The Big Opportunity with Virtual Reality

Virtual reality (VR) is being touted as the next big thing and venture capital firms are falling over themselves to give money to companies experimenting with the technology. There is also growing interest in mixed reality (MR), which is an augmented version that lets you use the real world as the backdrop to navigate VR objects placed within it. The MR experience is considered more real and believable, compared to VR, as the latter happens in a world that is entirely make believe. Here is a great Wired article on VR and MR which spurred my thinking and brought about this blog.

Turns out that VR technology has been around since the 1990’s but it was cost-prohibitive to mass produce. With the proliferation of smartphones, which have brought down the cost of sensors and created super computers that fit in our pocket, VR is finally ready to come of age.

It would be fair to say that Oculus Rift marked the turning point that resulted in VR going mainstream. Oculus started in 2012 as a Kickstarter project to build a VR gaming headset and quickly became a household name. In 2014 they were bought by Facebook for $2 billion. Since that moment there has been something akin to frenzy among the top tech companies to get into VR. Microsoft recently started shipping its HoloLens to developers (Source: Verge article). Verizon’s AOL bought a 360-degree VR video company called RYOT (Source: Wall Street Journal article). HTC, Google, Sony, Samsung, Apple and a host of other companies have launched VR products or are in the process of developing them.

However, all these companies are currently thinking about VR only through a lens of gaming and commercial applications like movies, tourism and for various new ways to market their products and services. It is great for companies to invest in innovation to find better and more effective ways to sell us ‘stuff’ but I believe that focusing entirely on the commercial aspects would be missing a much greater opportunity.

Here is the line in the article that sparked my thinking:
“People remember VR experiences not as a memory of something they saw but as something that happened to them.”(Source: Wired article).

In my mind, the greatest flaw we have as human beings is the inability to see through someone else’s eyes and, therefore, to empathise with them in a truly meaningful way. It is almost as if we are conditioned to personally experience a situation before we can fully appreciate and understand it on a deeper level. This is why it is often hard for us to truly empathise with people and situations that we have never experienced.

For example, most people get involved or start donating to Alzheimer’s and cancer research only after they have lost someone close or witnessed the disease first hand. Similarly people born rich are unable to appreciate the daily hardships and obstacles faced by families that live paycheque to paycheque, and simply view them as lazy or less hardworking.

Most people cannot fathom the daily experience of people of colour and the toll racism takes on a person’s self-confidence and self-belief. It is also very hard for any of us to imagine the emotional scarring that occurs, often for life, on victims of abuse. When there are no overt physical manifestations and scars, people struggle to feel a depth of compassion that might lead to action or a change in behaviour.

Now, let’s go back to the statement from the article; “People remember VR experiences not as a memory of something they saw but as something that happened to them.”

Now, imagine if we could develop VR and MR tools that will allow Presidents to walk virtual battlefields, before making the decision to go to war. I guarantee that they would not make it as lightly as they do today. Imagine if convicted murderers could see the hell they leave behind for victim’s families. What if skeptical lawmakers could live through the eyes of refugees fleeing war-torn countries? And college freshmen were able to witness the damage they do with a drunken but forced hook-up (not the actual act of rape but the aftermath). Imagine if Donald Trump could spend a day as a Muslim woman.

Think of it as an education tool to help us make better life choices and wiser decisions by building greater empathy, not as a brainwashing tool. I believe there is a greater potential for VR, and especially MR, that goes beyond experiences designed to create entertainment, one that could truly help us become more humane, compassionate and wise.

CEO’s of companies like Facebook and Google love to talk about their altruism. They want to give back to society by solving some of the biggest problems using technology. But because their motives are driven by profit (which allows them to fund these initiatives) we tend to end up with flawed initiatives like Facebook’s Free Basics.

So instead of Mark Zuckerberg and Sergei Brin playing God by holding onto innovations and breakthroughs in VR, to develop a narrow set of products that suits their commercial purposes (which they should still do), why not also open source all the research and code and allow the world to build off it and find many more commercial, altruistic and innovative uses for this technology.

Seeing life through someone else’s eyes is unequivocally the greatest power and gift we can give mankind and who knows, it might be the one thing that can help save us from ourselves.

HBO Go or No Go?

