The next ‘it’ technology is on the horizon and the usual hype has begun. Augmented reality (AR), the layering of digital information on a real environment, and virtual reality (VR), an immersive and interactive digital simulation of a 3D or 4D environment, took significant leaps forward in 2016. Facebook’s Oculus Rift, HTC Vive, Samsung Gear VR, Sony Playstation VR, and Microsoft Hololens are all competing for commercial sales in VR. And of course, Pokémon Go, with over 100 million downloads and a frenzy of obsessed players made augmented reality a global entertainment phenomenon.

But while the gaming industry seems to be in the first wave of change, other businesses shouldn’t be ignoring the potential in virtual experiences. Like we experienced with the PC, the internet and the mobile revolutions, the long process of determining the business and social implications of yet another new technology has begun.

Lear at the forefront

The implications of AR/VR on business will eventually foster fundamental shifts in how we interact and do business. Last year, Lear Corporation signalled their view of AR/VR’s importance by adding Mary Lou Jepsen, the head of Facebook’s virtual reality unit, to their board of directors. As business leaders and board members, we need to bring what we’ve learned about the importance of disruptive technology, innovation and adaptability to how we address the new world of AR/VR. Given the pace of change, it makes sense to begin that process now.

It’s fun to dream up the far-reaching potential of a world where AR/VR technology is omnipresent. If we can experience powerful social interaction in virtual worlds, will the number of bars, coffee shops and restaurants decline dramatically? If we can more easily and effectively collaborate virtually, will commercial real estate, business travel and commuter transportation demand drop significantly? Will future travel consist of a virtual vacation that ‘takes’ us to a location without airline hassles or the need for hotel beds? And will we need so many outfits and accessories if avatars take over social interactions or will virtual clothing become more important than what’s actually hanging in our closets?

This is a fun Silicon Valley parlour game, but we shouldn’t let this speculation dismiss the impact AR/VR could have across business in the next few years. A number of businesses are already using AR/VR to unlock value in very pragmatic ways and we are starting to see some smart adoption that hints at this technology’s future potential:

  • Earlier and more accurate prototyping: Ford vehicle designers sit in car models generated through virtual reality to identify issues and problems early in the design process. Architects and construction firms are doing the same. UK retailer Tesco even used VR in consumer research to redesign and improve store layout.
  • Training, especially in high-stakes situations: Surgeons-in-training can now wear a VR headset that places them in a surgical setting with a virtual patient, ‘feeling’ the resistance of the scalpel. Sports teams are working with VR developers to enable players to repetitively practise team strategies and tactics without as much physical toll and lower chances of injury. Mental health researchers are looking at VR for phobia patients in exposure therapy.
  • Easier, real-time access to rich information: The Q-Warrior Helmet by BAE systems uses AR to provide soldiers with “heads-up, eyes-wide, finger-on-the-trigger” situational awareness and transmit detailed instant positional information. Software developers are in final testing of ‘visual picking’ systems that tie into warehouse management systems to improve workers’ accuracy in distribution centres. Medical practitioners can use AR to locate the right vein for injections or superimpose surgical planning data onto organs and update those plans during an operation as situations change.
  • Increasing access and capacity: The National Basketball Association (NBA) broadcast its first live VR game in 2016, testing the potential to eventually offer more ‘seats’ to sold-out events or to international fans. YouTube introduced its Live 360 video streaming and spatial audio by offering viewers virtual attendance at Coachella [an annual music and arts festival held in Indio, California].
  • Provide richer selling experiences: GE provides demonstrations of its subsea oil technology with a virtual submarine experience to allow potential customers and engineers to see its products in action. In retail, consumers can virtually design kitchens or see furniture in their own home, while apparel retailers are testing virtual fitting rooms, superimposing outfits and sizing data on customers’ images in “magic mirrors”.

These examples hint at the potential, but experts agree we are still in AR/VR’s infancy. We don’t yet have many of the prequel items for widespread adoption: platform consolidation, an accepted interaction language (think of Windows for PCs or touch-screens for smartphones), cost reductions, and creation of must-have ‘killer apps’. And there is still the issue that using AR/VR makes some users nauseous.

Be prepared...

It is far too early to accurately assess where this technology is taking us. The impact and pace of change will likely be different across demographic segments, geographies, industries and use cases. However, if we’ve learned anything from decades of disruptive digital technology breakthroughs, we shouldn’t dismiss these changes outright. By now, we’ve seen too many industry leaders toppled by unforeseen threats and business models to ignore the potential of a new technology. At the same time, we’ve also seen tremendous value wasted by chasing bright shiny objects that don’t have meaningful impact.

So, how do we as business leaders and board members address this burgeoning virtual world? A first step is to ask the right questions and inventory our organisation’s capabilities to deal with more technological change. Here are some key questions every board should be asking:

  • How could the combination of a virtual world and the physical one impact our current competitive advantages or create new ones? Can AR/VR be leveraged in regards to major cost centres or customer segments and what use cases (training, selling, prototyping, etc.) could be the most meaningful?
  • Are we effectively tracking AR/VR development in our sector and others similar to ours? Are we able to identify emerging threats or competitors in this area and envision their impact at scale? Can we tap into a network of suppliers, partners or customers that are more AR/VR literate and give us more insight into coming changes?
  • Do we have the right processes, analytical capabilities and governance to think through implications and inherent risks to our business model? Do we have the right level and number of discussions around this or any potentially disruptive technology?
  • What should our resource prioritisation be toward this new area? As this technology evolves, what legacy assets would most disadvantage us (systems, physical assets, workforce)? What does that mean for how we fund and maintain these assets?
  • How innovative and adaptable can we be? What lessons can we learn from our organisation’s response to technological shifts that we can apply to this new technology? Do we have a ‘test and learn’ environment and the ability to execute quickly against rapid business change in areas of technology?

 

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