Digital Transformation Monitor

Augmented and Virtual

Reality

October 2017

Internal Market,Industry,Entrepreneurshipand SMEs

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Augmented and Virtual

Reality

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Rapid technological progress in the areas of hardware miniaturization and processing power is enabling thedevelopment of compelling devices that allow users to experience new “kinds” of realities. The potential applicationsof these new interfaces are huge, and major players including Google, Apple and Facebook are investing vastresources in pursuit of the ultimate future reality platform. However, doubts remain about the widespread adoptionof such devices in light of ongoing technical and integratory challenges.

perform an action, they generallyinteract with the interface by using acontroller. VR’s primary function is the‘replacement’ of a real environment witha virtual one, created by blocking a user’ssight/awareness and replacing it with afully simulated version. This greatlyenhances the level of immersion vis-à-visa regular display such as a television,regardless of whether or not the contentis intended to be interactive.

VR is therefore particularly suited tovideo games because immersion isparamount and highly sought after.

Augmented Reality (AR)

AR refers to the real-time digital overlayof information over physical elements. Auser’s real, visible environment is thepredominant element, with extrainformation intended to augment theactual environment a user sees on an adhoc basis, rather than fully replacing it.As a result, the capacity for immersionwith AR is lower than that offered by

Concepts of modified reality have longexisted, notably in the realm of futuristicsci-fi culture and academic imaginings ofa future society. However, in realitythese technologies are only justbeginning to come to fruition.

Virtual Reality (VR)

VR involves the use of a computer tovisually simulate an artificialenvironment within which a user caninteract with objects and be fullyimmersed. VR has variousimplementation interfaces, though a VRheadset is the current solution providingthe most immersive experience for users.If the VR content requires users to

Defining newkinds of realities

1virtual and mixed realities.

Nonetheless, it is likely more useful thanVR in many professional contexts asbeing totally isolated from one’senvironment is generally not the desiredoutcome for professional informaticstools and interfaces.

Mixed Reality - advanced AR

Some companies, like Microsoft, use theterm “Mixed Reality” to define themerging of the real and virtual worlds,meaning that virtual objects are‘anchored’ to the real environment asopposed to being ‘simply’ overlaid. As aresult the level of immersionexperienced by the user is greater thantraditional AR but still less than VR.

The boundaries between MR and ARtechnologies are still murky1, evenwithin the industry itself. Consequently,AR is a much more widely-used term,and generally encompasses both ARand MR.

Source: : IDATE DigiWorld – Illustrations from Wired2

Figures 1: Characteristics of VR, MR, AR

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Augmented and Virtual Reality

The market for VR and AR is highlyfragmented, with a multitude of playersdeveloping products from start-ups tolegacy internet giants.

Headsets for VR

As VR is fully immersive (the user’s‘seen’ environment is fully replaced), aheadset is generally required:

Smartphone headset

These headsets have a slot for a user’ssmartphone, which is placed inside andworn across the face, acting as both thescreen and the content source.

Many companies offer such devices, fromlow-end (less than €10 for a GoogleCardboard) to higher-end headsets (€ 50for a Samsung Gear VR). These kinds ofrelatively affordable headset arecurrently far more widespread thanpremium, dedicated VR offerings.

Premium headset

These usually include an actual screenand are connected to a computer thatacts as the content source and pushes itto the headset.

Premium headset are designed solely forVR, and as a result provide a far betterVR experience than a smartphoneheadset, albeit with a higher price tag(especially if the user does not alreadyown a compatible computer).

Facebook (with its Oculus headset), HTC(with the Vive) and Sony (withPlayStation VR) are the major players inthis segment currently.

Devices for AR

Currently, the vast majority of usersexperience AR using a smartphone or atablet. Indeed, a modern phone’s cameraand screen are enough to superimposevirtual objects over the environment inreal time. Pokemon Go is arguably themost well-known and widespreadapplication utilising AR on a smartphone.

