Business Horizons (2020) 63, 737e748

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The virtual reality value chain

Anouk de Regt*, Stuart J. Barnes, Kirk Plangger

King’s Business School, King’s College London, 30 Aldwych, London WC2B 4BG, U.K.

KEYWORDS Abstract Virtual reality (VR) technology is predicted to become indispensable in

Virtual reality the business world, as it fundamentally reimagines the ways in which firms interact
ecosystem; with customers. This technology has sparked a VR ecosystem, with multiple types of
VR technology; firms and other stakeholders interacting to create value. Firms need to define their
Value chain; roles in this ecosystem in order to capitalize on the opportunities and address the
Marketing strategy; challenges they face when navigating its complexities. This article develops a VR
Disruptive technology value chain that illustrates how the use of VR technologies adds value to key stake-
holders. It also provides an understanding of the current state of the VR ecosystem
and serves as a source for strategic managerial decision making and future VR
research.
ª 2020 Kelley School of Business, Indiana University. Published by Elsevier Inc. All
rights reserved.

1. The virtual reality ecosystem firms are still considering how best to implement
them to create value (Burke, 2018; Scholz & Smith,
Customer-firm interactions are changing with 2016). Similar to electronic commerce (Bhatt &
recent advances in digital technologies, including Emdad, 2001), mobile technologies (Kumar &
social media (Kietzmann, Hermkens, McCarthy, & Zahn, 2003), artificial intelligence (Kaplan &
Silvestre, 2011), mobile internet (Kaplan, 2012), Haenlein, 2019), big data (Miller & Mork, 2013)
contextual sensors (Brown, 2017), voice activation and the Internet of Things (Lee & Lee, 2015), these
(Sotolongo & Copulsky, 2018), and alternate- technologies have the potential to radically
reality technological platforms (Farshid, Paschen, transform how firms interact with their customers,
Eriksson, & Kietzmann, 2018). Alternate-reality employees, suppliers, and other stakeholders in
technological platforms, including augmented re- their value chain. This is evidenced by the rise of
ality (AR), mixed reality (MR) and virtual reality virtual commerce, or electronically mediated
(VR), are relatively new in the marketplace, and commercial transactions that originate from
alternate-reality technological platforms and
involve either digitally generated or real-world
* Corresponding author products and services (De Regt & Barnes, 2020).
E-mail addresses: anouk.de_regt@kcl.ac.uk (A. de Regt), But both business academics and managers lack
stuart.barnes@kcl.ac.uk (S.J. Barnes), kirk.plangger@kcl.ac.uk the frameworks needed to pursue understanding
(K. Plangger)

https://doi.org/10.1016/j.bushor.2020.08.002
0007-6813/ª 2020 Kelley School of Business, Indiana University. Published by Elsevier Inc. All rights reserved.
738 A. de Regt et al.

