The immersive experience of the metaverse allows for massive shifts in training, education, and work. In this episode of the At the Edge podcast, McKinsey expert Richard Ward speaks with McKinsey’s Mina Alaghband to share the myriad ways in which metaverse technology is already being implemented and how executives can get started to discover where the business opportunities exist, including no-regret moves they can make today.
An edited transcript of the discussion follows. For more conversations on cutting-edge technology, follow the series on your preferred podcast platform.
Why not practice first in the metaverse, where it’s low cost, you can do things in an infinite way, and you can make the impossible happen? Those types of things really offer people more efficiency and productivity.
Mina Alaghband: That’s Richard Ward, a McKinsey senior expert who joins me today. This is the last of a three-part series on the metaverse. I’m Mina Alaghband. Welcome to At the Edge, a production of McKinsey’s Technology Council.
Richard, thank you so much for joining us today. We’ve heard a lot about this ten-year aspiration for the metaverse to be a place where we all reside and have our identities, and there is a secondary economy that some say will be even bigger than the real-world economy. But business leaders will want to know what this looks like today, and what it will look like over the next few years. Could you start by describing some of the near-term use cases you’re seeing in the market?
Richard Ward: The things that you can do today are really quite interesting. On the VR [virtual reality] end of the spectrum, a lot of heavy industries and even the United States military have discovered that when you need to teach people a new vocational skill, like how to repair a piece of equipment such as a truck or a helicopter, one of the really long parts of that educational process is people learning where all the parts are on the equipment. So a number of organizations have decided to go VR and metaverse first, rather than real-world first.
It used to take 18 weeks to train a new recruit to work on one of these helicopters, but what they do now is hand a new recruit a pair of VR goggles, which in effect gives them their own private helicopter to learn on. They spend several weeks doing very intensive quizzes and simulations—where is the air filter and what order do you put these wires in? And one of the fascinating things that has come out of this is that they’ve been able to shorten their training course from 18 weeks down to ten weeks. This provides a real-world example of how if you need to do something that is very manual or requires you to move around a lot, metaverse tools can be very helpful. That’s one of the key elements of the metaverse: you can move around, you can walk places, you can see things, you can do things.
This technology is very powerful in terms of helping people learn things that are manual or tactile in the hand and that involve muscle memory. Much of the world does this type of work, and to be able to make the training for it more efficient and higher quality is a very exciting story.
Mina Alaghband: Can you give us an example in the financial services industry? What might an application of the metaverse look like today or in the near future?
Richard Ward: Whether you agree with the idea of NFTs—nonfungible tokens—the fact is that they are an asset class, and the financial services arena is starting to bring all of their usual skills and capabilities into this new asset class. There have now been loans that have been collateralized based on the agreed-to value of these NFTs. Similarly, there was a report recently about a firm issuing a mortgage for a virtual real estate deal in one of these digital, proto-metaverse environments.1 That’s essentially a collateralized loan, but still it’s very exciting that these kinds of concepts flow through this new digital setting.
The thing that adds a lot of interest to this is that the use of NFTs involves a lot of foreign exchange activity. So you have money going between, let’s say, US dollars into Ethereum, and then from Ethereum into another [crypto] coin or into other similar kinds of assets that are somewhat semifungible—those are activities that are very familiar to the financial services sector. It’s basically foreign exchange trading and management of risk. We’re still in the very early days, and I would defy anyone to truly be able to tell us about everything that financial services will be able to do five years from now.
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Mina Alaghband: If I’m in the industrial sector, what kind of applications might I be seeing today? And are these examples of augmented reality [AR] or VR?
Richard Ward: In field operations, people are starting to use AR for remote assistance provided through a smartphone or a tablet or even a set of fancy glasses with special lenses in them.
The really interesting part about this is when you start using the data generated from this process. For example, you could ask, “What are the things that we’re getting the most remote assistance calls on?” and then flow that information into updating the training program. You could then use that data to update an assessment program to see if people really did learn the things they need to learn, and then potentially see the number of calls for a category of problems go down.
There’s a stereotype that field workers are grumpy about this technology being a kind of big brother, but while certainly nobody likes to feel that someone is watching over their shoulder, it turns out that one of the things people do like very much is the feeling of gaining mastery over problems, which also gives them a sense of job satisfaction.
This is also true on the office side of things. For example, designers of new products and services are actually doing so in metaverse-type environments first, to understand how the products relate to the physical world. One of the things that we’ve learned during the pandemic is that if you put these metaverse design rooms up on the internet, your clients and other expert engineers can log in remotely, and the experience takes on the quality of Zoom in 3-D, which allows a new level of engineering to happen. The beauty of it is that people are able to do highly productive engineering design work without getting on an airplane. And that has a lot of rollover value for what we’re doing long term.