HBO’s announcement about launching a streaming only version of their popular service has been received with great joy and serious apprehension depending on which side of the fence you sit. For many years now consumers, specifically people who have cut the cable cord (cord cutters) have been clamoring for services like HBO and ESPN to go rogue. Cord cutters have said that they are willing to pay a monthly fee for these premium services if they were stand-alone and not part of a cable bundle; one that includes hundreds of channels nobody wants to watch. So for cord cutters and consumers like me, who currently live in both worlds, this is a big win and giant step in the right direction towards a la carte programming.

However, on the other side of the fence sit the cable and broadband companies who have balked at HBO’s move because it will disrupt their lucrative and outdated business models and threaten the uncomfortable status quo. Incidentally, the business model the cable companies are trying to protect is akin to going to a restaurant and being told that in order to eat your favourite desert you will have to order, and pay for, all the deserts on the menu – I doubt you would be eating there again! Comcast’s CEO recently publicly rebuked the HBO announcement; “Mr. Burke warned that, whatever HBO’s intentions, ‘it’s going to be a challenge for them to not cannibalize what is already a really, really good business’.” (Source: Wall Street Journal). It is worth noting that if Comcast’s proposed merger with Time Warner Cable gets approved by regulators, they would control 70% of the broadband market; and interestingly HBO will need to rely on broadband providers like them for the high speeds and massive bandwidths they will need for this gamble to succeed.

The reality is that when most established and entrenched companies make proclamations about changing their business model or radically disrupting the status quo, it is often a knee-jerk reaction to competitive pressures and therefore rarely ever thought through. Take for example CBS’s announcement, on the heels of HBO’s, about launching their own streaming service for $5.99 per month. CBS like other broadcast networks is free-to-air. This means that unlike cable channels all you need is to buy is an over-the-air-antenna and plug it into your TV and you can watch all the networks, as well as numerous local channels and public broadcasting stations like PBS; all in HD and all for free (Source: Lifehacker).

CBS also makes a lot of money by negotiating hefty “re-transmission” fees from cable providers, which form part of our monthly monster cable bills. So the first question is why would the cable companies continue to pay these hefty fees when CBS is making the same content available through other means? Additionally, from a customer standpoint, live sports like NFL games are not included in the streaming service. Let’s face it, CBS hardly has a reputation for stellar and premium content that people are willing to pay extra for; not sure many people are doing high fives about the fact that “Two Broke Girls” will be available to watch via streaming. Also, if I want to watch the first six seasons of the Good Wife, I can do this for free as an Amazon Prime member, or see them on HuluPlus under my current subscription (where I can watch many other shows), or simply download 2 seasons at a time from iTunes for roughly $65-$70; which is still cheaper than paying for one year of CBS’s ‘All Access’ streaming service  — you do the math.

HBO on the other hand is not like a CBS (other than the misfortune of having Time Warner as it’s parent company). It has always been an entrepreneurial company with innovation as part of its core DNA. It single-handedly changed the television industry; lifting the quality of content and thus saving us all from a TV-hell filled with nothing but the Kardashians. However, the quality of content that forged HBO’s brand reputation also forced the rest of the industry to raise its game, and many have followed-suit by creating their own original and award winning programming. AMC has had huge ratings and critical success with “Mad Men”, “Breaking Bad” and “Walking Dead,” while Showtime has given us “Dexter”, “Nurse Jackie” and “Weeds”. Even Netflix has gotten into the content game with “House of Card” and is now stepping fearlessly into the feature film business with a recent four movie deal with Adam Sandler (Read my take here: “Netflix, Data, Drunkard’s and Adam Sandler”).

So unlike CBS, I believe HBO is doing this for the right reasons and more likely to think it through and get it right, now that they have woken up to and accepted the new consumer realities. This I suspect also led to their decision to go ahead and piss on their powerful cable partners whom they did not care to inform ahead of making their announcement.

HBO knows that they can no longer distinguish themselves on quality of content alone. As a result they would be competing (with the likes of Netflix) with one hand tied behind their back as long they are relegated to being stuck as part of the traditional cable bundle.

Second, they have read and accepted the tea leaves on the changing pattern of television consumption. Online video has been growing for some years but the acceleration has been marked in the last year. An Adobe study shows that for the first time online video viewing habits are going mainstream and no longer relegated to tech savvy early adopters and cord cutters; “Researchers tracked 165 online video views and 1.53 billion logins over a year, and they found that total TV viewing over the internet grew by 388 percent in mid-2014 compared to the same time a year earlier — a near-quintupling.” (Source: Wired Magazine). This means that even people who have regular cable subscriptions are choosing to watch more of their TV and movies online via internet connected devices.