of the technologies’ potential for value creation. for multilateral communication between users
This article focuses specifically on VR and develops (Kietzmann et al., 2011). Web 2.0 technologies
a value-chain framework that describes how VR have changed the nature of firm-stakeholder in-
can create value for the interdependent agents, teractions, including those between firms and
such as firms and stakeholders, in the VR their customers, employees, competitors, sup-
ecosystem. pliers, investors, governments, and local commu-
VR provides users with a real-time, immersive, nities. Firms therefore need to adjust traditional
and interactive multisensory experience situated management and marketing models to successfully
indand artificially induced byda responsive, adapt to a new and dynamic market. To capture
three-dimensional, computer-generated virtual the value potential of this new technology, we rely
world. This world is usually paired with input and on Porter and Millar’s (1985) value-chain analysis
output devices that enhance the experience framework, as well as the new media value-chain
beyond the visual domain, such as handheld con- analysis framework developed by the European
trollers, headphones, treadmills, or other props. Commission (1996). The latter has been applied
Technology giants (e.g., Facebook, Apple, Google) to examine the actors, technologies, and interre-
and countless smaller firms have made significant lated value-adding activities in other emerging
investments in VR. The VR market is growing technological ecosystems, such as e-commerce
dramatically, with worldwide revenue forecasts (Schlueter & Shaw, 1997) and m-commerce
surpassing $40 billion by 2024 (Research and (Barnes, 2002). This resulted in the development
Markets, 2019). As VR is moving toward matura- of the VR value chain (see Figure 1).
tion, it will likely become a mainstream tool for The VR value chain is comprised of six core
firm operations in both the business-to-consumer processes that are divided into two main areas:
(B2C) and business-to-business (B2B) markets. content activities, which should be considered
After explaining of the VR ecosystem and its primary activities (Porter & Millar, 1985), and
interdependent agents, we develop a VR value support activities. The next paragraphs explore
chain that delineates how and where different these activities in more detail to uncover the
stakeholders contribute to the overall value- different actors and technologies that add value in
creation process. providing VR experiences to the end user. Although
This article provides several contributions to the roles within the VR ecosystem can be clearly
academic and managerial VR research. First, it defined, the VR ecosystem itself is still in flux.
develops a VR value-chain framework that both Therefore, the value activities that are pursued by
identifies the key stakeholders and their roles in different actors carrying out these roles may
the VR ecosystem, which contributes to enhanced evolve as new possibilities emerge. Additionally,
transparency and understanding of the overall VR owing in part to ever-increasing globalization, the
ecosystem. Second, this framework provides a activities that comprise the VR value chain
point of departure for strategic analysis of the VR frequently depend on interfirm networks of indi-
industry and examines how the value created by vidual actors on a global scale.
the different stakeholders, as well as by external
influences, drives the B2C and B2B VR markets. 2.1. Content activities
Third, by discussing current VR implementations
and their potential in enhancing operational The content segment of the model consists of
effectiveness, this research facilitates the three core processes: content creation and cap-
informed decision-making and strategic posi- ture, content management and processing, and
tioning process of firms. In the following section, content marketing. The scope of these processes is
we introduce the VR value chain and examine its described next.
individual components. We subsequently offer
predictions of how the VR ecosystem will evolve 2.1.1. Content creation and capture
before concluding with some practical Firms pursuing these processes add value through
implications. generating original VR content through two com-
plementary techniques: creation and capture. Con-
tent creation encompasses the digital production of
2. The VR value chain VR materials by making use of programming and an-
imation techniques to develop the content. Content
VR is a communication medium that is part of what capture relates to recording real-life photo or video
are called “new media,” or digital interactive content. To capture VR content, various technolo-
media powered by Web 2.0 technologies that allow gies and techniques are implemented, such as the
The virtual reality value chain 739

Figure 1. The virtual reality value chain

popular 360
GoPro camera, which uses multiple Middle East, Asia, and Africa are expected to show
lenses carefully arranged in a ring to capture con- significant growth in the next few years. In addi-
tent. Additionally, stereoscopic 3-D allows viewers to tion, a variety of studios and developers are
infer depth by capturing video input for each eye by broadening their repertoire by generating content
placing two slightly angled cameras at different for training and education.
viewpoints (Lebreton, Raake, Barkowsky, & Le The amateur provider group is comprised of
Callet, 2012). To create a map of the virtual prosumers, and their consumer culture helps
context that enables users to look around with six inform and create much of the content in new
degrees of freedom, light-field technology, in which media, including VR (Gardner & Lehnert, 2016).
lenses capture the intensity and direction of light in a Enhanced accessibility to and affordability of
scene (Huang, Chen, & Wetzstein, 2015), can be capturing devices has made it easier for amateurs
used. Regardless of the techniques implemented, to contribute to the VR content base. These
developing VR content is fundamentally different amateur content creators are already competing
from editing linear narratives, especially for room- with professional firms for consumer dollars and
scale VR. In a VR context, the user is in charge and, recognition in social VR worlds. For example, user-
as in real life, can view the setting from different generated content in the form of digital goods,
vantage points that are constantly changing. This such as avatar skins and accessories, are
enhanced level of user participation requires de- frequently exchanged for cryptocurrency in the
velopers to design an experience while keeping in High Fidelity Marketplace.
mind reaction speed, speed of movement, and scale Current prices can range from about $2500 to
relative to the user’s size. $6500 for an emerging artist’s work (Giles, 2017).
Two distinct groups are involved in the produc- With amateur content creators from around the
tion of VR content: professional and amateur globe joining the industry, international VR expe-
providers. Professional providers are firms, such as riences will likely have real-time translation of
studios and developers, that traditionally provide subtitles to ensure that a wide range of users can
content for other media. At present, these com- enjoy and interact with them. Overall, content
panies (e.g., Blizzard) are mainly geared toward creation and capture provide ample business op-
VR content creation for gaming, with North portunities for entrants, as the lagging volume and
America currently holding the largest market share variety of VR content are an underdeveloped
in the gaming sector (Gokani, 2018). But the component in the VR value chain.
740 A. de Regt et al.

