A framework for evaluating business lead users

Electron Commer Res DOI 10.1007/s10660-009-9035-3

A framework for evaluating business lead users’ virtual reality innovations in Second Life Kim Mackenzie · Sherrena Buckby · Helen Irvine

© Springer Science+Business Media, LLC 2009

Abstract This paper extends von Hippel’s (Manag. Sci. 32(7):791–805, 1986) concept of lead users to a virtual reality environment. Three lead user groups, site developers, business firms and avatars, have a synergistic role to play in extending virtual reality from a social networking platform to a commercial one. The paper proposes a framework for assessing the extent to which innovative practices have been demonstrated by lead user business firms in a virtual setting. It applies the framework to twenty pioneering firms that operated within Second Life in 2007, from an avatar’s perspective. The study’s findings indicate that business firms made little use of digital agents, and provided few examples of bricolage. However, they exhibited higher levels of innovation in their use of telepresence and interactivity, which contributed to the achievement of flow. As a single-avatar study, the paper has limited generalizability, however studies with a wider scope will enable further development of this framework. Keywords Virtual reality · Second Life · Avatar · Lead users · Innovations

K. Mackenzie () · S. Buckby · H. Irvine School of Accountancy, Queensland University of Technology, 2 George Street, Brisbane, Queensland, Australia e-mail: [email protected] S. Buckby e-mail: [email protected] H. Irvine e-mail: [email protected]

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Business has become increasingly competitive as it moves into the 21st Century, where the demand for innovative products and services is greater than ever before. [59]

1 Introduction This study, conducted within the leading virtual reality setting of Second Life, has three purposes. First, it expands the concept of “lead users” developed by von Hippel [66, 67] and applies it to three groups of lead users involved in virtual reality innovation: Linden Labs, the developers of the Second Life site, “real world” business firms operating within Second Life, and avatars, the community members of Second Life. Secondly, it develops an evaluative framework of elementary attributes for commercial innovation within a virtual reality environment. Thirdly, using this framework, it assesses the extent to which twenty lead user businesses have innovated in their Second Life sites. Technological advances challenge both established human patterns of interaction and traditional practices, offering the possibility of new ways of relating and doing business [37]. This is the case with virtual reality technologies, which enable a generation of “digital natives” [73] to share digital files, collaborate, network, and socialise in online communities [43]. Business firms are seeking ways to harness these technologies to create optimal business value. These include cutting-edge IT, communication, and corporate marketing firms, as well as leading educational organisations [62]. Virtual reality, commonly referred to as a “Web 2.0” technology [50], provides a new paradigm for business firms to engage with stakeholders in cyberspace, but also presents challenges that are yet to be surmounted. The Second Life virtual reality site was pioneered by Linden Labs in 2003, and allows content to be created and owned by its online community residents [58]. Due to its public accessibility, Second Life has been the first virtual setting to attract significant global business and educational interests [53]. More flexible than competitor game-themed virtual settings, it provides a rich virtual open-learning space that allows participants to gain knowledge of the technical requirements necessary for innovative applications of the technology. Consequently, it has provided a fertile laboratory in which business firms can experiment with the commercial viability of virtual reality. In keeping with the rapid development of the new social and business frontiers associated with online technology, this research is exploratory, empirical and evaluative [4]. It is informed by the concept of lead user innovation [66, 67], and is a “netography” [16], relying on qualitative data [38]. A QUT customised avatar, Honour Miles, gathered data according to a “predetermined set of categories” [5], and the data was assessed by means of the evaluative framework developed in the paper. Ethical approval for the research was obtained, and the avatar observed established ethical and professional protocols in the data collection process. The next section of the paper introduces Second Life. Following this, a review of the lead user innovation literature outlines the role of lead users, extending the concept to encompass three different categories of innovators. The evaluative framework

A framework for evaluating business lead users’ virtual reality

is then presented, and the innovative offerings of a sample number of business firms in the Second Life site are assessed against this framework for their use of agents, telepresence, interactivity/bricolage and flow. The summary and conclusions provide an overview of the study’s key findings, outline the limitations of the study and identify opportunities for further research.

