ARBW #11: From Irrational Exuberance to Clean and Sober
POSTED ON DECEMBER 10, 2017 BY SHEL ISRAEL
[NOTE: This is extracted from AR Business World, my newsletter about AR and VR for Business Readers. To receive the entire newsletter for free, please subscribe.]
Usually, we remember Charles Dickens at this time of year for, “A Christmas
Carol,” but as I write this final AR Business World newsletter of 2017, I find myself looking back at the past 12 months with the opening lines of a “Tale of Two Cities,” resonating in my mind.
“It was the best of times, it was the worst of times, it was the age of wisdom, it was the age of foolishness, it was the epoch of belief, it was the epoch of incredulity, it was the season of Light, it was the season of Darkness, it was the spring of hope, it was the winter of despair …”
To me 2017 was simultaneously the best and worst of times in Augmented Reality.
It was the best of years for vision, but not for adoption. It was a time for mind-boggling trailers of leaping whales, and disappointing performances to follow. It was a year of great innovations, but limited adoptions; a time for Unity and product fragmentation. It was a year of lofty goals that could not grasped.
Such ironies also filled my personal life. The Fourth Transformation became a best-seller. Transformation Group, LLC was formed and developed successful media, educational and consulting products. Yet, it was simultaneously a period in which a long-term partnership and friendship dissolved, corporate strategists for the most part remained in “wait-and-see” mode related to immersive technologies and much-hyped game changers, such as ARKit, changed very little other than Apple’s credibility as a category game changer.
At the same time, immersive technology investments flourished. People who experienced immersive technologies in headsets soared from a few million people in 2016 to several score millions in 2017.
In 2017, corporate adoption rose sharply. Ten percent of the Fortune 500 started pilot projects, some reporting extraordinary results in productivity, accuracy and profits and was on track to double each year for five years. The enterprise outspent consumer-facing businesses by a ratio of $10-to-$1, with the ratio tapering each year for the next five.
The consumer side, however, lagged for a variety of reasons this year, many of them related to the products’ high prices, short battery lives, clunky designs, and limited fields of view to name a few. These contributed to a consumer demand that was limited at best, too smart merchants not wanting to get too far ahead of customers, and tangible merchants so desperate to make tough quarterly returns they could afford neither time nor money to get distracted.
So as 2017, an odd year, draws to its inevitable close, what is the conclusion that we can draw? What is the lesson for us to learn?
Year of Irrational Exuberance
In the late 1990s, Alan Greenspan, then Federal Reserve chairperson, coined the term irrational exuberance. He was referring to investor immersion in a dot-com bubble that was dangerously inflating market values.
To my way of thinking, 2017 will be remembered as AR’s Year of Irrational Exuberance–if not for the entire world, which had troubles of its own, but for the VR/AR industry and those who share my Transformative vision for it.
This does not make it the worst of time by any means. We who dream dreams must be happy to pay the price to make them come true and often those payments span more than a mere 12 calendar months.
But as the baby breath of the new year awaits us after the conclusion of Christmas, the question I have been thinking about long and hard, is what will 2018 be like. First, it is not an odd year and second, much of the industry seems to be treating these final few weeks as if they had the worst New Year’s hangover in the history of celebration.
Year of Clean and Sober
In the last 12 months, nearly every aspect of the AR business ecosystem at a rate that is beyond healthy; it is actually remarkable in terms of money invested and products purchased, in terms of game-changing innovation, public awareness, technology, product and price refinement.
The only real problem of 2017 is that we insiders simply drank too much Kool-Aid. It altered our sense of reality in the same way Ken Keysey did for his followers according to Tom Wolfe in The Electric Kool-Aid Acid Testback in 1968.
I think 2018 will be different: it will be a more pragmatic year for the developers, vendors, buyers and adopter of immersive technologies. It is a year where the champions of Augmented Reality will cling to the reality of business and market adoption.
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I predict 2018 will be the Year of Clean and Sober.
More will happen with less effervescent enthusiasm. The little corporate pilot programs will become fruitful and multiply in enterprise usage.
- VR will train more employees who will produce more on the job while making fewer mistakes. They will be retained longer and make partners happier.