Most importantly, HBO is clearly paying attention to their customers changing viewing habits that have decimated the old Nielsen TV rating system. People no longer want to watch shows based on a Fixed Point Chart (industry jargon for the TV schedule published by a channel). Instead, they prefer to watch it a few days later or simply binge watch an entire show or season during a weekend or long haul flight.

While I do not have a crystal ball and cannot predict the success of HBO’s standalone service, I do know a couple of things. It is certain that they, like Netflix, will face tremendous opposition and hurdles from movie studios, cable operators and broadband providers; all interested in preserving their lucrative status quo. However, HBO will also have the wind in their sales based on the fact that customers are demanding a breakdown of the straight-jacketed cable model and getting more used to consuming content in an a la carte, anytime, anywhere, pay as you watch model.

My money is always on companies that try to deliver on their customers’ needs and focus on making life easier for them, rather than try to force customers down a path driven by the company’s myopic goals and bottom-line greed.

Big Numbers. Small Research.

Many companies fall for the big numbers being touted about the size of the Indian middle class, the fact that it is the second most populous nation on earth and has had the second largest economic growth rate for most of the last decade. These figures can and have dazzled even the most seasoned marketers, and here begins the fallacy of easy growth and big revenues. For years the middle class number being thrown around was 300 million, by both the UN and the US President. In 2001 it was finally accepted as being total tosh after a comprehensive McKinsey Global Institute Study. But it did not matter because the allure was enough for many brands to pour money into India without ever questioning the numbers, and far more importantly without trying to understand the local market dynamics and unique consumer behaviour.

Today, it is accepted that India’s middle class will grow to be an astounding 583 million people by 2025 (source: McKinsey Global Institute). To give you an idea, five percent share for a company like Kellogg’s would equal 29.5 million customers. In the UK, Kellogg’s is the market leader with a commanding forty-two percent share of the cereal market, which amounts to a mere 27 million customers in comparison. So, essentially even a relatively small share number, that in any other market would be scoffed upon, in India can amount to a larger customer base than leadership share in most developed markets. Many a seasoned marketer has looked at these numbers and dangerously never bothered to scratch beneath the surface before diving headfirst into India.

In the 1990’s Kellogg’s was one of the many companies that fell victim to this and had to learn their lesson the hard way. They invested some $65 million into launching their No. 1 breakfast cereal brand, Corn Flakes, in India; relying entirely on the population numbers and dreams of converting a meager one or two percent of consumers, without bothering to study and understand the existing breakfast habits that have been around for thousands of years.

If anyone at Kellogg’s had simply bothered to ask any Indian they would have known that Indian’s like to eat hot and savory foods for breakfast; like idli & sambar, aloo paratha with pickle, or spicy mixes like bhujjia. Furthermore, Kellogg’s never bothered to change any aspect of its marketing strategy or packaging for this vastly different customer. Instead, they relied on their Western strategy to win the day. Employing their world famous marketing strategy of “crispy flakes and premium quality” – unfortunately for them it turned soggy the moment it landed in hot Indian milk on every breakfast table. Their price premium also made them an unaffordable luxury for the vast majority. Kellogg’s was so confident of replicating their global successes that they proceeded to immediately launch a whole series of brands, one after the other; in the end only compounding woes.

In 2001, Kellogg’s finally realised their combination of ignorance and arrogance had led to dismal failure in India. They realised that they were not going to change the Indian consumers’ age old eating habits, in one short decade, and that they needed to change their strategy to succeed in India.

Kellogg’s is by no means alone; Mercedes Benz, Coca-Cola, MTV, Domino’s Pizza and a host of other well-established global brands and savvy marketing companies all learned their India lessons the hard way – by basing their entry on flawed assumptions, doing scant local research or arrogantly expecting to replicate Western strategies, they too failed to set themselves up for success as early entrants. Yet there is an equally long list of hugely successful companies that took the time to understand the market, adapt and cater their product offerings to suit the Indian palate and local tastes; they are now laughing all the way to their Indian bank accounts!

(Sources: Brand Failures – and lessons learned! and Brandalyzer)