2.1.2. Content management and processing Within the VR market, platforms can be classi-
Software that enables the conversion of digital fied across three dimensions: hardware, content,
content and raw 360
footage into usable formats and price. With regards to hardware, platforms
is crucial to ready the content for distribution and can be classified along a continuum, with device-
mainstream usage. Firms add value by reconfigur- agnostic systems that can be accessed by various
ing and performing postproduction editing of the VR systems without any special adaptations (e.g.,
VR content (e.g., stabilizing shots, optimizing VIVEPORT) at one end, and closed VR ecosystems
shaders, or adjusting rendering scale). Depending that are tied to a specific headset (e.g., the Oculus
on the tasks performed and the technological tools store) at the other. Regarding content, platforms
and services used, these processes can be divided permitting user-generated content are regarded as
into a few subclassifications. Content rendering, open platforms, whereas platforms providing only
content stitching and editing, content compres- premium content generated by studios and de-
sion, and content modeling all pertain to the visual velopers are considered closed platforms. Plat-
content. Rendering software facilitates the pro- forms that allow both types of content can be
cess of generating VR content based on a 2-D regarded as hybrid. As for price, a platform can be
image (e.g., panoramic pictures) or 3-D models free to use (open) or it can be fee-based (closed;
(e.g., 3ds Max files). Stitching and editing software e.g., pay-per-view or subscription models).
(e.g., VideoStitch or VeeR VR) enables developers Whether platforms operate for free or as fee-
to edit raw 360
video and to stitch together based can occasionally be linked to consumer
footage from multiple cameras. Compression status, as prosumers that have contributed to the
software that reduces file sizes (e.g., Google’s platform by uploading content (i.e., content pro-
Draco) is particularly helpful in streaming high- viders) might access other content for free,
quality VR content. Additionally, 3-D engines and whereas a consumer that did not contribute might
modeling software provide the frameworks for have to pay to get the same access.
creating computer-generated imagery, which is a The market can also be divided into single-user
necessary component of animated VR content. The and multiuser experiences. Currently, the majority
3-D engines are also used to add target selections of VR experiences (e.g., VR apps, retail VR dem-
that facilitate interactivity within the VR experi- onstrations, VR games) are created by professional
ence. For example, ray casting, in which an indi- designers and are intended largely for single users.
vidual interacts with a target of interest by Social VR platforms (e.g., High Fidelity) enable
centering a virtual ray on it with the VR goggles or multiuser connections from anywhere with high-
controllers, is frequently used for 3-D selection speed internet and are popular with technology
tasks (Yu et al., 2018). Virtual hand techniques hobbyists who interact in VR communities. But the
that map the real hand or handheld devices as the lines between professionals and hobbyists are
virtual cursor in 3-D coordinates can also be blurring, with both taking on the roles of partici-
implemented. And to generate a fully immersive pant and developer in social VR platforms. As de-
VR experience, spatial (360
) audio needs to be signers work toward enhanced “in-world”
added to the visual content using software from multiuser interaction, demand is rising for mixed-
firms like G’Audio Lab. Currently, Unity and Unreal reality live events with real-time communication
Engine are the most common engines for immer- between physical locations and the virtual world.
sive VR.

2.1.3. Content marketing

Firms involved in this step of the value chain act as
market makers by providing user access through 2.2. Support activities
downloading or streaming services. Their primary
tasks are to host, market, sell, and distribute VR In looking at VR support activities, it is apparent
content through various portals and platforms that digital infrastructures and services play a
(e.g., SteamVR). Brands, publishers, and de- central role. The main reasons for this are that
velopers thus add value by taking on the role of many VR features require an active internet
vendor in the B2C VR market. The different mo- connection to work and that most of the VR market
bile, console, or PC portals and platforms can be makers (i.e., the distribution network) operate
classified as either open or closed systems. In open exclusively digitally. The support-activities seg-
systems, users have unrestricted access to appli- ment of the framework consists of three core
cations and content, whereas in closed systems processes: data support, delivery support, and in-
the service provider restricts such access. terfaces and systems support.
The virtual reality value chain 741

