Which way for VRM?
Interesting discussions on the VRM steering group prompted by Doc Searls’ blogs about ‘fourth party services’ (http://blogs.law.harvard.edu/vrm/2009/04/12/vrm-and-the-four-party-system/).
The bottom line is that I think the concept of ‘user-driven’ services as espoused by Joe Andrieu (e.g. (http://blog.joeandrieu.com/2008/07/12/towards-user-driven-search/) is risky for two reasons.
First, it muddies the waters around VRM’s unique and special contribution: its focus on creating services that work on the side of the individual.
Second, it narrows the VRM agenda, to focus too much on mechanisms of user control, and not enough on even bigger challenges such as the design of new business models.
More detail, for those who are interested…
As far as I can see, ‘fourth party services’ are pretty much the same as the Personal Information Management Services we’ve talked about on this blog for some time (http://www.rightsideup.net/?page_id=58)
The debate itself stems from a growing a realisation that there are at least two ‘levels’ of VRM.
The first level simply gives individuals software based tools, like mobile phone apps, that the individual can use how and when they want.
The second level is when a specialist service or business provides extra infrastructure, functionality or services that help individuals do things they couldn’t do if they were left to themselves with their ‘apps’.
Doc Searls has termed this second layer of services which are acting for or on behalf of the individual as ‘fourth party’ services. There are others however, such as Joe Andrieu, who have started talking about ‘user driven services’ (http://blog.joeandrieu.com/ )
As I understand ‘user driven’ it means a service which is shaped – or ‘driven’ – to a greater or lesser extent by the user’s direct input. As Joe explains in one of his emails:
“User driven services are a category that, for me, is as much a direction of innovation as anything else. YouTube is more user driven than Cable TV. Blogs are more user driven than newspapers.
Every major Internet breakthrough has been by companies being more user driven in some way. Amazon. Google. eBay. Facebook. Twitter. The web and the net itself.”
On the other hand, as Joe stresses in the same email, ‘fourth party’ services are much more focused:
“Fourth Party services, in contrast, have a very tightly focused meaning:
fourth parties operate on behalf of you, the individual. 2nd parties
and third parties, e.g., Apple and various iPhone developers, have no
expectation or obligation of acting in your best interest. However,
your personal datastore does. Your lawyer does. That’s the distinction:
a fiduciary responsibility to the individual user.”
If we are interested in developing buyer-centric or ‘VRM’ services, which route should we follow: ‘user-driven’ or ‘fourth party’?
The agency concept
The fourth party or buyer-centric service anchors itself on the side of the individual. That’s what defines it and distinguishes it from all other business models and services – it works for and on behalf of the individual. It is on the individual’s side, acting as the individual’s agent (as I first talked about in my book Right Side Up many years ago).
For me, this is the fundamental intellectual – and practical – departure point. If you don’t get to this starting point you can never ‘get’ VRM or buyer-centricity. And if you don’t keep it as your anchor, you will get lost and confused in no time at all.
For many people however, this starting point is also their sticking point. They just can’t see it. They think we are talking about some sort of altruistic pressure group or charity – not a proper business.
This is odd because none of us have any trouble with big companies paying agents to work for them. In fact, there are so many agencies, consultants, advisors, contractors and so on working for big companies that sometimes it seems they’re the biggest business sector of all. Everyone knows what these agents do. They are employed by BigCo if and in so far as they are successful in furthering BigCo’s interests, as specified by BigCo of course.
The buyer-centric or fourth party service is no different: it earns its keep as long as, and in so far as, it acts for and on behalf of the individual in his or her dealings with other parties – such as all those BigCos with all their agents.
Perhaps one of the reasons people find it so hard to ‘get’ this is because it is so new. To work, it requires innovation on many fronts: technology, service and user-experience, business model, definitions of value, metrics of success, legal, contractual and regulatory issues, and so on.
In my view, the only way we can keep all these innovation projects working hand-in-hand and in sync is if they keep the starting point of ‘for and on behalf of the individual’– this litmus test of purpose – absolutely clear.
