In the next evolutionary step of digital technology, interactions are expected to get more virtual. Concepts once limited to science fiction and video gaming are transcending the bounds of reality and coming to life in the physical world, offering the potential to transform many aspects of business and personal interactions. Welcome to the metaverse.
The metaverse is a hot topic of discussion, and a growing number of consumers and consumer brands are getting on board. Some major companies are placing big bets on the metaverse that can fundamentally change the way people operate and interact with others. Further, with the metaverse evolving quickly, the topic now requires the organization Board of Directors (BOD) to understand and address how this will impact their companies’ growth and talent strategies, opportunities, risk profiles, etc.
To begin – What is the metaverse ? Answer – It is a next-generation internet, where content has evolved from text, to graphics, to video, and immersive digital interactions where connected, virtual experiences simulate those of the physical world as well as integrating digital and physical experiences to enable immersive interactions that move people beyond the glass screens on traditional devices. This vision of the internet is rapidly gaining traction as a platform for a wide variety of human interactions with the following being significant drivers –
- Advancing technology is driving increased connectivity, enabling communication and immersive experiences that were not possible until recently. Information sharing, sensing, and simulation are all advancing rapidly and becoming more interconnected thanks to newfound ubiquity of high-speed advanced networking and the availability and affordability of technology to render convincing three-dimensional worlds.
- People are spending more time engaging with digital systems and socializing in digital spaces than ever before. Some people are beginning to see their virtual lives as equivalent to their physical lives.1 Think, for example, of Gen X, Gen Z, and millennials who were raised on the internet and 3D gaming. The pandemic has accelerated the movement to virtual worlds by providing an environment without the limitations of phone calls, videoconferencing or physical presence.
Some observers of recent trends are circumspect about the potential opportunities related to the metaverse, casting recent startup activity as tantamount to the dot-com surge of the late 1990s. However, with the metaverse, digital spaces are already popular for socializing and entertaining, and they are beginning to turn the corner toward productivity-oriented use cases such as presentations, collaboration, research and development, etc.
Further, many technology, media, and telecommunications companies are active, with gaming, social media, and entertainment applications. As well, many consumers, brands, and creators are engaging in a variety of ways to produce concerts in gaming platforms and sell branded digital goods in virtual worlds. Many people are personalizing their “avatars,” or their digital personas, buying and selling virtual real estate and art, etc.
In addition to gaming and consumer interactions, enterprises can also leverage virtual worlds. For example –
A. Digital Twins of physical environments can be made hyper-realistic and physically accurate. The physical environment to be replicated may be natural, or it may be something that was constructed, such as a building or other type of structure, an industrial operation, or a transportation network. Humans, robots, and AI agents can work together inside these digital twins to plan, design, and test—accelerating innovation and planning cycles for a variety of business needs.
B. More engaging applications can be provided for training and onboarding new employees and customers
C. Virtual meetings or events can replace or augment traditional, in-person environments with people able to connect from anywhere in large or small groups to meet and collaborate.
The Metaverse is a rising tide
From a business perspective, the metaverse represents enormous and rapidly growing opportunities in the marketplace. Metaverse-focused companies raised $10.4 billion across more than 600 venture capital deals in 2021, nearly double the amount raised in 2020.2 A recent Bloomberg analysis estimates global metaverse revenue opportunities could approach $800 billion in 2024.3 Recent research by AllianceBernstein says the combined annual run-rate of the most relevant markets, which is a predictor of financial performance, is valued at $2 trillion and is growing.
In addition, established technology companies, independent creators, and startups are taking on varied roles in building the metaverse. Platforms are forming where users can engage with or experience the metaverse, while tools are emerging to enable creators to make and monetize their metaverse content.
The underlying software and computing power necessary to provide a backbone for the metaverse are rapidly developing. With the metaverse expecting to require more computing capabilities and faster connectivity, this is triggering further investment in next-generation chips, servers, and networking hardware.
