A Kellogg MBA Perspective on Virtual Reality & Augmented Reality Consumer and Enterprise Adoption

Over the Winter Quarter, our Technology and Innovation Strategy class at Kellogg culminated in a final research paper. The paper looked at the shuttering of Google Glass and what Google’s next steps should be. As part of this, I got to look deeply into the current state of Virtual Reality, which I have been following and waiting for (hello Oculus!) since I was a child, and Augmented Reality. I will be posting portions of the paper (it’s quite long) in digestible chunks here over the next week. Our team was comprised of Melissa Caldwell, Raghu Chirravuri, Olga Gordon, Jeff Hoffman, and me, Michael Nguyen. 

To see all of the sections, see my tag virtual reality.

Consumer Adoption of AR and VR

WordLens_Screenshot_French

AR and VR are gaining adoption and becoming more standard, with consumers getting more exposure to them in day-to-day life, particularly in retail, education and entertainment industries. By layering information onto existing objects or creating virtual environments, they provide consumers with richer, context-specific information in 3 dimensions.

Technologies are now available that make it possible for grocery shoppers to scan aisles with their smartphones or other AR devices to quickly identify products that are on sale or address certain dietary requirements and preferences. Layering this information onto existing physical stores helps customers efficiently browse and purchase products. In some cases, AR is not layered onto a physical store but onto a blank wall. Yihaodian, a leading Chinese e-commerce grocer, launched 1,000 virtual stores overnight to compete against its brick-and-mortar rivals with experiences that allow customers to walk around in the virtual stores and make purchases that are delivered directly to homes. Similarly, several fashion retailers are using AR “magic mirrors” to allow their customers to “try on” clothes, jewelry or shoes and help customers decide which clothes or accessories to buy without having to actually stock the items.

In education, AR and VR are being used to embed content into text and real world objects, allowing for visualization of 3D models and interaction within historical events, as well as remote collaboration. In higher education, AR and VR allow students to learn mechanical engineering concepts, math or geometry through 3D models that help them visualize spatial structures and interact with virtual models.

Learning via remote collaboration is another major use case for education; students and instructors at different physical locations can share a common virtual environment populated by virtual objects and learning materials. These technologies allow students to interact with objects in topics like astronomy, biology and medicine that would otherwise be inaccessible.

AR and VR have also been adopted by media companies to provide a more immersive entertainment experience. For example, AR is currently being used to create interactive movie posters and to embed content into movies that can be accessed through smartphones or other AR devices. At the same time, work is being done to create fully immersive 3D movies delivered through VR headsets. AR technologies allow gamers to experience digital game play in a real world environment, where movement detection allows players to interact with objects within the game using gestures and eye movement. VR systems like Oculus Rift create an immersive gaming experience where the user is placed into the game environment, opening up innovative content delivery prospects.

Enterprise Adoption of AR and VR

AR and VR also have the potential to change the way that many businesses function due to the technologies’ abilities to immersively simulate varied situations and conditions, particularly in industries such as the military, medicine, and automotive design and manufacturing.

The military has integrated these technologies more than any other industry across different use cases. One of the military’s primary applications of VR has been in training. Formerly, training would consist of physical simulations and crude recreations, but VR has provided a much more accurate, immersive version of what it actually feels like to be on a mission.[1] VR can also be utilized to simulate controlling drones so that training runs are as close as possible to the experience of when a drone is actually deployed.

AR and VR have also seen traction in the healthcare industry, as a number of implementations could improve patient care and make doctors’ jobs easier. From allowing doctors to quickly source and project medical histories, to lenses that allow them to see through a patient’s skin and identify veins, making it easier to place IVs correctly; hospitals were among the most loyal adopters of glass.[2]

AR can also be utilized during surgery. AR-implemented glasses (such as Google Glass) allow surgeons to record accurate representations of their work hands-free. They can stream video of surgeries around the world, allowing remote doctors to offer advice on difficult procedures. Information overlays will be extremely useful in the future, as the steps of a given procedure could be presented unobtrusively through a surgeon’s line of sight.[3]

