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Radical changes through virtual reality

A study by German economists shows that drastic disruption lies ahead for seven different sectors, impacting existing products, business models and production processes.
21 November 2018

When new technologies are integrated into a wide range of applications, as opposed to merely generating single products, they can revolutionize entire industries. Virtual and augmented reality have that potential. Virtual reality technology (VR) creates a virtual environment with which people can interact using mobile devices, especially VR glasses. Augmented reality technology (AR) presents users with virtual objects in their natural surroundings. For example, VR glasses might display information about an object in a person’s field of vision.

What charges are in store for companies not involved in developing these technologies? In a first step, Prof. Thomas Hutzschenreuter and his team at the Chair of Strategic and International Management at TUM evaluated existing VR and AR research, interviewed experts and analyzed start-ups. On this basis they estimated the time frame and the branches for the rise of these technologies.

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Disruption form 2020 on

The researchers’ prediction: In seven of 41 industries studied, these technological developments will lead to radical changes between 2020 and 2040:

  • In manufacturing, VR and AR will enable companies to reduce costs and increase productivity. Virtual models will transform the product development process. In the production process, workers will see instructions, hints and other information displayed in their field of vision. Teams distributed across multiple locations will work together in virtual environments.
  • Another place where the new technologies will make working life easier will be automotive workshops, where tasks have become increasingly complex with the growing differentiation and sophistication of modern cars. Augmented manuals will display step-by-step instructions for a wide range of repairs for the vehicle currently in the service bay.
  • In retail, a massive transformation will be seen in segments where online sales now still play a very minor role. One example is the furniture business: With augmented reality, customers will create visualizations of furniture without leaving home and then place their order online. Meanwhile, segments that are already doing business online will be able to reduce costs. One example is fashion, where fewer products will be returned when buyers can “try on” garments using avatars.
  • The communications and IT services industry will transform social VR services into a mass medium. Companies will offer a wealth of virtual worlds where users can meet and interact face to face. With options ranging from cafés to games, and from holidays to dating services, this will bring disruption to many sectors.
  • The music industry will undergo massive changes when VR technology enables fans to experience concerts anywhere and anytime. Marketers will be able to offer fans the virtual experience of sitting at any desired location in the audience, or even on stage, with excellent sound quality. At the same time, demand for concert tickets – now an important revenue driver following the decline in CD sales – will fall off.
  • The real estate industry will see changes in the way buildings are marketed. Companies offering virtual tours through buildings – whether they are still on the drawing board or existing – will have a competitive edge. The expensive and time-consuming process of constructing prototypes will be a thing of the past. VR applications will also become the default approach to planning the interior design.
  • For the educational sector, the researchers predict an increase in market share for universities offering online degree courses. Virtual reality classrooms will make studying at home more attractive and effective by facilitating better interactions between students and teachers while opening doors for new learning methods and more user-friendly course materials.

“Virtual and augmented reality are disruptive technologies: They will relentlessly and rapidly eliminate existing products, business models and production processes,” says Thomas Hutzschenreuter. “This process will be moving full speed ahead in just a few years. To remain competitive, companies in the industries we have identified will have to develop new strategies. Most of them will need to find partners because they lack the necessary expertise in virtual and augmented reality. Those that succeed will have excellent chances of achieving growth by boosting productivity while lowering their costs.”

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