8 Questions for Selecting a Virtual Worlds Strategy

Today The Conference Board announced a new report, "More Companies Are Using Virtual Worlds." While the title may not seem startling, there's deeper insight. The point that author Edward Roche seems to be making is that while virtual worlds are making headway into the business world, most companies don't have a strategy for entrance. He brushes off any skepticism that may surround a virtual worlds play by an enterprise, instead offering 8 questions to ask when developing a strategy. "There are companies that have done very well because they've recognized what they have to offer and what virtual worlds have to offer," Roche told VirtualWorldsNews.com "One of those in my opinion is Reuters. There's a very clear idea that virtual worlds can be a distribution platform for its news and services."

Unfortunately, Roche sees too many companies entering without a plan. They get trapped in a beat-the-Jonses mentality as soon as their competitors enter the virtual space.

"That's where the problems occur," said Roche. "Then you have to figure out what it is we're actually going to do. That's where you get some discussion around the entry strategy. You get lots of speculation around different possibilities, and slowly the emergence of some applications that work well, and some that don't. And then somewhere in the background, you get a little bit of that nagging voice of uncertainties."

When companies are ready to engage in the space, The Conference Board offers 8 questions as guiding principles:

Question 1: What is Your Entry Strategy?

Some companies see virtual worlds as a new frontier, similar to the Internet a decade ago. By aggressively moving into this space, they will be able to attain a "first mover advantage," similar to what Amazon.com did in the book-selling business or what eBay did with online auctions. Others enter because of competitive necessity, or experimentation.

Question 2: What is the Corporate Purpose?

Early corporate presence in virtual worlds appear to be mostly for the purpose of "staking out a claim" or establishing a "showcase" to put everyone on notice that the corporation is "in there." Some companies take out advertising in other parts of the virtual world. Others enter for the purpose of v-commerce or to provide customers with more information about their products and services.

Question 3: Do You Plan to Offer v-Products?

Virtual worlds offer an opportunity for companies to re-think completely their product and service offerings. But a change of perspective is required. Some use virtual worlds to promote and sell currently existing products. Others plan to create completely new products and services.

Question 4: Who is in Charge?

Most companies are unlikely to have a "Virtual Worlds Department" or "Virtual Worlds Vice President." The Reuters news service has a "Second Life Bureau Chief," but that is an exception. Since companies don't have this function in place, it will need to be invented. But who should take the lead? Some companies have set up committees or teams, or use their sales and marketing department.

Question 5: Which Virtual Worlds Should be Used?

Companies can choose from hundreds or even thousands of virtual worlds. But which one is best? Second Life is very popular. Some companies use multiple virtual worlds, develop a presence in each of them, and see which one holds out for the long haul. Others select a virtual world that is specialized-one that is frequented by a specific type of customer.

Question 6: How Much Will it Cost?

There is, as yet, no clear set of figures or benchmarks for budgeting for creation of a virtual world. Some companies are spending much more than others. Major areas of cost include design, building and maintenance, systems integration and hosting.

Question 7: What is the Revenue Model?

For most companies, understanding how to recoup their investment is difficult, at least for now. Much depends on the mode of entry. Some companies are justifying their virtual worlds budget through advertising, sales and marketing, customer and market research, training or R&D.

Question 8: Is IT Up to the Job?

"The IT function in most companies is one of the most under-rated and under-appreciated groups," says Roche. Apart from fighting a 24/7 battle against information terrorism, virus attacks, and various hacker clubs around the world while dealing with the next operating system release, the IT group manages for the most part to keep millions of transactions per second coursing through the electronic veins of an enterprise. Adds Roche: "Unfortunately, continual nagging from users and extremely difficult technical challenges tend to make IT resistant to change. Often, a new project is considered little more than another headache. But, ultimately, IT can be counted on to get the job done. Just budget the money and get out of the way."

One key to developing more interest in virtual worlds, Roche says, is expanding the available metrics for defining just who is behind the avatar. He points to the successful sale of Club Penguin to Disney as an example of what happens when a world can pinpoint just who's using it.

For now, if companies are interested in experimenting with virtual worlds, Roche himself offers four key ways to use them:

#1 See if there's some way to leverage your customer relations. Is there a community there that you can already approach. Can you build on your existing customers?
#2 Is there a way to use your virtual world as another way to advertise for a more traditional website. Can you drive traffic back to the web?
#3 See if there's a way to promote and showcase future products. With cars, it seems like a great way to showcase possible concept models.
#4 It's a great way to collect information about people using your stuff and finding people interested in your services and ideas, provided you tell them of course.

This report is only the beginning for The Conference Board. Roche says the group plans to continue research into the space, breaking it down into human resources, ecommerce, advertising, and more.

"If the space continues to grow as fast as it is, a company needs to be monitoring it, at a minimum, and be prepared to take advantage of them," said Roche. "If not, they need to have a specific answer why."

 

Comments

[Tony]

I would think that along with Q2 that the always important "What is our Exit Strategy". That is normally a common question when evaluating any investment isn't it?

Some companies may want to hop in for a bit, and exit quickly so that they can spend as little as possible but get some exposure. Others, like you mentioned, will want to hop in and stay in as part of "claim staking" or, more importantly, to help mold the virtual worlds into something that helps their business.

Either way, you need to know what the exit strategy is because it has a HUGE effect on your entrance (or non-entrance) strategy.