2 The virtual world of Second Life The Internet has undergone a paradigm shift since the advent of peer-to-peer communication technologies that enable the provision of online global communities such as MySpace, YouTube and FaceBook. In addition, new three-dimensional technologies offer Internet users a compelling visual impression of “moving through a 3D space in real time” [25] through sophisticated collaborative networked or multi user virtual environments [13] such as Second Life, World of Warcraft or Sims Online. Users, as avatars, can immerse themselves in these digitised worlds and experience the sense of flying, jumping and walking through structures, as well as co-creating virtual objects [46]. Such is the popularity of these sites that it is predicted that 80% of active Internet users will interact within online virtual worlds by the end of 2011 [50], providing transformational benefits greater than any other technology within five to ten years [12]. These technological developments provide business firms with significant opportunities to enhance their commercial relationships through increased collaboration, learning, and marketing [13]. However, while it is predicted that 50% of large business firms will establish a virtual reality presence by the end of 2012, it is also predicted that half will fail due to “lack of tangible goals and objectives” [13]. While virtual reality has the potential to unite the “passive experience of watching television” with the “interactive potential of the Web” [27], business firms need help with this transition [53], since virtual worlds present many risks and challenges [50]. These include the lack of interoperating technology standards that link with internal systems, the high levels of implementation costs, the time required to integrate systems with existing processes, the network bandwidth access requirements, the lack of ground rules, and the lack of privacy, security and legal protection for in-world activities [13]. At the time when this study was conducted in 2007, Second Life had over 10 million registered residents, and tens of thousands communicating at any one point in time [58]. No special technological skills were required, and following user-friendly prompts and instructions, new users were able to select from a number of free, readymade avatar profiles that could be further customized. The creation of any permanent structure, however, required the application of more advanced object-building skills, along with the purchase of virtual land, and payment of ongoing monthly fees. Creators owned copyright of their virtual creations that could be shared, sold for “Linden” dollars, or exchanged. These opportunities provided incentive for pioneering users to innovate and create a variety of new and novel virtual offerings. Second Life is still evolving, and remains privately owned and controlled. The developers are transparent regarding the site’s ongoing growing pains, and acknowledge that many new users have difficulties accessing the world and its offerings [27].

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Technology limitations result in the failure of teleports, the disappearance of inventory, and the stalling of “transaction loops” [53]. Additional problems include slow service, frequent crashes, the requirement to continually download updated versions, and the limitation of only fifty avatars per site at one time [72]. As a result, Second Life is still considered by many as unsuitable for real-world commercial activity, given the non business-like appearance of avatars, anti-social behaviour, high levels of X-rated activity, and the absence of in-world legal and copyright protection [21, 72]. Lack of policing by site developers, Linden Labs, means there is little effective control over in-world behaviour, with anonymous troublemakers known as “griefers” crowding public areas and generally causing disturbances [72]. News reports of virtual terrorist attacks on high profile sites have built a reputation for Second Life as being a virtual Wild West [21]. Second Life is also perceived by many business firms as still only a game, however they have been urged to consider consumer-driven implementations as “the forerunner of what will be in widespread use by many organisations during the next five years” [2]. Surprisingly, the demographic of Second Life community members is a mature thirty-two years of age [45].1 Typically “techno-savvy, playful, and demonstrating a high receptivity to new ideas” [53], they are largely responsible for the pioneering success and ongoing evolution of Second Life. Business firms operating within Second Life must therefore be sensitive to the effect of their commercial encroachment within the community setting [72] and innovative in their efforts to attract and engage community members within the shared virtual reality platform.

3 Lead user innovation This study employs von Hippel’s [66, 67] concept of lead user innovation,2 extending it to a virtual reality environment, identifying three groups of lead users in the virtual reality setting of Second Life, and applying an evaluative framework to the innovative activities of one of those groups, lead user business firms. Von Hippel [67] defined lead users of a “novel or enhanced product, process, or service” as those who display two characteristics with respect to that product, process or service. First, they face needs that will become common in the marketplace, but face them “months or years before the bulk of that marketplace encounters them” [67]. Distinguished from the broad group of users who innovate in an open innovation environment,3 von Hippel’s [66, 67] lead users typically represent a mere 1 The word “community” is used in this application to describe groups of people who communicate using

