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.