REPRINT R1706B PUBLISHED IN HBR NOVEMBER–DECEMBER 2017 AARMTICaLnEaCgOeLLrE’sCTGIOuNide to Augmented Reality Why Every Organization Needs an Augmented Reality Strategy by Michael E. Porter and James E. Heppelmann How Does Augmented Reality Work? The key is a digital twin. Augmented Reality in the Real World Companies are investing and testing. One Company’s Experience with AR A conversation with ABB’s chief digital officer, Guido Jouret by Gardiner Morse The Battle of the Smart Glasses Money is pouring into development.This article is licensed to you, Supoet Srinutapong of Microsoft, for your personal use through 2020-10-25. Further posting, copying or distribution is not permitted. Copyright 2017-10-31 Harvard Business Publishing. All rights reserved.
OWRANERHAGYALAUIENTGVYIMZESARETTNYRITOAENTDENGEYEDS 1 ODREORAWGLONITOLYOGAALPEDPPTFLHRAEOYFM(RATENHEDEHRABOPRIPDA)SU.TGOMREEN(ITOESD) 2 ODAUEPVEGNIMCETEHNAETTEATDHPPRISEAPANALDGITEPYOTEOIXNLPTAEYUROINEUCNRHCEA.N ILLUSTRATION BY MICHAEL BATURA/BULLY! ENTERTAINMENT 2 HARVARD BUSINESS REVIEW NOVEMBER–DECEMBER 2017This article is licensed to you, Supoet Srinutapong of Microsoft, for your personal use through 2020-10-25. Further posting, copying or distribution is not permitted. Copyright 2017-10-31 Harvard Business Publishing. All rights reserved.
BY MICHAEL E. PORTER AND JAMES E. HEPPELMANN There is a fundamental disconnect between the wealth of digital data available to us and the physical world in which we apply it. While reality is three- dimensional, the rich data we now have to inform our decisions and actions remains trapped on two-dimensional pages and screens. This gulf between the real and digital worlds limits our ability to take advantage of the torrent of information and insights produced by billions of smart, connected products (SCPs) worldwide. NOVEMBER–DECEMBER 2017 HARVARD BUSINESS REVIEW 3 This article is licensed to you, Supoet Srinutapong of Microsoft, for your personal use through 2020-10-25. Further posting, copying or distribution is not permitted. Copyright 2017-10-31 Harvard Business Publishing. All rights reserved.
SPOTLIGHT WHY EVERY ORGANIZATION NEEDS AN AUGMENTED REALITY STRATEGY Augmented reality, a set of technologies IN BRIEF put navigation, collision warning, and COPYRIGHT © 2017 HARVARD BUSINESS SCHOOL PUBLISHING CORPORATION. ALL RIGHTS RESERVED.that superimposes digital data and THE PROBLEM other information directly in drivers’ lineimages on the physical world, promises of sight are now available in dozens of carto close this gap and release untapped While the physical world is models. Wearable AR devices for factoryand uniquely human capabilities. three-dimensional, most workers that superimpose production-Though still in its infancy, AR is poised to data is trapped on 2-D assembly or service instructions are beingenter the mainstream; according to one screens and pages. This gulf piloted at thousands of companies. AR isestimate, spending on AR technology between the real and digital supplementing or replacing traditionalwill hit $60 billion in 2020. AR will worlds limits our ability to manuals and training methods at anaffect companies in every industry and make the best use of the ever-faster pace.many other types of organizations, from volumes of informationuniversities to social enterprises. In the available to us. More broadly, AR enables a newcoming months and years, it will transform information-delivery paradigm, whichhow we learn, make decisions, and interact THE SOLUTION we believe will have a profound impactwith the physical world. It will also change on how data is structured, managed,how enterprises serve customers, train Augmented reality and delivered on the internet. Thoughemployees, design and create products, and solves this problem by the web transformed how informationmanage their value chains, and, ultimately, superimposing digital is collected, transmitted, and accessed,how they compete. images and data on its model for data storage and delivery— real objects. By putting pages on flat screens—has major limits: It In this article we describe what AR is, information directly into the requires people to mentally translate 2-Dits evolving technology and applications, context in which we’ll apply information for use in a 3-D world. Thatand why it is so important. Its significance it, AR speeds our ability to isn’t always easy, as anyone who has usedwill grow exponentially as SCPs proliferate, absorb and act on it. a manual to fix an office copier knows. Bybecause it amplifies their power to create superimposing digital information directlyvalue and reshape competition. AR THE OUTCOME on real objects or environments, AR allowswill become the new interface between people to process the physical and digitalhumans and machines, bridging the digital Pioneering organizations, simultaneously, eliminating the need toand physical worlds. While challenges including GE, Mayo Clinic, mentally bridge the two. That improvesin deploying it remain, pioneering and the U.S. Navy, are using our ability to rapidly and accurately absorborganizations, such as Amazon, Facebook, AR to improve productivity, information, make decisions, and executeGeneral Electric, Mayo Clinic, and the quality, and training. By required tasks quickly and efficiently.U.S. Navy, are already implementing AR combining the strengths ofand seeing a major impact on quality and humans and machines, AR AR displays in cars are a vivid illustrationproductivity. Here we provide a road map will dramatically increase of this. Until recently, drivers using GPSfor how companies should deploy AR and value creation. navigation had to look at a map on a flatexplain the critical choices they will face in screen and then figure out how to apply it inintegrating it into strategy and operations. the real world. To take the correct exit from a busy rotary, for example, the driver neededWHAT IS AUGMENTED REALITY? to shift his or her gaze between the road and the screen and mentally connect theIsolated applications of AR have been image on the map to the proper turnoff. ARaround for decades, but only recently heads-up displays lay navigational imageshave the technologies required to unleash directly over what the driver sees throughits potential become available. At the the windshield. This reduces the mentalcore, AR transforms volumes of data and effort of applying the information, preventsanalytics into images or animations that distraction, and minimizes driver error,are overlaid on the real world. Today most freeing people to focus on the road. (ForAR applications are delivered through more on this, see the sidebar “Enhancingmobile devices, but increasingly delivery Human Decision Making.”)will shift to hands-free wearables such ashead-mounted displays or smart glasses. AR is making advances in consumerThough many people are familiar with markets, but its emerging impact on humansimple AR entertainment applications, performance is even greater in industrialsuch as Snapchat filters and the game settings. Consider how Newport NewsPokémon Go, AR is being applied in far Shipbuilding, which designs and buildsmore consequential ways in both consumer U.S. Navy aircraft carriers, uses AR nearand business-to-business settings. For the end of its manufacturing process toexample, AR “heads-up” displays that inspect a ship, marking for removal steel construction structures that are not part of the finished carrier. Historically, engineers 4 HARVARD BUSINESS REVIEW NOVEMBER–DECEMBER 2017This article is licensed to you, Supoet Srinutapong of Microsoft, for your personal use through 2020-10-25. Further posting, copying or distribution is not permitted. Copyright 2017-10-31 Harvard Business Publishing. All rights reserved.
