Technology Intelligence Group

The slippery value proposition- Virtual Spaces

Value Proposition. Return on Investment. Justification for Expenditure.

However you phrase it, there are skeptical people in every organization who want empirical, objective, hard evidence that any new initiative has a clear return on investment. In these harsh macro-economic times, this tendency towards risk-aversion is amplified to the detriment of new technology deployments that can save organizations much needed hard capital in the long term. The conundrum with RoI is that it is best defined after extensive deployments of a given technology, and their associated beneficiaries. When 100 or 1000 early adopters have installed a technology, used it extensively, and have had the leisure to write up a quantitative statement of benefit, the skeptics are happy and have covered their respective assets enough to green-light a project.  This would be fine if the organization wasn't attempting to gain a technological advantage or benefit from either making or saving money in the short term, because these well-defined RoI studies don't emerge until about 25-30% of the way through the maturity curve of a new technology. By the time you can definitively justify it, it's not new.

Looking at Virtual Spaces, there are luckily a number of RoI vectors, with both 'soft' and 'hard' numbers.  Lets walk through some of them briefly and the best sources for updated data:

Emerging Technology- Demographics and Economics (Third of Three in the series)

In the last two Emerging Technology blogposts, I wrote about the non-technical factors to adoption and success of emerging technologies.  The last component I would like to write about is the broader environment the technology innovation, as part of a system of technology surrounding an individual or company, is operating within.  This plays a critical part in the success of the broader technology.

As we have seen with the current macroeconomic conflagration, capital spending for IT projects in corporations has been almost exclusively frozen (or as an ex-VP of mine was quoted recently, the IT staff are burning through the remaining budgetary dollars in anticipation of a industry-wide freeze).  These economic slowdowns affect different portions of the globe at different rates of speed, as you can determine by the time-delay of financial bailout packages in the United States, Europe, and China.

A broader issue is the demographics of the adopters.  Unless you are targeting a specific age group or demographic segment with your technology, then you are most likely going to get adoption from the 24-30 age bracket (early adopters, traditionally), or the 30-50 age bracket (peak earning years and discretionary income).  Where this becomes interesting is when you plot age ranges (and associated economic brackets) on a region by region basis, as noted in a recent Economist magazine story regarding how the average age of child-bearing was effecting unemployment rates in Utah.

So, if you have a product or service that appeals to a specific age bracket, or requires a certain amount of discretionary income, you will need to look at not only the feature/functionality required by the customer base, but also the age-spreads by geography and where each geography is at present economically speaking.

We'll be using these three factors, adoption, combinatorial innovation, and Demography/Economy, as weighting when introducing new technologies on the Technology Intelligence Group.  As noted in prior blogposts, technological failure is seldom the determinant factor of success with emerging technologies, but rather these adjacent variables in the equation.

Emerging Technology- Combinatorial Innovation (Two of Three in the series)

Recently I wrote about the diffusion of technologies into personal and corporate technology systems as a key component to emerging technology innovation.  Although there is always the risk that any new technology will not work, this technological failure is most often weeded out in early product development or market trials.  One of the key factors is more often how the new invention is adopted as part of the broader ecosystem of technology that surrounds all of us.  If it doesn't fit with our current relationship or systems of technology, and requires widespread change (as opposed to incremental additional functionality), then it's odds of success are low.

Another contributing factor that seems remarkably obvious, however seldom receives it's due attention, is the dependent supporting technologies required for the new emerging technology to thrive.  If it's a new broadband video service like the Roku/Netflix brick, or Hulu, then you need video codec technologies to be at a certain maturity level, processor on a chip technologies to be at a mature price point for the Roku brick, and pervasive broadband.

Emerging Technology - Adoption (One of Three in the series)

On Tuesday and Wednesday of this week, I had the honor of participating on the 'Blogs, Wikis, and Virtual Realities' panel at The Nature Conservancy's ConEx conference in Vancouver.  I presented virtually, and received some excellent questions from the professionals at the conference.

One question forwarded by Jonathon Colman, TNC's panel moderator, associate director of digital marketing for TNC, and all around great conservationist, was 'What is the big thing coming down the technology pipeline that will change everything?'.  This is a frequent question I receive from clients, venture capital firms, and about every seat-mate on international flights.  Unfortunately, the answer is not an easy one.