2.2.1. Data support integrated circuits (ASIC) chips are designed to

Firms engaged in data support add value by perform specific repeated functions effectively,
providing the processing power and network with the best performance and lowest energy
infrastructure necessary to distribute VR content consumption. With regard to VR, ASIC imple-
to end users. Content distribution networks are a mentations can range from custom rendering of
crucial layer in the internet as a whole and play a images to sound conversion. And in addition to
similarly important role in the VR ecosystem. Since hardware, VR operating systems (i.e., the plat-
these networks are well established, the suppliers forms that serve as foundations on which VR ap-
for the VR market are mainly major actors, such as plications run) are growing more important as
IBM, Google, and Microsoft. Content distribution means to gain a competitive advantage. Oculus
networks are designed to transport large volumes Home and SteamVR are the principal market
of data while overcoming issues related to latency actors.
(the delay between a server request and the user In addition to hardware support, payment sup-
transfer), quality, and reach. As display quality port becomes particularly important when VR is
improves, in order to provide a fully immersive VR implemented as a sales channel. The payment
experience, bandwidths ranging from hundreds of process has to appear as a smooth and immersive
megabits to several gigabits per second and low VR experience to enhance virtual commerce. Pro-
end-to-end latency are required. Telecommunica- totypes of secure and convenient VR payment
tion and mobile network operators’ investments in systems, which do not require the user to leave the
digital distribution networks have enhanced end- VR context and thus facilitate integrating payment
user connectivity, which is further strengthened by functionality seamlessly with the customer
5G wireless-network technology (Bastug, Bennis, journey, are starting to emerge (e.g., Worldpay).
Médard, & Debbah, 2017). These investments These systems use the same smart chip technology
enable mobile network operators to act as open used for contactless payments (Ortiz-Yepes, 2014),
enablement platforms, bringing together different and they verify users through account logins (using
players in the VR ecosystem and facilitating apps like AirPin), connected devices, and bio-
interoperability and widespread adoption of the metric recognition (e.g., voice recognition).
technology (Chawla, Pe, & Manipis, 2018). Addi- Although still in their infancy, these systems will
tionally, such investments support real-time become more widespread as the technology
rendering of VR content streamed from cloud behind them matures.
computing services.
2.2.3. Interfaces and systems support
2.2.2. Delivery support Companies working in interfaces and systems
Firms that provide delivery support systems (e.g., support develop the technological components of
computing platforms and supporting hardware) VR delivery systems that enable users to interact
facilitate user interaction with digital content and with digital content. VR systems can be broadly
enable the VR experience to run smoothly. In order classified as either nonimmersive (e.g., desktop
to display content on a tethered head-mounted VR) or immersive (e.g., head-mounted display
display, you need a PC or laptop with hardware systems). Nonimmersive systems generally only
that meets or exceeds the minimal requirements. present monoscopic VR content (i.e., content
Besides a USB connection, a compatible and con- lacking depth perception). For example, non-
nected HDMI cable, and enough RAM (currently at immersive banner advertisements may show flat
least 4 GB), the central processing unit (CPU) and 360
photos or videos on a computer screen.
the graphics processing unit (GPU) are vital for VR Immersive systems are more advanced and support
performance. As with most computing systems, a stereoscopic view. VR systems use specialized
the CPU performs the basic operations. For VR, hardware interfaces (i.e., input and output de-
this means processing data regarding the simu- vices) to generate artificial sensations that replace
lated world (e.g., characters with artificial intel- real-world sensory input.
ligence) and data from user input. The CPU Regarding output devices, the main sensory
frequency (i.e., clock speed, or the amount of modalities in current use are sight and sound. VR
calculations per core per second) is especially display technology can be divided into three
important for VR development. The GPU is groups: screen-based VR (nonimmersive), head-
specialized to perform display functions and ren- mounted displays (immersive), and Cave Auto-
ders the images, animations, and video displayed matic Virtual Environment (CAVE) systems
in the VR context. While the CPU and GPU can (immersive). Head-mounted displays provide user-
perform various functions, application-specific centered perspective in real time using small,
742 A. de Regt et al.