FOR ARTICLE REPRINTS CALL 800-988-0886 OR 617-783-7500, OR VISIT HBR.ORGhad to constantly compare the actual ship ENHANCING HUMAN DECISION MAKINGwith complex 2-D blueprints. But withAR, they can now see the final design At its core, the power of augmented reality grows out of the waysuperimposed on the ship, which reduces humans process information. We access information through each ofinspection time by 96%—from 36 hours to our five senses—but at different rates. Vision provides us with the mostjust 90 minutes. Overall, time savings of information by far: An estimated 80% to 90% of the information humans25% or more are typical for manufacturing get is accessed through vision.tasks using AR. The ability to absorb and process information is limited by our mental capacity. TheAR’S KEY CAPABILITIES demand on this capacity is referred to as “cognitive load.” Each mental task we undertake reduces the capacity available for other, simultaneous tasks.As we’ve previously explained (see“How Smart, Connected Products Are Cognitive load depends on the mental effort required to process a given type ofTransforming Competition,” HBR, information. For example, reading instructions from a computer screen and acting on themNovember 2014), the SCPs spreading creates a greater cognitive load than hearing those same instructions, because the lettersthrough our homes, workplaces, and must be translated into words and the words interpreted. Cognitive load also dependsfactories allow users to monitor product on “cognitive distance,” or the gap between the form in which information is presentedoperations and conditions in real time, and the context in which it is applied. Consider what happens when someone refers to acontrol and customize product operations smartphone for directions while driving. The driver must consume the information fromremotely, and optimize product the screen, retain that information in working memory, translate the directions into theperformance using real-time data. And in physical environment in front of him, and then act on those directions, all while operatingsome cases, intelligence and connectivity the vehicle. There is significant cognitive distance between the digital information on theallow SCPs to be fully autonomous. screen and the physical context in which information is applied. Dealing with this distance creates cognitive load. AR powerfully magnifies the valuecreated by those capabilities. Specifically, The combination of the speed at which information is transmitted and absorbedit improves how users visualize and and the cognitive distance involved in applying it lies at the root of the much-repeatedtherefore access all the new monitoring phrase “A picture is worth a thousand words.” When we look at the physical world, wedata, how they receive and follow absorb a huge amount and variety of information almost instantaneously. By the sameinstructions and guidance on product token, an image or picture that superimposes information on the physical world, placingoperations, and even how they interact it in context for us, reduces cognitive distance and minimizes cognitive load.with and control the products themselves. This explains why AR is so powerful. There is no better graphical user interface than the Visualize. AR applications provide a sort physical world we see around us when it is enhanced by a digital overlay of relevant data and guidance where and when they are needed. AR eliminates dependence on out-of-of X-ray vision, revealing internal features context and hard-to-process 2-D information on pages and screens while greatly improvingthat would be difficult to see otherwise. At our ability to understand and apply information in the real world.the medical device company AccuVein, forinstance, AR technology converts the heat improve workforce productivity, are warehouse picking. Complicated 2-Dsignature of a patient’s veins into an image inherently costly and labor-intensive schematic representations of a procedure inthat is superimposed on the skin, making and often deliver uneven results. Written a manual, for example, become interactivethe veins easier for clinicians to locate. This instructions for assembly tasks, for 3-D holograms that walk the user throughdramatically improves the success rate of instance, are frequently hard and time- the necessary processes. Little is left to theblood draws and other vascular procedures. consuming to follow. Standard instructional imagination or interpretation.AR more than triples the likelihood of a videos aren’t interactive and can’t adaptsuccessful needle stick on the first try and to individual learning needs. In-person At Boeing, AR training has had a dramaticreduces the need for “escalations” (calling training is expensive and requires students impact on the productivity and quality offor assistance, for example) by 45%. and teachers to meet at a common complex aircraft manufacturing procedures. site, sometimes repeatedly. And if the In one Boeing study, AR was used to guide Bosch Rexroth, a global provider equipment about which students are being trainees through the 50 steps required toof power units and controls used in taught isn’t available, they may need extra assemble an aircraft wing section involvingmanufacturing, uses an AR-enhanced training to transfer what they’ve learned to 30 parts. With the help of AR, traineesvisualization to demonstrate the design and a real-world context. completed the work in 35% less time thancapabilities of its smart, connected CytroPac trainees using traditional 2-D drawings andhydraulic power unit. The AR application AR addresses those issues by providing documentation. And the number of traineesallows customers to see 3-D representations real-time, on-site, step-by-step visual with little or no experience who couldof the unit’s internal pump and cooling guidance on tasks such as product perform the operation correctly the firstoptions in multiple configurations and how assembly, machine operation, and time increased by 90%.subsystems fit together. Instruct and guide. AR is alreadyredefining instruction, training, andcoaching. These critical functions, which NOVEMBER–DECEMBER 2017 HARVARD BUSINESS REVIEW 5 This article is licensed to you, Supoet Srinutapong of Microsoft, for your personal use through 2020-10-25. Further posting, copying or distribution is not permitted. Copyright 2017-10-31 Harvard Business Publishing. All rights reserved.
