Director's Cut | Winter 2022
The Metaverse Meets the C-Suite
More businesses are interacting with the metaverse to enhance their business strategies and create new revenue sources. But before taking off in this virtual
space, business leaders and boards should consider some key questions.
Kristie P. Paskvan, CPA, MBA
Board Director and Leadership Fellow
Strategies for Today's Corporate Finance Leaders
When Facebook changed its parent company name to Meta, it became clear the metaverse
was going mainstream. One can barely turn around these days without hearing about the
metaverse, digital twins, virtual and augmented reality, non-fungible tokens (NFTs), edge
computing, and other concepts related to digitized reality.
François Candelon of Boston Consulting Group recently talked about the metaverse as a
physical world converted into digital data, then recreated digitally as either a reflection of
reality or as fiction (i.e., games). This means the metaverse is broader than just virtual or
augmented spaces. Instead, you can engage with the metaverse through your current
hardware before adding virtual or augmented reality components. Think of the metaverse
as a next-generation internet where our commercial activities, entertainment, social, work,
and sports interactions can, and likely will, take place. Visualize visiting another country or
hiking in a national park with just a click. If you think shopping online is easy now, imagine
having an online avatar to try on clothes for you before you purchase, or in the physical
world, augmented reality glasses that allow you to view an object in numerous colors or
patterns as you peruse various consumer goods.
The metaverse isn’t just limited to personal engagement—business interactions will also
benefit. As an example, real estate construction, supply chain planning and reporting, and
quality control reviews can all be enhanced with real-time digital twin applications that mirror
reality. Smart contracts and blockchain will benefit legal, financial services, and other
professions where title and ownership require verification.
As the speed of experimentation and implementation advances, there’s no doubt
that businesses will need to examine whether to interact with their customers and
stakeholders in the metaverse and focus on understanding how doing so can enhance
their business strategies.
GROWING THE METAVERSE
According to The Metaverse Insider and McKinsey, by 2030 the metaverse market is
expected to grow to $5 trillion. And, so far in 2022, over $120 billion has already been
raised by companies in the metaverse space, which is significantly up from 2021 when the
amount was over $10 billion. It’s clear the amount of capital being deployed in this space is
indicative of opportunities across a variety of sectors.
Many of the metaverse-focused investments are in companies that are creating and
maintaining virtual reality worlds, establishing more robust edge computing and blockchain
infrastructures, building upgraded hardware and software, and reviewing data security and
readiness. Others are establishing new applications, creating stories, designing experiences,
and reviewing products and services to determine a starting point for experimentation.
The potential for businesses to engage with customers within the metaverse seems limitless
through product branding, gaming, entertainment, hospitality, and retail transactions. For example, if you’ve ever played or seen Second Life or Fortnite, you’re likely aware of some basic metaverse platforms. Other examples include:
- Decentraland: This decentralized platform enables users to create their own avatars to explore different application landscapes. Users can also purchase real estate to create events and marketplaces. In 2021, Decentraland hosted a metaverse festival where American media personality Paris Hilton performed.
- Nvidia: Well known within the gaming industry, Nvidia created a collaboration tool for developers to create metaverse applications more easily. Companies like Kroger, Amazon, and PepsiCo have partnered with the tool to create immersive user shopping experiences.
- Roblox: Also well known in the gaming industry, Roblox has worked with companies like Nike to create Nikeland, allowing users to play sports games, shop for NFTs, and purchase consumer goods. The gaming platform also worked with Gucci to establish Gucci Town, creating a similar interactive site experience.
Business interactions through the metaverse are also on the horizon with the goal of creating operational efficiencies, enhancing training, and strengthening client interactions. Microsoft has an augmented reality application called HoloLens that motorcycle manufacturer Kawasaki is using in their factories to facilitate supply chain management and the construction of robots. HoloLens allows workers to interact through visual cues when performing various tasks.
Several law firms have purchased locations in Decentraland as they prepare to utilize smart contracts for clients. Other examples where businesses are beginning to interact with the metaverse include:
- Facility management companies: These companies can utilize the metaverse platform for data gathering as well as training and repairs. Being able to train someone for maintenance of a building located miles away through the metaverse can save both time and money.
- Architecture, design, and construction firms: These firms can utilize the metaverse to create digital twins, an environment mirroring physical reality (i.e., a real-time Google Maps). These digital twins allow clients to see and feel space, furniture, light, and views.
- Farmers: According to Global Ag Tech Initiative, digital twinning of farmland or grain facilities will allow farmers to learn to plant more efficiently and anticipate more accurate yields. Also, new farming equipment can be seen in 3D to experience utilization prior to purchase.
- Financial services: Finance Monthly reported the establishment of J.P. Morgan’s Onyx Lounge in Decentraland was based on the view that a “robust and flexible financial structure is critical” for the digital world to succeed, and J.P. Morgan wants to be at the forefront of creating interoperability between multiple payment and financial structures.
ARE YOU READY?
With its ability to streamline processes, save time and money, and allow further engagement with customers, it’s clear that organizations will be swayed to interact with the metaverse at some point. However, there are many areas to consider as you evaluate your company’s metaverse engagement. Before taking off into the metaverse, consider these questions:
- How does the metaverse fit into your strategic plan? Will being in the metaverse enhance your current operations, client interactions, employee training, or brand positioning?
- Will the metaverse present new efficiencies, speed to market, or cost reductions? If so, over what timeframe will these changes occur and who will benefit?
- Do you have a change management plan for large initiatives?
- How far is your organization with its digital transformation projects?
- Is your data organized and 3D ready? Are you comfortable with your cyber and data security plans for the metaverse?
- Does your team have the skills to manage a metaverse strategy?
- Do you have a trusted partner that can guide you through any financial ramifications of being in the metaverse?
- Are you prepared to accept or pay cryptocurrency for any transactions in the metaverse?
- How much are you prepared to spend each year on your metaverse initiatives, and are you budgeting for it in your three-to-five-year plan?
- What are your competitors doing in the metaverse?
- How are your customers or clients entering the metaverse, and what are their expectations for your involvement?
There’s tremendous curiosity about the opportunities the metaverse affords—as well as trepidation. Consideration of these questions and a discussion with customers, clients, employees, board directors, and industry experts will help clarify the right steps to take in preparation for capitalizing on the opportunities the metaverse presents.