- In healthcare, we will see better trained professionals using immersive technologies to treat, heal and save patients.
- Buildings will be better designed, constructed, leased and sold through VR and AR.
- Sports fans will enjoy bigger thrills and better understanding of team and player data.
- We will see incremental improvements in communications, public education, entertainment, energy exploration and other categories that very few people have even thought about.
This Clean and Sober year will generate less hoopla and more profits. It will be a time where real business decision makers start figuring out long-term strategies and short-term implementations. It will be a time to measure, evaluate and educate. It will be a time to look over your metaphoric shoulders to see if your competitors are gaining ground with AR deployments and to look at customers and the people you wish to recruit, so you can understand how new technologies are fundamentally changing the cultures you need to reach the most.
What was this year’s tiny little test, will be next year’s best practice. The companies that went first will leverage their success to take a competitive edge and establish thought leadership. In 2017, AR observers saw so much promise, which explains how otherwise sane people may have been sucked into a small dose of irrational exuberance.
Language Exchange
We will also see a shift in who has to learn a foreign jargon. In 2017, members of the AR community expected decision makers in retail and the enterprise to learn the language of the new technologies including terms such as volumetric, field of view and six degrees of freedom. It reminded me of an earlier era when productivity software publishers boasted when they produced 1200-page user manuals that users dreaded to open.
In 2018, the AR industry will learn the language of the business they are selling to. They will learn to see he customer problems with empathy and sell technology that reduce complexity, improve efficiency and make money.
Big Picture/Tiny Details
During 2017, I found myself frustrated more than one time by corporate executives who were trying to pick and choose between several disruptive technologies. They would talk about difficulties on whether to stake their futures on AR, AI, robotics, IoT, cryptocurrencies, autonomous vehicles and so on.
This is the wrong approach in my view. You cannot select one of these without considering how it integrates with the other. It is like having a carpenter decide to adopt a hammer at the expense of a saw. These are the tools of the near-term future and they often work best when used with each other.
J.S. Gilbert, a tech industry insider, predicted that these new technologies will begin to converge. “This will be a pivotal year as far as businesses setting the table; Attention will go to infrastructure, education, and other important factors to adoption.”
I agree. But to me, the big challenge of 2018 will be for c-level executives to paint strategic pictures that go five-and-ten years out, so that the middle level executives of the organization can start planning incremental steps in the form of low-risk, low-cost, easy to design and easy to implement pilot projects that steer toward that larger corporate goal.
I did not find many companies doing this in 2017, but I believe there will be many doing so in 2018.
Enterprise to Lead
Next year — as this year — the enterprise will be where the virtual lion’s share of AR investment will occur. According to Mike Boland, founder of ARtillry, an AR research firm, in 2017, the enterprise outspent the consumer side in AR by a ratio of $10-to- $1. While the margins will narrow in the coming years, Boland predicts the enterprise will enjoy a $10 billion ROI on AR investments in 2018, with the greatest investment going into manufacturing and assembly — where the greatest return was enjoyed in 2017.
The consumer side of AR in 2017 was not without its own little victories. Most notably Pokemon Go! grossed over $1 billion in 2017. It is following up in 2018 with 50 more cute little characters that the producers hope people will zap in parks and other public places. Personally, I can curb my own euphoria for Pokemon. I would not be unhappy to see it go. However, there are other immersive toys coming to market such as the Merge VR headsets that reveal puzzle games and living hearts through an amazing sponge cube when worn.
I had originally thought that products like the Merge Cube would make this the first AR Christmas, but I was wrong. AR will represent an extremely small percentage of Christmas retail sales. I doubt that 2018 will be the first AR Christmas either, but immersive headsets, toys and games will make AR more significant.
I also expect to see more use of AR to modernize the holiday shopping experience, particularly by merchants smart enough to appeal to the youngest family members — who we called Minecrafters in The Fourth Transformation.
Perhaps by 2020, AR will be a major component of holiday gift giving. Perhaps it will be later.
In the coming year, I will look at the future of business and consumer AR with the same enthusiasm as I demonstrated in 2017, but I will do it in the context of a more balanced clean and sober perspective.