SPOTLIGHT WHY EVERY ORGANIZATION NEEDS AN AUGMENTED REALITY STRATEGYCONVERGING PHYSICAL AND DIGITAL Augmented reality reduces the mental effort needed to connect digital informationabout the physical world with the context it applies to.SEPARATED PHYSICAL AND DIGITAL WORLDS CONVERGED VIEWMentally transposing GPS images onto the road ahead AR superimposes digital data directly on the real world.is demanding and prone to errors. AR-enabled devices can also transmit superimposed directly on the product buttons on a smart light switch the user CLINT FORDwhat an on-site user is seeing to a remote and operated using an AR headset, can place anywhere that’s convenient.expert, who can respond with immediate hand gestures, and voice commands.guidance. In effect, this instantly puts Soon, users wearing smart glasses will The technologies underpinning thesethe expert at the user’s side, regardless of be able to simply gaze at or point to a capabilities are still emerging, but thelocation. This capability not only improves product to activate a virtual user accuracy of voice commands in noisyworker performance but substantially interface and operate it. A worker environments is improving, and advancesreduces costs—as Lee Company, which wearing smart glasses, for instance, in gesture and gaze tracking have beensells and services building systems, has will be able to walk a line of factory rapid. GE has already tested the usediscovered. It uses AR to help its field machines, see their performance of voice commands in AR experiences thattechnicians with installations and repairs. parameters, and adjust each machine enable factory workers to perform complexA remote expert can see what the tech without physically touching it. wiring processes in wind turbines—andis viewing through his or her AR device, has achieved a 34% increase in productivity.guide the tech through the work to be done, The interact capability of AR is stilland even annotate the tech’s view with nascent in commercial products but is COMBINING AR AND VIRTUAL REALITYinstructions. Getting expert support from revolutionary. Reality Editor, an AR appa central location in real time has increased developed by the Fluid Interfaces group AR’s well-known cousin, virtual reality, isLee’s tech utilization dramatically. And, at MIT’s Media Lab, provides a glimpse of a complementary but distinct technology.by reducing the number of repeat visits, how it is rapidly evolving. Reality Editor While AR superimposes digital informationLee saves more than $500 per technician makes it easy to add an interactive AR on the physical world, VR replacesper month in labor and travel costs. The experience to any SCP. With it, people can physical reality with a computer-generatedcompany calculates a return of $20 on every point a smartphone or a tablet at an SCP environment. Though VR is used mostlydollar invested in AR. (or, eventually, look at it through smart for entertainment applications, it can also glasses), “see” its digital interfaces and the replicate physical settings for training Interact. Traditionally, people have capabilities that can be programmed, and purposes. It is especially useful when the link those capabilities to hand gestures settings involved are hazardous or remote.used physical controls such as buttons, or voice commands or even to another Or, if the machinery required for training isknobs, and, more recently, built-in touch smart product. For example, Reality Editor not available, VR can immerse techniciansscreens to interact with products. With the can allow a user to see a smart light bulb’s in a virtual environment using hologramsrise of SCPs, apps on mobile devices have controls for color and intensity and of the equipment. So when needed,increasingly replaced physical controls and set up voice commands like “bright” and VR adds a fourth capability—simulate—allowed users to operate products remotely. “mood” to activate them. Or different to AR’s core capabilities of visualize, settings of the bulb can be linked to instruct, and interact. AR takes the user interface to a wholenew level. A virtual control panel can be 6 HARVARD BUSINESS REVIEW NOVEMBER–DECEMBER 2017This article is licensed to you, Supoet Srinutapong of Microsoft, for your personal use through 2020-10-25. Further posting, copying or distribution is not permitted. Copyright 2017-10-31 Harvard Business Publishing. All rights reserved.
EXPERIENCE AUGMENTED REALITY FOR ARTICLE REPRINTS CALL 800-988-0886 OR 617-783-7500, OR VISIT HBR.ORGLaunch this interactive demo to seeAR’s key capabilities in action. VISUALIZE AR can reveal features or systems that would be difficult to see with the naked eye. Here, it exposes the internal components of a hydraulic power unit and provides data on their status.INSTRUCT AND GUIDEAR can replace hard-to-understand2-D instructions, such as thosefor a repair process in a manual,with interactive 3-D holograms thatwalk the user through each step.This AR shows how to replace apower-unit filter. INTERACT AR can replace physical controls— such as buttons, knobs, and built-in touchscreens—with virtual ones that are visually superimposed on the target. You can operate a power unit that drives a robotic arm in this AR experience. 1 (ADAPONPWDFNRROLOOIMDA)TD.HTEHAEPFPRSETEOHRBER(IAOUSG) MORENGTOEODGRLEEAPLLITAYY 2 OTOPELNAUTNHCEHAPAPNAANUDGPMOEINNTTEYDORUERADLEITVYICEEXPAETRTIHEINSCPEA.GE NOVEMBER–DECEMBER 2017 HARVARD BUSINESS REVIEW 7 This article is licensed to you, Supoet Srinutapong of Microsoft, for your personal use through 2020-10-25. Further posting, copying or distribution is not permitted. Copyright 2017-10-31 Harvard Business Publishing. All rights reserved.
SPOTLIGHT WHY EVERY ORGANIZATION NEEDS AN AUGMENTED REALITY STRATEGY VISUALIZE An AR showroom demo developed by Microsoft and Volvo provides an X-ray view of a car’s engine and undercarriage. AR will be far more widely applied the position of the steering wheel, the HOW AR CREATES VALUEin business than VR will. But in some angle of the dashboard, and the location ofcircumstances, combining AR and VR instruments and controls without having AR creates business value in twowill allow users to transcend distance to build an expensive physical prototype broad ways: first, by becoming part(by simulating faraway locations), and get everyone to one location to of products themselves, and second,transcend time (by reproducing examine it. by improving performance across thehistorical contexts or simulating possible value chain—in product development,future situations), and transcend The U.S. Department of Homeland manufacturing, marketing, service,scale (by allowing users to engage Security is going a step further by and numerous other areas.with environments that are either too combining AR instructions with VRsmall or too big to experience directly). simulations to train personnel in AR as a product feature. TheWhat’s more, bringing people together responding to emergency situationsin shared virtual environments can such as explosions. This reduces costs capabilities of AR play into the growingenhance comprehension, teamwork, and—in cases in which training in design focus on creating better usercommunication, and decision making. real environments would be dangerous— interfaces and ergonomics. The way risk. The energy multinational BP overlays products convey important operational and Ford, for example, is using VR to create AR training procedures on VR simulations safety information to users has increasinglya virtual workshop where geographically that replicate specific drilling conditions, become a point of differentiation (considerdispersed engineers can collaborate in real like temperature, pressure, topography, how mobile apps have supplemented ortime on holograms of vehicle prototypes. and ocean currents, and that instruct replaced embedded screens in productsParticipants can walk around and go inside teams on operations and help them like Sonos audio players). AR is poised tothese life-size 3-D holograms, working practice coordinated emergency responses rapidly improve such interfaces.out how to refine design details such as to disasters without high costs or risk. Dedicated AR heads-up displays, which have only recently been incorporated into 8 HARVARD BUSINESS REVIEW NOVEMBER–DECEMBER 2017This article is licensed to you, Supoet Srinutapong of Microsoft, for your personal use through 2020-10-25. Further posting, copying or distribution is not permitted. Copyright 2017-10-31 Harvard Business Publishing. All rights reserved.
