When the business environment is challenging, it can be hard for leaders to stay ahead of what might be coming next. Today, with many sectors experiencing complex pandemic-related supply, labor, and energy issues, it can be difficult for leaders to deal with current challenges while having foresight into the changes that tomorrow will bring.
Yet, in my experience, in the midst of complex environments is when it’s most crucial to pay attention to what’s around the corner.
COVID-19 was a devastating global disruption that accelerated our digital lives and work environments. In the process, the metaverse, a futuristic-sounding concept I define below, quickly moved closer to delivering on its “Web 3.0” billing.
Leaders used to technology hype cycles could be forgiven for being skeptical of the metaverse, and might be inclined to brush off the concept while they handle the continued disruption in front of them. However, I believe that leaders with a strong innovation infrastructure in their organizations should pay attention to this, as it has the potential to massively disrupt the way we work both physically and virtually.
Innovation discovery and execution capability is the key force underpinning an organization’s resilience in the face of new curve balls thrown at them. Those who have built this capability will be best positioned to take advantage of the opportunities the metaverse presents.
WHAT IS THE METAVERSE?
The metaverse is a persistent, interconnected, virtual environment where we work, shop, trade, play, socialize, and are entertained. It connects our physical and virtual worlds through virtual and augmented reality, enabled by 5G infrastructure and cross-industry collaboration on interoperability. It moves us toward a richer, more connected digital life across virtual platforms. In addition, it moves us from the smartphone we use to access web-based services, connect with people, and work on, to comfortable everyday eyewear that overlays digital information on the real world.
The metaverse’s melding of the virtual and real worlds is already happening, accelerated by changing consumer behavior through the pandemic.
Decentraland is a virtual reality world based on buying, selling, and building on virtual plots of land, bought with the game’s Ethereum blockchain-based cryptocurrency that equates to real money. And, we’re seeing real-world brands buying in. Renowned auction house Sotheby’s opened a virtual replica of its London New Bond Street Gallery this summer in Decentraland’s art district. Plots of digital land in Decentraland are selling for the cryptocurrency equivalent of hundreds of thousands of dollars.
In the music world, metaverse events are making waves. After musician Marshmello attracted 10.7 million viewers to a live virtual concert in the online video game Fortnite in 2019, engagement with similar events has only grown. Fellow musician Travis Scott’s live-streamed Fortnite concert in April this year attracted 27 million viewers, helping his single debut at number one on the real-world charts.
The gaming sector is largely driving today’s metaverse, alongside the technology giants looking to stake their ground in the space. Research house L’Atelier BNP Paribas expects in-game spending on items such as digital clothes and character upgrades to grow to $129 billion in 2021, up from $109 billion in 2019. Users are already buying digital goods from real-world brands, with luxury retail brands quick to recognize the opportunity.
Meanwhile, valuations suggest that investors are buying in too, with online game platform Roblox valued at $4 billion in an early 2020 funding round. On the technology side, social media giants are investing billions, with other technology companies joining as early investors.
BECOMING AN EARLY ADOPTER AND PROBLEM SOLVER
The metaverse is clearly in its early days, but it’s not too early for businesses to take notice.
Innovative organizations tend to invest in the infrastructure, people, and mindset to assess technologies. As a result, they are more likely to identify strong use cases and necessary business evolutions or transformations and consider them in strategic decision-making. Given how long and slow the process of transformation is, waiting for certainty can be risky.
While I’m a strong advocate for innovation teams, if they sit on an island remote from the business, they cannot be well-positioned to identify the specific problems that technology can solve. Engaging with domain experts on the metaverse will be as important as for any other technology. Our experience at the EY organization with both AI and blockchain has certainly proved the point.
It’s key for innovation teams to leverage a diversity of skills and experience to best push and pull the technologies to understand their enterprise potential. However, it’s when business domain experts are involved that we have identified specific business problems where emerging technologies create the most value.
Getting there has involved false starts, and this will be the case for the metaverse. Failure is part of the process, even with the strongest innovation capability. “Fail to win” can be a difficult mindset to sustain in the context of a large or risk-averse organization.
In my personal experience working with CEOs and leaders across organizations, I’ve seen firsthand that leadership attitude is crucial. When leaders are committed to innovation investment, we tend to see higher acceptance of failure and more room on the agenda for emerging technologies, even when the environment is challenging.
GET READY TO ACT
The metaverse is the latest in a long line of hyped-up consumer-driven technologies, so I’m not surprised it isn’t on every leader’s radar. However, while there are barriers to overcome, I believe the metaverse will create huge opportunities across many sectors. Organizations that are systematically addressing their innovation potential, irrespective of market stresses and strains, will be well-placed to act when the time is right.
The views reflected in this article are the views of the author and do not necessarily reflect the views of the global EY organization or its member firms.
Jeff Wong is the Global Chief Innovation Officer of Ernst & Young, one of the largest professional services organizations in the world.