Makers of The Metaverse: Sebastian Hohenberg Of McCombs School of Business On The Future Of The VR, AR & Mixed Reality Industries

An Interview With Fotis Georgiadis

Business sense. There are many great ideas and inventions out there. However, only when a great invention and a good marketing plan come together, the innovation will diffuse in the market. This goes back to Everett Rogers, whose book I mentioned earlier, but it is true within the XR industries like never before: marketing can separate a “nice gimmick” from a profitable innovation and vice versa.

The Virtual Reality, Augmented Reality & Mixed Reality Industries are so exciting. What is coming around the corner? How will these improve our lives? What are the concerns we should keep an eye out for? Aside from entertainment, how can VR or AR help work or other parts of life? To address this, we had the pleasure of interviewing Sebastian Hohenberg.

Assistant Professor of Marketing Sebastian Hohenberg is a marketing strategy researcher with The University of Texas at Austin’s McCombs School of Business, who strives to solve essential business problems related to the digital transformation of business and organic growth. Hohenberg’s research has been published in the leading marketing outlets, such as the Journal of Marketing, the Journal of Marketing Research, and the Journal of the Academy of Marketing Science. His most recent publication presents the first empirical study on virtual reality in marketing and one of the first articles on virtual reality in business research. In this study, Hohenberg and his co-authors examine how virtual reality can improve the new product development of durable producers.

Thank you so much for doing this with us! Before we dig in, our readers would like to get to know you a bit. Can you tell us a bit about your backstory and how you grew up?

Sure, I would love to — thanks so much for having me! Today, I live in Austin, Texas, but I am not originally from the U.S. In fact, I grew up in a mid-sized city in the northern part of Germany, called Hannover. While I completed most of my education in Germany, I have always been able to follow my (other) big passion: traveling. As a student, I spent a year abroad in South East Asia as well as in the United States (Detroit, Mich.). As a young scholar, I was able to participate in a visiting scholar program in Houston, Texas. In addition, I have enjoyed multiple backpacking tours to various parts of the world, like Myanmar, Japan, China, Australia, and Mexico‚ to name a few. I love to explore new things and I guess that is the common ground of traveling and research: searching for new insights, and new ways of doing things — these are the most exciting activities for me.

Is there a particular book, film, or podcast that made a significant impact on you? Can you share a story or explain why it resonated with you so much?

This is a tough question. Reading is an important part of my job and there are many books that come to mind. However, one book that had a particularly deep impact on me is “The Diffusion of Innovations.” In this book, Everett M. Rogers explains how new ideas manifest in innovations and spread via channels over time. This book made me realize how important marketing is for innovations: a new and better technology is not enough for an innovation to succeed in the market. In fact, the book is full with vivid case studies of successful new products, but also with descriptions of great technological innovations that failed. It was after reading this book that I wanted to get a Ph.D. It was this book that got me specifically excited about the interface of marketing, innovations, and new technologies.

Is there a particular story that inspired you to pursue a career in the X Reality industry? We’d love to hear it.

I became interested in virtual, augmented, and mixed realities in 2015. I had just started my first academic job as an assistant professor at the University of Mannheim in Germany. As such, I also became involved in the training of Ph.D. students. One day, we interviewed a rather unconventional candidate, Nathalie, who did not check all the boxes at first sight: she did not come from a major research institution like most candidates and, importantly, she did not have a background in marketing, but instead had focused on computer sciences and international trade in her studies. But I saw something special in her personality and I was intrigued by her passion for one new technology that was on the rise, but I did not know much about at that time: virtual reality! However, in 2015 there weren’t many use cases for this new technology and it was very difficult to study research questions related to VR and marketing. Therefore, we ended up creating our own use case for Nathalie’s dissertation: a virtual reality forecasting approach for new durable products. Nathalie eventually crafted a very remarkable Ph.D. thesis on this topic, and the article based on her first dissertation essay was recently published by the prestigious Journal of Marketing. My collaboration with Nathalie during her Ph.D. studies was clearly my inspiration to start working with the XR industry.

Can you share the most interesting story that happened to you since you began this fascinating career?

