Liveblogging MIT: Virtual Worlds & Business Value

After he finished keynoting the conference, Mitchell Kapor moderated a panel on Virtual Worlds & Business Value. There was little discussion of direct advertising as a revenue source. Instead the speakers focused on what they saw as much more practical value propositions: brand extensions, networking, and leadership training. Equally important was the question of how to market virtual worlds to investors.

"I sympathize with the idea of mystical experience. But we’ve had to put an ROI on that," said Ron Burns, President Proton Media.

Moderator: Mitchell Kapor

Panelists:
Thomas Malone, Patrick J. McGovern Professor of Management, MIT Sloan School of Management

Sandy Kearney, Global Director, Emerging 3D Internet, IBM

Ron Burns, President Proton Media

Adrian Si, Director, Scion/Toyota Motor Sales

Robert Gehorsam, President Forterra Systems Inc.

Scott Johnson, Managing Partner, New Atlantic Ventures

Julius Akinyemi, Director, Emerging Technologies, PepsiCo

Kapor: In the preparation for this, we talked about a lot of things. We talked about advertising or whether it would be other types of customer experience. We talked about public spaces and open platforms.  Tell us about something you’re passionate about in the space of the business value of virtual worlds.

Si: What I’m really passionate about is not using your brand and trying to be an advertiser. In virtual communities, it’s very user generated. If we’re going to have a positive brand perspective, we need to be providing a service to the consumer. In Whyville, our attempt was to educate tweens about finance and provide vehicles as an alternate means of logistic. The qualitative feedback we’re getting is very key.

Kapor: What would it take for you to make a massive investment.

Si: I will say we’re investing in the six figure in the virtual space over several worlds. We’re trying to hit the users and innovators in these communities.

Kearney: I happen to be a big Peter Drucker fan and Peter Schwarz. If you look at what they say, you have to take the long view. Schwarz says there will be a massive population boom that makes the baby boom look small. And those people think nothing of being online.

Akinyemi: What I’m passionate about is what we’ve been talking about all day is masked identity. When you look at a product, I want to take that from product extension and look at how do I reach out to systemic products in that market. One of the ways is to look collaboratively in that market and coproduce with the community products that will be much more sustainable in the market.

Kapor: If you’re not experimenting yet, do you have entry conditions?

Akinyemi: In that graph you showed, we fall slightly behind the early adopters. At the right time, you will hear me excited to be in.

Gehorsam: The other piece, aside from the mystical experience you talked about, is science fiction. Having sat at meetings in the Pentagon and having a talk about Ender’s Game, is impressive. The idea that a child can use a simulation and actually be commanding a battle and not know it, is a powerful idea. These are environments that allow the individual to conquer time and space. A lot of these worlds seem to come out of the MMOG world, but there’s another lineage that came to train pilots and surgeons, people who require high performance in high stress situations. These provide the capability to improve human performance democratically to a high degree?

Kapor: How will that play out in the enterprise space or with consumer brands?

Gehorsam: any time you have teams dispersed culturally or geographically, there’s an opportunity for roleplay or experiential learning.

Johnson: I share a belief in the inevitability of this thing. I see a need for people to experience s omething without actually going there. And there’s escapism. This is fundamental escapism. Linden Lab provides escape. Google street provides the other. These are two fundamental needs.

Burns: To tag on, as these worlds are changing and the VW is becoming a part of intranets, there are huge questions about how that works. I sympathize with the idea of mystical experience. But we’ve had to put an ROI on that. The speed of knowledge transfer is really the only competitive advantage a company can have in the information age. You can build it, but they may not participate. And it forces corporations to question whether their organization is based on secrecy and fear or on sharing of knowledge. The bigger the company, the more interesting the culture change is going to be. It’s an interesting experiment.

Kearney: Very loosely coupled as well. We as a community took the opportunity to lay our guidelines as an initiative to forge into this environment.

Burns: So you’re saying that you need leadership support?

Malone: Let me tell you my passion first. It’s not what can happen inside these virtual worlds, but what these worlds can teach us about the real world. We just completed a study about leadership in virtual worlds. The most interesting point is that leadership is not just a function of individuals, but a function of environments. The environments in these games are constructed in a way that makes leadership easier. Virtual economies make incentives easier. There are fine grained ways of conveying to members what the group wants them to do. And they’re very transparent in storing information about what the users do. Finally, these offer a range of communication over public and private voice and text. The combination of those three things makes it possible for people to manage themselves. All three of these factors are going to become much easier in the real world with information technology. We spend a lot of time when we think about leadership about how to develop leaders. Maybe we should spend more time thinking about how to create environments where it is easier for lots of people to be leaders.

We spent quite a bit of time looking at leadership, so we used a bunch of people who were very experienced game players and studied their leadership experiences. As our way of analyzing these things, we used a model of leadership developed here. 1. sense making. 2. relating. 3. envisioning, and 4. inventing. In most ways they embodied all of them, but in some games with more story-based ideas, sense and envisioning were less used.

Burns: I think the training and learning environments in corporate environments have to create a culture where it’s okay to fail in a practice world. When they’re ready they can go to the evaluation world. You have to have the room to fail without getting fired.

Kearney: It’s another important fact that you might not only fail, but there’s not as much control or structure. You can let loose. When I started working with this group, we had a large group of people with no objectives, no control, and no funding. And we had to lead that.

Malone: You absolutely had to do that. I think cheap communication is going to lead to much more decentralized control. When more people have information to make decisions by themselves, there are advantages for giving them the power to do so. It should be no surprise that we’ll see a lot more of these decentralized structures in the real world.