close-up screens that move in sync with the user. will likely remain the case for several years, even-
Head-mounted displays can either be integrated tually consumer VR software revenue should sur-
(for console or PC; e.g., Oculus Rift or HTC Vive) or pass hardware revenue as the installed base of
mobile (e.g., Samsung Gear VR or Google Card- headsets expands. Since consumers mainly use VR
board). In contrast, CAVE systems provide a more technology for leisure and entertainment, gaming
collaborative context with a large angle of view and video entertainment are at the forefront of this
(Mestre, 2017). Binaural audio effects (i.e., 3-D revolution. Two main catalysts could encourage
sound), via either speakers or headphones, pro- broader consumer adoption of VR hardware: the
vide the user with spatial bearing, recreating the decreasing price of premium consumer headsets
perception of distance and the user’s position and the increasing availability of high-quality VR
relative to sounds. The global 3-D audio market is content. Other adoption accelerants include
expected to grow apace with the VR market. enhanced media coverage in news and film (e.g.,
In addition to these output types, VR peripherals Ready Player One), the growing number of VR ar-
often incorporate haptic feedback to recreate the cades, cafés, and theme parks, and the rise of
sense of touch (e.g., by applying motions, forces, or mobile VR. These trends help expand the market by
vibrations) and atmospheric effects (e.g., with enabling VR access for a wider audience and
scents or blowing fans). In line with Zhang (2017), advancing opportunities for user discovery.
these input devices can be classified into two cat-
egories: manually operated devices and automatic 2.3.2. Enterprises and industry
capturing devices. The first category comprises While business adoption of new technologies
conventional input devices (e.g., keyboard, mouse, sometimes lags behind consumer demand, for the
or joystick) that can be used with nonimmersive VR, VR market they appear to be moving at a similar
as well as controllers developed specifically for pace, as a steadily increasing number of firms are
immersive VR (e.g., Oculus Touch). The second expressing interest in commercial VR imple-
category involves other VR peripherals that incor- mentations. Many businesses are finding VR helpful
porate some level of automatic tracking to capture in the manufacturing process, in product design
user input. Motion capture sensors track the user’s and prototyping, and for employee training. VR
overall body movement and position, focusing can be used to simulate the characteristics (e.g.,
especially on the user’s hands (e.g., via data performance, reliability, look and feel) of products
gloves), feet (e.g., via VR treadmills), and upper and processes, which can be examined and tested
body (e.g., via force-feedback vests). Head- under various conditions (Meissner, Pfeiffer,
mounted displays and CAVE systems incorporate Pfeiffer, & Oppewal, 2017), thus providing cost-
head-tracking sensors (e.g., gyroscopes and accel- effective and sometimes safer alternatives to
erometers) that monitor angular movement and the traditional methods. In addition, various firms are
user’s orientation and position using six degrees of also using VR to tap into and actively stimulate the
freedom: forward or backward, up or down, and trend of cocreation, in which users or consumers
left or right. In addition to this, most VR headsets design their own products, services, and experi-
also include infrared eye-tracking sensors and mi- ences (Cowan & Ketron, 2019; Jung & tom Dieck,
crophones. North American firms lead this market, 2017). VR can also help address some human re-
with many well-established technology firms sources challenges, such as enhancing training,
involved in VR hardware development. reconfiguring how the workforce acquires new
skills, and facilitating employee recruitment. It
2.3. Users can be helpful in practicing safety scenarios,
training technical procedures and skills, and elic-
The wide range of applications of VR technology iting and enhancing empathic behaviors in
across different global market sectors and in- customer service.
dustries is contributing to a broad spectrum of end
users. To help differentiate between the uses of 2.3.3. Research institutions and universities
VR technology, we identify four distinct end-user Although at present a relatively small number of
segments: consumers, enterprises and industry, research labs use VR technology, VR technology will
research institutions and universities, and other likely become a standard lab tool within the next 5
stakeholders. years (Matthews, 2018). Within some government
research institutions, VR is a key application in the
2.3.1. Consumers display of complex 3-D structures and the visuali-
Most of the revenue in the consumer VR market is zation of large data sets. Visualization of informa-
generated through hardware sales. Although this tion in a 360
context can make it easier to detect
The virtual reality value chain 743