Newer smartphones are offering a betterAR experience, thanks to improvedprocessing power and cameras. This iscertainly the case for Apple’s neweriPhones, which support ARKit – an SDKdeveloped by Apple (a big proponent ofAR) which lets developers create ARapps and content more easily.

An immaturemarket with highpotential

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Source: Bechtle (left) Optis (right)

Figures 2: AR deployment (left) and VR deployment (right)

450 €Price of the Oculus Rift

Headset, with two controllers

1711 €Average price3 of an “Oculus

ready” desktop computer(powerful enough to power

the headset)

23 million usersDaily active users of PokemonGo at launch (peak number)

5 million usersDaily active users of Pokemon

Go five months after

Source: Flexe

Figures 3: Augmented Reality on a tablet with dynamic overlays

“I regard [AR] as a big idea,like the smartphone. Thesmartphone is for everyone,we don't have to think theiPhone is about a certaindemographic, or country orvertical market: it’s foreveryone.I think AR is that big, it’s huge.[AR] could improve a lot oflives. And be entertaining.”

Tim Cook – Apple CEO –April 2017

Such significant potential has seen manycompanies trying (or having tried andsomewhat failed) to develop wearableAR hardware in the form of low-weight,connected glasses (or even lenses).

© M. Missfeldt

• Google’s 2013 consumer effortknown as Google Glass deliveredunderwhelming results. Thecompany is now focusing onindustrial applications in the B2Bsegment.

• Microsoft is developing its own ARheadset (known as HoloLens).

• Magic Leap, an AR start-up, hasraised hundreds of millions of dollarsin capital to develop its goggles4.

The big advantage of glasses is that thewearer can experience/use AR withouthaving to hold a smartphone in front ofhim/her self.

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Applications

There are a huge range of possibilitiesfor the deployment of AR/VR technology,with both consumer and enterpriseapplications being developed across allindustries (see figure 4). The B2Bapplications in particular vary widely,from simulations and training, to taskassistance and remote maintenancesupport.

VR’s high degree of user immersionmakes it particularly suitable forcreating training simulations, especiallyin sectors where training is traditionallycostly or dangerous such as aviation,disaster mitigation and in the military.Optis, a French virtual prototypingcompany, is deploying VR solutions forindustrial manufacturers, allowingengineers to visualise their ideas using a

Currently, in a B2B context, AR devicesare more commonly used on a regular ordaily basis than VR devices, as VRdevices tend to become physicallychallenging with prolonged use.

Despite positive developments, both VRand AR remain niche products, with alimited number of trials underwayworldwide – widespread uptake is notexpected until several key challenges areaddressed.

Figure 5: Potential of VR/AR software for different use cases in 2025

scale1 3D mock-up.

The primary strength of AR lies in itsability to display information directly‘onto’ parts or sections of a user’s viewthat require operator action. AR alsoallows the use of ‘hands-free’ displaysthat do not impede operator movements.

Existing AR applications include:

• Bechtle, a German B2B IT serviceprovider, which relies on Vuzix andEpson AR glasses instead of handheldscanners.

• Google and AGCo, a manufacturer ofcomplex agricultural machines, whopartnered to test AR glasses andfound a 25% reduction in productiontime on low volume, complexassemblies5.

Source: Statista based on Goldman Sachs Global Investment Research

Augmented and Virtual Reality

Source: IDATE DigiWorld

Figures 4: Applications possible for AR and VR for the public (B2C) segment (left) and professional (B2B) segment (right)

© Agco

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Augmented and Virtual Reality

Both AR and VR adoption and usageremain very low overall due to severalkey challenges.

Technical challenges

VR and AR have existed in various formsfor many years, but the technology hasnot been mature enough to be viable inmass market application. Recenttechnological advances – particularly inthe miniaturization of hardware – havedriven significant increases in thecapabilities of smartphones, withmanufacturing and distributioneconomies of scale allowing today’sdevices to offer compelling experiencesto much larger numbers of consumers.