FOR ARTICLE REPRINTS CALL 800-988-0886 OR 617-783-7500, OR VISIT HBR.ORGautomobiles, have been a key feature in elite AR also lets engineers superimpose The logistics giant DHL and a growingmilitary products, such as fighter jets, for CAD models on physical prototypes to number of other companies are using ARyears and have been adopted in commercial compare how well they match. Volkswagen to enhance the efficiency and accuracy ofaircraft as well. These types of displays is using this technique—which makes the picking process. AR instructions directare too expensive and bulky to integrate any difference between the latest design workers to the location of each product to beinto most products, but wearables such as and the prototype visually obvious—to pulled and then suggest the best route to thesmart glasses are a breakthrough interface check alignment in digital design reviews. next product. At DHL this approach has ledwith wide-ranging implications for all This improves the accuracy of the quality to fewer errors, more-engaged workers, andmanufacturers. With smart glasses, assurance process, in which engineers productivity gains of 25%. The company isa user can see an AR display on any product previously had to painstakingly compare now rolling out AR-guided picking globallyenabled to communicate with them. 2-D drawings with prototypes, and makes and testing how AR can enhance other types it five to 10 times faster. of warehouse operations, such as optimizing If you view a kitchen oven through the position of goods and machines insmart glasses, for example, you might see We expect that in the near future AR- layouts. Intel is also using AR in warehousesa virtual display that shows the baking enabled devices such as phones and smart and has achieved a 29% reduction in pickingtemperature, the minutes remaining on the glasses, with their embedded cameras, time, with error rates falling to near zero.timer, and the recipe you are following. If accelerometers, GPS, and other sensors, And the AR application is allowing new Intelyou approach your car, an AR display might will increasingly inform product design workers to immediately achieve pickingshow you that it is locked, that the fuel tank by exposing when, where, and how users speeds 15% faster than those of workersis nearly full, and that the left-rear tire’s actually interact with the product—how who’ve had only traditional training.pressure is low. often a certain repair sequence is initiated, for example. In this way the AR interface Marketing and sales. AR is redefining Because an AR user interface is purely will become an important source of data.software based and delivered via the cloud, the concept of showrooms and productit can be personalized and can continually Manufacturing. In manufacturing, demonstrations and transforming theevolve. The incremental cost of providing customer experience. When customerssuch an interface is low, and manufacturers processes are often complex, requiring can see virtually how products willalso stand to save considerable amounts hundreds or even thousands of steps, and look or function in a real setting beforewhen traditional buttons, switches, mistakes are costly. As we’ve learned, AR buying them, they have more-accurateand dials are removed. Every product can deliver just the right information the expectations, more confidence about theirmanufacturer needs to carefully consider moment it’s needed to factory workers on purchase decisions, and greater productthe disruptive impact that this next- assembly lines, reducing errors, enhancing satisfaction. Down the road, AR may evengeneration interface may have on its efficiency, and improving productivity. reduce the need for brick-and-mortar storesoffering and competitive positioning. and showrooms altogether. In factories, AR can also capture AR and the value chain. The effects information from automation and control When products can be configured with systems, secondary sensors, and asset different features and options—which canof AR can already be seen across the value management systems and make visible make them difficult and costly to stock—ARchain, but they are more advanced in some important monitoring and diagnostic is a particularly valuable marketing tool.areas than in others. In general, visualize data about each machine or process. The construction products company AZEK,and instruct/guide applications are now Seeing information such as efficiency for instance, uses AR to show contractorshaving the greatest impact on companies’ and defect rates in context helps and consumers how its decking andoperations, while the interact capability is maintenance technicians understand paver products look in various colors andstill emerging and in pilot testing. problems and prompts factory workers arrangements. Customers can also see the to do proactive maintenance that may simulations in context: If you look at a house Product development. Though prevent costly downtime. through a phone or a tablet, the AR app can add a deck onto it. The experience reducesengineers have been using computer- Iconics, which specializes in automation any uncertainty customers might feel aboutaided design (CAD) capabilities to create software for factories and buildings, has their choices and shortens the sales cycle.3-D models for 30 years, they have been begun to integrate AR into its products’limited to interacting with those models user interfaces. By attaching relevant In e‑commerce, AR applications arethrough 2-D windows on their computer information to the physical location where allowing online shoppers to downloadscreens, which makes it harder for them to it will be best observed and understood, holograms of products. Wayfair and IKEAfully conceptualize designs. AR allows 3-D the AR interfaces enable more-efficient both offer libraries with thousands of 3-Dmodels to be superimposed on the physical monitoring of machines and processes. product images and apps that integrateworld as holograms, enhancing engineers’ them into a view of an actual room, enablingability to evaluate and improve designs. Logistics. Warehouse operations are customers to see how furniture and decorFor example, a life-size 3-D hologram of a will look in their homes. IKEA also uses itsconstruction machine can be positioned estimated to account for about 20% of all app to collect important data about producton the ground, and engineers can walk logistics costs, while picking items from preferences in different regions.around it, peer under and over it, and even shelves represents up to 65% of warehousego inside it to fully appreciate the sight lines costs. In most warehouses, workers still After-sales service. This is a functionand ergonomics of its design at full scale in perform this task by consulting a paper listits intended setting. of things to collect and then searching for where AR shows huge potential to unlock them. This method is slow and error-prone. NOVEMBER–DECEMBER 2017 HARVARD BUSINESS REVIEW 9 This article is licensed to you, Supoet Srinutapong of Microsoft, for your personal use through 2020-10-25. Further posting, copying or distribution is not permitted. Copyright 2017-10-31 Harvard Business Publishing. All rights reserved.