A variety of consumer and enterprise hardware is required to support the metaverse with growing demand for devices such as headsets, gloves, smart jewelry, improved cameras, sensors, etc. to enable people to access and engage with the metaverse. And to help power this ecosystem, longer-lasting, smaller-footprint batteries are important.
Going forward, the metaverse is expected to impact traditional organizations and business models in many ways, including the scope of applications that are emerging as the metaverse evolves –
Work, collaboration — To improve the transition to hybrid work by providing people with virtual environments that enhance interactions. With this, virtual meetings enable people to participate with their avatar and engage in conversations that are more lifelike than current videoconferencing capabilities.
Manufacturing, logistics — Companies can use digital twins to emulate manufacturing and logistics processes within the metaverse to lower costs, improve predictions / planning / maintenance, etc. As well, industrial engineers can test product designs in a mixed-reality launch pad to fast track developing new products, reducing liabilities, etc.
Education, training — Online experiences combined with avatars expand the possibilities for learning and collaboration. A single avatar could move fluidly between spaces, from lecture hall to science laboratory to operating room. Medical practitioners could use an avatar before operating on live patients.
Consumer — Businesses and consumers could operate in a space where people are living, working, and shopping in a virtual world to expand the potential scope of interactions and transactions.
Government / Public Sector — The metaverse offers a platform for civic engagement and for government officials to be more accessible to their constituents. City meetings and public events can be held virtually with city halls and embassies being virtualized. This expands the options for organizations to expand services, cost-effectively deliver services, determining if physical structures are even necessary, etc.
Health / Well-Being — The metaverse is an enabler to evolve the current focus on telehealth with virtual care to recreate the “ in-person medical treatment experience “. This includes new health care innovations from mental health and pain management to surgery, fitness, physical therapy, patient care, etc. In addition, home gyms could also be significantly upgraded to improve health and well-being.
Web 3.0 and the Metaverse
Web 3.0 represents a related vision of the next generation of the internet, characterized by opportunities to leverage blockchain, or distributed ledger technologies, as an emerging way to enable multiparty business and consumer interactions. Web 3.0 is about building independent systems that are based on a technology ecosystem enabled by blockchain. It is characterized by a notion that all participants are equally able to create, own, transact, and monetize digital assets.
Web 3.0 portends new business models that arise by streamlining current complex processes across a range of industries. While initial use cases focused on digital currencies, emerging use cases involve functions other than finance, such as smart contracts, validating certifications, and supply chain transparency.
Some core characteristics of Web 3.0 include –
Reconstructed value chain – Web 3.0 economics favor creators (developers, service providers, and artists) and generally disrupt intermediaries and brokers who have historically connected those creators to their customers. Whereas some Web 3.0 experiments envision a completely autonomous and decentralized future, many others are more incremental, focused on streamlining transactions, reducing costs, and providing efficiencies to business processes.
High transparency, visibility – Blockchain-based systems often default to generalized sharing by design. Increased transparency and visibility are often viewed as helpful as well as blockchain certifiable authenticity provides new ways of representing value through digital goods.
The BOD role in Metaverse discussions
As leaders consider an expanding scope of possible use cases associated with the metaverse, the BOD has an important role to play in guiding conversations with insights on opportunities, strategy, and risk. This includes the BOD becoming familiar with the concepts and technologies to understand how the Metaverse can meaningfully improve outcomes.
For instance, imagine attending a BOD meeting wearing a pair of glasses that overlays physical surroundings with digital information. Whatever or whomever a director is viewing could be augmented with digitally rendered information. Wearing these glasses, the meeting agenda could be overlaid on the wall or a coffee cup, and documents could be overlaid with data sources or the recency of information to provide additional context. In another example, at a shareholder meeting a gaze landed on a specific audience member could produce a biographical sketch of the person — background and context that might be important when the person approaches a microphone to speak.
