself can be reworked. Forward thinking companies will develop their own constitution, a bill of rights and a social contract for all stakeholders to have a common purpose everybody involved can rally around. In short: enterprises need to socialize their business.

Technology is the critical enable to implement Human Business Design within your organization but technology is not a sufficient agent for change. We have to focus our work on humans, the limitations of extrinsic motivators (external reward or punishment) and the need for intrinsic motivators (finding meaning in work):

- Developing a foundation of trust
- Motivating and educating the stakeholders to become more active participants
- Providing access to stakeholder knowledge and skills
- Facilitating individual freedom and control
- Encouraging emotional/aspirational co-creativity and participation.

Successful evolution of the organization to a Human Business Design Enterprise requires them to find the appropriate locus of learning, between both market and non-market sources of ideas and knowledge. Most established firms are still trying to access these autonomous idea pools using industrial age logic and rational economic arguments, and, in most cases, tired and outdated marketing efforts where the emphasis is on surface-level tinkering of the customer engagement model, not a complete realignment and reorientation.

Enterprises have to understand that each business, with money and investment in structures, is no more than its people within and its people outside (all stakeholders). Enterprises need to rely more on people and bridge their left-brain thinking demands with the desires of people to focus more on their right-brain capabilities.

More than 10 years ago, the Cluetrain Manifesto exclaimed “Business is fundamentally human”. We need to stop treating stakeholders as “resources” and regard each stakeholders as clients with their own interests, desires and drivers.

If you want to learn more about Human Business Design and how we can help you implementing these principles into your organization, feel free to contact me at uwe@bateshook.com

And, all previous installments for this series, can be found here:

Part 1, Part 2, Part 3, Part 4, Part 5, Part 6, Part 7, Part 8, Part 9, Part 10, Part 11, Part 12