SPOTLIGHT WHY EVERY ORGANIZATION NEEDS AN AUGMENTED REALITY STRATEGYthe value-creating capabilities of SCPs. AR demand through AR. AR allows instruction Here are the essential questionsassists technicians serving customers in the to be tailored to a particular worker’s companies face:field in much the same way it helps workers experience or to reflect the prevalence ofin factories: by showing predictive analytics particular errors. For example, if someone 1. What is the range of ARdata generated by the product, visually repeatedly makes the same kind of mistake, opportunities in the industry, and inguiding them through repairs in real time, he can be required to use AR support what sequence should they be pursued?and connecting them with remote experts until his work quality improves. At somewho can help optimize procedures. For companies, AR has reduced the training Companies must weigh AR’s potentialexample, an AR dashboard might reveal to time for new employees in certain kinds of impact on customers, product capabilities,a field technician that a specific machine work to nearly zero and lowered the skill and the value chain.part will most likely fail within a month, requirements for new hires.allowing the tech to preempt a problem for 2. How will AR reinforce a company’sthe customer by replacing it now. This is especially advantageous for the product differentiation? AR opens package delivery company DHL, which At KPN, a European telecommunications faces surges in demand during peak up multiple differentiation paths. It canservice provider, field engineers conducting seasons and is heavily dependent on the create companion experiences thatremote or on-site repairs use AR smart effective hiring and training of temporary expand the capabilities of products,glasses to see a product’s service-history workers. By providing real-time training give customers more information, anddata, diagnostics, and location-based and hands-on guidance on navigating increase product loyalty. AR interfaces thatinformation dashboards. These AR displays warehouses and properly packing enhance products’ functionality or easehelp them make better decisions about and sorting materials, AR has reduced of use can be big differentiators, as can those that substantially improve productAPERRRRODODRRUASCMTAAINVTDIITCIYANLICLNRYFERAAECSDTEUOSCREIESS. support, service, and uptime. And AR’s capacity to provide new kinds of feedbackhow to resolve issues, producing an 11% DHL’s need for traditional instructors on how customers use products can helpreduction in overall costs for service teams, and increased the onboarding speed for companies uncover further opportunitiesa 17% decrease in work-error rates, and new employees. for product differentiation.higher repair quality. AR AND STRATEGY The right differentiation path will Xerox used AR to connect field depend on a company’s existing strategy;engineers with experts instead of providing AR will have a widespread impact on how what competitors are doing; and the pace ofservice manuals and telephone support. companies compete. As we’ve explained in technology advances, especially in hardware.First-time fix rates increased by 67%, and our previous HBR articles, SCPs are changingthe engineers’ efficiency jumped by 20%. the structure of almost all industries as well 3. Where will AR have the greatestMeanwhile, the average time it took to as the nature of competition within them— impact on cost reduction? AR enables newresolve problems dropped by two hours, often expanding industry boundaries inso staffing needs fell. Now Xerox is using the process. SCPs give rise to new strategic efficiencies that every firm must explore.AR to connect remote technical experts choices for manufacturers, ranging from As we’ve noted, it can significantly lower thedirectly with customers. This has increased what functionality to pursue and how to cost of training, service, assembly, design,by 76% the rate at which technical manage data rights and security, to whether and other parts of the value chain. It can alsoproblems are resolved by customers to expand a company’s scope of products substantially cut manufacturing costs bywithout any on-site help, cutting travel and compete in smart systems. reducing the need for physical interfaces.costs for Xerox and minimizing downtimefor customers. Perhaps not surprisingly, The increasing penetration of AR, Each company will need to prioritizeXerox has seen its customer satisfaction along with its power as the human interface AR-driven cost-reduction efforts in arates rise to 95%. with SCP technologies, raises some new way that’s consistent with its strategic strategic questions. While the answers positioning. Firms with sophisticated Human resources. Early AR adopters will reflect each company’s business and products will need to capitalize on AR’s unique circumstances, AR will become more superior and low-cost interface, whilelike DHL, the U.S. Navy, and Boeing have and more integral to every firm’s strategy. many commodity producers will focus onalready discovered the power of delivering operational efficiencies across the valuestep-by-step visual worker training on chain. In consumer industries and retail, marketing-related visualize applications are the most likely starting point. In manufacturing, instruct applications are achieving the most immediate payoff by addressing inefficiencies in engineering, production, and service. And AR’s interact capability, though still emerging, will be important across all industries with products that have customization and complex control capabilities. 4. Should the company make AR design and deployment a core strength, or will outsourcing or partnering be sufficient? Many firms are scrambling 10 HARVARD BUSINESS REVIEW NOVEMBER–DECEMBER 2017This article is licensed to you, Supoet Srinutapong of Microsoft, for your personal use through 2020-10-25. Further posting, copying or distribution is not permitted. Copyright 2017-10-31 Harvard Business Publishing. All rights reserved.
FOR ARTICLE REPRINTS CALL 800-988-0886 OR 617-783-7500, OR VISIT HBR.ORGINSTRUCT AND GUIDEAn employee at theagricultural equipmentcompany Agco viewsAR instructions forwork on a tractorhydraulic valve stack.to access the digital talent needed for AR services companies is an open question for digital communication approaches and indevelopment, which is in short supply. One many. Some companies have no choice but some cases can replace them altogether.skill in great demand is user experience or to treat AR talent as a strategic asset and Yet we see AR as much more than justuser interface (UX/UI) design. It’s critical invest in acquiring and developing it, given another communication channel. It is ato present 3-D digital information in ways AR’s potentially large impact on competition fundamentally new means of engagingthat make it easy to absorb and act on; in their business. However, if AR is with people. Just consider the novelcompanies want to avoid making a stunning important but not essential to competitive way it helps people absorb and act onbut unhelpful AR experience that defeats advantage, firms can partner with specialty information and instructions.its core purpose. Effective AR experiences software and services companies to leveragealso require the right content, so people who outside talent and technology. The web, which began as a way to shareknow how to create and manage it—another technical reports, ultimately transformednovel skill—are crucial too. Digital modeling The challenges, time, and cost involved business, education, and social interaction.capabilities and knowledge of how to apply in building the full set of AR technologies We expect that AR will do the same thingthem in AR applications are key as well. we have described are significant, and for communication—changing it in ways specialization always emerges in each far beyond what we can envision today. Over time we expect companies to create component. In the early stages of AR, the Companies will need to think creativelyteams dedicated to AR, just as they set up number of technology and service suppliers about how they can use this nascent channel.such teams to build and run websites in the has been limited, and companies have built1990s and 2000s. Dedicated teams will be internal capabilities. However, best-of- DEPLOYING ARneeded to establish the infrastructure that breed AR vendors with turnkey solutionswill allow this new medium to flourish and are starting to appear, and it will become AR applications are already being pilotedto develop and maintain the AR content. increasingly difficult for in-house efforts to and deployed in products and across theMany firms have started to build AR skills keep up with them. value chain, and their number and breadthin-house, but few have mastered them yet. will only grow. 5. How will AR change Whether to hire and train AR employees communications with stakeholders? Every company needs anor partner with specialty software and implementation road map that lays out AR complements existing print and 2-D NOVEMBER–DECEMBER 2017 HARVARD BUSINESS REVIEW 11 This article is licensed to you, Supoet Srinutapong of Microsoft, for your personal use through 2020-10-25. Further posting, copying or distribution is not permitted. Copyright 2017-10-31 Harvard Business Publishing. All rights reserved.
