The industrial metaverse is bigger than you think
Real Conversations podcast | S5 E17 | September 07, 2023
Vincent is a Principal in the EY Business Transformation practice, based in New York City (US). Vincent has over 20 years' experience working in telecommunications and Technology. He runs major growth and transformation programs for Fortune 500 Telecommunications and Technology companies in North America and Europe.
A new 'Metaverse at Work' study conducted in a partnership between Nokia and EY shows that the industrial and enterprise metaverse is not a buzzword and is truly here to stay. Vincent Douin from EY dives into the findings and discusses what they mean for businesses.
Below is a transcript of this podcast. Some parts have been edited for clarity.
Michael Hainsworth: While consumers are skeptical of the need to don an AR or VR headset to shop and socialize, Vincent Douin of EY has worked with automotive companies, power and utility operators, manufacturers, and supply chain logistics firms to help build successful use-cases for this next generation technology. They've found that it cuts costs, improves training, and reduces time to market. To paraphrase author Mark Twain, the death of the Metaverse was an exaggeration.
Vincent Douin: The metaverse is not dead. I would say the metaverse is just born. Indeed, there is a lot of buzz about gen AI over the past few months and less hype about the metaverse, but the metaverse is still alive and we see, EY, I see a lot of potential opportunity for the coming years with the metaverse, and even I'm even more optimistic about the industry of metaverse.
As you know, we have conducted a survey with Nokia about the enterprise and industry of metaverse. We have surveyed more than 850 companies across the world, and one of the key outputs of this survey is that the metaverse is here. Very few companies see the metaverse as a buzzword, and most of the companies we have interviewed, they're really seeing there is a lot of business opportunities with the industry around metaverse.
MH: If industries are more realistic about the metaverse than consumers, in which way? And how are they more understanding as to what the metaverse is really all about?
VD: First, you're right. We definitely believe that there is more potential for the industrial metaverse than the consumer one. One of the reasons is that industries started years ago to deploy Industry 4.0 solutions to start leveraging digital IoT network solutions to improve their processes, and the industrial metaverse is the kind of continuation of all the Industry 4.0 initiatives they have deployed over the past few years.
When we interviewed companies, whatever the sector, they really saw the industrial metaverse as a continuation of the digital twin project - for example - they have done in the past few months. It's not like something completely new for them. It's more an augmentation of some industry follow-through projects they have started doing in the past.
MH: If you're building a digital twin of an industrial operation or an enterprise, you're collecting a remarkable amount of data that helps you, more likely with an artificial intelligence, machine learning algorithm type of technology, to advance a business case that you could then apply all that data all through the building, that sort of virtual world. But your study seems to have made it clear that if one doesn't have a business case for the metaverse, it will never work. You can play with proof of concept, but it won't go to the next phase unless you have a business case. How do you take it to the next phase?
VD: Very good question, and you're right. We ask companies about the business benefits of the metaverse. They gave us many good reasons, like capital expense (CapEx) optimization and cost efficiency. But then, in the end, you're right. If you want to scale your metaverse projects, you need to have a proven return on investment (ROI) on your pilots and you're testing. That was one of the first concerns of the companies we discussed, but most of them are able very quickly to show positive returns upon investment.
I was very surprised that, in the end, all the companies that have already deployed metaverse initiatives or solutions are even more optimistic and positive about value creation than those that have not started. It's just a proof point, a data point, that confirms the fact that most of the companies that have tested piloted metaverse see early benefits of the deployment they have done.
MH: I'm surprised about that ROI component. I would've thought we would still be at the very early stages of the metaverse, such that we're really not even looking for a return on investment. We're just looking to explore what it's capable of doing. How do we ensure that we're getting a return on that investment? And what kind of return on investment are companies looking for?
VD: One of the most tangible pilots, or testing these days, of the enterprise metaverse is around training, onboarding your resources, or could be like corporate training. You are a new joiner at Nokia. You need to have your two/three days of onboarding, or it could be a more sophisticated use case about what we call the XR hands-on training. You need, as a technician, to be trained on a machine, on something more sophisticated.
For both cases, the business case is immediate. You need to deploy, I would say, the metaverse pilot for a few hundred thousand dollars, but then you are just saving a significant cost in terms of travel for your employees. So, that is a very simple example, and by the way, at EY, we are already supporting a lot of clients deploying that kind of virtual or immersive training, and the ROI is very clear and very simple to demonstrate.
Then you have other use cases around digital twins for virtual manufacturing where the existing solutions, as you were mentioning, do not use metaverse or 3-D environments, but it's pretty easy. Or we have a lot of companies that are able to prove an additional value with the usage of the metaverse that you can extend and use more effectively, all the optimization of your processes moving from a single two-dimension to a three-dimension world, I would say.
MH: In addition to cost savings and operational savings in these pilot projects that we're seeing for metaverse use cases within the industrial world, what are the other aspects that we're seeing tremendous pressure being put on companies today in the world of ESG? Is there a sustainability component that you saw in the study?
VD: Definitely, that was after. The cost efficiency was definitely ranking super high in terms of the benefits of the metaverse. So that's probably one of the most significant outputs of the report is that everyone is very enthusiastic about the metaverse due to the fact that... In fact, what's interesting is that companies did not anticipate the benefits of environmental social and governance (ESG) and sustainability. Now, as they have more and more pressure on their ESG reporting, they are more than happy to find additional non-expected benefits there. You're completely right. That's a super important area.
Then another interesting area that emerged from the study is safety, employee safety. Going back to the manufacturing world, the maintenance, the on-the-field people. It is pretty clear that most companies in specific industries, like manufacturing or Power and Utilities (P&U), claim significant benefits in the safety improvement of their employees.
