What’s With the Metaverse?
How should your business think about the Metaverse? And is it time to pivot your digital strategy to serve the consumer of the future?
What do “Total Recall”, “Tron”, “The Matrix”, and “Ready Player One” have in common?
You got it — a concept that’s increasingly getting close to virtual reality.
The Metaverse is an abstraction of virtual reality that’s closer to augmented reality. In the words of Metaverse investor and futurist Matthew Ball, “The Metaverse is a massively scaled and interoperable network of real-time rendered 3D virtual worlds which can be experienced synchronously and persistently by an effectively unlimited number of users with an individual sense of presence, and with continuity of data, such as identity, history, entitlements, objects, communications, and payments.”
In other words, the Metaverse offers opportunities to interact through a digital avatar in various ways, such as working, playing, exercising, or just hanging out.
Businesses today are relatively social media savvy, with delivery mechanisms ranging from ads on Facebook and YouTube to dedicated business pages and a strong brand presence on various platforms. This customer-facing infrastructure is linked all the way back to targeting, acquisition, and sometimes servicing engines.
So how do businesses steer their digital strategy in the Metaverse based on the rapid advent of underlying building blocks of VR, AI, and blockchain?
Investments and possible hurdles
Under the direction of Mark Zuckerberg, Facebook has gone headlong into the Metaverse initiative. It’s no longer a product, but an identity of the future that’s reflected in the name change to “Meta.” According to the Wall Street Journal, Meta is going to be impacted by $10B in operating profit in 2021 and plans to hire 10,000 workers in Europe alone over the next five years just to build Metaverse products. According to CEO Jensen Huang, Nvidia Corporation’s Metaverse — Omniverse — is one of the company’s most important initiatives. Heavy private equity investments are already pouring in the space with players such as Softbank investing $150 million in Metaverse platforms selling luxury fashion brands. These investments in turn are driven by Metaverse platforms such as Roblox, which has already reported 47 million active users.
Decentralized, open-source blockchain communities such as Ethereum have sprung up with underlying use cases for transactions (Ether currency), decentralized autonomous organizations (DAOs), deregulated finance (DeFi), and non-fungible tokens (NFTs). Companies such as JP Morgan Chase, Microsoft, Intel, and BP are already part of the Enterprise Ethereum Alliance, which paves the way for financial transactions.
As the environment for the Metaverse shapes up both in private and public forums, there are key infrastructure and decision-making areas such as security standards, data privacy, etc. that remain. Combine that with the power of technology companies and the potential for companies like Meta to create a monopoly, much remains to be seen.
The future of the Metaverse
Considering different dynamics of this growth, Wall Street analysts and journalists are projecting the market size of the Metaverse to be anywhere from $10 to $80 trillion by the next decade. We predict private companies such as Meta and Roblox will receive sufficient investments over the next five years, resulting in technological development and implementation. However, public platforms such as Ethereum will likely lag by another three to five years. Industries such as retail and financial services will face a big wave of change as immersive experiences, DeFi, and blockchain-based currencies emerge and expand in the Metaverse. The growth of Metaverse platforms will be driven primarily by developers and content creators who are linked to users, driving network effects through social connections on the platform.
Let’s paint a picture of a few impact areas and how we see Metaverse trends evolving.
Pastime and leisure
Trends:
Virtual nature experiences, museum tours, travel tours, and recreation.
Sub-impact areas:
Customers will be able “teleport” freely from one space to another, attending live concerts from their living rooms and their digital avatars attending meetings in virtual office spaces. Museums will likely own NFTs and invite visitors to digitally roam at a discounted rate, regardless of distance or time zone. Mixed reality technology will enable recreation experiences, such as Meta’s Supernatural, driving gaming consoles toward the sports and exercise realms. Consumers will be able to virtually attend live concerts, allowing them to see their favorite musicians at affordable rates.
Consumer experience
Trends:
Consumers as co-creators, seamless, secure cryptocurrency transactions, safety and privacy on platforms.
Sub-impact areas:
One of the big differentiators between the Metaverse and today’s social media is that customers will act as co-creators of multiple digital assets, including “bodies.” People will be able to create digital versions of spaces with fine details, curating and conserving digital assets enabled by cryptocurrency transactions. Metaverse providers will strive to ensure an environment in which all users feel safe and are able to express themselves by collaborating with authorities and agencies to ensure safety, privacy, and compliance.
Retail and shopping
Trends:
Luxury boutiques, digital assets, retail.
Sub-impact areas:
While luxury brands such as Gucci and Rolex establish their brands on the Metaverse, they’re free from the bounds and limitation of a cost structure and geography while focusing solely on building brand equity and driving collaborative and creative customer experiences. With the proliferation of NFTs, new creatives from luxury brands are already seeing millions of dollars of transactions even as they establish their brands in the Metaverse. Brands such as Nike and Vans have already built their own Metaverse experiences such as “Nikeland” and “Vans World” on Roblox’s platform. Customers will soon be able to roam virtual shopping malls with a limitless array of available inventory from their favorite retailers. They will be able to purchase assets from the brands that they love with seemingly no boundary between the digital and the physical realms.
How to come up with a Metaverse strategy
The Metaverse calls for a different way of thinking about your business model. The following approaches can help you align your digital strategy with the proliferation of the Metaverse.
1. Drive intense customer focus
Your business should strive to understand customer experience and the changes it undergoes as customers move from awareness to decision-making. Target only a few segments, identify points of friction, and address both virtual and in-person journeys for the customer. For example, transacting in blockchain-based currency for products showcased in the Metaverse might be a normal customer expectation.
2. Make smaller bets
Don’t jump on a trend with high investment dollars right away. Investments in the Metaverse are akin to investments in the internet for businesses — not all businesses need to have an ecommerce strategy and there’s no need to follow a mass-industry approach. Niche branding tailored to the right customers will always yield a high impact, so let trends pan out with the market before deciding on next steps.
3. Keep turning bets into value propositions
Managing innovation and driving governance towards Metaverse initiatives helps rapidly synthesize opportunities into offerings. The innovation policy should address discovery, validation, and confirmation to supercharge identified Metaverse initiatives. New products and services on the Metaverse should be aligned to customer expectations of accessibility with a clearly identified roadmap for successful transactions.
4. Partners are key for growth
As an extension of the internet, the Metaverse relies on mutual collaboration between Metaverse providers and businesses. Establishing a presence might require businesses to align on alternative deal structures (such as profit sharing) to test and participate in platform viability. At the same time, Metaverse providers need to have robust technology platforms to offer early commercialization and help businesses capitalize on trends.
What’s to come
Expect to see a significant rise in the use of Metaverse as underlying technology ecosystems comprised of 5G speeds, cloud storage, virtual machines, and seamless cryptocurrency transactions come together on private and public platforms. Fast-paced evolution of core technologies such as audio-visual, hand gestures and inputs, haptic feedback, and mixed realities will result in an immersive, all-day experiences for a digital avatar. The Metaverse will define the next wave of our virtual lives with a significant impact on both our society and businesses.
Slalom’s strategic approach aims to understand your organization’s vision and design a roadmap based on three primary tenets: plan, grow, and adapt. Slalom’s rapid iteration process pushes boundaries and enables teams to innovate, discover, and challenge convention. Explore Slalom element lab212 to see how your business could benefit from immersive experiences, redefine what’s possible, and give shape to the future.
Slalom is a global consulting firm focused on strategy, technology, and business transformation. Learn more and reach out today.
