What is Extended Reality? Otherwise known as “XR” extended reality is a term used to define the concept of “extending” or transforming our reality with the use of technology.
In simple terms, it’s how we build on the world we have with technology to create unique environments, experiences, and interactions. For businesses and consumers alike, XR represents a powerful opportunity.
Valued at $26.05 billion in 2020, the XR market is growing at an incredible rate. Experts believe XR will have a value of $463.7 billion by 2026, representing a CAGR of over 62.67%.
Though demand for extended reality has been gradually increasing for some time, the market saw a significant boost during 2020 and 2021. The pandemic (COVID-19) prompted accelerated interest in the creation of virtual experiences for retail, work, and collaboration.
Around 80% of business executives now say XR is essential to bridging the “physical distance” between employees.
Today, we’re going to demystify the concept of XR once and for all, to help you understand where this amazing market is headed.
What is extended reality? XR Definition
Extended Reality is basically a tool for adding something to our existing reality. Think 3D content seen through your smartphone camera or smart glasses, or virtual worlds you can see via headsets.
The concept of XR has actually been around much longer than most people realise – since Charles Wyckoff filed a patent for an XR film in the 1960s.
Of course, it’s only recently companies have begun to really unlock the potential of the XR landscape, thanks to the evolving technology we have access too. Advanced smartphones capable of tracking everything from eye movement to positioning are paving the way for “AR.” Intelligent sensors and ultra-high-definition lenses are introducing us to new examples of “VR”.
Companies are rapidly developing supporting technologies for XR platforms, ranging from high-performance hands-free headsets to AI-enabled tools for capturing information and translating it into extended reality environments.
The Three Types of Extended Reality
There are currently three forms of extended reality in the marketplace, each defined by the level of interaction between the virtual and real worlds. Let’s take a closer look at each of these three environments.
Augmented Reality (AR)
Augmented Reality is perhaps the best-known of the XR environments available today. Augmented Reality expands on the real world by implementing virtual information, objects, and data into the world around use. Virtual elements can feature everything from animations and images to text and video streams.
Lately, AR solutions have been growing at a much faster rate than other modes of extended reality, due to their accessibility. AR solutions are frequently implemented into smartphones, which most consumers have already.
This helps to generate quicker adoption of AR tech, because people don’t need to purchase additional hardware to access AR.
One of the initial examples of AR most people are familiar with is “Pokémon Go,” an app which allows users to hunt specific creatures and see them in the real world through their smartphone.
Since the arrival of Pokémon Go, however, AR has evolved drastically. Today’s apps can:
- Deliver real-time guidance and information to professionals for better productivity
- Offer hands-free assistance to staff through smart glasses with information streaming
- Generate stronger communication and collaboration experiences
- Boost retail interactions with “try before you buy” experiences for customers
- Improve interactions between companies and consumers through immersive service, support, and even instruction manual experiences.
Virtual Reality (VR)
Virtual Reality, or “VR” replaces the real world almost entirely, by creating unique, interactive virtual spaces for users to step into. Unlike with AR, people using VR need specially-created hardware, including headsets (for seeing a virtual space) and sensors / controllers (for interacting with the space). Some devices also need a computer connection.
Virtual Reality first rose to fame in the entertainment industry, as a way to immerse gamers in unique experiences powered by their game consoles.
Today, virtual reality has grown to be a far more diverse technology with various use cases, particularly as the technology becomes more affordable.
Virtual reality can:
- Assist with safely training employees in complex situations
- Create virtual meeting rooms for collaboration between teams
- Improve efficiency and productivity in product design processes
- Enable the quick prototyping and discovery of new product ideas
- Create unique consumer/brand experiences for major companies
Mixed Reality (MR)
Mixed Reality is where things start to get a little confusing for most people in the XR landscape. Initially, many people assumed “MR” was just an extension of augmented reality. Both technologies mix the real and virtual worlds, after all.
However, Mixed Reality is a little more complex than this. While augmented reality embeds digital content into the real world, mixed reality actually merges the two environments to produce new visualisations, opportunities, and interactions.
With mixed reality, you can have holographic meetings with colleagues, or interact with a digital twin of a product for quick innovation.
Mixed Reality is still in its early stages, but companies like Microsoft are introducing us to new possibilities all the time.
Mixed reality can:
- Align teams across geographies using holograms
- Create immersive product building and design experiences
- Enhance training and development strategies
- Offer real-time guidance and support to staff in dangerous situations
- Change the way we interact with machinery in the modern world
What Can Extended Reality Do?
The potential of XR is only just starting to be discovered. Research suggests around 60% of people believe XR will be a “mainstream” environment in the next five years. The rise of XR is also paving the way for the discovery of new concepts, like the “metaverse”.
By combining virtual and real landscapes, extended reality has a range of valuable use cases such as:
- Customer experience: With AR, companies can allow customers to try clothing, furniture, and other products, seeing what they look like in-person before making a purchase. Virtual reality can create more engaging demonstrations for customers or provide useful ways for businesses to provide their customers with service and support.
- Training and development: XR is becoming particularly common in the educational landscape. In universities, teachers are using virtual reality to place their students in landscapes where they can interact with educational content. In the business world, AR, MR, and VR can all help employees to develop skills without putting them at risk.
- Remote work: Workers can connect easily to other employees, interact on shared content, and even work on projects collaboratively through XR devices. With MR and AR, specialists can even guide team members through complex tasks, like how to fix a problem on a piece of manufacturing machinery.
- Marketing and sales: Companies are extensively exploring opportunities for engaging with their customers through XR. Virtual reality showrooms are popping up around the world, and AR apps make it easier for brands to make their latest products stand out.
- Entertainment and events: Virtual reality events are quickly taking over as the new trend for the event industry. Similarly, XR environments can offer a wide range of valuable entertainment experiences by submerging users into immersive experiences.
What Will the Future of XR Look Like?
XR is gaining more attention all of the time in today’s technical landscape, though there are still challenges yet to overcome. Companies investing in the future of extended reality will need to consider carefully how they can manage issues like:
- Expensive hardware: While affordable tools for Extended Reality are beginning to emerge in the modern market, the most advanced solutions can still be very expensive. Further innovation will be necessary to create products accessible to all budgets.
- Consumer comfort: Clunky, uncomfortable, and disorienting headsets can make it difficult for people to spend longer amounts of time in XR. Consumer comfort will be a necessity for the future of XR development.
- Security and safety: A lot of the benefits of XR rely on the ability of tools to safely transfer data and information. Security and privacy concerns will need to be addressed by tomorrow’s XR vendors.
Despite a number of possible challenges, demand for XR is definitely on the rise. Sales of virtual and augmented equipment are set to continue growing strongly over the next five years, reaching around 70 million units sold per year in 2025.
Even in a time when economic uncertainty is high, XR is thriving. Indeed, it’s one of the few areas growing not despite the pandemic, but because of it. As a future of physical distancing and virtual interaction settles into place, XR solutions provide a lifeline for companies serving customers, and connecting staff.
Crucially, it’s not just the consumer market that will thrive in the future of the XR space – but the enterprise landscape too. Many companies are now looking at extended reality as a solution within their strategy for digital transformation.
The XR environment is ideal for offering everything from remote assistance opportunities to better collaboration. Sales of XR headsets even tripled in 2021.
The arrival of new technology, from 5G to advanced AI and enhanced sensor systems will only strengthen the standing of the XR marketplace.