As the automotive industry has historically been on the cutting edge of technology, it is no surprise to see that the biggest firms are leveraging early forms for AR and VR to help design, test, and manufacture new products. Ford has already partnered with Oculus, utilizing VR to rapidly design and prototype new cars. The headset allows engineers and designers to virtually enter the car and evaluate its design more practically than a 3D model on a computer or small-scale mock-up.[4]

Despite these exciting ventures, there are still a wealth of implementations not yet explored. For example, AR could be leveraged to help with manufacturing, increasing the complexity of products while decreasing the amount of focus and time commitment needed per-employee. During the manufacturing process, a projection could be displayed over two components to show how they properly fit together. Assembly and disassembly processes could also become easier as step-by-step instructions could be overlayed on a given product, making it easier to understand the order in which to proceed.[5] In addition, videos could be presented to the employees unobtrusively when text instructions may not suffice. Further uses include the ability to use VR to allow engineers to see inside of components to understand how they really work and are constructed.


[1] http://ultraculture.org/blog/2014/11/19/us-military-piece-virtual-reality/

[2] http://thenextweb.com/dd/2014/01/01/medical-augmented-reality-will-seamlessly-save-life/

[3] http://venturebeat.com/2014/03/13/this-stanford-surgeon-shows-us-the-future-of-medicine-augmented-reality-google-glass-exclusive/

[4] http://www.fastcompany.com/3024328/innovation-agents/ford-taps-oculus-rift-for-future-automobile-designs

[5] http://advancedmanufacturinginsight.com/archived-articles/item/augmented-reality-manufacturing

A Kellogg MBA Competitive Analysis: Major Stakeholders in Augmented Reality / Virtual Reality (Microsoft Hololens)

Over the Winter Quarter, our Technology and Innovation Strategy class at Kellogg culminated in a final research paper. The paper looked at the shuttering of Google Glass and what Google’s next steps should be. As part of this, I got to look deeply into the current state of Virtual Reality, which I have been following and waiting for (hello Oculus!) since I was a child, and Augmented Reality. I will be posting portions of the paper (it’s quite long) in digestible chunks here over the next week. Our team was comprised of Melissa Caldwell, Raghu Chirravuri, Olga Gordon, Jeff Hoffman, and me, Michael Nguyen. 

To see all of the sections, see my tag virtual reality.

Microsoft (Hololens – Augmented Reality)

https://i0.wp.com/compass.surface.com/assets/fe/e6/fee6354a-37a7-4f7e-a29d-1a8a3e42b8e0.jpg

The most direct threat to Google’s existing business is from Microsoft’s Hololens headset. Similar to Google Glass, Hololens is a stand-alone, untethered AR headset extended from the Xbox Kinect platform that will be released with the launch of Windows 10 by the end of 2015. Hololens differs from Glass, as it has a full computing platform built within the headset. Running on Windows 10, this headset can project images not just on top (as Google Glass) of what the user sees, but also can place 3D holographic objects into the real world and allow people to interact with those objects naturally with hands, fingers, and voice. This functionality means a Hololens wearer could watch a holographic large screen TV on a real living room wall, play with digital Legos on a kitchen table, or even walk across the surface of the moon and view details on the ground in high resolution.

The potential of Hololens lies in its integration into the complete Windows 10 ecosystem. Microsoft is focused on having one Windows 10 operating system across PCs, tablets, and mobile phones, and Hololens is meant to serve as a complete communications, productivity, and entertainment platform. This would allow apps running on any other Windows 10 platform would run just as easily run on Hololens, eliminating the inertia present in creating a developer ecosystem. Microsoft sees the evolution of the tablet as a portable computing device in Hololens, and possibly as an eventual replacement for the monitor. This is an attempt to define a new product category and jump-start it with an existing ecosystem, as Apple did with the iPad. Success will depend on how well the Windows 10 unified ecosystem works in reality.

We expect several shortcomings from the initial Hololens product, similar to Google’s own experience with Glass, including battery life, overheating, and outdoor usage. While Microsoft does have hardware experience from its video game and mobile phone (formerly Nokia) divisions, it is unlikely that a launch with such new technology and learning curve will soon reach a mass-market audience in both reception and pricing.