Kapor: So this sounds pretty rosy. What kind of roadblocks are people passionate about.

Johnson: It’s the pragmatic question of why people are going to show up and do things. Right now dating is a big motivator for getting people online. That’s probably the first one. The big road block then is when is my mom going to do this. If you invest too early, you lose a lot of money. This whole phenomenon started maybe 20 years ago, and the question is when it’s going to go mainstream.

Akinyemi:  One of the main obstacles is the ease of entry. If I need to collaborate with avatars that will help me to create a new logo or product, this has to be easy to ease into and do that. If I want to create a quick marketing blitz that will fulfill my quota to X market, I want to quickly do that.

Si: You need to break down how you view ROI. It’s hard to measure how this is leading to selling cars. You can view how people are talking about your brand and relating to it. If you have that experience with individuals, you can think will they buy a car down the road. Probably.

Burns: Whenever I go out and talk about this, people are either very excited about it, or they’ll scratch their head and go “Why would I want to be a cartoon character on the Internet?” And mostly young people look at the Internet as a social tool, while older people look at it as a big encyclopedia. It’ll take a generational flip when the people who grew up in gaming will be making important decisions.

Kearney: It’s whether you look at it as a tool or appliance. My son looks at the laptop in the same way  as the refrigerator. What I see now with customers, though, is the sense that “I don’t get it, but I know I should get it.”

Malone: A barrier of the 3D Internet is that it doesn’t have enough Ds. One of the nice things about virtual reality is that you’re freed of constraints. You can talk to hundreds of people over email. In VWs, we use things we’ve learned from the physical world to govern how we interact with people. We need to have more flexibility. I guess we’ve seen some examples in online games in that you can have private chat channels. It’s nice to not have to out of the room or in the corner to have a private conversation.

Gehorsam: There’s an assumption in VWs today that they should exist in the human scale because we see the avatar as a human. Maybe that’s getting in the way of what we can see the 3D world exist as. Maybe we can be submolecular or galactic.

Kapor: That’s been imagined in sci-fi, but not so much in VWs.

Malone: I like this idea in that the 3D World we’re talking about is the horseless carriage of the future. We think of it in the old way because that’s what we have.

Kapor: Does anyone have anything else burning to say?

Malone: What would it take to have a 4D Internet?

Johnson: You can go to a Victorian Sim.

Gehorsam: But you’re locked into a multi-user environment. Time can’t go faster or slower because it goes the same for everyone. We’ve explored that. Say you’re in an emergency environment with a fire or break in or something, can you generate a fastforward in the VW? Or multiple fastforwards?

Audience: This is for Tom, have you done any analysis in behavioral change in the users as far as metric changes?

Malone: I’m not sure I understood entirely. We did find people who said that they did learn lessons from their virtual world that applied to them in the real world.

Audience: But did it work within the world? Or do you see application in the VW to improve reaction time?

Byron [co-study host]: The details are on the Seriosity website. There’s a pretty good linkage that feedback can definitely change  behavior.

Audience: I’d like to better understand what you think are the benefits to companies and developers in open-sourcing and open-sourcing quickly. What do you think you’ll make money doing?

Akinyemi: Everything we do in the virtual world, you can imagine the magnitude of network usage. If you’re Cisco, you have to think that’s a valuable position. From my situation, I see a key valuable position in quick time to market and customizing to what consumers want. If I can find that in the virtual world, I can transport that to the real world.

Kearney: In open sourcing there’s a migration factor. If you think about that, like Dan Hunter spoke about, you want to be prepared for that to follow migration patterns.

Johnson: And there’s still a transaction processor for Linden Lab, so they make money for that.

Kapor: The overall pie that gets created as the result of throwing the technology open is the largest possible one. The tricky part is figuring out what that does to your business model. The overall code to the Internet is quite open, but people have figured out many different models to work on top of that. And often they have physical analogs.

Malone: a couple of hypotheses: We came up with a couple taxonomies for business models. Creator, Distributor, landlord, and broker.  You create something, sell it, sell the rights to use something, or match buyers and sellers. Over the years we looked at all the publicly held companies and classified them—laboriously with student time—and 50 percent is in the creator model, 15 percent are in the distributor model, and only one percent go to brokers.

I would guess that the landlord model in SL, if you include Linden Lab, would probably be 1/3. So they would probably all exist in different proportions. The second hypothesis is that in the long run they’ll exist in the same proportions.

Audience: It seems like your example the PC, Mitch, was a grassroots things. We’ve seen that with IM, that it came in through the consumers, not through corporate or ROI.  I was wondering if folks see a pathway for products to go that way and why some products may not cross that barrier.

Johnson: I never said that it was inevitable that corporations would embrace this. I said it would be inevitable that it would be a huge deal in society and people would make businesses of it. To me those are very different things.

Audience: My coworkers aren’t in virtual worlds at all. They humor me on it. When I told them I came out here, they asked me why did you have to fly to do that. Can you answer that?

Kearney: It’s all in that awareness stage. People need to see it, feel it, and experience it in a way that they understand. Successful worlds have a good bridge, like Webkinz. The kids have a physical connection.

Kapor: I want to thank the panel. As usual it probably raises more questions than answers, but I will guess that in ten years, when we have this conference, people won’t come into the room, they’ll just connect over the worlds.

Joey Seiler
www.VirtualWorldsNews.com
joey (at) showinitiative.com
(512) 535-8650
skype: joey.seiler.vwnews