Magic Leap, Tech’s Pause, and Patient Innovation

Magic Leap recently gave members of the tech press hand on demonstrations that led to a series of articles and reviews of the previously mysterious augmented reality headset. Before this, all the public saw were brief accounts from influencers or investors and a few demo videos from Magic Leap’s website. Last week, the cat officially came out of the bag.

While somewhat optimistic, most tech reviews were pretty negative and the 10,000-foot view conclusion that was clear from nearly every account is that we are still years (many years) away from this technology is ready for your average consumer. I’ve used Magic Leap as an example and proof point for a variety of dynamics happening in our industry and I think it is worth using them again to make some additional points.

Tech’s Pause
I’ve attempted to articulate the period we find ourselves about the tech industry by explaining a period of innovation pause. We just came out of a series of waves that were very close together if we look back at the last 30 years of technology innovation. The entire industry was heading to calm period, and I believe we are in that cycle now. I’ve used the surfing analogy before, that a set of rideable waves generally comes in a pair of three which is then followed by a sometimes annoyingly long pause before the next set. I believe we are in the pause before the next set, and I’m not sure how long it will last, but my gut is it will last longer than many realize.

This is the main reason why most tech companies are looking to enhance their existing innovations through small improvements focusing on efficiency and functionality rather than chase whatever may be next. It is undoubtedly true, whatever fuels the next wave of innovation may stem from these functional improvements and more continuous innovation, however, the point remains that gradual progress rather than leaps forward is where we are at in an industry cycle.

Which means many pundits, industry observers, entrepreneurs, and investors but exhibit something they are not generally good at–patience.

Patient Innovation
I do much work with venture capitalists and entrepreneurs, and the one phrase I always found interesting was patient capital. There are companies, often some of the ones investors are most bullish on, which everyone involved agrees will require patient capital. That is money that is willing to be invested with the noted expectation that it will take a long time to become a return on investment. This is often because the company is viewed as disruptive (like Uber) or that the technology itself is well ahead of its time but the overcoming the technological hurdles now will be worth it at the end (closer to Magic Leap’s position).

What I’m adding to the patient capital conversion is the idea of patient innovation. Magic Leap may be extremely successful because of the early work that went into solving technology problems, or they may be an example of a technology solution that was just too ahead of its time. Regardless of how the chips fall with Magic Leap, there is a need for them, and many others in our industry to innovate patiently.

Since Magic Leap’s primary product is one that is dependent on a market being ready, they don’t have any other products or revenue streams to rely on. Where a company like Apple, Google, Microsoft, or Amazon is undoubtedly working on similar hardware, they have the luxury of being able to be patient where Magic Leap does not. Which is where Magic Leap’s strategy begins to get interesting as they try and develop things, whether they be software or hardware, that can bring in revenue in the short term to stop the bleeding of cash, and make them somewhat less dependent on venture or debt capital in order to wait until the market is ready for their solution.

While I can appreciate Magic Leap wanting to be first and wanting to be early, sometimes this is more a curse than a blessing. I’ve seen too many times companies who are too early to a market learn the wrong lessons rather than the right ones and make grave mistakes about what the market wants because of the wrong lessons being learned about what customers want.

What I expect Magic Leap to do, which is not unlike what Microsoft is doing with HoloLens and their partner ecosystem around Windows, is to go after the enterprise market to start with. Enterprises are often good test beds for early innovations, and when it comes to augmented/mixed reality, there are use cases big corporations are interested in today. While it is not a big market, nor will that market profitably any time soon, it is an excellent place to start building a business.

We as humans, and as a tech industry, like exciting products. The industry is hungry for something new, and this is one reason it is easy for Magic Leap to get a lot of press. However, the use cases take a much longer time to work out and find a fit in the market. Unfortunately, the big pie of the consumer market does not need AR yet. Eventually, I think they will, but this market is more like ten years out than five years out.

I’ll end this article with a saying I’m fond of that has continually proven true and is relevant to this topic. Consumers adopt solutions to pain points very quickly and adopt brand new technology very slowly. AR falls into the latter category for now, and that is why we should expect a long adoption cycle and the testing of the patience level of everyone involved.

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Ben Bajarin

Ben Bajarin is a Principal Analyst and the head of primary research at Creative Strategies, Inc - An industry analysis, market intelligence and research firm located in Silicon Valley. His primary focus is consumer technology and market trend research and he is responsible for studying over 30 countries. Full Bio

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