Internet technologies and who have “come together for a particular purpose. . . guided by policies and supported by software” [49]. 2 Lead user innovation focuses on just one dimension of innovation. The literature on business innovation

covers a much broader scope. It includes innovation studies with a focus on, for example, the macro or global [11], the national [28], the sectoral [10, 20], adoption models [56, 57], or on the concept of “open” innovation [6, 33, 51]. The narrower concept of lead user innovation is appropriate for this paper, which focuses at a micro level on particular firms operating within one virtual reality site. 3 For example, research studies have identified users as participating in the development of open source

software [14, 30, 70], working as customers in innovative partnerships with organizations [9], participat-


handful of organisations or individuals perceiving and responding to certain needs earlier than others [55]. Secondly, von Hippel identifies lead users as being positioned “to benefit significantly by obtaining a solution to those needs” [67]. Consequently, lead users enjoy the benefits of being at “the leading edge of markets” [40] and reap financial rewards by developing an innovation ahead of competitors [39]. Lead user innovation emphasises functionality, as firms identify and rely on lead users as a “need-forecasting laboratory for marketing research”, as well as for the development and design of new products [66]. The insights of these lead users are believed to offer the best information for business firms initiating innovative commercial activities [67, 69, 71]. This has been confirmed by empirical studies highlighting the commercial value of lead user-generated products or concepts [39, 65], and identifying lead user characteristics [15]. Lead users are a source of innovation because of their ability to assist in the process of determining user needs for new products in rapidly changing fields, such as those “touched by high technology” [67]. This offers a satisfying explanation of the role of lead users in the computer industry [26], because it acknowledges that traditional market research is unable to develop successful commercial applications for high technology products and services. It posits that market research for technology innovations should focus on understanding the needs of lead users, their source of ideas, and their suggested solutions, in order to better identify potential commercial applications [34]. Although the concept of lead user innovation pre-dates the advent of virtual reality, it is particularly appropriate in the dynamic virtual reality environment, since it acknowledges the role of lead users in technological change [3]. This paper extends the concept of lead users to three groups operating in the Second Life virtual reality environment. Each of these groups satisfies von Hippel’s [67] two characteristics of lead users, as displayed in Table 1. First, they face needs of the general marketplace ahead of the bulk of that marketplace, and secondly, they are in a position to experience significant benefit, both tangible and intangible, “by obtaining a solution to those needs” [67]. According to these characteristics, the creators of Second Life (Linden Labs) can be categorized as lead users of virtual reality technology. They recognized the future market potential of virtual reality, but ahead of most of that market. They are leveraging existing virtual reality technologies to refine their “product”, a unique virtual reality platform, for their own commercial objectives. As the provider of the virtual reality platform, they benefit from the feedback and interaction with the business firms and avatars who use the site, and establish themselves in an advantageous position for the next wave of virtual reality innovation. After a significant decrease in business activity in the Second Life site since this study was conducted, Linden Labs’ announcement of a “new and beautiful land”, Nautilus, illustrates Linden Labs’ attempt to re-establish the site in a more commercially advantageous way, while still relying on feedback through an official public blog page [35]. Lead user business firms operating within the Second Life virtual reality platform establish business premises, and, ahead of the general business community, explore ing in sports innovation [36] and experiencing benefits from “freely revealing their proprietary innovations” [18].

K. Mackenzie et al. Table 1 Second Life lead user groups’ characteristics Second Life lead user group

von Hippel’s (1988) lead user characteristics Facing market needs ahead of the market

Positioned to benefit from a solution to needs

Site developer

Recognizes market needs for virtual reality ahead of the market: establishment of virtual reality platform

Experience in development of virtual reality technology ahead of competitors; business income; well placed for next virtual reality innovations

Business firms

Recognizes business needs for virtual reality ahead of the market: establishment of virtual reality business premises

Virtual reality experience; income earning capabilities; enhanced image

Avatars

Recognizes consumer needs for virtual reality ahead of the market: creation of virtual reality avatar and toolkit

Experience in virtual reality use; community building; excitement of crossing new frontiers; Second Life praise

the emerging technology of virtual reality as a way of better serving their customers in the future. Developing commercial applications of virtual reality ahead of other firms works for their benefit by providing them with the expectation of financial reward and first-mover advantage. Their Second Life experience will establish them at the forefront of the business use of virtual reality, enabling them to identify strengths and weaknesses of the technology and the Second Life platform, the costs required to maintain a virtual reality site, and to enhance their reputation as being on the cutting edge of virtual reality technology. Lead user avatars, by building toolkits to create their own virtual offerings within Second Life, fit the definition and behaviour of lead users in a more traditional sense, as customers, by recognizing consumer needs and providing solutions ahead of the market. Their benefits may be tangible, as they develop their own in-world social and cultural practices, improve object-building expertise, create virtual income capabilities, and position themselves at the forefront of virtual reality use. Lead user avatars may also experience intangible benefits as they participate in the excitement of innovation, are honoured by Second Life as community builders, and have the satisfaction of frontier building for the public good. They encapsulate, at least in part, what von Hippel described as the “democratization” of innovation [68], as, with little regard for payment or intellectual property rights, they provide valuable feedback to both the Second Life site and the individual business firms through their responses and virtual reality innovations. The specific focus of this study is on the commercial activities of one of these groups of lead users, business firms, within the context of the interplay between the three co-existing groups of lead users. Figure 1 displays the application of von Hippel’s concept of lead user innovation [66, 67] to a virtual reality context. The assessment of the innovative activities of these business firms is made from the perspective of a lead user avatar. The interactions between the three lead user groups, from a com-


