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)

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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.

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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.

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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.