That said, problems such as 'VR sickness‘– where some VR users experiencesymptoms similar to motion sickness –persist, preventing VR from developingbeyond the mostly solitary, physicallychallenging experience it currently is(particularly after extended use). Thisand other similar issues cast doubt onjust how widely-applicable VR interfaceswill become in the longer term,especially in professional contexts.

Furthermore, the computer processingpower required for VR (and to a lesserextent AR) remains a considerablelimitation.

Premium VR headsets need to beconnected to a computer with manycables (e.g. 4 USB ports recommendedfor the Oculus Rift), which often get inthe way during use, impairing the user-friendliness of the technology a lot.Whilst wireless VR headsets are indevelopment, there remains significantprogress to be made before the qualmsof this medium are rectified.

AR on the other hand, with its much-reduced hardware requirements andintuitive usability (user can still see theworld around him/her), remains a morepractical tool in a professional contextfrom a technical standpoint. Even so, nomanufacturer has managed to create atruly compelling, lightweight, connectedAR solution thus far.

Source: Goldman Sachs Global investment Research

Figure 6: VR/AR headsets forecasts: a far slower adoption than smartphones or tablets

1 The Foundry, “VR? AR? MR? Sorry, I’m confused.”,https://www.foundry.com/industries/virtual-reality/vr-mr-ar-confused2 Wired, The Untold Story of Magic Leap, the World’sMost Secretive Startup,https://www.wired.com/2016/04/magic-leap-vr/3 Average calculated on Oculus-ready computersoffered on the Oculus websitehttps://www.oculus.com/oculus-ready-pcs/#pc-offers4 TechCrunch, Magic Leap confirms $502 millionSeries D round.https://techcrunch.com/2017/10/17/magic-leap-confirms-502-million-series-d-round/5 Google, Complex assembly, done faster.https://www.x.company/glass/

References

Key challenges towidespreadadoption

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“I think everyone wouldbasically agree that we do nothave the science or technologytoday to build the AR glassesthat we want”“We may in five years, or sevenyears, or something like that.But we’re not likely to be ableto deliver the experience thatwe want right now.”

Mark ZuckerbergFacebook CEO - April 2017

This level of bespoke customization isgenerally slow and expensive and hasfew proven business cases, preventingmost smaller companies from makingsuch investments at this point in time.

There is less of a need for VR to beintegrated with a company’senvironment (as VR does not rely on it).Nonetheless it also requires, in mostcases, very focused, specific developmentin order to be seamlessly integrated withexisting software and systems.

Source: Daqri

Figure 7: Viewing a digital model inAR for the construction industry

A frequent need for “tailor-made”applications and software

Currently, AR experimentation (in B2B)relies on custom, tailor-made softwaredesigned to work with a company’sphysical environment and integrate withits existing systems.

About the Digital Transformation MonitorThe Digital Transformation Monitor aims to foster the knowledge base on the state of play and evolution of digital transformation inEurope. The site provides a monitoring mechanism to examine key trends in digital transformation. It offers a unique insight intostatistics and initiatives to support digital transformation, as well as reports on key industrial and technological opportunities,challenges and policy initiatives related to digital transformation.

Web page: https://ec.europa.eu/growth/tools-databases/dem/

This report was prepared for the European Commission, Directorate-General Internal Market, Industry, Entrepreneurship and SMEs;Directorate F: Innovation and Advanced Manufacturing; Unit F/3 KETs, Digital Manufacturing and Interoperability by the consortiumcomposed of PwC, CARSA, IDATE and ESN, under the contract Digital Entrepreneurship Monitor (EASME/COSME/2014/004)

Authors: Laurent Probst, Bertrand Pedersen & Lauriane Dakkak-Arnoux PwC

DISCLAIMER – The information and views set out in this publication are those of the author(s) and should not be considered as theofficial opinions or statements of the European Commission. The Commission does not guarantee the accuracy of the data included inthis publication. Neither the Commission nor any person acting on the Commission’s behalf may be held responsible for the use whichmight be made of the information contained in this publication. © 2017 – European Union. All rights reserved.