The Future is now: The Inside Story of Oculus Rift

oculus rift

By Isabella Maxwell, Goda Blaskeviciute, Una Petersone, Man Kit Chong, Qiuyue Li

 

Let’s talk about the Rift…

Oculus Rift is a virtual reality system, which is used primarily as a gaming device and is also designed to be used in other industries. Rift uses technology such as state of the art displays and optics that are designed specifically for VR, custom optics system works together with a low-persistence display providing a wide field of view and the sensation that you are looking around a 3D world[1]. For example the device features an accelerometer, magnetometer, gyroscope and 360-degree positional tracking that follows six axes of movement.

In order for Rift to work, a computer running Windows 7 or higher is required as well as a cable which connects from the Rift to the computer. Complementary accessories include these cables, a remote, an Xbox One controller and a sensor[2].

A set of lenses using low persistence is placed on top of OLED panels, in order to create a 3D image and focus the picture for each eye[3]. The image displayed is adjusted accordingly from the user’s head motions; embedded sensors in the goggles are installed as well as an external positional-tracking sensor in order to track head movements more accurately and ensure the user does not experience any blurring of motion[4].

 

A Brief History of Oculus Rift

  • In 2011 an 18 year-old Long Beach, California resident Palmer Luckey hacked the first prototype of Oculus Rift[5].
  • A year later Palmer met John Carmack – the co-founder of id Software and the duo formed OculusVR[6].
  • In March 2014, Mark Zuckerberg announced Facebook’s $2 billion acquisition of Oculus[7].
  • The pre-orders of the consumer version of Rift started in January 2016[8] and in March the first batch of virtual reality headsets were shipped to consumers.

 

Is Rift a disruptive technology?

Oculus Rift possesses all the characteristics of a disruptive innovation from the ‘Christensen Model’. Firstly, Rift is a new product that has added to the existing gaming headset market however has also opened up new opportunities and potential markets for other industries and companies.

The device was originally a VR headset targeting gamers. It is also suitable for other markets, providing real-life experiences for traditional gamers and also for entertaining purposes, such as social activities including watching movies and socializing with friends. Furthermore, Rift also aims to be used for industrial and professional purposes, it gives architects a fresh experience to see exactly how the building will look before construction commences.

By taking the production cost into consideration, Oculus Rift belongs to disruptive innovation because it costs less than the old product. In 2015, HTC Vive, which functions more or less the same as Oculus (but merely for gamers), was launched and priced at 800 US dollars.

 

Who can use the Rift?

Entertainment

Gaming is the primary use of Rift, and according to Virtual Reality Society (VRS), infotainment forms such as virtual museums, galleries, theatre and virtual theme parks use Oculus technology as well[9]. The Oculus Cinema app allows audience to deeply immerse in their film experience, making them feel as if they were watching films in their own personal theatre, or as if they were inside the film itself; while events filmed by VR filming company can take people to, for example, a Coldplay concert[10].

Healthcare

Some innovative institutions use VR technology for diagnosis, treatment and skills training. Real diagnostic images from CAT scans or ultrasounds are being used to create 3D models of a patient’s anatomy. This means, surgeons can determine the best way to safely and efficiently perform a surgery, locate tumors or practice other complex procedures[11]. Besides that, virtual-reality can now help to rehabilitate patients after stroke or some brain injuries. Special virtual therapy is created as a game, helping patients to feel more motivated to exercise. According to the MindMazeto, this virtual-reality therapy can be more effective than the traditional one[12].

Military and NASA

Oculus Rift technology is widely used by the U.S. military to train soldiers. Noncommercial versions of different games are used to prepare troops for combat situations[13]. VR is also used to help rehabilitate soldiers after different traumas. NASA is also known as a virtual-reality technology user. Scientists there are working on making this technology control robots on Mars, while astronauts use it to relieve the stress[14].

Architecture

By using Oculus technology, organisations can render the resulting structure in 3D as well as experience it as if it was real. According to the VRS, “the ability to test a number of factors without the time and cost of building the structure, reducing the number of errors present in the completed building” is one of those advantages that will increase the use of virtual reality technology in architectural industry.

Car Manufacturing

Automotive manufacturing has also been using simulations for a long time. VR technology allows engineers and other employees to inspect the interior and exterior of a car, check different details of the engine and spot any potential problems before manufacturing the automobile[15].

