Introduction

While consoles like the Oculus Rift may not be an integral part of our everyday lives, virtual reality maintains a greater presence in our society than one may expect. Do you enjoy going out on Pokemon-catching explorations through Pokemon Go? Or how about sending dog face Snapchats to your friend? These are examples of Augmented Reality (AR)--which adds a virtual layer on top of a real-world setting. Next up is Virtual Reality (VR). Let's say you are in your bedroom holding what looks like a pair of big, black goggles. You slip them on and… huh? You are suddenly seeing an ancient Roman temple all around you. No, you did not teleport from your bedroom to a Roman temple. In fact, you are still in the same place--but your senses are telling you otherwise. This is Virtual Reality--which creates a computer-simulated reality for the user that encompasses all their senses. And last but not least is Extended Reality (XR). If both AR and VR had to have a parent, XR would assume that position. XR is the umbrella term for both AR and VR. In other words, it spans the range of both real and virtual environments. Since XR encompasses both fully virtual worlds and those that integrate virtual elements in the real world, I will be using 'XR' to describe the industry as a whole. The XR industry is one that isn't just showing massive potential in the way we spend our down time--it has the ability to change the way we do business. However, XR also has its drawbacks. How expensive will it be? Are there any potential societal risks? The different parts of XR stated above will be discussed through case studies and analysis. But we do know one thing for certain: XR's growing presence in our lives is virtually unstoppable.

Augmented Reality

Comprising 36% of the XR market, AR is expected to grow to a value of $198B USD by 2025. Currently, the realm of AR is mostly dominated by gaming-related interests. According to Statista, in 2017, Pokemon Go comprised 84% of mobile AR spending. Since AR places a virtual layer on top of an existing environment, it would make sense for this part of the industry to move towards providing support for mobile devices. Companies have caught onto this and are now beginning to use AR as part of their consumer strategy.

Let's start with a case study of a company I'm sure many of us are familiar with when decorating a home: Ikea. Oftentimes when going out to buy furniture, customers may wonder, "Will this table fit in between my two lampposts?" Or maybe, "Will this couch complement my rug well?" This can lead to hesitation when buying goods as customers will be unsure as to whether that new couch will brighten up the living room or look out of place. If the furnishing does not fulfill customer expectations, they will end up returning it--wasting time for both the purchaser and seller. Ikea has a solution for this problem using AR. By attaining the ability to view objects in 3-D models, customers can get a better idea as to how an object will fit in their homes. To put the icing on the cake, Ikea has used AR to demonstrate how a large piece of furniture (couch, bed, etc.) will fit in a person's house. Now, you can see that the cabinet you were thinking of getting would cover the pictures you already framed up. Instead of having to drive all the way to the Ikea store and back only to find that the chair you bought is too small for a table, AR makes it possible for consumers to buy with confidence--making the process of decorating a home less stressful and time consuming.

Drawing from the book Blue Ocean Strategy by W. Chan Kim and Renee Mauborgne, AR has created a new "blue ocean"--unexplored markets--for companies. As a part of the retail customer base, there are nonconsumers that are not a part of the market due to a lack of time and aversion to worrying about whether a product will be the right fit for their lives or not. By using AR, companies can expand their customer base to appeal to these noncustomers. AR also has the potential to create a domino effect amongst industries. According to the New York Times, AR could be used during the Olympics to allow for athletes to pop up on the screen and explain how they execute maneuvers live. This could affect not just TV broadcasting channels but also sporting companies. These pop ups may be used for sports companies to advertise. And the increased appeal of hearing athletes speak about their experiences would draw a larger audience for media companies.

Virtual Reality

The world of VR sees much of its potential in gaming. As of 2018, gaming comprised 48% of the VR software market. The market is expected to be valued in the billions in a few years as Statista states that the global VR market will be worth $6.4B USD in 2022. However, VR is not just used for people to immerse themselves on a beach or gaze atop snowy mountain peaks. VR has also been used to create strides in industries ranging from medicine to retail. By using VR, it is possible to mitigate risk by using VR as a sort of simulator--testing and analyzing situations before they take place in the real world.