Unfortunately, that’s precisely what the ‘user-driven’ concept loses. By shifting the focus from relationship and purpose (e.g. services that work for the individual) to mechanisms (does it happen to be ‘driven’ by the user or not?), the user-driven concept weighs anchor and (to mix metaphors horribly) lets the balloon float free – to be taken in whatever direction the wind of ‘user control’ might take it.
Now. You could argue – as Joe might – that if it is user-driven then it must, by definition, be acting for and on behalf of the individual. I’m not sure. A bank ATM is a ‘user-driven’ service, to some degree. It’s ‘more user-driven’ than the bank counter and the teller – and it’s this spectrum of ‘user-drivenness’ that Joe seems interested in.
But the ATM is there mainly to outsource costs from the bank to the customer. User self-service is a big thing for companies wanting to offload costs on to customers. These companies could embrace the concept of ‘user-drivenness’ quite happily. And without our moorings relating to ‘for and on behalf of the individual’ we can’t distinguish between the two.
It’s also true, however, that the concept of an agent acting for and on behalf of the individual also has its blurry edges. There are, for example, many ways of acting for and on behalf of individuals: political and social campaigning, legal representation, and so on. You could say your lawyer is your ‘agent’. You could say somebody you pay to clean your house or your shoes is your agent too, because they are acting on your instructions.
Marginal or central?
The interesting thing about all these forms of agency is that they lie outside the commercial mainstream. They are either ‘non-commercial’ (e.g. political and social campaigning), or if they are commercial they exist only on the margins.
Lawyers for example, flourish on the back of information asymmetries. They are experts and you depend on this expertise. And they charge you accordingly, so you only employ a lawyer when you are desperate.
The maid cleaning your house lies at the opposite extreme of information processing. Here, it’s mainly manual labour which no one has ever been able to automate. This is the economic equivalent of balloon squeezing. You might push the work from one person to another but the volume of work – the air inside the balloon – remains unchanged. No new efficiencies have been created.
The interesting thing about this is that the lawyer and the maid exist at the extremes of information processing cost/difficulty.
The real breakthrough of buyer-centric or fourth party services is not just the agency concept but how and where this concept is applied – in the heartlands of the economy: commercial activity.
For them to do this, they need to create new types of business which use information in new ways. These are businesses that make their money out of ‘consumer empowerment’ or, in the case of public services, citizen empowerment; services that put the power of information in the hands of individuals to help them do what they want to do more effectively and more efficiently.
To make this happen, most buyer-centric or fourth party services will indeed need to be ‘user driven’. For example, it goes without saying that an agency relationship cannot work if the client (in our case, the individual) cannot specify what he wants to achieve, monitor the work of the agent, and so on. We need clever information technologies to make it possible to do this in ways that are easy to use, on a mass scale. This is a massive innovation challenge in its own right, but it’s just one consequence of the core agent concept.
So, to sum up:
Joe advocates the ‘user-driven’ concept on the grounds that it is ‘a direction of innovation’.
Yes, it is one possible direction of innovation. But actually, the scope of innovation it envisages is quite narrow – basically, the mechanisms/services that enable the user to drive the service.
The buyer-centric/fourth party vision on the other hand requires at least three different levels of innovation. For it to work, we need:
• Clever new tools, software and so on that help individuals gather, store, slice and dice, analyse, share and deploy the information they need to do the things they want to do. (This, in itself, is effectively a whole new industry)
• Innovative new business models to make these new technologies happen. (What are the revenue streams for the service, what are the economic incentives for the business and the people it deals with?)
• Innovative ‘social technologies’: i.e. the rules, practices, relationships and safeguards that generate the trust these businesses must have if they are to prosper.
For VRM to flourish, we need all three ‘dimensions’ of innovation.
VRM’s defining contribution is the notion of using information – and developing information services – that work on the side of the individual. The potential scope and benefits of this idea, for both individuals and organisations, is unthinkably huge.
We blur this focus at our peril!
Alan Mitchell
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