 

Oculus Rift’s position in the S curve

According to Foster’s model, S curve illustrates the relationship between research effort and performance of the technology. Technology has ultimate limits determined by laws of nature, which allows us to predict the future of a technology and indicates the need to realign a firm’s strategy.

Rift is likely to lie in the middle of the S curve because there is high probability that a more advanced version of the product will be released, similar to what occurred with the HTC Vive. R&D for example, will help to improve the quality of graphics in the future. Yet, there are some limitations that Oculus experiences preventing it from moving up the S curve, for example, the ‘Touch’ game encourages users to face only in one direction-180 degree instead of the full 360-degree experiences that the Vive provides[16].

 

Is Oculus Rift a dominant design?

According to the Utterback and Abernathy’s Model, Oculus falls into the Fluid Phase[17] because it is a radical innovation that has created an entirely new product for the VR world. Other leading competitors that exist in the market are the HTC Vive and Sony’s PlayStation VR. Rift goes one step further than its competitors and spreads across multiple industries.  In this fluid phase, frequent changes to product design occur and hence competition at the moment is based on the performance of the product. As Rift is in this phase, a dominant design has already been established and product innovations do not occur to such an intense level.

Oculus Rift also has characteristics that are evident in the transitional phase. There is a dominant design, yet it is new and unique. The industries in which Oculus exists will quickly enter the transitional phase as the market for virtual reality systems is successful and has already accepted the product. The technology and software required to operate Oculus has already been established; therefore companies can afford to shift from R&D to working out how to produce the product on a larger scale in order to meet future demand[18].

 

The leaders in Virtual Reality technology

By comparing the 2016 market shares of the leading brands in VR headsets, the leaders of the technology are:

–       Google Cardboard (30%)

–       Samsung Gear VR (21%)

–       Sony’s Playstation VR (21%)

–       Oculus Rift (8%)

–       HTC Vive (7%)

–       Other (13%)

VR headsets

Sourced from Strategy Analytics: [19]

 

Who created the value for the technology?

Strategy Analytics predict that virtual reality headset revenues will reach up to $895 million in 2016. Their research also expects that the newly launched devices will account for 77% of the value from Oculus, HTC and Sony. However, despite the fact that the game-console based and pc based devices dominate the value share, lower priced mobile phone based devices will account for 87% of volumes in 2016 for the virtual reality headset market[20].

2016 is due to be a pivotal year for VR and Oculus, HTC and Sony are three brands that will create further value for the technology. Thomas A Furness III introduced virtual reality technology in the form of a visual flight simulator in 1966. Two years later, Ivan Sutherland created the first virtual reality head-mounted display system [21]. However, it is not always the innovator who creates the value for the technology. In virtual reality technology, it is the market leaders today who created the majority of the value for the technology. Their innovative versions of VR headsets have dominated market value. The brain behind Oculus Rift, Palmer Luckey, had significant impact on the technology and was a major value creator after drawing up various prototypes for new and improved virtual reality headsets.

 

How has Oculus become a market leader?

Although Oculus Rift has impacted significantly in VR technology and has created value for the industry, it is not yet a market leader. It is evident that Samsung and Sony’s devices are the leaders with high market shares. These devices are leading the market because they are already well-established and highly profitable brands. Sony’s PlayStation VR headset will dominate the market over its competitors because of its lower price and established gaming network[22]. According to recent research, Sony’s PlayStation VR headset will “outsell both Oculus Rift and the HTC Vive rival devices by the end of 2016” [23]. Oculus has used the complementary assets of these market leaders to exploit its technology and become market leaders even though they did not invent the technology.

Rift value creation began with the idea of it. Its skilled R&D team and complex technology means it has a strong appropriability regime and makes Oculus technology hard to imitate, as well as assure value capture. Moreover, Oculus’ virtual reality headset design is patented D701, 206 that covers the “ornamental design of a virtual reality headset,” which only adds more value[24].

The complementary assets of Oculus VR have a big influence in the potential success of their innovation. After Facebook has acquired it for $2 billion, Oculus now has a door to social media, new opportunities and partnerships. The acquisition also reduces risk on the manufacturing and work capital side, allows them to publish more made-for-VR content, and allows focus on solving hard engineering challenges and delivering the future of VR [25]. According to a statement from CEO Mark Zuckerberg, he believes that by working with developers and partners across the industry, many uses of the Rift can be developed[26].

