Discussion On Oculus Business Model Canvas

Question

Task: To be completed individually, you are required to prepare a business report that deconstructs an organisation's business model and identifies the critical success factors that make the business sustainable. Your analysis will demonstrate your critical thinking skills and your ability to professionally articulate your findings.
Before commencing, you must seek your lecturer's approval to undertake an analysis of the business you have chosen. The type of organisation that should be identified for study is one that is relatively new, innovative in how they operate, and have most likely been established in the last five years. To achieve a result that meets your study objectives, please ensure the business report addresses each of the assessment criteria detailed below and which is elaborated in the marking rubric.

Assessment Criteria:

1. Provide a succinct description of the business, the industry in which it operates, the market or markets it serves, and the products and services it provides (10%)
2. Deconstruct the business model of the selected business using the nine building blocks in Osterwalder & Pigneur’s canvas (20%)
3. Explain the key interrelationships that exist across the nine building blocks (20%)
4. Identify and discuss the critical success factors the business has to get right to achieve sustainable success (10%)
5. Evaluate what factors might impact the success of the business model (10%)
6. Discuss the changes you would make to the business model if this was your business (20%)
7. Quality of written submission, minimum 6 peer-reviewed journals, and APA referencing format (10%).

Answer

Executive Summary
In this report, the Oculus business model has been illustrated based on the product Oculus Go in a detailed manner using the nine-component business model. Also, the success and risk factors associated with the Oculus business model has been identified based on which relevant changes have been recommended. The information based on Oculus Go has been collected from online sources including relevant websites and pre-published articles.

Other than that, the Oculus business model revealed the use of an online platform for selling and marketing its products and services. The virtual reality integrated headset offered by the company has gained significant acceptance worldwide.

However, competition within the market is relatively high in this industry. Other than that, the risk of huge investment and lack of R&D can affect its business in the future. Hence, the need for appropriate marketing strategy based on both online and offline platforms is highly required. This can assist to raise fund as well as invest in R&D wisely leading to competitive advantage, customer loyalty as well as financial growth.

1. Introduction
The present report is focused on exploring the Oculus business model in a detailed manner. Facebook Technologies, LLC, is doing the business as Oculus that is a technology company based in America. The company was formerly known as Oculus VR, LLC and founded in the business year 2012 by Nate Mitchell, Palmer Luckey, Michael Antonov, and Brendan Iribe. The company is headquartered in Menlo Park, California, US. Oculus is in the virtual reality industry which has gained significant attention due to its software and hardware products. It serves the worldwide market. The products include Oculus Go, Oculus Quest and Oculus Rift S. Its services include Oculus store offering apps and games for the headsets. Oculus Go was launched in the year 2018 with the pricing of US$249 for 64 GB.

2. The oculus business model using nine building blocks in Osterwalder & Pigneur’s canvas
As stated by Castelvecchi (2016), Oculus offers fast head-tracking performance and delivers low latency offering the impression of a gigantic environment within a physical space that is comparatively small. Other than that, the pricing strategy of the Oculus Go products is comparatively affordable than others. The building block approach of Osterwalder & Pigneur’s (2010) has highlighted the Oculus business model (Refer to Appendix A- Oculus business model canvas).

2.1 Customer segments
The target customers of Oculus are the people within the age group of 20-40 years old, mostly males. However, the products do not specifically focus on particular customer segments rather focuses on all segments.

2.2 Key partners
Facebook has acted as a significant backup for Oculus Go, since the acquisition in the business year 2014. Besides, the company has also partnered with Samsung for developing the Samsung Gear VR for smartphones, Qualcomm, Xiaomi as well as acquired Surreal Vision focusing on the development of telepresence in the Oculus Go products.

2.3 Value proposition

1. Greater gaming experience through instinctive visual display
2. Without motion sickness, head movement tracking

iii. Compatible with Xbox One, PC/MAC, XBOX 360, PS3, PS4, YouTube, and Netflix, Farahani et al. (2016)

2.4 Key activities
Oculus Go offers a first-person video game experience that attracts potential gamers from the market. Other than that, the large field of view for gaming experience and the integration of head tracking technology has gained customer acceptance at an extensive rate.

2.5 Channels
As the company is marketing worldwide, it has integrated campaigns and online marketing strategies as its business channel to market its product. Online stores including Amazon and its website oculus.com offer the products and services required. The campaign conducted in the business year 2012 proved successful and raised around $2.4 million, ten times more than was expected which was $250,000 which served for the up-gradation to Oculus Go, Foerster et al. (2016).

Fig: 1 (Benefits of Oculus’s channels)

2.6 Revenue streams
In the business year 2018, Oculus launched Oculus Go in the market and gained significant revenue. Specifically, in the business year 2019, the company sold $5 million worth of content within 2 weeks for its Oculus Go and its campaigning has also assisted to gain funding, Harrington et al. (2018).

2.7 Cost structure
Due to its increasing profit, Facebook is planning to invest around $500 million specifically in Oculus Studios for games compatible with the Oculus Go headset. The launch of Oculus Go with the pricing of US$249 is affordable and has been successful compared to Oculus Rift S as the price of the product is US$399, Hoffman et al. (2014). The operating cost is considerably less than its revenue and turnover.

Fig: 2 (Changes in pricing strategy)

2.8 Key resources
High-end technology and virtual reality platform have been its key resources, attracting potential customers from the market.

2.9 Customer relationships
Online advertising and campaigning have gained the company significant funds and sale its products at an extensive rate. It gained more than 1 billion customers worldwide after the launch of Oculus Go, Luckey et al. (2015).

3. Key interrelationships
As the company focuses to attract more gamers, the target segment of the age between 20-40 years has been commendable for the company. Also, the acquisition of Surreal Vision and partnering with Samsung, Qualcomm and Xiaomi has offered the company a competitive edge and to integrate the latest technology attracting potential customers.

Since the development of the 1^st kit, the interest among customers has been increasing due to its better gaming experience, affordable pricing strategy as well as compatibility. Other than that, the fund that has been acquired of $2.4 million during the 1^st campaign was ten times than what was expected which is $250,000. Hence, the key activities and value proposition are highly appreciated by the customers, Munafo et al. (2017).

The online sales have offered the company $5 million in the year 2019 due to its pricing strategy and offering greater gaming experience to the customers. The use of virtual reality along with telepresence has significant scope in the future to gain higher revenue compared to its operational cost.

4. Critical success factors
Although the Oculus business model highlights potential future possibilities and financial growth of Oculus in this particular industry, it has to get certain areas straight to attain sustainable business. Online stores and marketing strategy have offered the company success and potential customers.

Other than that, this particular industry is highly competitive, hence the pricing strategy set by Oculus has been commendable until now to expand its business. The growth of interest among customers towards technological advancement has offered the products and services of the company to gain higher revenue and return on investment. Pulijala et al. (2017).

Integrating with Samsung and acquiring Surreal Vision has also offered the company a scope to develop innovative products that can gain potential gamers from the worldwide market at ease. The funding raised during the campaigning of its 1^st kit of $2.4 million has assisted to develop its business and enter the market at ease along with the product Oculus Go.

5. What are the factors impacting the success of the Oculus business model?
As stated by Settgast et al. (2016), innovation and creativity in products and services can assist companies to gain competitive advantage and growth in the market. Based on such context, it has been comprehended that the services offered by Oculus Go lack the number of compatible games. Other than that, the investment of $500 million is huge for Facebook to offer as there is no guarantee that the customers will stick to the particular brand as the number of competitors is increasing in this particular industry including Sony and Microsoft.

On the other hand, the limited use of Oculus Go headsets within PC or MAC can affect its customer base as their expectation is diversified. Also, minimal research and development can affect the innovation of product and customers might lose interest in the product. As the products are available mainly in online stores, the need of step-in stores is highly needed for the business as customers tend to buy this kind of products by visiting the stores, Lee et al. (2016).

6. Oculus business model changes
To enhance the future possibilities for Oculus, research and development are further required to offer innovation specifically in the field of peripheral vision that can enable complete coverage of human vision. On the other hand, both brand offline and online stores need to be integrated into the Oculus business model to gain a higher customer base.

The marketing and campaigning strategy have to be developed to raise more fund to develop the products rather than just investing $500 million. Other than that, inhouse R&D can enhance the scope of the product towards innovating enhancing the reputation of Oculus than other competitors, Gago et al. (2016). Diversifying Oculus Go in the field of cinemas, theme parks, training camps, and schools can be commendable as it can expand its business platform as well as increase the interest of customers.

7. Conclusion
In conclusion, it can be stated that Oculus has huge future scope in this particular industry. However, the need for effective marketing strategy and R&D is highly needed to attain a competitive advantage and gain customer loyalty towards the brand. Also, innovation in the products and services while up-grading Oculus Go can increase the interest of customers offering the company a potential customer base and brand image in the worldwide market.

References
Castelvecchi, D. (2016). Low-cost headsets boost virtual reality's lab appeal. Nature, 533(7602). Syrett, H., Calvi, L., & van Gisbergen, M. (2016, June). The oculus rift film experience: a case study on understanding films in a head mounted display. In International Conference on Intelligent Technologies for Interactive Entertainment (pp. 197-208). Springer, Cham.

Farahani, N., Post, R., Duboy, J., Ahmed, I., Kolowitz, B. J., Krinchai, T., & Pantanowitz, L. (2016). Exploring virtual reality technology and the Oculus Rift for the examination of digital pathology slides. Oculus business model Journal of pathology informatics, 7.

Foerster, R. M., Poth, C. H., Behler, C., Botsch, M., & Schneider, W. X. (2016). Using the virtual reality device Oculus Rift for neuropsychological assessment of visual processing capabilities. Scientific reports, 6, 37016.

Gago, M. F., Yelshyna, D., Bicho, E., Silva, H. D., Rocha, L., Rodrigues, M. L., & Sousa, N. (2016). Compensatory postural adjustments in an oculus virtual reality environment and the risk of falling in Alzheimer's disease. Dementia and geriatric cognitive disorders extra, 6(2), 252-267.

Harrington, C. M., Kavanagh, D. O., Quinlan, J. F., Ryan, D., Dicker, P., O'Keeffe, D., ... & Tierney, S. (2018). Development and evaluation of a trauma decision-making simulator in Oculus virtual reality. The American Journal of Surgery, 215(1), 42-47.

Hoffman, H. G., Meyer III, W. J., Ramirez, M., Roberts, L., Seibel, E. J., Atzori, B., ... & Patterson, D. R. (2014). Feasibility of articulated arm mounted Oculus Rift Virtual Reality goggles for adjunctive pain control during occupational therapy in pediatric burn patients. Oculus business model Cyberpsychology, Behavior, and Social Networking, 17(6), 397-401.

Lee, D., Baek, K., Lee, J., & Lim, H. (2016). A development of virtual reality game utilizing kinect, oculus rift and smartphone. International Journal of Applied Engineering Research, 11(2), 829-833.

Luckey, P., Trexler, B. I., England, G., & McCauley, J. (2015). U.S. Patent Application No. 29/472,807.

Munafo, J., Diedrick, M., & Stoffregen, T. A. (2017). The virtual reality head-mounted display Oculus Rift induces motion sickness and is sexist in its effects. Experimental brain research, 235(3), 889-901.

Osterwalder, A., & Pigneur, Y. (2010). Business Model Generation. Hoboken, New Jersey: John Wiley & Sons Inc.

Pulijala, Y., Ma, M., & Ayoub, A. (2017). VR surgery: Interactive virtual reality application for training oral and maxillofacial surgeons using oculus rift and leap motion. In Serious Games and Edutainment Applications (pp. 187-202). Oculus business model Springer, Cham.

Settgast, V., Pirker, J., Lontschar, S., Maggale, S., & Gütl, C. (2016, September). Evaluating experiences in different virtual reality setups. In International conference on entertainment computing (pp. 115-125). Springer, Cham.

Appendix A- Oculus business model canvas