MH: I guess this ties back into the idea that the companies that are already getting involved, either dipping their toe into the metaverse water or jumping in headfirst, are finding that they are more convinced that the metaverse will be a thing than those who haven't started it yet. And it's not just tied to that cost-reduction side, that sustainability side, where you don't have to put people in a plane and get them from point A to point B for training and things like that. But then training also ensures that employees know what's expected of them once they step onto an actual factory floor.
VD: Yes, exactly. Another very concrete example we discussed with one of our clients is onsite maintenance. So that was for a power utility company in the US. They had to train their onsite technicians to be able to repair some pipes. And I did the demo. I was part of the development of this pilot, and I was blown away. You are completely immersed in the middle of the desert in a kind of small electricity power site, and step-by-step, you see exactly the different steps of the procedure you need to do. You need to close out one pipe to open another to change one piece. And just having that in the real three dimensions, I'm sure, increased by a significant portion the memory of the technician to be able to redo the same task in the future.
MH: What are some of the risks and challenges that your study uncovered?
VD: We got a lot of concern about data and privacy, for sure. I will say that's not very surprising. In every new type of digital or technology-related project, you usually have that kind of data privacy risk raised. Then, a lot of challenges that were not surprising, but we were not expecting so many concerns around, were about change management.
MH: People don't like change.
VD: Yes, people don't like change. And most of the use cases we envision for the industrial metaverse will be for what we call the 'blue-collar', related to manual workers, particularly in industry. And for this kind of working employee level in companies, they are very reluctant to change and to technology. And we got a pretty high percentage of concern regarding change management from the company leaders. But then, in the interviews, we got a lot of stories as well about that.
Even to give you an anecdote, some companies are even concerned by the potential mobilization of the unions on the adoption of new metaverse procedures or use cases. For example, in the automotive industry in Europe, one or two large car manufacturers that I will not name here were really concerned by the potential action of the union in some European countries.
MH: In what way? I would've assumed that a union would be on board with a metaverse experience because it would give their members increased access to training. They would be less likely to be injured on the job. They're more informed about what it is they're doing. Is there a job loss risk associated with the deployment of a metaverse?
VD: Yes, because some use cases are definitely there to optimize and bring more automation in there. For example, the manufacturing or logistics processes have more and more robots running some manufacturing processes or logistics or warehouse tasks, and the metaverse will bring even more. That was part of the use cases. We identified that the metaverse can bring some value on top of the drones, the robots, for sure.
So yes. Yes, you have a risk of fewer jobs in that kind of task or process. Then I like your point, meaning there are, on the other hand, a lot of benefits for the employees around training and safety again. I think companies should work and communicate with their employees to really show the pros of the metaverse and just demonstrate that the net value at the end will be positive for the employees as well.
MH: In addition to these types of challenges, what kind of challenge are you seeing as far as the adoption of the metaverse? I can imagine it's such a new idea. Even if you're working with an organization that is already engaged in the sensor spread that's necessary for digital twins, you're collecting that remarkable amount of data, and you're putting it all together, I can imagine there's still a lack of expertise at the industrial level for most companies today.
VD: Yes, you're completely right, and I was going there. The main challenges beyond the risks we just discussed are lack of expertise and technical difficulties deploying projects. Even going back to your question on the ROI, the challenge for companies is more to successfully deploy pilots than to prove the ROI of the pilots.
So, to go back to our study, 59% of the companies that have deployed metaverse use cases confirmed that they have run into multiple challenges in the deployment. So almost two-thirds of the companies that have deployed something have struggled.
For us, for all the consulting services, companies like EY or the integration services company, that's a great opportunity because, yes, the metaverse is a complex environment combining connectivity, clouds, and vertical applications. Within the connectivity, you may have different kinds of technology; 5G, Wi-Fi, and IoT, then a huge amount of data has to be properly collected. So yeah, definitely, that's one of the key challenges that is still an issue for most companies going into the metaverse today.
MH: I'm still, though, just fascinated by the data from your study that concluded that 80% of experienced respondents believe the metaverse will have a significant or transformative impact on their business.
VD: Indeed. I think for us that one of the most positive outputs of our study is that all the companies that have started there are more than convinced that they will create a lot of value with the metaverse, and even the companies that did not start yet are still positive, less positive than the experienced ones, but very optimistic about the potential value creation of the metaverse.
MH: If there's one takeaway point for the listener today that is considering investigating and incorporating metaverse technologies into their enterprise, what should it be?
VD: Go and test pilots of use cases because you will find some value and some ROI at the end. Then, do not underestimate the complexity of deploying a metaverse project, but you should try and go for it because all the companies that have started are very optimistic and positive about the value and everything, they were able to create, thanks to those metaverse use cases.
MH: And what's your favorite metaverse use case?
VD: Where was most surprised about all the use cases around robotics, going back to your question on the employment impact. In fact, a lot of companies were really interested by use cases around operations robotics, about delivery robotics, and, in the end, to leverage the metaverse to simulate end-to-end their supply chain or their processes. So, going way beyond, if you want the traditional digital twin, that is just simulating a portion of the supply chain or a portion of a process, and this mainly in two dimensions. The vision of some companies of the end-to-end 3-D monitoring of their operations or their supply chain was pretty surprising to me.
MH: Are you optimistic that the metaverse is more than just a fad?
VD: I'm completely optimistic that the metaverse for the enterprise and the industrial world is here to stay and is much more than a fact for sure.
MH: But you didn't add the consumer side of it. That's still up in the air.
VD: The consumer side is still up in the air. You're right, a lot of B2C companies tried their virtual shops. So yes, I think the next generation of shopping or e-commerce will include the dimension of virtual reality, but I see that more as a mid-long-term opportunity that will probably come later than the use cases and the pilots and the deployments we have observed for the four industries we covered in our report.