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Metaverse? Meta-Trap!

As innovators are laying the foundations of the metaverse, businesses around the globe are increasingly keen to capture some of its value. Whether you’re considering tapping into the metaverse or you already have started exploring, now’s the time to make sure you get your approach right. In this article we explain how to avoid the common pitfall of going for the low-hanging fruit, and instead seize the larger strategic value for your business. Read on to learn how to create new sustainable revenue streams in an increasingly virtual world.
Too often, when we are introduced to a new technology, it’s tempting to fall back into old behaviors, replicating what has worked in the past. The first radio shows read from newspapers. The first TV shows were live action plays. As articulated by marketing expert <a href="https://www.amazon.co.uk/Digital-Darwinism-Survival-Business-Disruption/dp/0749482281" target="_blank" rel="noopener">Tom Goodwin</a>, we may add some innovative garnish and invent new processes around them, but fundamentally, our mindset remains rooted in the past.
And we’re doing it again—only this time, it’s happening in the metaverse. Let’s call it the meta-trap. Retail brands replicate physical stores in Decentraland, music labels launch virtual concerts and consumer good companies allow users to demo products virtually.
Let&#8217;s be clear: these moves need to be celebrated. Progressive brands enter gaming worlds and use NFTs as a chance to win eyeballs, engage with younger audiences and build their brand across a new channel. The big question of the moment is: how can companies leverage the learnings from these early metaverse initiatives? How can we build on the momentum and create new sustainable revenue streams? Let’s explore three aspects businesses often fail to consider when tapping into the metaverse.

It is not a video game, and we will not walk around in VR headsets all day. It’s a chance to make our lives better by marrying the physical with the virtual.
We must understand virtuality—including everything from AI-supported AR and VR to NFTs, Meta Humans and what else will be discovered—as a chance to create interactive products, services and ventures that would not have been possible in pre-metaverse times. Does this include activities in virtual platforms like Decentraland? Absolutely, but this is just the tip of the meta-iceberg.
Consider Zwift which can be described as a more interactive and metaverse-like version of Peloton. Cyclists can go head-to-head with others, in real time, from the comfort of their own homes (full disclosure: there is no comfort in racing up Mont Ventoux). In addition, workout plans are customized to each rider’s individual performance. In 2020 the business received a <a href="https://news.zwift.com/en-WW/191648-zwift-raises-450-million-investment-series-c-round-led-by-kkr" target="_blank" rel="noopener">$450 million investment.</a>
Think of the metaverse as an opportunity to foster deeper relationships with customers, drive employee performance and satisfaction, personalize the product experience and elevate traditional sales channels. Ultimately, this can lead to the creation of new revenue streams and business models.

 What is the metaverse?

This is not a minor quick win. Start by understanding the long-term potential for your business that sits behind emerging technologies.
The metaverse is massive: projected to serve up to <a href="https://ir.citi.com/gps/x5%2BFQJT3BoHXVu9MsqVRoMdiws3RhL4yhF6Fr8us8oHaOe1W9smOy1%2B8aaAgT3SPuQVtwC5B2%2Fc%3D">five billion users by 2030 with a total addressable market of $13 trillion</a>—which is about the size of China’s current GDP.
But to successfully unlock the potential of virtuality, companies need to think less about how they can jump onto the NFT bandwagon to make quick cash, but rather how they look into the long-term potential that sits behind those emerging technologies.
Right now, frog is working with a global consumer goods business to do just that. It’s about defining a strategic entry into the metaverse, identifying future value pools that help build a more compelling future-proofed growth narrative.
To get to that point, we collaboratively analyse macro, category trends, consumer needs, alignment to company strategy, partner priorities and existing assets to leverage. Once the right problem is defined, we think about how metaverse-related technologies empower us to shape a solution of long-lasting value. We must recognize the metaverse as a tool to solve significant customer needs, rather than a solution in and of itself.
This brings us to our last point:

 How do I enter the metaverse?