SPOTLIGHT WHY EVERY ORGANIZATION NEEDS AN AUGMENTED REALITY STRATEGY INTERACT An operator of a Wemo sheet-metal production line uses AR gesture commands to run several machines at once and switch between operations.how the organization will start to capture the require the capacity to develop and more-complex, dynamic contextualbenefits of AR in its business while building maintain dynamic 3-D digital content and experiences must be built from scratch,the capabilities needed to expand its use. often benefit greatly from the use of head- which requires specialized expertise.When determining the sequence and pace of mounted displays or smart glasses, whichadoption, companies must consider both the are still in the early stages of development. Simple applications, such as an AR-technical challenges and the organizational enhanced furniture catalog, may needskills involved, which vary from context to Apps that produce interactive only basic product representations.context. Specifically, organizations need experiences, which create significant value More-sophisticated business instructionto address five key questions: for both consumers and businesses, are applications, however, such as those the most challenging to develop. They also used for machine repair, will require 1. Which development capabilities involve less-mature technology, such as accurate and highly detailed digitalwill be required? Some AR experiences voice or gesture recognition, and the need product representations. Companies can to integrate with software that controls create these by adapting CAD modelsinvolve more complexity than others. SCPs. Most companies will start with static used in product development or byExperiences that allow people to visualize visualizations of 3-D models, but they using digitization techniques such as 3-Dproducts in different configurations or should build the capability to move quickly scanning. The most sophisticated ARsettings—like those created by IKEA, into dynamic instructional experiences that experiences also need to tap real-time dataWayfair, and AZEK—are a relatively easy have greater strategic impact. streams from enterprise business systems,place for companies to start. Consumers SCPs, or external data sources and integratejust need to be encouraged to download 2. How should organizations create them into the content. To prepare forand launch AR apps, and only a mobile digital content? Every AR experience, broadening the AR portfolio, companiesdevice is needed to use them. should take an inventory of existing 3-D from the least to the most sophisticated, digital assets in CAD and elsewhere and Instruction applications, like the ones requires content. In some cases it’s possible invest in digital modeling capabilities.Boeing and GE employ in manufacturing, to repurpose existing digital content, suchare more difficult to build and use. They as product designs. Over time, however, 12 HARVARD BUSINESS REVIEW NOVEMBER–DECEMBER 2017This article is licensed to you, Supoet Srinutapong of Microsoft, for your personal use through 2020-10-25. Further posting, copying or distribution is not permitted. Copyright 2017-10-31 Harvard Business Publishing. All rights reserved.
FOR ARTICLE REPRINTS CALL 800-988-0886 OR 617-783-7500, OR VISIT HBR.ORG 3. How will AR applications recognize across multiple brands of phones and led to growth in employment, not a decline.the physical environment? To accurately tablets and should make sure they’re ready Technology has dramatically increased our for smart glasses when they arrive. (See productivity and our standard of living.superimpose digital information on the “The Battle of the Smart Glasses.”) It has given rise to new kinds of offeringsphysical world, AR technologies must that meet new needs and require newrecognize what they’re looking at. The 5. Should you use a software- types of workers. Many of today’s jobssimplest approach is to determine the development or a content-publishing involve products and services that did notlocation of the AR device using, say, GPS model? Many early AR experiences have even exist a hundred years ago. A lesson ofand show relevant information for that history is that today’s digital revolution willlocation without anchoring it to a specific been delivered through stand-alone generate new waves of innovation and newobject. This is known as an “unregistered” software applications that are downloaded, kinds of work that we cannot yet imagine.AR experience. Vehicle heads-up navigation complete with digital content, to a phonedisplays typically work this way. or a tablet. This approach creates reliable, The role of humans in this future is high-resolution experiences and allows misunderstood. People have unique Higher-value “registered” experiences organizations to make apps that don’t strengths that machines and algorithmsanchor information to specific objects. require internet connectivity. The problem will not replicate anytime soon. We haveThey can do this through markers, such as with this model is that any change to the sophisticated motor skills—well beyondbar codes, logos, or labels, which are placed AR experience requires software developers what robots are capable of today—thaton the objects and scanned by the user with to rewrite the app, which can create allow us to do the subtle manipulationan AR device. A more powerful approach, expensive bottlenecks. that’s needed in, say, replacing a machinehowever, uses technology that recognizes part or wiring a turbine. Even relatively lessobjects by comparing their shape to An emerging alternative uses skilled work, such as drawing blood, pruninga catalog of 3-D models. This allows a commercial AR-publishing software to a garden, or repairing a flat tire, requiresmaintenance technician, for example, to create AR content and host it in the cloud. human dexterity and defies automation.instantly recognize and interact with any The AR experience can then be downloaded Human cognition adapts instantaneouslytype of equipment he or she is responsible on demand using a general-purpose app to novel situations; people easily adjustfor maintaining and to do so from any running on an AR device. Like website the way they interpret information, solveangle. While markers are a good starting content, the AR content can be updated problems, exercise judgment, and takepoint, shape-recognition technologies are or supplemented without changing the action to suit their circumstances. Humansadvancing quickly, and organizations will software itself—an important benefit have flexibility, imagination, intuition,need the capability to use them to tap into when large amounts of information and and creative ability that for the foreseeablemany of the highest-value AR applications. frequent content changes are involved. future are beyond the reach of any machine. The content-publishing model will become 4. What AR hardware is required? common as more and more machines and While the advances in artificial products include real-time AR interaction intelligence and robotics are impressive,AR experiences aimed at broad consumer and control. A content-publishing we believe that combining the capabilitiesaudiences have typically been designed capability is essential to scaling AR up of machines with humans’ distinctivefor smartphones, taking advantage of across the organization. strengths will lead to far greatertheir simplicity and ubiquity. For more- productivity and more value creation thansophisticated experiences, companies use THE BROADER IMPACT either could generate alone. What’s neededtablets, which offer larger screens, better to realize this opportunity is a powerfulgraphics, and greater processing power. The digital revolution, with its SCPs and human interface that bridges the gapSince tablet penetration is lower, companies explosion of data, is unleashing productivity between the digital and physical worlds. Wewill often provide them to users. For certain and unlocking value across the economy. see AR as a historic innovation that provideshigh-value applications—notably those in Increasingly, the constraint is not a lack of this. It helps humans enhance their ownaircraft and automobiles—manufacturers data and knowledge but how to assimilate capabilities by taking full advantage of neware building dedicated AR heads-up displays and act on them—in other words, the digital knowledge and machine capabilities.into their products—a costly approach. interface with humans. AR is emerging as It will profoundly change training and skill a leading solution to this challenge. development, allowing people to perform Eventually, however, most AR sophisticated work without protractedapplications for service, manufacturing, At the same time, the rapid evolution of and expensive conventional instruction—aand even product interfaces will require machine learning and automation is raising model that is inaccessible to so many today.head-mounted displays that free users’ serious concerns about human opportunity. AR, then, enables people to better tap into thehands. This technology is currently both Will there be enough jobs for everyone, digital revolution and all it has to offer. immature and expensive, but we expect especially for people without advancedthat affordable smart glasses will become education and knowledge? In a world HBR Reprint R1706Bwidely available in the next few years and of artificial intelligence and robots, willwill play a major part in releasing AR’s full humans become obsolete? MICHAEL E. PORTER is a University Professor atpower. Microsoft, Google, and Apple now Harvard, based at Harvard Business School.offer AR technologies optimized for their It is easy to conclude that new JAMES E. HEPPELMANN is the president and CEO of PTC,own devices. However, most organizations technology diminishes human opportunity. a leading maker of industrial software.should take a cross-platform approach Yet new inventions have been replacingthat allows AR experiences to be deployed human labor for centuries, and they have NOVEMBER–DECEMBER 2017 HARVARD BUSINESS REVIEW 13 This article is licensed to you, Supoet Srinutapong of Microsoft, for your personal use through 2020-10-25. Further posting, copying or distribution is not permitted. Copyright 2017-10-31 Harvard Business Publishing. All rights reserved.