Sure! Interestingly, this story begins with rejection. For our VR research project, my co-authors and I thought that we had the perfect business case: we would provide durable producers with user experience data for a new product and a pre-launch sales forecast. Such information is very difficult to obtain and market research companies can charge substantial amounts of money for such data — we were going to offer this for free. In exchange, we merely requested a 3D model of an innovation from the firm’s pipeline and a few market figures that serve as inputs for our VR forecasting tool, such as the planned advertisement spending. Despite this clear value add, it took us almost a year to find a suitable collaboration partner. This issue was mainly due to the skepticism towards VR we encountered: senior managers of leading durable producers described VR as a gimmick or a toy without many use cases for non-tech industries. Of course, we knew that this was fundamentally wrong! This is why we decided to actually engage even more in our use case development and worked even harder. Today, our research clearly shows that VR creates value for non-tech industries, right now, and not just in a distant time. After all, we were able to turn rejection into innovation!

Can you share a story about the funniest mistake you made when you were first starting? Can you tell us what lesson you learned from that?

I started in tech as an intern for a consulting company. Because our partner had an important steering committee call, she asked me if I could drive her BMW, while she would lead the call. Guess what happened: with the entire project leadership team on the phone, I hit a parked car, so that one of our exterior mirrors literally fell off. I was really ashamed and afraid of the consequences: financially, as I was still a student and far from being able to afford a BMW or its spare parts, but more so: personally — for sure, I was expecting substantial portions of gossip and smack talk. However, what actually happened was very different, namely: empathy. After the incidence, many colleagues reached out and encouraged me to cheer up and not to worry. In the end, this crash may have even worked to my advantage. Had I not hit the car with the entire leadership team as live witnesses, I wouldn’t have met so many important people. It took me several years since then (and hearing Brené Brown in Austin) to learn the real lesson from this mistake though: vulnerability connects you with others and can even spark innovation! People aren’t looking for perfection, but for someone to work with who dares greatly.

None of us are able to achieve success without some help along the way. Is there a particular person who you are grateful towards who helped get you to where you are? Can you share a story about that?

I could not agree more! Of course, I owe a deep debt of gratitude to many academics, such as my Ph.D. advisor Christian Homburg and my colleagues and mentors, especially Texas McCombs Marketing Professors Leigh McAlister, Vijay Mahajan, Raji Srinivasan, and Andy Gershoff. However, I am most grateful to my wife Anne. We have known each other for over 15 years and have been married for five of them, and Anne has been the biggest support in my career. First, she encouraged me to follow my passion and pursue an academic career — which is a very generous move, because academic careers come with strings attached, such as geographic flexibility (e.g., it is very unlikely that the university in your favorite place to live has an open position when you are searching for a job). Second, when I had the opportunity to move to UT Austin, a top10 research institution, Anne gave me the chance to accept this dream job, although she had her own career. As soon as I showed her how lovely and refreshingly weird Austin is, she actually embraced the change and moved with me to Texas. Her ability to adapt and take on new experiences is truly inspiring!

Are you working on any exciting new projects now? How do you think that will help people?

Just a few weeks ago, we started exploring an interesting idea around VR and the role of space. In particular, we are trying to discover how VR can help to make workspaces more satisfying and productive. I think that this project can have high impact because the future of work will arguably take place in the metaverse, where space can more easily be configured and customized.

Ok super. Thank you for all that. Let’s now shift to the main focus of our interview. The VR, AR and MR industries seem so exciting right now. What are the 3 things in particular that most excite you about the industry? Can you explain or give an example?

1. Fully immersive experiences. Even today, VR, AR, and MR technologies provide high levels of immersion, mainly leveraging head-mounted displays and motion controllers. Due to this immersion advantage, social VR apps, like vSpatial, Horizon Workrooms, VRChat, and ShapesXR are on the rise. Just imagine what these simulations will be able to accomplish once body suits and other highly immersive equipment become more available. To my mind, fully immersive experiences have the potential to revolutionize social life.
2. User experience perfection. VR, AR, and MR provide fully digital user journeys and, thus, all user activity can be tracked automatically. This data advantage offers huge opportunities for businesses aiming to improve user journeys through utilizing the rich diagnostic information that VR apps and equipment can provide.
3. The unexpected. As you mentioned, the XR industries are so exciting now and attract the smartest and brightest people from all over the world. Did you know for example that about a fifth of Meta’s employees are now working on VR and AR? Or that Accenture just invested approximately $30 million to equip its consultants with 60,000 Meta Quest 2 headsets? Likewise, Microsoft is investing billions of dollars in virtual-reality soft- and hardware, too. To me, one of the most exciting things about XR is this accumulation of brain power and new technology that will likely develop use cases and innovations that we can’t even imagine today.

