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Facebook’s Acquisition of Oculus Rift: What It Is, and What It Isn’t

Posted April 15, 2014 by Editor
Categories: Strategy, Technology
Facebook map

This post was written by Neal Moore, Directing Associate and Senior Strategist here at Jump. You can get in touch with him by commenting on this post.

Mark Zuckerberg and company have billions to spend on, really, whatever.

And one school of thought is that a company with that much capital should be making risky investments in non-core, orthogonal businesses just because one of those potentially disruptive technologies could end up being the next big thing.

There’s also the school of thought that criticizes recent acquisitions by big brands like Facebook and Google as “a reflection of uncertainty as the companies search for tech's next big thing.” But in either case, this move is much more strategic than that.

If we unpack what’s possible technologically, what’s desirable for Facebook’s users, and what’s profitable for Facebook and their partners, we can come to a new understanding of the opportunity.

Zuckerberg’s Vision

Mark Zuckerberg’s announcement talks about immersive gaming, virtual courtside seats for a game, virtual doctor’s visits, and above all, making it possible to “share unbounded spaces and experiences with the people in your life.” There's no question that this is a long-range gambit.

While the courtside seat case is really interesting for its own reasons—imagine TBS losing clout with advertisers as viewers seek out richer experiences online; the NBA could make deals with Facebook instead—the most interesting thing to me is the core Facebook value proposition: sharing experiences with friends. And with that in mind, we can move into a closer look at what this acquisition is, and what it isn’t.

What It’s Not

Popular assessment of this massive $2B purchase of Oculus Rift seems to be centered on three motivations:

  1. Making it possible for friends and family to meet up in virtual rooms, creating a more immersive competitor to Google Hangouts

  2. Blocking Google from the most promising VR technology yet, and beating Google to the next frontier in advertising space

  3. Enhancing Facebook’s attractiveness as a gaming platform

These assessments miss the mark. Here’s why:

  1. Casual virtual rooms are a lousy application of VR. Facebook’s brand is about connecting real people. They have video calling; 3D could enhance it incrementally. It’s not about competing with uncanny Second Life or World of Warcraft fantasy worlds. That’s a different group with a different set of needs than most Facebook users who would rather stay in 2D than get creeped out by an avatar of their friend in real-time.

  2. Blocked from a great 3D interface, Google is hindered, but they still have the world they created with Earth and SketchUp to plaster with ads. If Google wants to make a YouTube of virtual worlds, they won’t own the experience of 3D footage of events captured by friends and family until they make their own Rift-beater. What they will have that Facebook won’t, however, is Google Earth and the world-builders of their former SketchUp unit. Call this one a draw.

  3. No one needs a more immersive Farmville. Zuckerberg seems to be reassuring excited gamers that the next big thing in gaming will still happen… he’s not buying Rift to shut it down and spoil the party for Sony or Microsoft. He simply doesn’t have to care about gaming platforms; Facebook isn’t threatened by Microsoft or Sony. While Xbox One has its charms as a communications platform with Skype and the Xbox Live ecosystem, it’s far from the kind of adoption rate that Facebook has. Gaming is a red herring.

We know, then, what this acquisition of Oculus Rift isn’t. So what is it?

What It Is

The real opportunity for Facebook is immersive memories. With this concept, people could:

  • Share the journals and highlights of their experiences using Facebook

  • Invite their friends into their world one highlight, photo, story, or video at a time. They post, they boast—and their friends enter that world

  • Have a richer, more immersive, more compelling experience thanks to Facebook’s newly-acquired VR technology

This concept of immersive memories avoids all of the hang-ups we see with the popular assessment of Facebook’s new relationship with Oculus Rift, and gets right back to the all-important idea of sharing experiences with friends.

What’s Next?

To really make the most of this move towards an immersive sharing experience with friends, a playback/control input device like Oculus Rift just isn’t enough. People need to get their experience into the system, which is where things get interesting. What else would people need?

  1. 3D environment capture

  2. Wearable 3D experience video capture

  3. 3D space reconstruction and navigation

  4. Massive storage and fast access for smooth real-time navigation

  5. Solid, high-speed broadband

Oculus Rift is a step in the right direction, but there’s certainly a lot that needs to happen in order for users to be able to make the most of this experience. VR is still in its infancy. Using headgear is a big behavioral change, especially at a time when more Facebook use is happening on mobile. That said, this sort of acquisition could be the necessary next step for launching VR into the mainstream.