FOR ARTICLE REPRINTS CALL 800-988-0886 OR 617-783-7500, OR VISIT HBR.ORGAugmented Reality inthe Real WorldWHO’S INVESTING THE MOST? ENTERPRISE ROLES…Percentage of executives in each industry who say they are currently Percentage of surveyed developers creating AR experiences in each use categorymaking substantial investments in AR, and percentage anticipatingsubstantial investments in three years SERVICE 2017 2020 Manuals and instructions, service inspections, remote expertAUTOMOTIVE guidance, customer self-serviceTECHNOLOGY,MEDIA & MANUFACTURINGTELECOMHEALTH CARE Quality assurance, assemblyRETAIL & instructions, performanceCONSUMER dashboardsINDUSTRIALPRODUCTS SALES & MARKETINGPOWER &UTILITIES Product displays & demos,PUBLIC augmented advertising,SECTOR optimization of retail spaceENERGY &MINING DESIGNFINANCIALSERVICES Collaborative engineering,HOSPITALITY inspections of digital prototypes& LEISURE OPERATIONS 0 5 10 15 20 25 30 35 Heads-up displays, digital productSOURCE PWC 2017 GLOBAL DIGITAL IQ SURVEY, TAKEN BY 2,216 BUSINESS AND IT controls, augmented operatorEXECUTIVES FROM 53 COUNTRIES manualsAR HEADSETS TAKE OFF TRAININGProjected growth in augmented reality headset unit shipments Job-specific training, safety &worldwide (in millions) security training, coaching30 OTHER25 Surgical guidance, quality20 assurance for buildings15 (N=107) 0 5 10 15 2010 …AND STRATEGIC GOALS Percentage of respondents citing each reason as the primary goal of their AR development program HIGHER MANUFACTURING QUALITY GREATER SALES REVENUE SHORTENED DEVELOPMENT CYCLE ENHANCED END-USER EXPERIENCE IMPROVED TRAINING METHODS PRODUCT DIFFERENTIATION5 BETTER SERVICING ENHANCED MONITORING0 2016 2017 2018 2019 2020 2021 CAPABILITIES 0 5 10 15 20 25 (N=100)SOURCE INTERNATIONAL DATA CORPORATION 2017 WORLDWIDE QUARTERLY AUGMENTED SOURCE PTC SURVEY OF THINGWORX STUDIO PILOT PROGRAM PARTICIPANTSAND VIRTUAL REALITY HEADSET TRACKER HBR Reprint R1706B NOVEMBER–DECEMBER 2017 HARVARD BUSINESS REVIEW 15 This article is licensed to you, Supoet Srinutapong of Microsoft, for your personal use through 2020-10-25. Further posting, copying or distribution is not permitted. Copyright 2017-10-31 Harvard Business Publishing. All rights reserved.
SPOTLIGHT ONE COMPANY’S EXPERIENCE WITH AROwCExonitpmeheprAiaRennyc’esA CONVERSATION WITH Guido Jouret joined the Swiss facing. The first is the aging of the skilledABB’S CHIEF DIGITAL industrial giant ABB in 2016, after workforce. In the oil and gas industry, forOFFICER, GUIDO JOURET spending more than two decades example, there was a massive employmentBY GARDINER MORSE in technology leadership roles at surge in the 1960s and 1970s and then a Cisco and Nokia. As chief digital hiring lull. As a result, you now have a officer, he helps lead the $34 billion lot of older workers retiring, taking skills company’s technology strategy and institutional knowledge with them. in green power, transportation, A similar dynamic is happening in many robotics, and automation in over 100 other industries. Second, we have a lot countries, and he champions its AR more machines in remote locations, and we initiatives. Here, Jouret describes want to be able to monitor, operate, and fix AR’s transformative potential—and those machines with fewer people on-site. why many businesses underestimate And the third challenge is the growing the change that’s coming. complexity of new technologies, which require new technical skills. Why is ABB interested in augmented reality? What pilots are you doing? AR can help address three macroeconomic In our pulp and paper business, we’re challenges that we—and our customers—are working on AR that will allow us to service the equipment of remote customers without sending in technicians. Today a customer 16 HARVARD BUSINESS REVIEW NOVEMBER–DECEMBER 2017This article is licensed to you, Supoet Srinutapong of Microsoft, for your personal use through 2020-10-25. Further posting, copying or distribution is not permitted. Copyright 2017-10-31 Harvard Business Publishing. All rights reserved.