From these and in company Executive sessions, the idea is to provide curated, just-in-time information by augmenting and enriching physical environments, focusing attention on important signals and filtering out noise. Although these ideas are new, these capabilities are doable now. And given the need for flexibility in finding and retaining talent plus the challenges of travel and meeting in-person in recent years, the need is to enable people effectively connect and communicate in a hybrid work environment with virtual meetings and new tools to improve decision making by fast tracking learning and understanding.
To better position the organization for success by getting these significant advantages, better managing change, and mitigating risk – this is an opportunity for the BOD to explore, understand and manage how the metaverse impacts –
- Business Outcomes – with additional revenue streams, new ways to create wealth, increase brand relevance and value, be a more future ready organization, etc.
- Business Models — With more ways to perform tasks and collaborate, innovate, monetize value creation, expand services, increase opportunities, evolve the business model, etc.
- Talent, Skills — The metaverse can enable people to reimagine how they work, more easily try new things, expand the talent pool for projects, hiring, etc. – from literally anywhere and in new forms. And trigger a need to have new skills in 3-dimensional design and visualization, display visuals and rendering, personal interactions, etc. Plus be a competitive advantage to attract and retain top talent.
- Technology Investments — The investments in edge computing, next-generation connectivity, software, hardware, and talent to support shifts to a mixed reality world.
- Safety, Integrity, Responsibility — Because the metaverse is a new and emerging technology, it is important to address new challenges associated with trust, reputational risk, mental health, etc.
- Security, Privacy — Since the metaverse can introduce new vulnerabilities and risks related to digital identity and fraud, organizations need competencies in protecting personal information while also identifying and addressing emerging cyber risks.
- Ecosystem Management — Since platform and technology selection in the metaverse is new and may be complex initially, creating and building ecosystems needs to become a core competency for the organization.
- Taxes, Ownership, Regulation — A transactional, international virtual universe creates a need to clarify tax, ownership, and regulatory issues that are traditionally rooted in geographic or jurisdictional boundaries as well as have new policies and practices related to digital assets and digital currencies.
- Inclusivity, Social Policing — With the metaverse being an enabler of providing inclusive experiences and managing participants’ behaviors in virtual and physical environments, enlightened organizations will be better positioned to attract and retain top talent.
Given the metaverse technology and capabilities are evolving rapidly to make virtual interactions more immersive, engaging, diverse, and innovative – the better BOD will bring wisdom and insights to discussions about opportunities and strategies to meaningfully improve outcomes to successfully move the organization forward in the evolving business landscape. To help the cause –
Questions the BOD should be asking –
- What are we doing to encourage our company exploring opportunities with new domains, technology and innovations?
- What opportunities does the metaverse present for our company’s growth, innovation, and talent experience ?
- What is our company’s business case for pursuing the metaverse ?
- Should our organization pursue metaverse adoption and development on its own – or – are there alliances, partnerships, industry associations, other enterprise relationships etc. that can be leveraged for advantage ?
- Should we consider having a committee with business, innovation and technology people to explore opportunities and assess risks associated with current and emerging technologies ?
- What processes do we have in place to monitor the evolving metaverse environment and continually re-evaluate opportunities and risks ?
- What are our competitors, those in other industries, Big Tech, and the many startups doing with respect to investing and creating new value in the metaverse ?
- What risks might ensue from each potential use case, including the ethical implications of new technology and digital experiences ?
- What risks might ensue from becoming an – early adopter, follower, or laggard in having a presence in this new ecosystem ?
- How might regulations affect opportunities to benefit from the metaverse ?
- What policies or processes are in place with respect to digital assets and digital currencies ? Do they need to be changed or updated ?
- How can we leverage the metaverse to attract new talent and upskill selected current personnel to increase organization appeal, expand opportunities, create new wealth, etc. ?
With the importance of meaningfully improving outcomes and having the related digital competencies on the BOD and in the C-Suite to create new wealth, please contact CAIL if interested in learning more about innovating for impact and making good on opportunities.
April 14, 2022 Deloitte / CAIL Innovation commentary 905-940-9000 info@cail.com www.cail.com/BI