In our next case study, we will examine how Walmart manages to use VR technology to improve their physical services. When training retail employees, it is often done at a specific time with either the manager or someone from corporate headquarters coming down to conduct the training. But what if an employee is flustered from events that happened earlier that day? Or maybe the corporate situation is one like Dunder Mifflin in The Office--where training from corporate headquarters results in less than stellar results. But by sending Oculus Rift headsets to all Walmart stores, it is possible for employees to conduct their training without having to worry about missing a training session. Employees can redo their training if they feel that they need to brush up on something. As a result, employees claim that the training has improved customer service and learning more quickly. With over 45 modules, it is possible to create a detailed training program instead of cramming training modules over a few sessions. Since the Oculus Rift requires the user to 'do' instead of 'watch', the modules are ingrained in the user's memory. Through VR, Walmart has made it possible to improve the physical capital and utility of their employees and reduced training costs.

Looking at this Walmart example and going back to Blue Ocean Strategy, it can be seen that by using VR, Walmart is continuing to lurk in bloody red waters--the areas filled with competing firms looking to gain an advantage over each other through cutting costs and improving technology. While Walmart may have improved the quality of its workforce, it didn't do anything to draw new customers from coming in. Of course, the opposite point--that Walmart is drifting towards blue ocean waters--can be supported. If Walmart's customer service and friendliness of employees dramatically improves due to VR training, customers who normally would not shop at Walmart due to social stigmas or having a closer store may decide to choose Walmart for exceptional service. Due to the power to influence both work and play, VR is expected to be an emerging market deserving of attention.

Extended Reality & Potential Downsides

Overall, the possibilities of XR to combine both virtual and real-time reality are exponential. Looking for a new home but went on a rainy day? VR technology can be used to view that house in 3D on that sunny day you were hoping for. Want to have fun with friends outside? AR allows for millions around the world to enjoy playing Pokemon Go. XR literally opens up new worlds for people to explore.

However, there are some criticisms surrounding this emerging industry. At the moment, the price of the equipment required for XR is out of reach for many consumers: The Oculus Rift is $400. XR also has the potential to unleash a situation similar to those found in Black Mirror. Will we end up spending more time in virtual realities rather than our own? What will happen to society if this becomes an epidemic? After all, we see a similar phenomenon with people being attached to their phones and the Internet. Another concern is that the technology involved is experimental. What if one of the mechanisms in the headset causes seizures? If it is used in fields like medicine, could XR provide the wrong diagnosis? And how similar (or different) are XR simulations to the real world?

There are companies looking to alleviate some of these concerns. ImmersiveTouch is a Chicago-based Medical Technology company that specializes in using VR to both plan and train for surgeries. On the surgical planning side, 3D models are used to determine the most effective surgical methods. By uploading a patient's data onto a form, the system is able to provide a realistic model of a body part. Turning to the surgical training aspect of things, doctors can use VR to practice different surgical methods and train those looking to go into surgery. By using realistic tactile sensitivity, the simulations are to be close to an actual surgery. However, there are some questions to be raised from these practices. Just how closely would a simulation resemble an actual surgery? If there are people talking to the surgeon during a real surgery but not during the simulation, would the surgeon be able to react accordingly? How about if an unexpected problem occurs during surgery? Such problems can only be resolved through time and as the public garners more interest in XR technology as a whole.

Conclusion

Like drones, XR was initially seen as a product of entertainment. However, as its technology improves, there are newfound purposes that it can be used for. It can be used to close sales in the real estate market. It can train employees effectively. It can even potentially save a life. But the industry also has a darker side to it. When I look around me, I see the negative effects of technology. People scroll through their Facebook feeds aimlessly. They burn countless hours watching funny cat videos. We're traveling down a road to nowhere. Will XR make this situation worse for the world? As an Economics major, I can't help but think about the Law of Diminishing Marginal Utility. As we use XR for the first, second, third time, we may get immense satisfaction out of it. But there will come a time where people will be dissatisfied. They will want more. So will XR end up improving this world? Or will we be trapped in an alternate reality--looking to escape our problems?