hidden patterns and correlations, and it could thus contexts and will become increasingly important
help scientists, researchers, and analysts spot to firms’ overall strategies. Although industries
meaningful data that machines cannot (Teras & with higher labor costs (e.g., healthcare) or where
Raghunathan, 2015). Researchers are also using VR the cost of errors is high (e.g., aerospace) will
to study nonverbal behavior, social interaction, and potentially gain the most on VR investments, all
social cognition (e.g., Fox, Arena, & Bailenson, firms need to consider the appropriateness of VR
2009). In these contexts, VR enhances ecological applications to their operations or risk being left
validity while maintaining experimental control and behind in their industry. To define a firm’s VR
facilitating the reproducibility of research findings. strategy, managers need to allocate time and
While the consumer, retail, and manufacturing other resources to explore which methods of VR
sectors are spearheading investment in VR tech- technology implementation can add value to their
nology, VR is expected to transform colleges and stakeholders and establish competitive
universities by improving student and staff advantages.
engagement and enhancing the efficacy of learning. Like many new technologies, VR can create
Although initial investments and the level of im- value in two ways: by becoming a part of products
mersion might be low (e.g., using 360
media and leading to superior features, and also by
through the web or mobile VR), a growing number reimagining the processes of manufacturing and
of higher-education institutions are expected to use delivering products (Porter & Heppelmann, 2017).
VR to create enhanced simulation and learning First, and intuitively, when VR becomes part of
contexts. This transformation will result in short- products, it creates value through enhancing user
term, and potentially long-term, business opportu- interfaces and boosting user experiences and
nities because the majority of these institutions will engagement levels (Barnes, 2016; Van
outsource this work owing to a lack of expertise. Kerrebroeck, Brengman, & Willems, 2017).
Second, and less intuitively, VR applications can
2.3.4. Other stakeholders add value to the development, manufacturing, and
Apart from the primary and internal stakeholders, delivery of products and services. In terms of
VR technology will also influence secondary development, just as the internet has transformed
stakeholders since it can be applied effectively in the access, collection, transmission, and storage
many settings. For example, Boyd and Koles (2019) of data (Plangger & Watson, 2015), VR applications
highlight that VR, when applied in a business-to- can transform how firms acquire and handle data
business setting, can be used as a branding tool to develop new and existing products and services.
to reach potential investors, and that VR data These applications can translate data into more
visualization could be used to better inform accessible, informative, visual, and intuitive for-
shareholders. Stakeholder dialogs mediated mats that can enhance information absorption,
through VR technology could result in creation of decision making, and knowledge transfer (Mele,
value, particularly in the context of corporate Spena, & Peschiera, 2018). In terms of
social-responsibility strategies (Okazaki, Plangger, manufacturing, VR applications can facilitate
West, & Menendez, 2019). In addition, just as VR human and machine collaboration by enabling
facilitates collaboration between scientists and more proactive and effective task execution. For
academics, it could potentially be applied to so- example, VR can augment human capabilities to
ciety more broadly. Furthermore, some of the facilitate operation (e.g., by improving ergo-
users of VR technologies also fulfill other roles nomics; Wilson, 1997), improve control (e.g., via
within the overall VR ecosystem. For example, interactive manuals and process sequences;
firms involved in the production of immersive Górski, 2017), and enhance feedback mechanisms
contexts need to connect with government (e.g., through training simulators; Matsas &
agencies to keep abreast of new legislation. To Vosniakos, 2017). It can also add value by
ensure market success, the different stakeholders enabling more effective monitoring of perfor-
cannot operate in silos. They need to work mance and of decision-making processes.
together, as they each influence in some degree Finally, in terms of the delivery of products and
the future of the overall VR market. services, VR can add value by transcending the
physical limitations of real-world interactions. For
example, VR applications can transcend distance,
3. Developing VR strategies time, and scale boundaries of the physical world
by digitally representing real-world entities or
As the VR market grows and matures, VR adoption systems (e.g., digital twins; Tao et al., 2018). This
will accelerate across a diverse range of industrial provides managers the ability to interact with and
744 A. de Regt et al.

evaluate these representations in hypothetical, often affected by changes in environmental fac-

what-if scenarios, which could significantly tors that originate outside of the firm (e.g., legis-
improve firms’ decision making, performance, risk lation, market disruption, competition, and the
reduction, and other strategies. economy; Burke & Litwin, 1992; Strandvik,
VR strategies can be developed throughout the Holmlund, & Lähteenmäki, 2018). Managers need
firm’s value chain to boost stakeholder engage- to understand these external contextual factors
ment, enhance operational efficiencies, and and their potential implications to better prepare
improve overall performance (Hammerschmid, for possible future scenarios. Regarding the firm’s
2017; Mujber, Szecsi, & Hashmi, 2004). But internal factors, a key decision is whether the
depending on contextual factors, certain VR ap- implementation of the VR strategy should be
plications might be more appropriately directed completed in-house or outsourced to a dedicated
toward those areas of the firm’s value chain that VR company. The decision is often largely depen-
present the most potential for value creation. For dent on the overall scope and complexity of the VR
example, a marketing team might use VR to project (including the type of content and inter-
revolutionize the try-before-you-buy concept by face), as this will greatly affect such factors as
creating high-end VR storytelling experiences; budget, type of equipment, timelines, and
those working in customer service or human re- personnel. As a general recommendation, firms
sources might use VR for training programs and should consider this decision by first generating an
team-building exercises; and those in operations, in-house proof of concept. This will give a better
logistics, and technology development would stand understanding of the budget needed and can help
to gain from visualization of products and in securing funding from outside sources (e.g.,
enhanced data tracking in VR contexts. VR thus has government and angel investors).
the potential to give rise to new business models
that use VR technology as a selling point to
4.2. Driving commitment
generate a competitive edge. Although VR might
seem beyond them owing to their limited re-
Garnering support across all levels of the firm will
sources, small- and medium-size enterprises may
help managers to communicate positively and
reap competitive advantages by adopting VR stra-
transparently about the new technology and drive
tegies at this early stage, as this could help them
employee commitment. Since people’s willingness
anticipate stakeholder demands more nimbly than
to adopt innovative technology differs, managers
their larger competitors. Today’s early adopters of
need to recruit professionals that are skilled at
VR can learn lessons from the experiences of first
initiating, facilitating, and implementing changes
adopters while still taking advantage of VR’s rela-
(i.e., change champions; Howell & Higgins, 1990).
tive novelty to offer unique products and services
Additionally, they need to identify barriers to
that stand out among competitors.
adoption and develop strategies to overcome
them. Research by Kane, Palmer, Phillips, Kiron,
4. Implementing VR strategies and Buckley (2015) indicates that successful firms
tend to have leaders who share their vision, define
VR has the potential to produce significant gains, a road map, create cross-organizational authority
but that potential is sometimes unrealized owing for adoption, and reward employees for working
to suboptimal implementations. To effectively toward it.
adopt the VR strategy, firms need to undertake the
following activities: (1) assessing the context, (2) 4.3. Resource allocation
driving commitment, (3) resource allocation, (4)
testing and implementation, and (5) reassessment Firms need to allocate both human and opera-
and support. tional resources to facilitate VR implementation.
Firms that see VR simply as a nicety might be more
4.1. Assessing the context prone to contracting an outside firm to create the
VR app. But for enterprises in which industrial
Strategic assessment of the external and internal design is expensive and elaborate, or whose busi-
context will help managers to predict the potential ness model or long-term consumer-engagement
for value creation and to determine the scope of strategy involves VR, it might be more beneficial to
the VR project best suited to achieving this goal. bring VR development in-house. In terms of human
Important elements of a firm’s internal context, resources, a lean VR team would consist minimally
such as leadership and organizational culture, are of the following employees:
The virtual reality value chain 745