As is the case with picking the best wine, emerging technology is entirely a subjective experience.  What works best for you may not be the thing that works best for other people.  Just as each fingerprint is unique, so is each individuals or organizations interaction with technology.

The path this leads you down is that technology innovation is an iterative process.  Sometimes the innovations and inventions are small (the new Apple laptops come to mind), and rarely they are a giant leap ahead.  The interesting bit is that the degree of invention or innovation is most often not the determinant factor, but rather the ability of companies, people, and governments to integrate these technologies into the existing system of technology that they use.

An example: I will sell you a device today for your enterprise that will provide relevant and timely data to your employees in the areas they are working in, like personalized business intelligence.  This would save your staff from 'Search', a tool that was useful when there were scarce assets on the Internet but provides less utility with each additional piece of data we add to the Internet or enterprise.  Your employees will have the data they need to make important decisions BEFORE they even realize they need it. Sounds pretty good, right?

Now, go tell your existing database teams that you are going to upend their query structure and processes.  Tell your corporate business intelligence people that you are democratizing BI for the masses.  Listen as all of the infrastructure component teams (SharePoint, Unified Comms, Infosec) tell you how the new tool doesn't integrate with the legacy systems and that they will not support your purchase request. 

So much for that idea.

I've written in the past about technologies like VRML (which suffered from lack of an ecosystem of hardware and network bandwidth to reach critical mass) and Broadband over Powerlines (which suffered/suffers from a dysfunctional regulatory regime for electricity delivery worldwide, as well as the occasional complacent risk-averse utility).  These technologies were independently viable, however were not viable when transplanted into the real world.  Like a body rejecting an organ transplant, the rest of the environment was hostile to the innovation.

What can you do?

As a vendor of emerging technologies, you can understand your customers business processes, and tailor your offering for their environment (integration with legacy tools is a painful but necessary boat-anchor).  You can try a Trojan Horse approach of offering a reasonable degree of incremental functionality to get your foot in the door, then expand your offering greatly to allow your risk-friendly customer an excuse to provide to the inevitable organizational immune-response.  Or, you can relegate yourself to the small but vibrant community of early-adopter customers that thrive on disruption and new technology opportunities.

You can read more about the broader framework in each of the Technology Intelligence Group's analysis reports, in addition to the focus on a particular technology.  The technology AND the environment need to be ready for these technologies to be viable.

Adoption and diffusion of innovation is one piece of the emerging technology puzzle.  The other two are combinatorial innovation and the broader global framework of economics and demographics.  We'll be writing about these other two pieces of the puzzle next week.

Bandwidth Caps, Streaming Media and Virtual World Architectures

There has been abundant debate lately about Comcast's impending implementation of a 250GB/Month bandwidth cap on it's users in the United States.  Time Warner had started capping in June of 2008 by limiting subscribers to 40GB/Month, and many international ISPs regularly implement bandwidth limitations for their users. 

The reason behind this is simple, the majority of providers of Internet access come from a metered-service background, be they telephone calls or cable channels.  Now they want to apply the same model to Internet Access.  This is going to work out badly for many emerging Internet application classes.

Virtual Worlds Expo 2008 Round-up

Last week was a busy week in Los Angeles for the Virtual Worlds Expo 2008 at the Los Angeles Convention Center.  According to conference organizers I spoke with, nearly 1300 attendees participated in the event, which included multiple tracks covering consumer, media, children, enterprise, education and a 'future of virtual worlds' track.  I was fortunate enough to participate on a panel in this last track, alongside such industry luminaries as John Swords, Ian Hughes, Mark Wallace, and Ben Goetzel. 

The overall show was well populated compared to previous shows, if not a bit drowning in the spacious LACC.  It was evident that the industry is evolving, both in the international flavor of the participants attending, as well as the distribution of industry vs. customers, and (within industry) the number of consumer virtual world companies vs. the number of technology providers to same.  The latter quantity was present in abundance, with every company vying to be the platform-of-choice for developers to create consumer and business worlds upon.

