The metaverse is one of the hottest topics of conversation in 2022. After a pandemic-enforced two years of being "extremely online," the conventional wisdom seems to be that we're all perfectly primed to live and work in a virtual world. At least, that's what the Big Tech companies seem to think. Businesses are now being urged to explore the metaverse and capitalize on what Goldman Sachs says will be an $8 trillion market.
But, despite the hype, I don't believe we're all ready to fully inhabit our own Ready Player One-scape just yet. It's certainly true that in the long term, we will see businesses offer more augmented reality (AR) and virtual reality (VR) powered experiences. And we will see more desire from consumers to interact with companies over multiple channels--some of them virtual. But in the short to medium term, no one can be really sure what the metaverse means for digital commerce. That's why businesses, particularly retailers, need to shift the way they think about new technology investments and business models.
Online plus offline does not equal metaverse
Early metaverse experiments came with Second Life's efforts to connect our physical and digital worlds--like allowing users to push a virtual cart around a virtual grocery store to receive physical goods. Though interest was reignited as Covid lockdowns hit, Second Life's CEO says the platform still only has around 900,000 active users. That's an infinitesimal fraction of the user base of the artist formerly known as Facebook, Meta.
But despite Meta's strength in numbers, it and its Big Tech brethren will not be the companies that prevail in the metaverse. The ability to run a metaverse is very different from the ability to run a social network. This is the same logic that was proven in the early days of digital commerce, when many brick-and-mortar stores simply tried to recreate their physical offering in an online space. The best strategy for a Sears or Walmart wasn't to just copy themselves in digital format. They needed to completely reconstruct their operations to succeed (and they didn't always manage it). The real successes were digital commerce "natives" like Amazon and Alibaba.
In fact, I would argue that no one is going to be taking over the world anytime soon with the metaverse. It's still very much an emerging economy. There are big questions over how physical money and resources are expected to be exchanged for digital goods. Cryptocurrencies and NFTs are widely touted as the solution, but the majority of today's consumers have no idea how to get involved in NFTs or bitcoin. Naturally, as with any emerging economy, there are also issues of trust and regulation surrounding new methods of payment.
And, let's not forget, the technology itself will need some work. Right now, access points to the metaverse are still very weak. This is a problem that can be solved, but it will take some time. Consumers do not want to wear clunky VR headsets or "smart" glasses all day long. And the virtual representation of "people" in the metaverse is a way off being workable. The Microsoft Metaverse launch featuring avatars with no legs underlines this problem--there are very few available sensors today that can depict leg movements.
What all of these factors boil down to is that a "lift and shift" approach won't work. Conway's law applied to the metaverse means a wholescale top-to-bottom reimagining of digital commerce is needed to get close to a successful model. So, what should businesses do in the interim? They should start to think like a venture capitalist (VC).
Channel your inner VC
The best strategy to build a winning metaverse proposition is to set an innovation budget aside and then handle it like a VC fund. This fund should be separate from your corporate identity and your brand. Digital commerce business leaders can then invest in any metaverse entity or initiative that interests them or that they think has potential. This VC-like outlook will allow businesses to experiment in the metaverse space with controlled risk. What's more, through this process, they will make connections and find the right technology partners that can support a future metaverse proposition that is feasible and deliverable.
Like any good VC, it will also pay to look to where others have already had a measure of success. For this reason, digital commerce decision-makers in charge of investment decisions should also look to the gaming industry for inspiration. The gaming world is already experienced at creating ecosystems--like Roblox and Fortnite--where players (especially younger users) are accustomed to the idea of spending real-world money on virtual goods. The concept of dressing an avatar, for example, in custom clothes or "skins" is already familiar.
Simply trying to make your business a "metaverse business" today won't work. Organizations are shackled by their internal infrastructures and existing technology, and there is too much risk and complexity. Instead, by taking a VC-like approach, businesses will be primed to take advantage of the opportunity the metaverse will present but de-risk themselves from betting the current business on it. If the metaverse takes off, the new entity the business has invested in and created can subsume the old, and move forward successfully.