"Metaverse" or "Metatraps"? The Perspective Needed for Long-Term Growth

This article presents content originally published in "Design Mind," a design journal operated by frog, under the supervision of Mr. Noriaki Okada of Dentsu BX Creative Center.

As innovators lay the groundwork for the metaverse, global companies are increasingly eager to capture its potential value. Whether you're considering metaverse adoption or already testing its use, now is the time to verify if your approach is on the right track.

This article explains how to introduce the metaverse to capture greater strategic value for your business, avoiding the common trap of chasing immediately achievable goals. Learn how to create new, sustainable revenue streams in an increasingly virtual world.

What is the "Metatrap" that causes us to repeat "what worked before" even in metaverse spaces?

When encountering new technology, we often revert to past behaviors, repeating methods that worked before. For instance, the first radio programs were simply newspaper readings, and the first TV programs were live dramas. As marketing expert Tom Goodwin clearly explains, even with some innovative "flavoring" or new peripheral processes, our fundamental mindset remains rooted in the past.

And now, we're doing the same thing again. Only this time, it's happening in the metaverse. Let's call this the "metatrap." For instance, retail brands are recreating their physical stores in the metaverse space "Decentraland," music labels are hosting virtual concerts, and consumer goods manufacturers are conducting virtual demo sales.

Let's be clear: these initiatives deserve praise. Progressive brands are seizing opportunities to enter the gaming world, experiment with NFTs (non-fungible tokens), engage younger demographics, and build their brands through new channels.

The crucial question now is how to leverage the lessons learned from these early metaverse initiatives. Furthermore, how can this momentum be used as a springboard to create new, sustainable revenue streams?

※ = NFT (Non-Fungible Token)
A technology that certifies digital data as unique and endows it with asset value.

The metaverse is not a game; it's an opportunity to realize a better life for people

Next, let's take a closer look at three perspectives companies often overlook when leveraging the metaverse.

① What is the metaverse?
The metaverse is not a video game, nor is it about walking around all day wearing a VR headset. The metaverse is an "opportunity" to realize a better life for people by connecting the physical world with the virtual world.

It must be recognized as an opportunity to develop interactive products, services, and new ventures—including AI-powered augmented reality (AR) and virtual reality (VR), NFTs, metahumans*, and all other virtual technologies yet to emerge—that were impossible in the pre-metaverse era. So, does activity on virtual platforms like "Decentraland" also fall under such opportunities? Absolutely. However, it is merely one corner of the "metaverse iceberg."

※ = Metahuman
Tools for creating highly realistic digital models of humans.
 

Consider the example of the virtual cycling service "Zwift." Zwift can be seen as a more interactive, metaverse-style version of "Peloton," which provides online fitness services. Users can comfortably race other users in real-time from home (though let's be honest, cycling up Mont Ventoux is never comfortable). Furthermore, customized training plans are generated based on each user's performance. In 2020, Zwift's business attracted $450 million in investment.

Consider the metaverse as an opportunity to deepen customer relationships, enhance employee performance and satisfaction, deliver personalized product experiences, and elevate the quality of traditional sales channels. Ultimately, this will lead to the creation of new revenue streams and business models.

Understanding the long-term potential benefits hidden behind new technologies

② How to enter the metaverse?
Metaverse initiatives are not the kind of thing where quick wins are easily achieved. Start by understanding the potential long-term benefits for your company hidden behind the emerging technologies.

The metaverse market is expanding. By 2030, it is projected to reach 5 billion users, with a maximum addressable market size of $13 trillion. This scale is nearly equivalent to China's current gross domestic product (GDP).

However, for companies to effectively unlock the potential of virtual technologies, they must focus on the long-term potential behind these emerging technologies rather than seeking quick profits by jumping on the NFT bandwagon.

Currently, frog is collaborating with a global consumer goods manufacturer to advance precisely this research. The key is identifying future sources of value and defining a strategic approach to entering the metaverse. Understanding promising value sources enables the construction of compelling growth scenarios that remain valid over time.

To achieve this, we collaborate on analyzing macro trends within the category, consumer needs, alignment with corporate strategy, partner priorities, and existing assets to leverage. Once the relevant issues are clear, we explore how metaverse-related technologies can contribute to building solutions with enduring value. It's crucial to recognize that the metaverse itself is not the solution; it's a tool for addressing critical customer needs.

This leads to the third point.

Pursuing transformative ideas beyond the obvious will pioneer the next era.

③ How to develop profitable products?
Broaden your perspective. Before rushing into execution, pursue transformative ideas beyond the obvious.

First, the validity of any product idea, growth strategy, or market opportunity must be verified based on cultural, technological, and commercial insights. Unless such verification is effectively introduced, executed, and scaled, the commercial potential cannot be unlocked and permeated throughout the entire organization. To pioneer the next era with high-ROI products, we must pursue not just the obvious, but the more transformative ideas that lie beyond.

This is where many companies stumble.

From our experience driving strategy-led innovation across diverse industries, countries, and business models, we see a common pattern: organizations often believe "ideas are overrated" or (more commonly) "we already have plenty of ideas."

Indeed, innovation labs are plastered with sticky notes, and opportunities to attend design thinking workshops abound. But how compelling are these ideas in practice? Did a 30-minute brainstorming session yield a truly groundbreaking idea so exciting you couldn't wait to tell your best friend? Is it so spot-on you could see it as a headline in your favorite magazine? In reality, aren't they just slight tweaks on what competitors are already doing or what worked well in the past? If you think this is a common story, take a step back and dare to broaden your perspective.

At frog, we use "transformative questions" as one of many tools to devise transformative solutions. This tool also helps us encourage clients to break free from the status quo mindset and think more holistically.

frog's Transformative Questions

Here are a few "transformative questions" that stimulate the brain and spark a fountain of new ideas:

• What if we could develop next-generation AI influencers capable of building intimate, one-on-one relationships with millions of fans?
• What if you could personalize product experiences and services for each individual, further enhancing the inclusivity of your product portfolio?
• What if NFTs could be used not just to increase bragging rights for high-value consumers, but to enable every customer to build a personally meaningful relationship with your brand?
• What if you could use virtual reality and immersive simulations to boost employee performance and satisfaction?
• What if you could develop immersive experiences that gradually shift customer behavior, helping people live more sustainable lives?

Naturally, questions that spark such thinking may not apply to every industry. The key point here is that before executing metaverse initiatives, you need to think broadly and identify strategic metaverse opportunities that align with your specific business.

Once you see a direction, quickly build a prototype and conduct agile validation tests to refine your idea. Build only the technology necessary to prove your concept and gather realistic feedback.

Investing in growth areas is crucial for driving innovation during a recession

The current U.S. environment of inflationary pressures and high interest rates suggests an economic downturn may be imminent. In such times, many executives typically freeze, resort to cost-cutting, or adopt defensive, risk-averse strategies.

It might seem like the metaverse should be put on the back burner, but is that really the case?

An eight-year global study conducted by the American consulting firm Bain & Company after the 2001 recession shows that now is precisely the time to invest in future growth areas. This is because during economic downturns, approximately twice as many companies achieve exceptional growth and profits compared to the calm periods before and after.

Therefore, we believe the need for companies to build resilience into both their current and future businesses is becoming increasingly urgent. One key channel for doing so is the metaverse.

In the latest episode of frog's "Chief Challenges" series, "Expectations vs. Reality," we explore how to transform groundbreaking ideas that challenge conventional wisdom into products, services, and experiences that significantly transform businesses. If you're interested in exploring the metaverse from a strategic perspective, please contact frog.

This article is also featured in the web magazine "AXIS".