One of the actual additional values of this is that you can take those same engineering diagrams and capabilities built in a 3-D collaborative environment, and with a little bit of polish, they actually become front and center in people’s marketing campaigns and sales promotions. They’re able to bring a client into a new environment, show them how the equipment integrates with their own, and let them walk around and take a good look at it.
Mina Alaghband: Can you talk about the scale of the real business opportunities available to executives within the next two years versus ten years from now?
Richard Ward: For cultural-goods companies, such as those in the entertainment industry or gaming, there are VR metaverse use cases for you and your workers, your clients, and your support people who are doing maintenance. And if you run a service organization—for example, a fast food chain—the ability to teach people all of the processes and mechanisms of the line before they even get close to dangerous equipment has very broad uses across the board that you can literally do now.
If you’re an industrial player with use cases that are more like NFTs and cryptocurrencies, I do think it’s still early days for those to reach the point of integration with activities such as using physical equipment and person-delivered services. But I fully expect that things like digital serial numbers will soon be tied to an NFT-type concept that is registered on a public blockchain, with additional information tied to that. I think that is something that you will probably see in the industrial space earlier. And then once that is set up, you can hang additional things off of it, similar to how VIN numbers for automobiles are publicly available, so you can have accident reports or insurance quotations based on that data. It would really surprise me if, three years from now, everything that costs more than $10,000 doesn’t have a serial number on a blockchain.
Mina Alaghband: For executives who think about using the metaverse for training and assessment of talent and skills, what kind of outcomes and improvements can executives expect?
Richard Ward: Improved efficiency and productivity. For example, BMW’s new all-electric vehicle production line ran as a simulation for six months, building virtual cars on a one-to-one scale in the metaverse, before they actually did the final layout for the factory. And in the process of those six months, they changed the design about 30 percent from the original. They’ve not said publicly how much more efficient it was, but they did say that about 30 percent of what they thought was the world’s best factory on day one of the simulation had to change in the process. These are people who build new factories on a daily basis, and they still found that level of learning from the simulation.
Why not practice first in the metaverse, where it’s low cost, you can do things in an infinite way, and you can make the impossible happen? Those types of things really offer people more efficiency and productivity.
Mina Alaghband: One of the interesting anecdotes I heard from an industrial company is that the rate of innovation on their technologies is so fast that actually keeping their workforce up to speed is creating this incredible level of complexity in their talent organization. Instead of trying to constantly reskill their talent in the old style of training, they are embedding the training programming into the day to day of those technicians, and delivering it via AR goggles.
Richard Ward: The full metaverse example of that would be that when you are at the office or at home, you would have a virtual version of your work that you could practice with and learn from. And then when you actually go on-site to the real-world version of the work, your AR glasses or system would then overlay that digital information you’ve trained with onto the real thing, and it would all be very familiar. Or if there was some major variation from what the digital model was telling you, it would stick out like a sore thumb, so people could address that immediately instead of remaining unaware of a problem that has arisen or failing to address it for some other reason. So you have this kind of integration between the real world and the digital world in this metaverse concept.
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Mina Alaghband: A couple of the industries that seem to be affected earliest by the metaverse are retail and CPG [consumer packaged goods], especially with the advent of luxury goods and experiences existing in the metaverse. If these are the early bellwethers, what can we learn from the early inroads of these industries into the metaverse?
Richard Ward: Some of the lessons that come out of those early experiences relate to the fact that when people go into the metaverse, they present themselves differently depending on the context. For example, if you and I were doing this interview in the metaverse and it was being filmed, I would make sure that my avatar was business appropriate and that my visual features were mostly human. But if it’s just me and, let’s say, three of my friends hanging out and we’re going to watch a football game being projected holographically, then we will present ourselves differently. People in those situations where they are very comfortable socially often diverge radically from normal human presentations. And so you have to rethink that concept for the right context.
Mina Alaghband: A lot of the use cases and examples you’ve provided really involve 3-D rendering of concepts, yet most of the experiences that are happening in the early metaverse today are rendered in 2-D, and it’s mostly all in virtual worlds and gaming platforms. How do you see that evolving?
Richard Ward: I think we can all agree that if you’re wearing a pair of goggles that are stereoscopically correct and you’re in a VR environment, that’s close to a true 3-D representation. But what we also have is a bridge capability called 2.5-D, which is where three-dimensional gaming technology is leveraged, yet the experience isn’t quite truly 3-D. For example, on Ikea’s website, you’re now seeing images presented in what feels like a three-dimensional model. If you scroll your mouse or swipe your finger left and right, the piece of furniture spins around or up and down, and you can see it top to bottom. And if you turn on the camera on your phone, you can place the piece inside of your living room to see if it will fit and whether the colors really go with your carpet. In fact, Pinterest just announced the other day that they’ve added 80,000 SKUs into this kind of 2.5-D ability on their platform. This creates a faster ramp to decisions and purchase because there is a clickthrough to buy capability.