If Facebook wants to create a system of immersive memories, it needs to think about what companies provide these capabilities (whether to buy or partner), who else wants them, what is in it for them to go through Facebook instead of someone else, and what exactly is an appropriate valuation. With some of Facebook’s other recent acquisitions, it’s clear that Zuckerberg is able to think through these kinds of problems.

If Facebook is serious about taking the next steps to round out the system of IP or physical offerings, there are a few companies that I think Zuckerberg should be looking at:

  1. GoPro: GoPro is already capturing compelling experiences. Facebook needs more compelling experiences to make the most of this new world it’s trying to build.

  2. Telepathy One: Telepathy One is a nifty Google Glass competitor with this use case in mind. A system of immersive memories needs memories, and a device like this could help capture those kinds of images every day.

  3. Panono Ball: Toss it or roll it around, and capture a space. Useful for the type of image capturing that a device like the Rift requires.

  4. Photosynth: A software that can stich images together faster or as well as Google Street View or Earth—live and at consumer-accessible processing bandwidth by 2016. This, or something like it, is essential to capturing the environment in a seamless way.

  5. Artemis: Facebook’s interest in broadening wireless infrastructure to reach remote users (drone-mounted hotspots?) could use Artemis’ pCell technology. It could also speed up video transfer rates for already dense areas, a necessity considering the massive bandwidth that this type of imaging requires.

If Facebook is going to create a fully immersive experience, it’s going to need more than just Oculus Rift to do it, and companies like those above could all help Facebook continue to build a full system—instead of just one part of it.

In looking at this acquisition, I find it more useful to think about finding the opportunities present in what information is available. Doing so implies a lot about what could be next—immersive memories—and what’s adjacent to where the brand is today.

In purchasing Oculus Rift, Facebook isn’t looking to make a more immersive Farmville, to create virtual rooms, or even just to defend itself against Google. It’s looking to build upon its core competencies—always a good idea—and create an even more immersive personal network, the likes of which have never been seen before.

For Ford, Options Come Directly from Early Action

Posted April 10, 2014 by Editor
sheet aluminum

This post was written by Neal Moore, Directing Associate and Senior Strategist here at Jump. You can get in touch with him by commenting on this post. For the first part of this small series on Ford’s Aluminum F-150, see Mike Smith’s post, The Bet Ford Is Placing On Their Aluminum F-150 Isn’t On Design—It’s On Consumer Opinion.

Earlier this week, Mike talked about the challenges that Ford is likely to face with the release of their new aluminum F-150. His post was a great breakdown of what it’s going to take for Ford to succeed after the release of their new truck. But the steps Ford has been taking to make their aluminum F-150 a reality have been going on since long before the truck’s announcement.

One of the success factors Mike mentioned was sourcing, and that plays a large—maybe the largest—part of Ford’s success in making this truck happen.

Currently, auto manufacturing accounts for a relatively small portion of the global supply of sheet aluminum. But according to automakers, the demand for aluminum to produce vehicles is expected to double by 2025, with the amount of aluminum body sheet content in North American vehicles expected to increase tenfold in 2025 from 2012 levels. Ford’s news F-150 plays a large part in that increase in demand, as the amount of aluminum required to make this recent change to the F-150 is massive, to say the least.

By sourcing up their aluminum contract and locking in a competitive price early on in the game, Ford has both given itself a head start—it’s releasing its state-of-the-art truck before anyone else—and given itself a competitive advantage because sourcing up a supply chain of this magnitude is such a long-term process.

It’s not that other auto manufacturers aren’t doing well—it’s just that Ford has remained innovative by having the wherewithal to make these types of decisions before anyone else, putting them ahead of the competition. GM’s version of the aluminum truck isn’t set to be released until 2018, which constrains their options for supplier contracts and pricing leverage. Much of Ford’s innovation with the F-150 was enabled by the success of their supply chain team in sourcing up the aluminum needed for this massive undertaking.

This isn’t the first time that Ford has had the foresight to act early. In a move that was similarly criticized at the time, Ford avoided government bailout by heavily mortgaging itself in November 2006 before global credit markets seized. They realized then, as they likely did now, that they were close to being backed into a corner. Realizing that before anyone else saved them a bailout, and this time, put them a few years ahead of the competition.

We’ve seen the same thing time and time again with other businesses that have taken large bets before their competitors have had time to act. Boeing is taking a big risk with its new 787 by transitioning from aluminum to carbon fiber production. And Apple, both for their pioneering (and subsequent cornering) of manufacturing techniques, and for their ability to source up supply chains until there’s nothing left for competitors as they did with the unibody Macbook, has similarly structured itself into a position of competitive advantage by acting early and eating up a big portion of the supply chain before their competitors.

