Risk or opportunity: How should CEOs view the metaverse?

The metaverse concept has garnered significant attention recently, with investment in this area experiencing a significant uptick in 2022. The future of this technology, however, remains uncertain. While some big gaming companies have reported impressive results, such as Roblox, which had over 58 million daily active users in 2022, and Fortnite, which generated over $9 billion in sales between 2018 and 2019, the investment landscape is complex. Meta, for instance, continues to invest at least $10 billion annually in metaverse development.

To be sure, organizations must carefully evaluate their approach to metaverse investment. While the potential benefits of this technology are considerable, the risks and uncertainties must be considered. Investors have begun questioning metaverse companies regarding the expected timing of tangible results from their investments. Adopting a cautious, multilayered approach to metaverse development is essential, dipping a toe in the water before taking the plunge if and when developments warrant.

CEOs should view the metaverse as a significant opportunity with enormous potential for growth and innovation rather than a big risk. According to estimates by McKinsey, the metaverse is being seen as the next iteration of the internet and has the potential to generate trillions of dollars in value by 2030. Therefore, companies investing in metaverse development view it as a crucial strategic initiative. However, there are clear risks of missing out on this wave of change. It is essential for companies not to be distracted by the challenges in related technologies, such as crypto and NFTs, and instead focus on the potential benefits of the metaverse. In a recent survey of business leaders, the majority expressed optimism about the positive impact of the metaverse on their industry in the coming years. Thus, CEOs should view the metaverse as a significant opportunity to transform their business models and drive future growth.

The road to 5 trillion dollars

In June 2022, McKinsey estimated the market value of metaverse activity to be between $200 billion and $300 billion. The market value has grown larger since and is expected to reach between $4 trillion and $5 trillion in the next eight years. Several factors make this exponential growth possible, including the metaverse's widespread appeal, which transcends gender, geography, and generation. Consumers have demonstrated a willingness to spend on metaverse assets and are receptive to adopting new technologies. Furthermore, companies are making substantial investments in the infrastructure required for the metaverse, and brands experimenting in the metaverse find that customers are delighted. The size of the metaverse market is expected to be on par with that of Japan's economy, which is the third-largest in the world.

The potential impact of the metaverse on the economy is staggering, with McKinsey estimating a market value of $5 trillion by 2030. This makes it a technology trend that CEOs cannot ignore. The metaverse combines various emerging technologies such as AI, immersive reality, advanced connectivity, and Web3, which have been identified as highly promising by the McKinsey Technology Council. As a result, the metaverse has the potential to touch on many areas of the enterprise, making the CEO the natural integrator to lead the company's response.

Moreover, the metaverse's enormous scale and potential economic impact call for CEO attention. While the metaverse's potential is vast, there are also obvious risks in missing out on this breakthrough technology. CEOs who can marshal their company's resources to create a coherent, value-driven response will be best positioned to capture the opportunities presented by the metaverse. With the CEO's support, metaverse initiatives will be less likely to get stuck in "pilot purgatory" and more likely to succeed in creating value for the enterprise.

How CEOs can prepare their companies for the metaverse revolution

The available evidence supports both the optimists and the skeptics regarding the metaverse, but the scales may slightly tip favor the optimists. Many of the largest consumer firms worldwide, accounting for 71 percent, have already established a presence in the metaverse. Those who have not done so may be taking the risk of being left behind without a plan. Companies in various industries closely monitor the developments and make preparations, as very few industries will remain unaffected by the metaverse. It may appear an unusual time to invest in the metaverse amid an economic downturn. Still, research indicates that businesses that optimize their financial position and invest in growth during such times tend to emerge stronger in the next cycle.

The metaverse strategy will vary depending on the company's sector. The metaverse has the potential to significantly disrupt sectors such as banking, manufacturing, media, professional services, retail, and telecommunications. CEOs in these industries may consider taking more proactive measures than those in other sectors.

Nonetheless, CEOs in any industry can take three measures to secure their place on the train and put their companies in a favorable position for the eventual metaverse boom. Firstly, they must consider how the metaverse aligns with their current business model and determine what aspects of the metaverse will excite their customers. Secondly, they should prioritize practical use cases that align with their overall strategy, develop detailed business cases, and create roadmaps for each use case. Treating these efforts with the same seriousness as any other strategic initiative is crucial. Thirdly, CEOs can set the vision for their company's metaverse efforts and choose leaders to oversee each initiative. This might involve appointing a chief metaverse officer, as some companies have already done, or having functional leaders take the lead. Companies will likely need to partner with specialized providers for hardware, software, and metaverse-related development services. Continuous testing and learning are essential for bridging the gap between expectations and results.