Wednesday, April 15, 2015

Failure is inevitable

Augmented reality is a fascinating industry because the market is really difficult to ascertain.  This new emerging technology has always been depicted in science fiction novels and movies.  So it seems like the market for this new technology has already been defined.  However even with this distinction, after read In the Discovering New and Emerging Markets article, I think failure is still inevitable.

Augmented reality is defined as a, "live direct or indirect view of a physical, real-world environment whose elements are augmented (or supplemented) by computer-generated sensory input such as sound, video, graphics or GPC data".  Essentially, this is combining the virtual world with the real world, which has several use cases in both the industrial sector and the commercial sector.  There have been cases defined in every industry from Art to Tourism and Sightseeing, so the big question is which industry should companies pursue?

I think this is where Christensen principle of being ready to fail to determine the correct market to invest in is essential.  He quotes "...managers can always count on one anchor: 'Expert's forecast will always be wrong.'" Even if a market looks prime for disruption, consumers may not adopt your technology for the use case you predicted.  This is primarily do to the uncertainty of consumer value in the product.  One great example for this is the Honda example that Christensen provides.  Honda thought that the motorcycle market wanted cheaper sleeker motorcycles, which as we learned was a miscalculation.  However, through this failure they were able to uncover the true market their motorcycle addressed and was able to capitalize on it because they didn't "put all their eggs in one basket".

Current companies that are investing heavily into augmented reality are Google and Facebook. Google invested $546 million in Magic Leap and Facebook invested $2 billion to purchase the Oculus VR.  These two internet giants pursuing this industry will each have their own way of integrating it into their business.  And even though their integration may seem like a great fit for their current product, it may not be moving toward the correct market.  This is why Google's position is very interesting.  Google excels at search and data, so combining this with augmented reality provides a very flexible backbone for whichever direction Google wants to take their product.  They can make small investments into various industries conducting market research and getting feedback, and when they find the market that they feel is worthwhile, they can invest heavily into that market.

Based on Christensen's article emerging markets are very difficult to ascertain with any certainty and current management education poorly equips managers to deal with it.  Although, I feel that augmented reality will definitely be a technology that will be widely accepted it's still an emerging market with a lot of uncertainty.  I'll be interested to see how Google overcomes it's initial failure.

Additional Readings:
Google Acquisition:

How Augmented Reality can be used:

What Facebook wants with the Oculus VR:

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