A Netflix Moment for Virtual Reality in the Workplace

By Steve Grubbs

In 2000, Netflix approached Blockbuster about purchasing their fledgling company. Blockbuster was brick and mortar, and Netflix would be the online arm of the company taking them into the digital age. The price to buy Netflix at the time was $50 million. Blockbuster laughed at the price, and, as they say, the rest is history.

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This CNBC chart shows the battle was over 9 years after the fateful meeting.

Today, Netflix is valued at more than $200 billion and there is one lone Blockbuster left in the world.

Most of us have lived the Netflix story: they shipped DVD’s through the mail with no late fees and then later, became the undisputed streaming entertainment champion. It didn’t stop there. They became one of the most awarded studios in the world for the quality of their content and their show, Stranger Things, is arguably the most watched show in the history of the world.

But it wasn’t easy for Netflix. They needed a combination of events to occur: the creation of the DVD, and then broadband Internet into every home and an adversary — late fees at Blockbuster — that people came to hate.

We are at a similar inflection point with virtual reality in the workplace as Reed Hastings and Netflix were in 2000 and for three reasons, we are on the verge of a similar ascendency for VR in job training, sales, meetings and design.

Consider these solutions being adopted by some of the world’s biggest corporations today:

Walmart trained employees nationwide with 17,000 Oculus headsets purchased to teach soft skills, new tech literacy and customer empathy.

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Walmart trained associates with 17,000 headsets, four at every store in the U.S.

Miami Children’s Hospital trained employees in skills like phlebotomy, CPR, starting an IV and more.

And at our company, ChalkBites, we now offer 20 live classes in VR every month, training employees in forklift safety, OSHA compliance, fire safety and human resources.

Even more, forklift simulators now provide warehouse workers the same level of training that was once reserved for pilots.

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Forklifts navigate this warehouse as drivers learn the simulator before taking to the floor.

VR Company Acquisitions and Investments

The deal market for VR and AR companies is heating up, especially in light of quarantine and the pandemic.

Thinking about the motivation behind all the activity in the space of virtual reality in the workplace, consider these three seismic shifts affecting the VR market:

First, Virtual reality headsets have reached a level of quality and price that largely removes the ‘hardware adoption’ friction point from the equation. Virtual reality hardware — like the Oculus Quest 2, Vive Focus Plus and Pico Neo 2 — have created great products with a plummeting price. With the advent of Qualcomm’s XR chip, the world of augmented and virtual reality just became real. The Oculus Quest 2 — which is lightning fast — is the first headset to have this new chip. Even more, the rollout of 5G over the next 12 months means that headsets will have big data pipes with crazy-low latency. In fact, our friends at Qualcomm tell us the latency between your closest cell tower and your phone will be about 1/1000th of a second.

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The Oculus Quest 2

There’s also the price. At the consumer level, the Oculus Quest 2 has rolled out at a shockingly low price of $299. The business price of the three premium headsets (Oculus, Vive & Pico) ranges between $600 and $800. This means that a small business can keep three headsets in an office for daily use for less than $2000 and a large business can have a bundle of 20 for less than about $12,000.

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The Vive Focus Plus in use at an education conference.

Takeaway: tech companies are delivering premium-quality hardware at affordable prices as they prepare to scale VR around the world.

Second, content for training is developing rapidly and the studies show it is dramatically more effective at a significantly lower cost than traditional training. Let’s start with effectiveness. In the summer of 2020, PWC (formerly Price Waterhouse Coopers) released an extensive study on the effectiveness of training in the workplace. The results were dramatic [see results below].

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PWC finds dramatic results from learning in virtual reality. Image from ARPost.

Now consider cost. The traditional way employees are trained or meetings occur is for humans to travel from one location to another. It doesn’t matter whether the trainer is traveling to the office or the employees are traveling to the training conference; or whether the sales staff is traveling to the prospective customer or local dealers are traveling to the manufactuer for product training — anytime people travel, it’s expensive. The cost of an employee to attend an OSHA training seminar in a warehouse with an experienced OSHA trainer in virtual reality is literally less than $5. That doesn’t cover the gas to get to the next town for traditional travel. This tour gives you a look at what a training center looks like in virtual reality.