Mina Alaghband: Is now the time for executives to make big investments in the metaverse? How can executives approach this realistically at this point in the development and demand cycle and be sure they don’t miss the moment but also don’t invest too soon in this new trend?
Richard Ward: If you’re asking whether there are no-regrets moves that can be made today around the metaverse, the answer fundamentally is yes. In every single company, there are people who draw for a living, whether that’s graphic designers, marketing people, engineers, product designers, or process engineers. I guarantee that most of the tools they use are three-dimensional tools, which means you have the raw materials of these 2.5-D metaverse capabilities to start building out and presenting to partners, clients, and workers and facilitating the discussions that you would like to have. And these things are long-lived assets—you will reuse them 20 years from now. And so I think that’s really a no-regrets move that allows people to start taking assets they already have, skill sets they already have, and add a little bit of tech, add a little bit of technical capability, and you can start moving into this 2.5-D metaverse environment in a variety of ways.
Mina Alaghband: We’ve heard all sorts of numbers in terms of the size of the metaverse being anywhere from hundreds of millions to trillions of dollars in size. Can you help us contextualize the size of the metaverse and how that economy is going to develop over time?
Richard Ward: If you think about how the eight billion people on the planet use their time, we all have 24 hours in a day—we sleep for, let’s say, six of them, and then we have this live-work-play splitting out the rest of our time. If we migrate part of that time into the metaverse, where people use it for some of their work, or for shopping for what they need, or for education of children, you start to see that it’s not hard to get to a story where easily 20 percent of certain human activities are done in this metaverse context. And in economic terms, 20 percent of the global economy is a lot. It is certainly trillions [of dollars].
And then if you look at the categories that are being reclassified as we understand the metaverse, the entire gaming category gets reclassified as metaverse, and there’s 200 billion [dollars] right there. If you add in all the things that need to be built and programmed to build out the metaverse, and paying money for unique forms of entertainment that is not possible without the metaverse, you very quickly get to large numbers.
I do think that you’re going to find people moving through this 2.5-D ramp into the 3-D world that helps create the metaverse, that gaming is well on its way, and then closely followed by that will be the industrials and others that have a physical delivery capability. So goods and services that must be physically delivered are prime candidates for going into the metaverse first, because they get a lot of direct productivity benefits in addition to trying to create these new product lines that would be purely digital.
Mina Alaghband: What are you most excited about when it comes to the metaverse?
Richard Ward: I am truly excited about the ability for how we build on Zoom for a remote work and play environment. One of the great lessons we’ve had from the pandemic, as horrible as it’s been, is that things that people had said were impossible for decades are now possible. Like the idea that you can’t possibly have everybody not be in the office—it’s been proven wrong.
I think the part that I’m most excited about is where I see a shift in the hours that I currently spend doing certain activities related to entertainment or work or education. Whether it’s on my phone or laptop, shifting some of that into a full 3-D metaverse type of environment may be of higher value to me as a consumer because I will enjoy them more and learn more.
Mina Alaghband: And what are you most worried about regarding the metaverse?
Richard Ward: Certainly concentration of power. In any networking situation, if one party has all of the control, that doesn’t always work out.
The other thing that I worry about is that many of these technologies record and gather an incredible amount of personal data about you as a physical being. The VR/AR tools, the wearables, and the full metaverse experience go to the next level of data collection.
Mina Alaghband: How do people get started in understanding the metaverse and the business opportunities it enables?
Richard Ward: The metaverse itself is an experiential technology, so the thing that you really are going to need to do is some on-ramping and trying some things out. If you’ve got kids and they’ve got a VR game, especially a multiplayer game, go along for the ride and see what all the hoopla is about. Evaluate it from a systems perspective, asking questions like: What are the choices people make in the games? Why are people deciding to do this? How are they evaluating these problems and communicating about them?
I have conducted “tours” of the metaverse with maybe a thousand people, and every time I strap on one of these headsets and let people experience what’s possible, every single one of them comes away saying they immediately have ideas for how they can bring this into their business. It’s one of those things you need to try, instead of reading about it or watching videos about it. For literally just hundreds of dollars, the metaverse awaits.
Mina Alaghband: Thank you so much, Richard.
Richard Ward: Thank you for having me.
At the Edge is a production of McKinsey’s Technology Council. It is hosted by Mina Alaghband. Contact us at [email protected].
Comments and opinions expressed by interviewees are their own and do not represent or reflect the opinions, policies, or positions of McKinsey & Company or have its endorsement.
