Microsoft Hololens : a viable penetration strategy ?

How Will Microsoft Claim Its Place in the AR Head Mounted Display Market?


Microsoft is aiming to replenish the image of its product towards high quality and high tech equipment to become industry leaders. Announced as a surprise feature of the Microsoft 10 launch, HoloLens is Microsoft’s contribution to the combined Virtual Reality (VR) and Augmented Reality (AR) movement. But how will Microsoft outrun staunch competition from companies such as Apple, Metaglass and Facebook alike to gain market share?


HoloLens Technology in a Glance: Is It a Disruptive Technology?
 Illustrations to the applications in the industries

Microsoft’s HoloLens is a headset equipped with transparent lenses, featuring AR Technology. Once worn the surroundings look the same, however holograms are displayed which allow you to interact with voice commands and finger gestures. (Statt, 2015) Bearing the similarity to VR, AR integrates apps and services into the world of the users. (Tam and Statt, 2015)

Microsoft hololens

Courtesy of Microsoft: Microsoft, Why Hololens

Once it came to light, Microsoft’s HoloLens has received plaudits and skeptics from Tech reviewers, claiming that this product could be categorised as a disruptive technology (Dujmovic, 2015) (Nall, 2015), or not (Berthiaume, 2015). By the same token, we believe that HoloLens is a disruptive technology for the criteria theorised by Christensen: that HoloLens has created new markets, that HoloLens would diminish the cost of products in the long-term, that HoloLens still casts some doubts to the potential users (Berthiaume, 2015), and finally that HoloLens allows developers to rapidly improve performance.


Some illustrations to show why HoloLens is a disruptive technology would be Case Western Reserve University whereby the “Human Anatomy” lectures to Medical students have been transformed greatly (CWRU, 2015). The company Trimble Buildings is to refine their communication and collaboration ways on their construction projects (Trimble, 2015). And using HoloLens, NASA is able to project the tracks Curiosity Rover could take to explore Mars (NASA, 2015). We also believe that HoloLens would profoundly benefit the manufacturing and architectural industry, with other industries to follow in the future.


Microsoft’s Excellence in Value Capturing
 Ways to penetrate the market in the VR Industry

As products in the AR device industry are in their introductory period, they are not mature enough to share or compete in the market. Hence, it is hard to say whether there is a leader among Google, Facebook, Sony and Microsoft. Firstly, because they are all in the fluid introductory stages and secondly because they have all tailored their products to targeted different markets, in order to be the market leader in their segment. (Bohmer, J, 2015)

They all have their own specific advantage and leads the development of portable virtual devices.


Regarding HoloLens, Microsoft possesses a ready established supply chain offering better prices and established production lines of high efficiency and trained workers. Microsoft formed partnerships with numerous suppliers on an international scale, hence it has to maintain high level of complex supply-chain operations and partnerships with Intel. (Ntofon A, 2016).


Operations wise, established for 41 years, Microsoft possess operation sites across the globe (primarily Vietnam), to ensure proximity to suppliers, simultaneously minimising transportation costs, labor costs and negative environmental impact (Microsoft, 2015).  After Microsoft software is installed the finished HoloLens is distributed only to developers through Microsoft’s well established, reputable ecommerce platform (Dudoviskiy J, 2015). This means HoloLens can hit the mass market quickly and potentially more cheaply than its competitors meaning that it has a competitive edge. Another complementary asset is the warranties that Microsoft can offer and the launch parties it can afford. Such marketing and after sales techniques give HoloLens a higher value than its competitors. Moreover, as Microsoft have distribution facilities in worldwide stores, HoloLens can access global markets more quickly.


HoloLens benefits from a significant amount of complementary assets as a result of its ties with the second largest company in the world such as slice of Microsoft’s $1.1 billion yearly advertising budget. (Fineberg S, Peterson T,  2014).


Courtesy of Microsoft: Microsoft Project Hololens 6


The HoloLens was launched as a surprise announcement during the Windows 10 launch in January 2015. Members of the press were taken to the firm’s Building 92 for a demonstration; illustrating how Microsoft is using its brand image and stature in the industry to gain focus from the gaming and design markets to HoloLens. The Microsoft website has a dedicated section for to HoloLens in hopes to tie the new product with its brand reputation.


Microsoft events (HoloLens Minecraft exhibitions and themed event in Cannes) drum up excitement for the product before it reaches mass market. HoloLens also comes will Microsoft after sales support including Microsoft Complete Warranty, e-tutorials and free Operating Systems upgrades to ensure that bugs are fixed and technology is as advanced as possible. This puts the HoloLens a step ahead of smaller brands who do not have the resources or the established crowd to attract attention.