It is possible that in a future in which Hololens becomes successful, users will no longer rely on a Google search box to look for information, instead using the Cortana personal assistant interface in Windows 10 by pointing at an object in view or issuing a vocal command. Regardless of whether Hololens can be an immediate mass-market success, as an early mover, this is a significant attempt by Microsoft to own the category and define standards for how people engage and interact in AR, similar to how many standard mobile touch gestures were defined by Apple.

A Kellogg MBA Competitive Analysis: Major Stakeholders in Augmented Reality / Virtual Reality (Sony, Oculus, Valve)

Over the Winter Quarter, our Technology and Innovation Strategy class at Kellogg culminated in a final research paper. The paper looked at the shuttering of Google Glass and what Google’s next steps should be. As part of this, I got to look deeply into the current state of Virtual Reality, which I have been following and waiting for (hello Oculus!) since I was a child, and Augmented Reality. I will be posting portions of the paper (it’s quite long) in digestible chunks here over the next week. Our team was comprised of Melissa Caldwell, Raghu Chirravuri, Olga Gordon, Jeff Hoffman, and me, Michael Nguyen. 

To see all of the sections, see my tag virtual reality.

https://dbvc4uanumi2d.cloudfront.net/cdn/4.3.30/wp-content/themes/oculus/img/product/dk2-hero.jpg

Competitive Analysis: Major Stakeholders in Augmented Reality / Virtual Reality

While numerous firms are engaging in VR or AR headset platforms, firms that have major corporate backing to avoid being acquired and have the finances to pose a legitimate threat to Google are discussed below and in summary Table A.

clip_image002

Sony (Project Morpheus – Virtual Reality) and Valve (HTC Vive – Virtual Reality)

Sony and Valve are similar in their focus on gaming entertainment through VR headsets. While Sony has its own console platform (Playstation), Valve focuses on the PC market, creating a consistent gaming experience for PC gamers regardless of hardware manufacturer or operating system through its Steam gaming platform. In March 2015, both companies revealed they are planning to release their products by the end of 2015. Sony will develop and manufacture its own headset, while Valve will work with partners such as HTC to release headsets, similar to Oculus and Samsung in producing Gear VR. With both firms’ focus on entertainment, these are greater threats to Oculus, discussed below, rather than Google AR and VR.

Facebook (Oculus Rift – Virtual Reality)

The Oculus headset is a tethered (wired) unit that requires a high-end PC to power, creating a sit-down user experience. Oculus has gained traction in VR and AR by creating an ecosystem of applications and new hardware add-ons that add functionality to the device such as body movement and finger tracking for user interfaces.

Oculus initially had a pure focus on gaming and simulation rather than productivity, making it less of a threat to Google. However, with the Facebook purchase of Oculus VR and the announcement of the partnership with Samsung to release Gear VR (more detail below), the Oculus platform is more of a threat. Aside from its current dominance as a social platform over Google+, Facebook has also launched search, advertising, and portal-like products that combined form a significant threat to Google as the default source of information of the masses.

Oculus has released several developer headset kits to the community, with the first consumer-focused version expected in 2015. Oculus has repeatedly stated the consumer product must be oriented to the mass-market not only in functionality but also price. While Facebook does not have direct experience in producing hardware at mass levels, Samsung, its partner on the Gear VR, does. Thus, we believe that Oculus will be able to deliver a mass-market headset more quickly than other competitors.

Samsung (Oculus Rift / Gear VR – Virtual & Augmented Reality)

Samsung’s Gear VR is an untethered (wireless) headset that requires the Galaxy Note 4 mobile phone. Note 4 users simply insert the device into the headset. Using Oculus technology, the Gear VR has an advantage over Oculus because it supports AR through its outward facing camera. Unlike other AR solutions, Gear VR cannot not reasonably be worn outdoors. While Gear VR does not compare to full-powered VR solutions such as Oculus, the partnership creates two concerns for Google. First, Samsung is a dominant global hardware partner for Facebook, with experience in display and mobile technologies. With Samsung as a manufacturing partner, Oculus would have an advantage in merchandising over other platforms. Second, the partnership creates more exposure to the Oculus platform for users and app developers. The Gear VR was released in December 2014 at $199 (non-mass market focused “Innovator Edition”); based on Samsung’s aggression in the mobile market, we can expect rapid iterations on the platform and increased compatibility with new phones.