What are the 3 things that concern you about the VR, AR and MR industries? Can you explain? What can be done to address those concerns?

Some of the VR, AR, and MR advantages also bear substantial risks, which may offer some cause for concerns:

1. Security. One of the biggest use cases for VR, AR, and MR technology will be the metaverse. However, much of the metaverse currently feels like the Wild West. For instance, did you hear that a woman’s avatar in the new Horizon Worlds platform was recently sexually assaulted? In addition, there are more and more reports of metaverse fraud, such as phishing scams, identity theft, and money laundering. These issues will amplify unless security leaders have innovative ways of enforcing cybersecurity. Without destroying the momentum around XR technologies, we will need more and better regulation in the metaverse.
2. Social cohesion. While some segments of society get really excited about these new technologies, others remain highly skeptical and haven’t even tried VR goggles. Arguably, there is a risk of a societal divide, much bigger than with the advent of computers and the internet. Addressing this risk is essentially on all of us: we must try to enable as many people as possible to access and master these new technologies. Universities, like UT Austin, can take a key role in this mass education task.
3. Responsible usage. From my own experiences with XR technologies, I can honestly say: there is a risk of losing track of the real world. When I am in virtual reality, I get transported to a different world. Sometimes, it requires my wife’s gentle taps on my shoulder to make me aware of the actual time and reality. There are many dystopian stories, such as “Ready Player One,” that focus on this threat and I believe that the risk is real. However, I also feel that it is still the right time to set clear boundaries, especially with our children in mind.

I think the entertainment aspects of VR, AR and MR are apparent. Can you share with our readers how these industries can help us at work?

VR, AR, and MR can effectively create social presence between individuals that are physically miles apart. The COVID-19 pandemic, with its lockdowns and social distancing, has reminded us of how crucial personal interactions are for our work and well-being. Separately, the globalized and hectic nature of today’s existence still restricts our ability to be physically close with our co-workers and friends. Thus, by creating social presence in a digital environment, XR technologies can help us to immerse ourselves effectively with others in the absence of physical presence and hence: make our work more efficient, while retaining its worth and effectiveness.

For instance, I have recently attended a high quality, fully immersive research presentation from my office in Austin through VR via Altspace. The presenter was actually in Europe but I could still be present and without the major time commitment related to international travel. Even very traditional B2B and manufacturing companies are starting to realize these potentials. For example, I have seen a VR exposition of a producer of packaging machinery. I have also talked to a B2B company that is experimenting with initial operations of their machines through a VR-AR solution. I do not think that VR will or should replace travel and in-person meetings entirely, but I think the technologies will help us to better allocate our time and resources.

Are there other ways that VR, AR and MR can improve our lives? Can you explain?

As a professor, I see one more focal area of life — in addition to work and leisure — that will benefit greatly from these technologies, resulting in a very tangible improvement of our lives: education. Even today, leading business schools like Texas McCombs offer highly interactive online courses at all levels and across most subjects via Zoom. Digital course offerings have the advantage that they are a) more flexible and b) more affordable than in-person offerings, hence contributing to the democratization of education. However, what is currently missing from these formats is much of the social component, such as networking or even the usual hallway small talk. Well, this is different with education through XR technology! XR technology is a unique chance to leverage the advantages of digital education, without the disadvantages of education via Zoom.

What are the “myths” that you would like to dispel about working in your industry? Can you explain what you mean?

Especially when meeting with some of the more traditional business leaders, I often hear something along these lines: “VR will have a great future someday, no doubt. However, today the technology is just not advanced enough,” or that “There aren’t any feasible use or business cases.” This is clearly a myth! I mentioned our research on VR forecasting earlier as well as the recent VR solutions related to machine operations, services, and trainings. All of this is evidence: VR, AR, and MR have real life impact, not tomorrow but already today!