There is a somewhat low appropriability regime (due to the innovative and high tech nature of the industry and those using backwards manufacturing techniques). However, Microsoft has applied for a patent for a head-mounted display with an electrochromic dimming module which would switch glasses on demand from augmented to virtual reality (Surur, 2016). This is significant in the design work environment where users need to simultaneously interact with their coworkers; so Microsoft has weakened competition by strengthening the appropriability regime to capture the greatest value from the market. It is the complementary assets of Microsoft’s resources that can afford these patents.


HoloLens’ Problems in Diffusing the Technology


Following Everett Roger’s Model (used to determine the speed of adoption by consumers), we determine that Microsoft’s HoloLens may have a strong relative advantage but it really shows its full potential when it meets different industries than the video game industry alone.


For now, many VR/AR devices are only to be developed in the industry of video games or connections. Instead, HoloLens can be used in many different industries. It has a wider usage for different industry, it can make subsidiary occupation in real production and manufacture. For instance, HoloLens will be more favorable to industries and governments and will have wider market than any other VR devices as it is presented now.


Courtesy of Microsoft: Microsoft Hololens Conference at Los Angeles 2015’s E3


Another undeniable advantage would be the compatibility of the device. HoloLens can be used based on Windows 10 system and can be linked with any devices with WI-FI or bluetooth. However, such VR/AR devices are the most creative things during recent years, that led to few people being familiar with the concepts. There is no idea how to connect the real world with the virtual world before even though 3D and Virtual reality are often the exciting topic on some technology magazines. So consumers may not understand the real significance of these devices.


The third point would be the complexity of the device. For consumers, the use of HoloLens for the first time is not so difficult, it only needs a few time to make all the adjustments and calibration, but people still need to overcome some problems just as the first time you used a computer.


As for 3D movies, you may feel a little dizzy as it makes the virtual and reality together thus make people’s brain feel confused. People who want to use HoloLens needs time to adapt to it and it also need time to make sure oneself feel convenient and easy with this device.


So although the application isn’t so complex, HoloLens still need to make more development about how to make people feel more easy to use it.


A big problem would be the Trialability. The device will cost a lot whatever happens (market requirement). Moreover, there is no places where people can try it easily (same problem as the Oculus Rift). You can trail the HoloLens at conferences, but this represents such a small percentage of potential users that it is not really relevant.


But thanks to Microsoft being one of the biggest company in computing field, the observability is high. Therefore, they do own very efficient distribution networks. Their status allows them to communicate to consumer through dedicated communication channels. As for example their video during E3 2015 (the one where they presented HoloLens through the video game “Minecraft”) got nearly 4 million views (and the official presentation totals 15 Million views).


Crossing the Chasm


First it targets developers, which are the first ones which will get interested on the device. They see in it an opportunity to use it as a new innovative way to interact. They are a small part of developers who wants to penetrate the market as early as possible because they believe VR will become an important part of video game and think it will rise over the years. Next the company will aim to developers on a higher scale, and some few video gamers. They saw the work of innovators and believes there is possibilities and opportunities on a large scale for the video game industry. Some few gamers are really into VR and could be considered as the gamers’ innovators.


Then on Microsoft scope there will be video gamers and some designers. The device’s possibilities appear to every gamer. They begin to play games and such. Some professionals (such as design artists etc.) may tend to use the device for professional purpose. HoloLens depends a lot from commercial success of video games.


And a last, the cash cow: Industrials. They saw the different possibilities by looking at the achievements from video games. Designers work also convinced them that this tool may become necessary to keep being competitive (like computer did before). At first it will concern architecture, mockup design (cars, aircrafts…), construction which have direct application of the technology.


The true purpose of Microsoft would probably be to integrate the market of companies and industries which is much more lucrative than the video game industry. But the only way to prove the beneficial possibilities from their device will be through video game. Therefore, they’ll have to go through a difficult battle with other companies such as Oculus Rift which is specialized in video gaming. The Chasm will be very difficult to overcome for Microsoft. They’ll have to compete with companies that are much more specialized on their field. One of the major argument would be the size and reputation of Microsoft and the fact that Windows is nowadays very powerful concerning the video gaming industry.


The fact that Microsoft communicate on lot of different application for its technology may prove itself destructive for the company. Future will tell us if their communication strategy and advantages from Microsoft will allow the company to be successful.


Microsoft HoloLens’ Competitors


IN regards to HoloLens’ most relative competitor, only the Meta Glass Company can be identified. Meta Glass is also an AR (augmented reality) device for people to see a virtual 3D view, with the background of the real world. Meta Co was created in 2012 and has developed two versions of production – Meta 1.0 and Meta Pro. This fresh technology company has very strong competitive advantages, namely its talented recruits. The CEO Meron Gribetz was in the Israeli military many years ago, which is where the technical inspiration originated; he invented an AR application for Israeli military use. The chief scientist Steve Mann, known as ‘the father of wearable computation’ began researching 30 years earlier than Google. The chief consultant Steve Feiner was known as ‘the father of Augmented Reality’. The abundant patents, the combination of hardware and software and the support of Unity 3D community allowed Meta Co significant advantages across the AR fields.