FOR ARTICLE REPRINTS CALL 800-988-0886 OR 617-783-7500, OR VISIT HBR.ORGneeding guidance on repairs gets a binder machines that are extremely complex, so How should a company get startedwith documentation. We’re developing they can’t be easily automated. Servicing an with AR?AR on a HoloLens headset that will let the industrial 3-D printer would be an example.customer be guided by a remote technician Or work done in semiconductor labs. First, if you haven’t already done so, youwho can see what the customer is looking should design and build your productsat and walk them through a repair. We’re Those are all pretty cutting-edge. Are digitally so that you’ll have digital modelsat the early stage. We’ve put together some there less-cool applications that will be of them to use in developing AR and VR.prototypes, and we’re sharing those with as important? Otherwise, you’ll need to create thosecustomers to get their feedback. digital models later, which is complicated. This doesn’t sound superexciting, but it Second, figure out where AR could generate In our marine business, we’re working could have a big impact: If people use AR the most value in your operations orwith a coalition of companies on pilot simply to adhere to a best-in-class process, services. I’d gauge that using those threeprojects involving autonomous vessels—like it can prevent mistakes and injuries. You dimensions I’ve mentioned: danger,Google self-driving cars but ships. You can can have the best standard operating remoteness, and complexity of the task. Itimagine starting with small autonomous procedures in the world, but if your workers probably shouldn’t be a priority to add ARferries on lakes but eventually scaling up to don’t follow them, it doesn’t matter. AR to a simple machine that’s easily accessible.container ships. You wouldn’t need large can ensure compliance with processes. For On services, I’d ask where AR could enhancecrews on these ships. If somebody on shore instance, imagine you’re working with an an existing service rather than what newneeds situational awareness of what’s industrial motor and there’s a step in the service you could build from scratch withhappening on a vessel, they could use AR manual that says, “Turn off the power.” AR. It’s much easier to get a customer that’stechnology. We think we could bring this It would be easy to overlook the step and already using some of your maintenancecapability to market within a few years. damage the equipment or get hurt. With services to try an enhanced version. If AR, the software could say, “Turn off the you and a competitor provide the sameHow would that work, remotely power and glance at the switch to confirm service, and yours has an AR componentchecking in on an autonomous ship? it’s off.” When you looked at the switch, that allows customers to do some of their the AR could take a picture of the state of own work, that creates value for them andA captain onshore might use AR to see the the switch, time-stamp it, and record the differentiates you.view from the ship’s bridge and contextual location of the motor using GPS. So youinformation about the ship’s speed and would now be certain that the switch on a How do you see augmented reality andcourse and other telemetry data. This is motor was off at a specific location and time artificial intelligence coming together?a case where you’d be integrating virtual during a specific step in a process.reality and augmented reality. The VR Today we can create really good artificialwould be the view from the bridge. The AR Do businesses have unrealisticwould be live telemetry overlaid on that expectations about AR because of hype intelligence that can play Jeopardy! or aview. If sensors showed that something on the consumer side?was going on in the engine room, you could game like Go, but it’s harder for AI to figureteleport there from the bridge and have a Actually, I think it’s sometimes thelook around a virtual engine room that had reverse—press about consumer uses of out how to respond to situations whereAR information superimposed on top of it. new technology negatively influencesYou can imagine needing only a few people the perception of that technology in it has no training. It will come up with anactually on board at any time. business. It’s a recurring theme. Think of the press around consumer drones, informed response, but the outcome canWhat other sorts of jobs do you see for instance, which suggests that they’reAR doing? a nuisance or a toy. But of course we’re be unpredictable. If you train an automated finding important applications in industryThere are three overlapping areas where now for inspecting refineries, pipelines, ship to handle clear skies and a calm sea,I see AR taking off. The first is in dangerous and high-voltage transmission lines.jobs. You want to make sure people have Same thing goes for blockchain, which at and a hurricane hits, you don’t know whatthe best information possible at exactly first was seen as the technology behindthe right moment, because the cost of bitcoin, the digital currency used by drug the AI will do. People, at least for quite somenot having that—people getting injured, dealers. But businesses are beginning toequipment being destroyed—is so high. understand that blockchain will have a time, will be better at reasoning in contextSo I would imagine AR applications in huge impact on contracts. AR was seenrefineries, chemical plants, construction, as a game platform, and there was bad in novel situations. So we can imagine thatand mining, for example. The second area press when Google Glass stalled, whichis jobs in remote locations, like on an oil rig may have colored how businesses saw with the fusion of AI and AR, the AI willor an offshore wind farm, where it’s really the technology—maybe as a sciencevaluable to make sure that the people you experiment that wasn’t going anywhere. provide a set of recommendations about,do have on-site have the skills they need. But people who actually work with AR inThird, AR will be really useful in cases the industrial space are quite excited. say, what step to take next in a repair; awhere people are working with products or human with the contextual expertise will make the final call; and at that point AR could provide useful guidance. If there’s a noise coming from a motor, it could be many things. AI could look at the data and suggest 10 possible causes and recommend a few to consider first. But the tech’s decision about which to follow up on will be based on his experience, his team’s design knowledge, what he finds when he opens up the machine, and so on. He will make the final call about what the problem most likely is and then select an AR program that guides the repair. HBR Reprint R1706B NOVEMBER–DECEMBER 2017 HARVARD BUSINESS REVIEW 17 This article is licensed to you, Supoet Srinutapong of Microsoft, for your personal use through 2020-10-25. Further posting, copying or distribution is not permitted. Copyright 2017-10-31 Harvard Business Publishing. All rights reserved.
SPOTLIGHT THE BATTLE OF THE SMART GLASSESThe Battle of theSmart GlassesMICROSOFT ODG GOOGLE GLASSHOLOLENS R-7 ENTERPRISE EDITIONTo date, the lack of affordable, lightweight, high- information (What does that sign say in my language?) on a virtual CLINT FORDperformance smart glasses has been a barrier to augmented screen that hovers before them whenever and wherever needed.reality’s widespread adoption. The head-mounted displays(HMDs) most businesses use for AR tend to be expensive What will the next generation of wearables look like? Googleand cumbersome, and none of the options available to was first to market with Google Glass, a visionary effort that stalledconsumers have achieved broad acceptance. for a variety of reasons, including high cost and privacy concerns. Microsoft subsequently launched the HoloLens, which many view But the race to develop a popular version of this new as promising, but it is expensive ($3,000), has a narrow field of view,digital interface is on—and is attracting both tech titans and and is somewhat bulky. (It’s more of a headset than a pair of glasses.)upstart inventors. Investors are pouring money into wearables The HoloLens may prove adequate for some business applicationsdevelopment, betting that HMDs running AR will ultimately disrupt but is not yet ready for consumer use. Famously secretive Apple isthe market for phones and tablets. The screens in consumers’ rumored to be developing user-friendly smart glasses; the mid-2017pockets will be replaced by AR interfaces that people put on—and launch of its ARKit developer software for AR apps and the fallkeep on—without a second thought, just as they do sunglasses. 2017 introduction of the AR-capable iPhone X hint at that possibility. Google recently released an improved Glass and launched ARCore, In this Spotlight package we have described how businesses are a direct response to ARKit. Numerous other companies are jumpingusing AR to improve visualization, instruction, and interaction. into the market. Among them are Magic Leap, a start-up that hasThese same capabilities will allow HMDs to become the consumer already raised $1.4 billion to develop a head-mounted virtual retinalinterface for many products and forms of data. Consumers will use display, and three companies converging on a sunglasses-likehand gestures and voice commands to access information about concept: Osterhout Design Group (ODG), Vuzix, and Meta.and interact with the machines and devices around them, includingappliances; audio systems; and home heating, cooling, lighting, The stakes are high. Whoever wins the glasses wars will controland alarm systems. Smart glasses will guide people through the a technology that transforms how people interface with the digitalworld, allowing them to summon instructions (How do I change a and physical worlds—far more than the iPhone did a decade ago. Intire?), directions (Where’s the subway entrance?), and even tourist this next round of the mobile-device arms race, the title of world’s most valuable company could be up for grabs. HBR Reprint R1706B 18 HARVARD BUSINESS REVIEW NOVEMBER–DECEMBER 2017This article is licensed to you, Supoet Srinutapong of Microsoft, for your personal use through 2020-10-25. Further posting, copying or distribution is not permitted. Copyright 2017-10-31 Harvard Business Publishing. All rights reserved.