The Origins of RedOctane (Before Guitar Hero)

I am reading a Harvard case study about Netflix for a class at Kellogg right now and reading about its timing of switching to unlimited rentals in the summer of 2000 reminded me of when I first heard about the company that would become RedOctane, the producers of Guitar Hero (did you see: Rock Band is coming back) and a startup success story.

I remembere the exact article posted on April 17, 2000 at IGN: WebGameZone to Offer Import Rentals

Ever wanted to play the latest and greatest games out of Japan, but don’t quite have the budget to do so? There are many titles that are already out that deserve a good run through, but with prices floating around $70 each, one cannot afford to play them all. Well one online retailer noticed this and decided to start a bold new venture: renting import Dreamcast games Online.

WebGameZone is taking the high price of 70 dollars per game and changing it to a simple $4.99 rental. The company is already known for being the largest online videogame rental store, but until now has never offered the latest Japanese titles.

So what does a five dollar fee get you? How does 10 days of usage sound? That’s right… you get over a full week of gaming for the price of a typical fast food meal. After you are done with the game, you just send it back in the pre-paid, pre-labeled box that is provided.

Obviously, we can’t guarantee the quality of the site’s service, but it is certainly something import-hungry gamers may want to check out. Thirty import titles will be made available at first, with more and more being added as time goes on. This is truly a unique venture, and will be interesting to see if it works out.

Both Mike Won and I read the same article and while I am not sure exactly what happened next, one of us found out the company was in Sunnyvale (in Silicon Valley, 20 miles away from where we lived in San Jose), and I contacted them right away about internships. I would have happily worked for free, but got a quick response from Juan, came in a few days later, met the rest of the team (Kai Huang, Charles Huang, Dean Ku, etc.) and essentially had a part time job (probably at $7.50 an hour) at the age of 19 shipping game discs and learning about Japanese import games for the Sega Dreamcast. This probably all happened within 10 days. I was employee #9 or #10 until I left to finish my degree at UC-Berkeley in 2002, but my time there in that first stint is summarized in my LinkedIn profile:

In my first experience with RedOctane (formerly WebGameZone), I started as an intern, learning about shipping logistics. Over time, I was promoted to Customer Service and given complete freedom (and responsibility) to interact with customers and learn how to resolve issues without backup support in a loss limited structure.

Through these experiences, I learned vital lessons about the human psychology, empathy, effective communication, and stress management, critical lessons I still use on an everyday basis.

Promoted from Intern/Shipping Logistics (2000) to Customer Service / Game Inventory Buyer (2001).

Other fun links I found: (but couldn’t find the old logo)

Free Rental Offer

RedOctane Begins Renting Import PlayStation 2 Games

Woa! WebGameZone actually sent it to me!!

I Was Right! [About Coffee Meets Bagel]

It’s not often that I can say I was right, but I feel can do it this time. Six weeks ago, I wrote (about dating service Coffee Meets Bagel):

CMB received $2.8M in venture capital last May, which would not cover its marketing budget for this next year. Yet, its is only asking for 500K from Shark Tank. This leads me to believe CMB is mainly on Shark Tank for the PR and don’t want to give up very much equity, has another round coming, or does not intend to go with its stated marketing plan at all – it would not have the money for it. If it needs to grow massively to become profitable, CMB has no other option than to take the buyout offer.

And so it turns out CMB 1) indeed needed the money despite raising 2.8M eight months ago, 2) didn’t want to give up much equity to get it 3) because they had another round coming 4) to fuel marketing.

In other words, good PR boost. I do think it is odd to raise so much more money so recently after the venture round. CMB must have started looking for more money just 3-4 months after that round. This also suggests that the investors believe the product has hit the right mix of stickiness (if people come on – they will stay, and thus funds are needed to accelerate users into the app).

On Feb 18:

Dating App Coffee Meets Bagel Lands $7.8 Million In Series A

Coffee Meets Bagel, the dating service that focuses on quality over quantity, has today announced the close of a $7.8 million Series A financing round led by existing investor DCM Ventures. Quest Ventures and Azure Capital also participated in the round.