Courtesy of: HTC, Vive  //  Courtesy of: Microsoft, Hololens


Here we should also mention Oculus Rift of which, acquired by Facebook, is the current leaders in the VR industry and Video Game Industry. Currently, all devices are large black goggles. However, we can predict that over time they will become more streamlined in order to increase attractiveness and wear-ability (Think of the personal computer getting smaller to increase their practicality). However, Oculus Rift is different from HoloLens because it can only create a virtual world where users are totally encapsulated in it. In fact, it coud be argued that Oculus Rift is not AR but only VR. Maybe now HoloLens is falling behind in the video game market but, once a polished product, can adapt to a wider range of application fields in the future.


Another important competitor is Google Glasses. Currently this device, the first advanced AR production to hit the market, is the most popular. It claims to be just like a smartphone without the trouble of reaching into your pocket. Compared with HoloLens, it may be more suitable for everyday use but Google Glasses have significant limitations in more complex fields such as 3D construction design, where Hololens shines. We can see that although HoloLens has many competitors and maybe many more in the future, it still has its specific features for competition.


Microsoft has already made an impact in the design industry which will help it to attract the early adopters. HoloLens won the prestigious the Red Dot Jury, Product Design Award in 2016. This ‘Seal Of Quality… is arguably designers that Microsoft needs to win over, particularly if the HoloLens is going to become a go-to tool among artists and architects” (Pot J, 2015). Furthermore Microsoft and Lowe has teamed up in a pilot project that will deliver AR simulations to some of Lowe’s home improvement stores where customers can design their own kitchen (Ungureanu H, 2016). This could stimulate designers demand, by illustrating a clear way in which HoloLens can attract custom. Furthermore, Volvo and Microsoft have announced that they will use HoloLens to design and sell the safest cars in the world; “HoloLens, gives clients an AR view of their future car “(Ungureanu H, 2015), allowing HoloLens to make its mark on the car manufacturing industry. Moreover, Microsoft are also awarding research schools $100,000 and two HoloLens developer kits, in order to stimulate app innovation (Ungureanu H, 2016).




Microsoft claims that designers will benefit from being able to visualise their project from every angle. This has the potential to revolutionise the development and marketing sector, stimulating new, more exciting waves of innovation. However, in order to fulfill this need and to attract designers it can be argued that the creation of a defining app to attract the design industry is paramount. For example, a collaboration with CAD could gain respect and increase utility of the device.


Ever since losing a significant market share from the industry leader Apple, Microsoft has replanned its marketing strategies: to be the mere product that customers could rely on in terms of functionality. Microsoft is working on innovating across a spectrum of technologies, one of them notably including HoloLens, directly addressing on what the enterprises and individuals are trying to accomplish in terms of productivity and business processing (Adrian et al., 2016).


HoloLens is well-positioned within the Microsoft ecosystem and its search to reignite the reputation of a quality product for professionals (ibid.). This article has shown how Microsoft possesses the resources and potential to become a leader in the VR headset industry. However, what matters is how they will approach their chosen market segment and to what extent their needs are fulfilled. It is important to note that the head-mounted display market is still immature: it could take years before this disruptive technology has a broad impact. It isn’t hard to imagine HoloLens making rapid gains in wearability over the next few years. Although we don’t expect organizations to rush out and buy a bunch of HoloLens devices, planners and developers should be considering the opportunities these types of devices enable when thinking about new ways of interacting in the 2018 to 2020 time frame (Kleynhans S, Michael A, 2015). Maybe one day, we don’t need to call a repairman when we have some trouble about water pipes or electronic equipment. Instead we can just wear the HoloLens and connect it with the repairing information center where, as if in person, someone could teach you how to work by 3D image. Can you imagine anything as cool as this?




(Adrian et al., 2016)

(Kleynhans S, Michael A, 2015)


(Berthiaume, 2015)

(Dujmovic, 2015)

(Nall, 2015)

(Statt, 2015)

(Tam and Statt, 2015)

(NASA, 2015)

(Case Western Reserve University, 2015)

(Trimble, 2015)

(Ntofon A, 2016)

(Microsoft , 2015): Microsoft Annual Report

(Dudoviskiy J, 2015)

(Fineberg S, Peterson T,  2014)

(Surur, 2016)

(Bohmer, J, 2015)

(Pot J, 2016)

(Ungureanu H, 2016)

(Ungureanu H, 2015)    &

(Markii, 2016)

(News91, 2016)



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