In business strategy, early action is absolutely essential to success, and Ford’s new F-150 shows it.

In Ford’s case, the company’s success has been framed because Ford realized they were backed into a corner before any of their competitors, an observation that gave them more options and time to work with than anyone else. Dodge waited for $4/gallon gas to bring passenger car cylinder deactivation technology to its Ram Hemi V8, and is adding diesel to meet fuel economy targets. GM is betting on adding a smaller truck to do the same. Both of these are riskier bets; Ford’s strategy will require the least customer behavior change of them all to adopt.

If you want to help ensure the long-term success of your business, starting early and developing a long-term strategy is key. Ford has been planning this move for years and years, and we’re only seeing a very small part of the story of the aluminum F-150 today. What will be the aluminum F-150 for your business? And more importantly, how do you plan on getting there?


Photo credit: Jim Motavalli via Car Talk

The Bet Ford Is Placing On Their Aluminum F-150 Isn’t On Design—It’s On Consumer Opinion

Posted April 8, 2014 by Editor
aluminum on steel f-150

This post was written by Mike Smith, Director at Jump Associates. You can get in touch with him by commenting on this post.

At the weekly company meeting not long after Detroit’s North American International Auto Show this January, I posed a question to Jumpsters: “What was the greenest introduction at Detroit this year?”

There were, as expected, mentions of electric cars, alternative energy announcements, and ever smaller, more economical engines manufacturers have been working into their fleets. But the biggest environmental impact of a single offering at the 2014 Detroit Motor Show—one that flew completely under the radar in that meeting—was Ford’s all new aluminum F-150.

Aluminum cars, of course, aren’t new. Manufacturers like Jaguar and Audi have been playing with aluminum for a long time in lower volume vehicles. It’s not the usage of aluminum that’s revolutionary in Ford’s case—it’s the fact that Ford has taken the best-selling, and arguably the most iconic vehicle in America, and made it out of the stuff of (as consumers see it) beer cans and flimsy European sports cars as a way to increase its fleet fuel economy.

Auto manufacturers have long been grasping at low-hanging fruit to meet increasingly stringent CAFE standards. Only now, they are shifting from focusing on cars people are less emotionally invested in—appliance-like economy cars—to cleaning up big iron in a way that should help the F-150 become CAFE positive.

A lot of things are going to need to happen for Ford to succeed with the bet they’ve placed on their new truck. But one thing that hasn’t been discussed much even in the face of thousands of questions and comments about this new strategy from Ford is exactly how big of a factor public opinion is going to play for Ford moving forward.

When an auto manufacturer changes the materials or manufacturing processes of an economy car, chances of consumer outcry are slim. It’s an economy car, after all, so no one is going to be surprised if Ford or GM or Honda changes the way it’s made. Fuel economy is expected in those kinds of vehicles, and anything that gets consumers closer to that goal is practically guaranteed to be well-received.

With the F-150, though, Ford is up against something completely different. They’re big, they’re heavy, they’re American, and they’re supposed to be powered by massive V8 engines, and made of steel. And iron. And probably left over steam locomotive parts. And we know we can use them to tow cattle trailers, pull out tree stumps, and build barns—even if we mostly use them for Costco runs. Toying with the design and manufacture of something so sacred is an entirely different situation.

Ford has been positioning themselves for this shift for some time by introducing their EcoBoost engines—which they’re charging a premium for, by the way—throughout most of their fleet, including their trucks. By introducing engines with lower displacement, but more horsepower, Ford’s slowly been planting the idea of a fuel-efficient pickup in the minds of consumers. But Ford is going to need to do a lot of convincing in order to make the new aluminum F-150 really feel right.

The battle for Ford isn’t design (the new truck looks great) or sourcing (they’ve already attained long-term contracts for the incredible amount of aluminum they’re going to need for the new F-150)—it’s winning over the hearts and minds of its buyers and showing them that it’s okay to change an American icon. People’s values change more slowly than auto manufacturing—even American auto manufacturing. And messing with an icon may very well be the most dangerous thing that Ford has ever done, even though people’s values are all too frequently left out of conversations about big design changes like these.

Is this a safe move from Ford? Absolutely not. Whether the aluminum F-150 will be a massive success or a dramatic failure is yet to be seen. But at a time when safe moves are becoming increasingly harder to find, Ford has done something remarkable with the bet they’re taking on this new truck. And sometimes, that’s exactly what it takes to succeed.


Photo credit: Ford

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