Third, the pandemic of 2020 has shown businesses that working remotely has benefits, but without the ability for people to interact together — in the same space — that effectiveness hits a wall. Remote work was normal for many when the pandemic hit, but for the vast majority of companies, it was as shocking as a jump into the ocean on a January day. Use of Zoom, Microsoft Teams and Google Meet skyrocketed and companies quickly adapted to a world where employees did not come into the office.

Zoom fatigue worked its way into the lexicon in 2020.

The problem: Zoom fatigue. Staring at a 2D screen is a great solution during a pandemic, but it eliminates the ability for people to gather together in the same space and converse, design, solve problems and train. The remote option for gathering as a group remotely is collaborative VR on a social platform like Engage, Spatial, Altspace VR or Horizon. As Joanna Stern, columnist for the Wall Street Journal, noted:

Design teams at Mattel use Spatial to review 3-D designs of new toys, including Barbie’s latest DreamHouse. Pfizer uses it to orient and train new employees at manufacturing sites. At Accenture, employees can go to the “Nth Floor” in AltspaceVR to meet up with colleagues in a virtual cafeteria or attend an all-hands meeting.

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Mattel is experimenting with toy design on Spatial. Image from VR Scout.

Takeaway: doing business remotely is here to stay, but the limits of a 2D screen are leading to the adoption of solutions through virtual reality.

So, thinking about our Netflix-Blockbuster analogy, the players in the VR workplace space are pretty clear. On one side, we have virtual reality shared spaces and simulators. On the other side, we the traditional path of employees traveling, written manuals, 2D videos and YouTube videos.

While the status quo is always the dominant, incumbent player, some technologies and companies — like Netflix in 2000 — are poised to not just gain marketshare, but totally replace the existing paradigm. Understanding the factors that lead to these ‘Netflix moments’ is the key to having the vision to see which will be next.

Business case studies and professors may disagree on some of the factors, but three factors stand out:

  1. An incumbent(s) that is looking past their technology disruptor.
  2. A product that has either a lower cost or provides greater value for the money.
  3. A product that is superior to the existing product in a significant way.

Peter Thiel, the PayPal co-founder and Palantir founder, boils it down into these four factors:

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Rule #1: Build proprietary technology that is 10x better than the status quo.

So Thiel regards proprietary technology as essential. Not just any technology mind you, but one that provides a 10x performance improvement over the closest substitute. Even as a startup, Amazon could offer at least ten times more books than a traditional book store, just as it could be argued that PayPal made buying and selling on eBay ten times easier.

Rule #2: Look for Network Effects

What makes a network based business so perfectly suited for a startup is that they are often unattractive to large, established players. As Tim Kastelle points out in a recent post, network effects take time to develop, so at least in the beginning they are unlikely perform well by conventional metrics. But in time, they can become blockbusters.

Rule #3: Create economies of scale

As the market grows, each customer becomes increasingly valuable, not just for what they buy, but for the value they add to the rest of the network. It is, after all, returns to scale that create outsize profits.

Rule #4: Build a great brand

The last element that Thiel cites is branding, although he goes into far less detail here than the other rules. He uses Apple and Steve Jobs as an example, which is fairly obvious, but doesn’t go much further than that.

Virtual reality in the workplace has the potential to satisfy these rules and drive change fast. The largest companies in the world — Apple, Google, Microsoft, Facebook and HP — all realize this and are spending millions on virtual reality. Consider these points:

  1. Airplane simulators, which cost millions to develop just 15 years ago, are essential to training a workforce. Today, a forktruck simulator can be purchased for a $110 per month subscription.
  2. Employees from across a country — or even across the globe — can now gather in the same place to work, train or plan without leaving home.
  3. The world’s best trainers and experts can gather in the same room with workers without the burden and cost of travel.

Virtual reality is invading the workplace, from architecture to training to meetings. With plunging costs for hardware, the advent of collaborative group virtual reality and the 2020 pandemic, VR is about to have its Netflix moment.

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Steve Grubbs is the founder of ChalkBites VR, a company focused on workplace training and the integration of virtual reality into the workplace. Learn more how virtual reality can impact your company at www.ChalkBites.com.

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