 A 3-D designer to shape the style and feel of 4.4. Testing and implementation
the VR application.
The VR strategy needs to be tested and then
 A few developers for programming the code implemented in a real-life setting to help man-
that enables VR functionality that know C# agers obtain tangible results. During the test
and Cþþ programming languages for working phase, the firm should ensure that the VR appli-
with 3-D engines and JavaScript if focusing on cation works with other technologies. Scenarios
WebVR. need to be created to expose unintended conse-
quences and flaws. Internal and external commu-
 A quality-assurance engineer for debugging nication needs to be established. For example, a
and refining the new software product. monthly strategy-checkpoint meeting can help.
Before distribution to the end users, marketing
 A user-experience designer to enhance the efforts should emphasize unique customer
end user’s perception of the application. experiences.

 A project manager to ensure timely delivery. 4.5. Reassessment and support

Additionally, companies should consider incorpo-
Reassessment is needed to monitor progress and to
rating marketers and salespeople in the process.
set up support for further strengthening of the VR
Further adjustments based on the type of firm and
implementation. The benchmarks set at the outset
industry should be considered as well. For
can now be measured using specific metrics. For
example, small firms and early-stage VR companies
B2C firms, these include the time spent in the
might want to recruit individuals who can fit mul-
branded VR context, or the “gaze-through rate,”
tiple roles and wait to hire specialists until their
which is used to describe the effectiveness of vir-
business grows.
tual advertisement in capturing user attention. For
In terms of operational resources, firms can
B2B firms, this may include calculating the cost
reduce the initial investment in equipment by
reductions and savings the VR application pro-
focusing on creating content that is available
vided, for example by eliminating prototyping time
through desktop VR or lower-end VR. Firms can
or costs. But regardless of the context, support
use a 360
camera and platforms that allow
and training should be provided to enhance work-
nondevelopers to create VR apps (e.g., Unity’s
force effectiveness. Performance reviews should
PlayMaker or Unreal’s Blueprints scripting sys-
inform future VR strategies by examining perfor-
tems) to conduct a proof of concept or to
mance indicators and then revising or introducing
develop simple 360
VR tours or storytelling ap-
new elements in future iterations.
plications. Projects within this scope can be
operational in a couple of weeks and should cost
less than $5,000, which is often the minimum 5. Opportunities and challenges
required investment for outsourced VR projects
(Kapoor, 2019). When VR equipment is needed Although the strategy and steps for VR imple-
only sparingly or for special events, renting could mentation can be clearly outlined, the VR
be a viable proposition. Alternatively, firms will ecosystem is still in flux, and firms need to main-
need higher-quality equipment and a larger in- tain situational awareness to capitalize on the
vestment for animated and interactive VR ap- opportunities and address the challenges that
plications (e.g., training simulators or virtual- currently arise in B2C and B2B markets. For B2C
commerce applications), and for extending an companies concerned with the front-end uses of
immersive application beyond a single-person VR, the two main VR implementations appear to be
experience (e.g., social VR or multiuser presen- as a marketing tool and as a new sales channel for
tation applications). These projects also require virtual commerce. Various brands have adopted VR
an extended timeline, as they can take up to a for brand storytellingdso many in fact that
year to build, principally because of the need for immersive VR technology might even create a new
integration with other technologies (e.g., smart medium for storytelling (Adobe, 2018). Other core
and sensor-rich equipment and surroundings; uses of VR are for streaming live events and 360