Fig. 1 Lead user business firms in a virtual reality environment

mercial point of view, should be mutually beneficial. Benefits should occur as business firms make use of the Second Life site, while avatars visit the Second Life site, forming opinions and initiating interactions, both in the site at large, for social purposes, and within the sites set up by individual business firms. Using their experience to make their virtual needs known poses a challenge for avatars, and for businesses, if they are to tap into that resource in developing commercial applications [16]. The innovations of these three groups of lead users, and their interactions, provide a rich source of insight and feedback about the virtual reality environment. The extent to which these interactions and innovations are monitored and adopted by lead user business firms will be a crucial determinant in the development of virtual reality for commercial applications. Due to the nature of the relationships and interactions between the three groups of lead users, and the fact that it is an interactive and reflexive process rather than a linear and controlled one, predictability is limited. What form future virtual reality commercial applications will take is therefore uncertain, but due to the cutting edge nature of virtual reality and the openness of the lead user inter-

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actions, they will undoubtedly move business firms into unchartered territory. It may occur within the existing virtual reality environment, or it may cross over into the realm of new technology, as portrayed in Fig. 1. The next section proposes a framework for evaluating the effectiveness of lead user business firms’ innovative offerings within Second Life.

4 An evaluative framework for assessing business lead users’ virtual reality innovations Electronic commerce, conducting business via the World Wide Web, differs significantly from traditional commercial environments with a physical dimension [23], as it operates in a digital realm by means of computer networks [64]. Commerce has progressed from a physical product, process and agent, through to a digital product, process and agent, and is now evolving with virtual reality technologies to deliver virtual products, processes and agents [7]. In order for businesses to deliver digital products successfully using virtual processes and agents, it is essential that they carefully consider the unique characteristics of the Internet that are integral to providing a satisfactory experience for the user. These characteristics are encompassed within the notion that the Internet offers an alternative experience to a real-world setting that lacks a human interface, an attribute which is essential to building trust and authenticity in commercial relationships. A significant challenge for commercial interaction on the Internet, therefore, is the development of trusting relationships with customers, since traditional mechanisms for developing trust are not available [22, 44, 47]. Internet users also expect to experience a sense of presence as a mediated substitute for real life. Providing a sense of presence, described as the awareness a user has of being in a computer-generated environment [60] and having “an external space beyond the limits of the sensory organs themselves” [63], is also particularly challenging in a two-dimensional online environment [23, 31]. Interactivity, the interaction with hypermedia content, also requires particular attention, as it is the key to “stickiness” and customer loyalty for an online commercial website [5, 17]. Further, providing a satisfying sense of engagement for users [23] through high levels of interactivity and telepresence [23, 42] is also a key challenge for business firms’ websites. This “flow” or engagement can be described as the degree of enjoyable immersion experienced by the Internet user during site navigation. When it occurs, self-consciousness is overtaken by an intense self-gratifying sense of play and nothing else seems to matter [8]. This registers a positive association with a brand and is likely to encourage return visits [24]. Early literature on cyberspace suggests that virtual reality technologies provide improved capabilities that address these four e-commerce characteristics, and enhance the user experience [61]. Increased capabilities include first, the use of virtual agents to meet and greet customers in a virtual reality setting, which helps to provide a customer service experience closer to the physical [25]. Virtual agents provide the opportunity for business firms to build trust with avatars and to collect consumer virtual behaviour information [19]. Secondly, a sense of presence can be achieved through the application of vivid telepresence. Telepresence allows business firms to


display virtual products in virtual premises, and provide navigational capabilities for users that are more intuitive, logical and life-like, than two-dimensional e-commerce sites [25, 32, 54, 61, 63]. Thirdly, virtual reality offers the opportunity for the provision of more complex interactive offerings, and the ability to foster bricolage. Sophisticated interactive capabilities include the ability to link between virtual reality settings and websites, to select audio and video offerings, provide virtual giveaways and sensory experiences, and to send instant messages between business firms and avatars. In addition, the ability to engage in bricolage fosters lead-user interactivity and potentially invaluable collaborative opportunities. