Calculating ROI in Virtual Reality for Manufacturing
From manufacturers to architectural firms, to construction companies, organizations are constantly seeking ways to improve their business. Whether it’s the drive to innovate, reduce time and costs, or simplify workflows, the justification for investment can be daunting. In any business case, research, comparative examples of success, and most importantly, expectations for return on investment (ROI) are necessary components. This article will detail how to approach justifying investment in virtual reality (VR) technology.
When companies investigate VR, the unknown returns of this technology can create a challenge for some. Even though VR has been in use for decades, it is still an unfamiliar technology in many organizations. The recent mainstream media attention given to VR in response to the proliferation of consumer-grade head-mounted displays (HMDs), like the Oculus Rift and VIVE, is only increasing interest but many questions still remain. Common questions are,” Who else is doing this?” followed by “What gains have they realized?”
Exploring and learning about other uses cases is a good first step to gain insight into ROI validation. Not all case studies include hard dollar figures of cost savings and cost avoidance, though they can be sources of anecdotal evidence of VR’s soft value in terms of improving collaboration and decision-making. Many companies realize design improvements when multi-disciplinary teams have access to better tools for collaboration. Better teamwork, insight, and informed decision-making will lead to measurable gains. Admittedly, some of these quality gains are realized anecdotally as teams get experience with a new way of working.
The Many Uses of Virtual Reality
ROI is unique to each organization’s processes, costs, and workflows. Start estimating potential ROI by analyzing where VR can add value to your workflow. Successful implementation of a VR solution is possible across design, production, sales and marketing, and ongoing service and maintenance. Talk with people who would use the technology for their needs, and gain support. Consider how many different departments could use a VR system or how VR could help break down silos by bringing departments together for collaborative reviews. Successful implementations often involve multiple departments and/or projects so the system utilization rate is high. The following chart summarizes the common uses of virtual reality in organizations.
In a recent conversation with a construction company, a VR investigator asked how to get started with narrowing down the best possible use cases. The “aha” moment came when talking about the company’s past projects as sources of information. Which projects went through the most design revisions and why? Did delays increase costs? Which past projects had cost over-runs and why? Very quickly, a list of projects was developed to gather information to begin estimating ROI.
A manufacturing company had similar questions but had not realized their existing metrics could form the basis of an ROI calculation. If they could reduce the time required to make design decisions, they save the value of each person’s time in the required meetings. The cost per hour for designers, coordinators, managers, and executives can all be calculated. If a decision isn’t made, getting onto the decision maker’s schedule can delay progress by days or weeks. This could be valuable time lost getting a product to market. The opportunity cost was another factor considered; delays in one project delay progress on other initiatives.
How to Determine Virtual Reality ROI
The following are sample thought-starter questions for ROI calculations.
- What is the cost of one physical prototype, and how long does it take to build?
- What were the costs of rework on previous prototypes that were built?
- How could better access and ergonomics improve assembly tasks and production?
Reduced Design and Development Cycles
- What is the value of a designer’s time?
- What is the opportunity cost if they cannot work on new projects?
- Have your designers/engineers expressed concern about working on complex designs on a desktop monitor?
- How much insight can be gained by collaborative viewing of complex, digital prototypes in a 1:1 scale instead of on a desktop or wall monitor?
- How would cycle time reduction improve responsiveness to capitalize on new user demands and trends?
- What efficiencies could be realized if product teams work together in a comfortable workspace to evaluate the impact of design changes more quickly?
- What errors and costs could be avoided through improved collaboration?
- How could product assembly and servicing be assessed sooner and made more efficient?
- How could virtual designs enable faster, better decisions at any stage of development?
- What product quality elements could be assessed before physical prototypes or production begins?
- How could more insightful reviews inform executives and reduce risk?
- If critical decisions are not made in a meeting, how long does it take to get stakeholders together again and what could that delay cost in time and lost opportunity?
Sales and Marketing
- How could marketing use digital models to gather early user feedback on design to make improvements?
- What is the full opportunity cost of losing a deal because your development technology is not competitive?
- What is the value of taking advanced sales orders if utilizing digital prototypes?
- What is the value of a new client?
What to Consider Before Investing in VR
Before investing in any VR technology, thorough investigation into the use cases, capital, facility, and human resource requirements should be conducted. Consider all of the elements necessary for successful implementation to understand the total investment. This will be, at minimum, the return that is required. Larger-scale systems like wall-sized displays or surround-screen immersive displays can require facility modifications to physical spaces, power, and air handling. Smaller-scale solutions like HMDs may not require significant changes in a facility, but the allocation of time for dedicated testing may need to be captured as time invested. Consider ongoing staffing and maintenance as well.
If the investment required to realize needed gains is higher than expected, but the value is still perceived, consider a small-scale pilot run to provide evidence. A pilot run can take several forms:
- Start with a smaller-scale system like an HMD or small collaborative display. Consider the work that can be tested in such a system and how the results will apply to a larger roll-out.
- Rent technology for a period of time to do a short-term proof of concept.
- Partner with a university that has VR technology, and either rent time or create a student project. The Campus Alliance for Advanced Visualization (THE CAAV) is a member-run group of US-based universities with global connections, whose members have varying types of VR environments.
Developing the ROI justification for a VR investment can seem like a mountainous task, but is worth the effort. Virtual reality is a proven technology. Some organizations realize ROI in one project or less than one year through multiple cost- and time-saving areas. Using the ideas outlined above will provide a framework to help your organization take the next step in applying this technology to your digital workflows. Look at past projects. Talk with people that would use VR to gather their insights on how VR will create efficiencies. If a third party may be valuable to gather more information from users, consider a consultant to perform interviews. While VR can add value, any investment decision should be fully informed.