What are your “5 Things You Need To Create A Highly Successful Career In The VR, AR or MR Industries?”

I would like to take a broader approach to this question. In particular, I would like to draw your attention to 5 Things You Need to Create A Highly Successful Career in the Time of VR, AR, and MR (in any industry):

1. Business sense. There are many great ideas and inventions out there. However, only when a great invention and a good marketing plan come together, the innovation will diffuse in the market. This goes back to Everett Rogers, whose book I mentioned earlier, but it is true within the XR industries like never before: marketing can separate a “nice gimmick” from a profitable innovation and vice versa.
2. Technological sense. I am thinking about the business students and managers here. While these individuals may not (yet) work with the equipment and algorithms on a daily basis, they still should be eager to try the newest technology solutions. It is difficult to just imagine some of these immersive experiences. When I give a talk about VR and marketing, one of my first questions is always: who in the audience has tried VR? Then after the talk, I try to get those people who had not tried it before, to test the VR. Using VR, AR, and MR effectively will be a baseline qualification like using computers today. It is time to build everyone’s personal XR skills!
3. Analytical capabilities. Already today, business analytics are key. Some of the best students from our top universities’ Ph.D. programs get hired by the big tech companies to improve the algorithms and develop new ones. These capabilities will even be more important in the future when VR, AR, and MR reach the mass markets. Eventually, much more data in more dimensions will be available and we will need more, not less, analytics.
4. Storylining capabilities. The downside of BIGGER data will be that it is even more difficult to make sense of it. What I have observed in recent years is that the capability to put complex analyses and results into a logical sequence becomes increasingly important. In other words, telling a compelling story from the data at hand — this will be even more important in the future.
5. Relationship building capability. Our social interactions will shift more to the digital world and meetings with our avatars will soon be the rule rather than the exception. However, my recent research shows that some of the classical relationship building strategies, such as building trust, work differently across digital media as compared to the physical world. Yet, building relationships will remain key for success, even in the metaverse, so all of us will need to learn some new approaches related to digital relationship building.

You are a person of great influence. If you could inspire a movement that would bring the most amount of good to the most amount of people, what would that be? You never know what your idea can trigger. 🙂

I am part of a movement and I hope to inspire students, fellow academics, and managers alike to join me in this mission: the digital transformation of business. Within this realm, a segment that I would like to especially convince is traditional businesses and late adopters. My concern is that similar to the diffusion of the e-commerce or mobile internet many companies we know today will miss the “digital transformation boat” and may disappear. A related concern is that many individuals will miss that boat, too, potentially leading to a notable social divide. From a societal perspective, we should all have an interest that transition happens inclusively without too many individuals getting left behind.

We are very blessed that very prominent leaders read this column. Is there a person in the world, or in the U.S. with whom you would like to have a private breakfast or lunch, and why? He or she might just see this if we tag them 🙂

Christina Raab (Accenture). I was her intern more than 10 years ago and could support Christina for a short time in her endeavors to digitalize the German automotive industry. Now, she is part of Accenture’s global executive leadership team and promotes the digital transformation of entire markets. I would love to talk to her about the opportunities of VR, AR, and MR technologies for manufacturing and B2B companies.

In the U.S.: Jessica Rosenworcel, chairwoman of the Federal Communications Commission. Of course, I have followed the FCC’s endeavors to create better regulation for the big tech giants. I would love to discuss with Chairwoman Rosenworcel how business schools, like at UT Austin, can contribute to creating a user-friendly and safe metaverse. Given the global reach of tech regulation, this meeting could even be together with the chairwoman’s European counterparts, Ursula von der Leyen and Margrethe Vestager.

Thank you so much for these excellent stories and insights. We wish you continued success on your great work!

Thanks so much for having me. I really appreciate the opportunity and look forward to the next stages of the digital transformation journey — these will be exciting times and remember, don’t miss the boat!

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Makers of The Metaverse: Sebastian Hohenberg Of McCombs School of Business On The Future Of The VR… was originally published in Authority Magazine on Medium, where people are continuing the conversation by highlighting and responding to this story.