 

How will this innovation spread into the market?

The Rift has various characteristics that make it marketable and attractive to potential clients and consumers. We can use Rogers’ five-factor framework in order to explain why the Oculus Rift will be successfully adopted and accepted by the market[27].

Relative advantage

Relative advantage is mostly viewed as an economic benefit of an innovation to the previous alternative it intends to replace. After comparing Rift with PlayStation and HTC Vive, it can be concluded that: Rift is similar to HTC Vive but cheaper, lighter and there are more sensors available. Rift is better than PlayStation in the resolution area. Economically speaking Rift is merely a bit cheaper with higher quality than the others. The relative advantage of Rift is not obvious.[28]

Compatibility

Rift is highly compatible with gamers because it displays a fully immersive 3D experience that makes existing consumers feel like they are actually in the game, which is exactly what they are looking for[29].

People who work with VR call that feeling “presence.” Once obtained, your body cannot always distinguish between what is real and what is not. The Rift is incompatible due to the fact that it lacks in flexibility because you cannot walk around with the headset on. This incompatibility will consequently result in the market being less accepting of the product, especially as the consumer using Rift will eventually become too immersed in the world of VR, rather than living in reality itself.

Complexity

An innovation is perceived as relatively difficult to understand and use. The system requirements of Oculus Rift are very high. More concretely, Oculus Rift requires a very powerful and relatively expensive graphics card (an Nvidia Geforce 970 or an AMD 290 or greater), which not a lot of people have. It seems that the first consumer version of Oculus Rift is not going to go mainstream. However, according to Zuckerberg, the VR presents a massive potential in the future[30].

Trialability

Oculus Rift is of a high level of trialability as there various ways to test it. Since the sales started, Oculus can be tried in retail places[31]. Other places where gamers and consumers can test the Rift are game or trade shows, hi-tech fairs and exhibitions. Another option is to use Oculus Rift Demo Map[32]. The map displays locations where owners of the Rift offer demonstrations to people interested in this VR headset.

Observability

Rift has a high level of observability, as there are a lot of young people who can be seen using it. Also media is full of information about this product after Facebook’s acquisition. Besides that consumers are sharing their experiences on various blogs and creating the whole network of Oculus fans.

To conclude, Rogers’ five-factor theory can be used to analyse the strengths and weaknesses of the product and which features will enable it to grow in market acceptance. Rift is highly compatible with the existing entertainment industry and through a high level of trialability and observability; Oculus will achieve satisfaction from the market.

 

Who will be the first to adopt the technology?

Further analysis of Rift can be achieved by using Moore’s model to define and explain the innovators, early adopters and its adjacent segments. The innovators are the population of the society who are always the first to take risk and try the newest technologies while early majority is known to be less tolerant to imperfections and wants the first experience to live up to their expectations[33].

The early adopters and visionaries are the consumers in the gaming industry as well as gaming software developers who seek to purchase products that would enhance all gaming experiences. Oculus Rift technology is not only used for gaming but for also in healthcare and architectural industries, which are the adjacent segments in the early majority. Therefore the pragmatists would be medical developers, for example wanting to use Rift for surgery practicing and training purposes.

The support of early adopters is important for the promotion and growth of a product. Therefore Moore’s model can be very useful to devise a strategy that will sell Oculus to its early adopters. Pre-orders of Rift sold out immediately at the price of $599, before the product was even ready to ship. This shows the thirst of innovators and proves that people believe in the product, creating the demand[34].

Oculus has to pay close attention to its product positioning, marketing strategy and distribution channels. Luckily, Facebook solves a lot of these problems. Other VR headsets focus more on the gaming sector[35], whilst Oculus has a chance to spread across various industries as Facebook is a well-known brand and has enough capital. Facebook is one of the best means to reach a wide audience of early adopters and grab their attention. Finally, the distribution channels question is solved by using the various partnerships that the famous social network has.

 

Oculus Rift Market Development

market development

 

 Bibliography 

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[4] Smith, S. & Andronico, M (2016) What is the Oculus Rift? Retrieved from: http://www.tomsguide.com/us/what-is-oculus-rift,news-18026.html

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[19] http://cloud.highcharts.com/embed/yrobed

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