This is the current-indicator-incarnation of a leading-indicator that I wrote about in late 2007, in that VC investment in the virtual worlds market was leaning heavily towards technology and component startups versus retail virtual world plays themselves.  It took eight to ten months for these second round investments to bear fruit, and they were in full bloom at the show.

One side note- many vendors I spoke with bemoaned the mix of industry/customers at the show, as there was an overpopulation of industry represented this time around.  It may be the first-time-location or a statistical blip in attendee mix.  Time will give us more samples to trend from.

Next, I head off to Coventry England to the Serious Virtual Worlds 2008 conference.  I had the opportunity to keynote the conference last year just as the integration of virtual worlds and the real world was still a black art.  This year should provide much more meat for conversation (or presentation) given the considerable activity that has taken place in the intervening twelve months.  I'll be posting the presentation shortly after my keynote, although in my usual fashion, it will be of the 'pretty pictures to accompany the speaker's points' school and not a longhand document with lots of text. When I get back to the states next week I will do a voiceover to accompany the slides and post them to slideshare.

Announcing the T.I.G. Virtual Worlds Industry Outlook 2008-2009

Shortly after leaving Cisco in June, I began speaking at length with customers, startups, large technology firms, goverment and academics about the state of the virtual worlds industry.  Based on those discussions, and key insights from fellow TIGger Sean Kane, I am pleased to announce the release of the Technology Intelligence Group's Virtual World Industry Outlook 2008-2009.

The document will be relocated shortly to it's permanent home on the Technology Intelligence Group's formal website, which is coming soon.  I encourage you to check back regularly for the formal launch of the TIG website and the key insights available from industry experts.

Comments and criticisms welcome.

Welcoming contributor Benjamin Duranske

The Technology Intelligence Group is pleased to introduce our newest contributor, Benjamin Duranske.  Mr. Duranske is an intellectual property attorney and a frequent speaker and writer on the subject of virtual world technologies and the law.  He is the author of the book Virtual Law: Navigating the Legal Landscape of Virtual Worlds, and co-chairs the American Bar Association's Committee on Virtual Worlds and Multiuser Online Games of the Section of Science & Technology Law.  He founded the SL Bar association in the virtual world of Second Life, and writes on legal issues associated with virtual worlds at the blog Virtually Blind.

Please join us in welcoming Benjamin, and look forward to his insights in this emerging field.

Welcoming contributor Dr. Wm LeRoy Heinrichs

It is my distinct pleasure to welcome the newest contributor to the Technology Intelligence Group, Dr. Wm LeRoy Heinrichs.  Many of you may recognize Dr. Heinrichs from his long tenure with Stanford SUMMIT, and the phenomenal work they have done there in surgical simulation over the last 20+ years.

For those of you who are not familiar with his work, Dr. Heinrichs is Professor (Emeritus) at Stanford University's School of Medicine and Director of Simulation at SUMMIT (Stanford University Medical Media and Information Technologies).  Dr. Heinrichs serves on the Executive Committee of the Center for Immersive and Simulation-based Learning, and writes and lectures widely about Surgical Simulation and Serious Virtual Worlds.  Dr. Heinrichs serves as Chief Medical Director at Innovation in Learning, Inc.

I have personally had the opportunity to view SUMMITs impressive projects in this space and have spoken extensively in industry how they are a benchmark for simulation leveraging virtual environments.  I am personally looking forward to Dr. Heinrichs contributions and analysis in how the field of surgical simulation and related fields can benefit from emerging technologies such as virtual simulation spaces.

Please welcome Dr. Heinrichs.

Intel Larrabee: Potential Disruptive Technology

One of the major announcements at last week's SIGGRAPH conference was the Intel paper presenting their new graphics architecture.  I say graphics, however it doesn't take much imagination to realize that a powerful many-core architecture like Larrabee has general-purpose and special-purpose computational potential beyond graphics specifically.

I am not a graphics processing expert, I will be the first to assert.  For a technical write-up on what Larrabee is and is not, I would refer you to the excellent Ars Technica article on the subject.  What I do know is how to spot disruptors when they surface, and this announcement has the potential to become very disruptive.