By Jim DeLoach, Former Andersen Partner
and currently a Managing Director at Protiviti. He is the author of
several books and a frequent NACD contributor.
Copyright 2023 National
Association of Corporate Directors (NACD). This article originally appeared on NACD’s
BOARDTALK original article maybe found here. Reprinted with permission. No
further reproduction is permitted without permission from NACD.
The metaverse has the potential to be a disruptive, expansive,
and transformative force, even to the point of spawning its own economy. Every
board has a fiduciary duty to evaluate that potential for its company’s future.
define the metaverse as “a collective of virtual-reality shared
spaces, where users interact with a computer-generated environment as well as
other users… in an interconnected network of 3D virtual worlds.” Much more than
connecting people to information, the metaverse in the future connects people,
places, and things, sometimes in a fully virtual environment.
According to a global
survey of 250 global business leaders, the metaverse has the
potential to dramatically impact the future of the human experience. Almost all
survey participants expect a “moderate to significant impact” on the global
economy 10 years out and believe that the metaverse will be “moderately to
extremely important” to business success. While views of the metaverse may vary,
more than two-thirds of business leaders across the globe believe that
something impactful is emerging in the market. It might even be a technological
and societal shift similar to the advent of the Internet age.
According to the survey, a majority of organizations (55%)
are already deploying the metaverse in various areas of the business such as
marketing and advertising, conferences, trade shows, human resources functions,
and immersive shopping and product simulations—commercial applications that are
well past mere gamification, which was the focus over the last decade. Almost
all organizations believe that, over the next 10 years, the metaverse will
prove to be “moderately to extremely important” to the customer experience and
to sustaining customer loyalty. Metaverse technologies that organizations are
most excited about include augmented, virtual, and extended reality, as well as
artificial intelligence (AI). (Note: AI plays a key
role in creating the metaverse as it enables a more immersive and
engaging virtual experience as well as greater diversity and accessibility.)
The research also indicates that more than a few organizations across multiple
sectors are giving the metaverse close attention.
What is the board’s appetite for this new age thinking?
Detractors point out that no one can say for sure what the metaverse will look
like in 10 years and that a fully realized metaverse—however one chooses to
define it—requires orders of magnitude more computing power than what is
currently available. Networks need to become much faster, with less latency, so
that experiences are not impeded. Skeptics also question how much a company can
prudently invest given the uncertainty over the length of time it will take for
the metaverse to become commercially viable.
Proponents counter that at the turn of the 21st century, no
one could have predicted the full impact of today’s Internet. Projections of
the potential dollar value of metaverse-related activity vary wildly—in large part
due to the unknown ways the metaverse will mature over the next 5 to 10 years.
Yet, estimates of the size of the overall global impact tend to be massive, ranging
from $5 trillion to $13 trillion, averaging around $8 trillion. Even if the
metaverse generates just a fraction of these projected values, it merits
attention in the boardroom as powerful use cases continue to appear across
It is the classic “too big to ignore” dilemma compounded by
uncertainty over the time horizon for evaluating return on investment. These
business realities present a challenge to any business case, particularly for
companies averse to moonshot projects. The good news is that companies don’t
have to be first adopters; boards can learn from the following relevant action
Get up to speed on emerging technologies. This is square one for all directors as they engage the
digital world. Bring outside experts into the boardroom to keep the board
apprised of relevant technology trends, how they affect industry fundamentals,
and specific market opportunities and use cases germane to the company.
Identify and lean on expert resources inside the organization regardless of the
function they support. When seeking guidance, insist on getting it in plain,
practical terms. Also, share relevant articles from publications with strong
technology content presented in practical ways.
debt with intention. With emerging technologies driving
the need for agility, a focus on technical debt is a safe play. For many
organizations, technical debt has accumulated slowly and insidiously to the
point where it has become the proverbial ball and chain that constrain an
organization’s ability to keep pace with agile and “born digital” competitors. Protiviti’s
research indicates that seven in 10 organizations (69%) believe
technical debt has a prominent impact on their ability to innovate.
Accordingly, directors need to understand the nature and extent of technical
debt and ask management where they stand in modernizing legacy applications.
Begin with the right mindset.
Directors should keep an open mind in focusing on the metaverse as an integral
part of a strategic conversation in which long-term goals, the technological
innovation needed to reach those goals, the capital deployment ramifications,
and the related upside opportunities and downside risks are all considered. The
risk equation is as much about the risks of late entry and opportunity costs as
it is about innovation failure and lackluster returns.
Understand the strategic implications of metaverse
technologies. No company can ignore the
possibility that the metaverse offers an opportunity to participate in the
construction of the future. The board should engage management in strategic
conversations regarding the playbook for seizing opportunities as
marketplace-disrupting technologies emerge. The strategic emphasis will vary by
industry. Directors should focus on potential use cases in the industry, how
the metaverse can affect the customer experience, the level of investment
required to make an impact in the market, the governance structure needed to
manage the investments made, and the talent needed to be successful.
Apply a risk lens. In approaching the future, risk
management is key in evaluating potential use cases. The risk of investing in
metaverse technologies as well as the risk of late entry and missing the wave
of opportunity are relevant considerations. As for the metaverse, boards can
expect the usual cybersecurity, data privacy, and regulatory discussions. It
will spawn new
threats such as the cloning of voice and facial features, the
hijacking of video recordings using avatars, and invisible-avatar
eavesdropping. No doubt, there will be issues around disinformation and
protecting children. Additional risks to the strategy will also arise if the
metaverse is akin to the “Wild West” without rules, regulators, or guardrails.
In summary, boards should evaluate the potential of the
metaverse to the organization with a focus on management’s capabilities for
monitoring emerging technologies, evaluating potential threats and
opportunities, and developing use cases to reality-test opportunities and
identify risks. With the significant market opportunity of the metaverse and
the sizeable amount of investment capital flowing into the space, this is a
smart thing to do. Directors should invest time with senior management to
understand and envision the possibilities and prepare for the future. Even if
the metaverse does not fully materialize to what some believe is its full
potential, it will open up many new possibilities and encourage companies to
consider different and creative ways to engage markets, customers, and
Check out Jim’s website.