Luck & Aylett, 2000). These more complex and product showcasing, focusing on product attri-
large-scale VR projects can cost between butes, features, and functionalities. Regarding VR
$10,000 and $300,000, but prices will likely as a sales channel, online retailers are already
decrease in the future. starting to commodify virtual shopping by
746 A. de Regt et al.

providing innovative payment methods (e.g., Ali- and economies of scale to advance growth rates.
baba’s VR Pay). Moreover, by enhancing and Although this is a global trend, there are regional
personalizing the online shopping experience differences in the direction of growth. For
through VR, retailers aim to overcome the trust example, North American firms are more focused
deficit experienced by some consumers. on developing VR hardware than Asian firms, which
Because data collected within VR applications are investing in VR software development.
can be related to the user, privacy and security While the VR value-chain processes are distinct
issues could become a major challenge for firms in nature, they can also overlap due to the linking
that want to use VR technology in a consumer nature of some business models. These business
context. Privacy and security breaches, involving models are centered around creating value by
improperly protected consumer information during linking elements from the multiple value pro-
the registration and payment processes, malware, cesses, thus compelling big firms to compete in
or data hacks, can pose a challenge (Martin & more than one process. This complexity also re-
Murphy, 2017; McGee, 2016). Additionally, poten- quires firms to be flexible in their decisions and to
tial consumer concerns regarding data ownership base their strategy not only on their past but on
and access, and especially sharing data externally future trends and positions. Furthermore, the VR
with third parties, need to be addressed. Physical value chain will likely experience instability in
safety concerns (e.g., disorientation of the user) many companies, as competitive pressures and
also need to be considered, these should become new opportunities arise and as the VR ecosystem
less pressing as VR technology improves. matures and attracts new actors. The exceptions
For B2B firms, the biggest opportunities are for are the data- and delivery-support processes,
enhancing workforce communication and which should remain relatively stable owing to
manufacturing processes. Currently, VR’s cross- their reliance on existing IT infrastructure, net-
platform accessibility is enhanced by browser works, and products, and because the big tech
vendors’ commitments to WebVR standards. This giants facilitate these, leaving less room for new
benefits firms by facilitating virtual meetings, actors. Accelerated growth is likely in the content-
enhancing collaboration between teams with creation and capture processes of the VR value
mixed backgrounds, and mitigating differences chain, with the VR gaming market remaining the
that might arise because of VR technology’s biggest driver of innovation and change. Addi-
inaccessibility. tionally, marketing managers will increasingly
A key challenge for commercial VR rollouts is incorporate VR experiences into their larger
that most of the hardware currently available is customer-facing strategies in the next 5 years, as
consumer grade. Commercial users need more customers demand and expect more engaging
robust VR hardware with enhanced functionality experiences.
(e.g., higher resolution and processing capabil- Soon VR will without question affect firms
ities), dedicated technical support, and enhanced across a variety of sectors and industries. Owing to
ergonomics. Additionally, although the overall their everyday, practical relevance and ease of
number of VR developers has increased, the supply implementation, WebVR-ready browsers will play a
of developers does not equal the demand, which is pivotal role in reconciling the browsing of the past
rising thanks to the uptake of VR across industries. with the browsing of the future, translating 2-D
Firms might need to allocate additional resources experiences into 3-D and driving virtual com-
to attract the right talent. merce. After this transition stage, the focus is
likely to shift toward VR-first browsers that convey
only WebVR content and that are accessible solely
6. Conclusions through emerging interfaces and hardware. To
boost the overall volume and quality of the con-
In sum, VR has a bright future and has the poten- tent and to lower development costs for new en-
tial to revolutionize firm-stakeholder interactions. trants and existing firms that want to experiment,
This article has outlined how the VR ecosystem the VR market would benefit from peer-to-peer 3-
works and creates value for those involved in it. D image repositories and platforms. This would
Although the VR ecosystem has yet to fully mature, allow creators to monetize and promote their
established technology firms (e.g., Facebook, content directly to buyers without relying on a
Microsoft, Google, Samsung, and Sony) continue to centralized profit-taking corporation. Advances in
strengthen their position by strategically acquiring VR hardware, coupled with the increased emer-
VR startups. These acquisitions facilitate vertical gence of VR-based shopping contexts, will stimu-
and horizontal integration that drives efficiency late the market’s development of VR payment
The virtual reality value chain 747

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