Vendor relationship management: viable or theory?

While at LeWeb3, I caught Doc Searls session entitled "Turning the tables: What happens when the users are in charge." Doc is co-author of The Cluetrain Manifesto and widely regarded as a leading thinker on customer relationships. Susan Kish at LunchoverIP does an excellent job bullet pointing Doc's presentation.

I was especially interested in following up on his ideas around vendor relationship management (VRM) as this has specific meaning to me. In enterprise land, VRM usually means managing suppliers within a business to business context. So far, that has proven something of an illusion. Too many people remember the hub systems of the late 90's where what seemed like a great idea around creating electronic markets rapidly turned into a price race to the bottom. I would go futher and argue that those systems gave the Wal-Marts, Tescos and other retailers a powerful weapon with which to beat up suppliers and which has since done little for end user customers other than act as a price brake.

In Doc's parlance VRM means putting customers in charge. He gives the conceptual example of car hire where users effectively broadcast a request for information/proposal in markets where there is plentiful supply. Offers are received and the customer gets to choose which service they prefer. Freelance contracting is another example where projects are bid upon and the prospective customer chooses the most appropriate bid. E-lance is Doc's quoted example.

The idea has the ring of authenticity but I want to know what it means for important things like my finances. I provided Doc with the example of a bank that requires a facilities letter for renewing services as part of the compliance process. According to Doc, I should be able to manage this the way I wish. I can't.

In my case, the bank requires a signed copy sent by post or a signed faxed copy. This is ridiculously inefficient yet my bank doesn't permit electronic handling via a service like EchoSign. The business reality is that no bank is going to allow exception handling except on its own terms. Worse still, as a single voice from millions, the chances of my having serious influence to help them (and myself) are almost zero. And I'm not even thinking about the how the sub-prime crisis has panned out (hat tip: Jeff Nolan) for individuals and what this says about the relationship between financial institutions and the individual. Yet this is one of the core relationships that we as individuals hold in our daily lives.

Doc then cited choice in healthcare. This is a specific issue in the US, amply demonstrated by Susan Scrupski's recent plea:

I’ve been wrestling with wretched old-school health forms all afternoon that will undoubtedly be, um, input or maybe scanned into some old-school enterprise system that will carefully set up my health insurance for 2008. If it weren’t Sunday, I probably could do some digging and figure out exactly what the “business process” is that will determine my paper-input-to-digital-imprint record through the labyrinth of enterprise systems. Will an outsourced provider be involved? Probably. A mainframe? Probably. A large-scale database? Oh yeah.

Have I enjoyed this process today? No. Was I able to customize my health insurance policy and my coverage according to my particular family’s health situation? Not in a 2.0 way. Was I able to choose a health insurance company by my review of doctors online and get recommendations from other insureds about which health insurance companies actually paid claims on time and answered questions with friendly, caring concern? Well, definitely not.

At face value this should be a no brainer if it wasn't for the fact that the US healthcare system is carved up among a bunch of BlueCross/BlueShield and a myriad other providers which are not connected in any sensible manner. In the late 1990s, Kana provided software to some of the BCBS organizations that provided much of the functionality Susan requests. At the time the solution was aimed at the insuring agents but it was a solid step in the right direction. But what was a great idea fell by the wayside as Kana regrouped in the aftermath of the dot bomb era. As an aside, Kana also had a great customer centric solution that provided Renault trucking customers with the ability to tailor their purchases online, including financing options. So this is nothing new. It just hasn't been executed against.

Let's turn to Dell, Ed Burnette's post and the resultant post by Mike Krigsman. One might be forgiven for thinking that with all the publicity afforded by Jeff Jarvis in his Dell Hell series that things have changed. Apparently not. This from Ed:

When I ordered my first Dell years ago I was impressed with how “smooth” the whole operation was. The order was complete and the computer built and shipped within hours. Customer support answered the phone when I needed them, and we had no problems understanding each other. Ah, well, like full service gas stations, I suppose such conveniences have been sacrificed to razor thin profits.

And that's at least a good part of the point about why I believe VRM, Doc Searls style is an illusion. Jarvis is mad keen on 'cluetrain' thinking yet it seems that after some two years, Dell still struggles over processes that could be fixed.

I asked Doc how he answers the questions these types of example pose given the history of past efforts. "There's no point in trying to pick off fights you can't win right now." That's always true but I'd argue differently.

• The notion of customers managing relationships in the way Doc describes ignores the customer/enterprise economic power relationships and process problems that large enterprises must manage.
• Enterprise hasn't caught up with even basic customer relationship management processes - even though the software exists with which to get the job done.
• There is no sense of economic tradeoff in the VRM model because it assumes plentiful supply which in turn reeks suspiciously of price pressure at the cost of service delivery. Ed's example appears to illustrate that reality.
• Enterprise will not implement anything unless there is an economic benefit and which can be shown to improve process. I'm not convinced the case has yet been made convincingly enough to grab corporate attention. That could change if there is a solid risk issue at stake.
• Unlike Mike, I don't see this as an IT failure issue but one of cultural realignment where the economic cost of having a broken process has yet to be adequately understood in the context of long term business goals.

Until these basic problems are resolved then on one thing Doc and I are likely agreed: VRM is a theory.