Think bigger. Strive for transformational ideas that lie beyond the obvious before rushing into execution.
It&#8217;s true that every product idea, growth initiative or market opportunity needs to be validated and grounded in cultural, technological and commercial insight; and unless it is implemented, executed and scaled effectively it doesn’t unleash its commercial potential across the organization. But to build the next era of ROI-heavy products, we must strive for transformational ideas that lie beyond the obvious.
And that’s where most companies fail.
Having worked in strategy-led innovation across different industries, countries and business types, we can say most organizations share one opinion: either something to the effect of “ideas are overrated,” or (more likely) something to the effect of, “we’ve already got plenty of ideas.”
And indeed—the walls of innovation labs are covered with Post-Its and there is no shortage of design thinking workshops. But how powerful are these ideas in practice? Did the 30-minute brainstorming session lead to a world-first idea that is so exciting you want to tell your best friend about it? Is it so relevant that your favorite magazine would feature it as a headline? Or is it a twist on what your competitor has already done or what has worked well in the past?
If this sounds familiar, we invite you to take a step back and dare to think bigger.
At frog we like to use transformational questions as one tool of many to come up with transformational solutions. It also helps to take our clients out of the status-quo mindset and to see the bigger picture.
Here are a few brain teasers to get your creative juices flowing:
<ul style="margin-top: 20px;">
<li>What if we could build an intimate one-to-one connection with millions of individual fans by creating the next generation of AI influencers?</li>
<li>What if we could personalize the product experience and offering for every single individual—making our portfolio even more inclusive?</li>
<li>What if we could use NFTs to not only strengthen bragging rights of big spenders, but allow all customers to build a more personally relevant relationship with our brand?</li>
<li>What if we could drive employee performance and satisfaction through virtual reality and immersive simulation?</li>
<li>What if we could create immersive experiences that nudge customer behavior and help people live more sustainably?</li>
</ul>
Of course, these thought starters don’t apply to every industry; but the takeaway here is to think big and identify the strategic opportunity of the metaverse for your specific business before you head into execution.
Once there is some direction, quickly prototype and test the experience in agile fashion to validate and refine the idea. Build only enough technology to demonstrate the idea and garner real feedback.
A word on innovation in the midst of a recession:
The current inflationary and high interest rate environment signals that an economic downturn could be around the corner. A scenario that puts many business leaders into shock or kickstarts a defence play of cost-cutting and playing it safe.
The metaverse? Not a priority. Or should it be?
<a href="https://www.bain.com/insights/taking-advantage-of-turbulence">An eight-year global study</a> by Bain &amp; Company, following the 2001 downturn, shows that now is the time to invest in future growth areas. This is because twice as many brands capture a disproportionate share of growth and profits during economic downturns versus surrounding periods of calm.
Hence, we believe, the need for brands to build resilience into their current and future businesses is becoming increasingly more pressing—with the metaverse being one key channel to do so.
Visit our latest Chief Challenges episode <a href="https://www.frog.co/insights/chief-challenges/strategy-innovation">Expectations vs. Reality</a> to learn more about how to turn radical, disruptive ideas into transformative products, services and experiences that change companies. And if you are curious to explore the metaverse from a strategic point-of-view, <a href="https://www.frog.co/contact" target="_blank" rel="noopener">get in touch</a>.

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Tobias Borris

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How to Unlock Future Growth in CPRD Through Clean Products, Services and Experiences

The consumer product goods (CPG) industry has a growth problem. To be exact, between 2012 and 2016 large consumer good firms only generated an organic growth rate of 1.5 percent1. This is not to say that the established CPG playbook – centered on building mass-market brands, retail relationships and synergies – is not still delivering strong revenues today: but it fails to deliver promising growth rates.
Much of that growth is being captured by start-ups: Instagram-led niche brands who focus on a single hero product which is sold directly to consumers. While direct-to-consumer (D2C) companies from Casper to Brandless have experienced financial struggles of their own, challenger brands have been growing four times faster than legacy companies2. That is also because highly sought-after millennials that hold a spending power of $200bn in the U.S. alone3 are four times more likely to avoid big multi-nationals than Baby Boomers4, and three times more likely to see newer brands as better or more innovative5. In fashion, millennials are two times more likely to prefer up-and-coming designers6.
As almost 70% of European consumers are now actively looking for greener alternatives in their lives7, sustainability has become the next frontier of category growth – providing a long-term opportunity for large CPG firms to reclaim some of that growth. After all, green has evolved from a topic that used to be relevant for the few to a soon-to-be basic requirement for the consumer mainstream. Another signal demonstrating this change in consumer behaviour is a record investment in the year 2018 of $16bn in cell-based protein firms which promise to re-think not only food production but also key ingredients for the beauty and fashion industry as the world is getting greener8.
But as of today, many CPG companies are struggling to develop new profitable products and services that are carbon neutral, let alone carbon negative. While every action that helps to steer towards a greener planet is appreciated, optimizing existing products and businesses won’t move the needle for any company’s bottom line in this new green world.
Retail and CPG companies don’t need small improvements, but a transformative offering that solves for a changing consumer segment, the business and the planet. Which is why we believe that our Clean Growth ambition is the only way forward thinking organisations can transition successfully to truly greener business models.
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Click &#8216;Download&#8217; below to read more and find our detailed report.
<cite>1 &#8211; Real Organic Growth Rate Large FMCG companies w/ net revenue &gt;$8B 2012-16 &#8211; Source: The World Bank Group 
2 &#8211; Faster Growth Challenger brands vs. legacy companies (CAGR 15.7%, 2008-16; example in makeup) Source: Euromonitor 
3 &#8211; <a href="https://www.mckinsey.com/industries/retail/our-insights/the-influence-of-woke-consumers-on-fashion">McKinsey &amp; Company</a> 
4 &#8211; <a href="https://www.mckinsey.com/industries/consumer-packaged-goods/our-insights/the-new-model-for-consumer-goods">McKinsey &amp; Company</a> 
5 &#8211; <a href="https://www.mckinsey.com/industries/consumer-packaged-goods/our-insights/what-beauty-players-can-teach-the-consumer-sector-about-digital-disruption">McKinsey &amp; Company</a> 
6 &#8211; <a href="https://www.mckinsey.de/~/media/mckinsey/locations/europe%20and%20middle%20east/deutschland/news/presse/2018/2018-11-29%20state%20of%20fashion/181128_stateoffashion.pdf">McKinsey &amp; Company</a> 
7 &#8211; Fahrenheit 212 Poll of 700 European Consumers, 2020 
8 &#8211; Record Investment In cell-based protein firms in 2018 &#8211; Examples: Just, ripple, Beyond Meat, etc. Source: Pitchbook</cite>
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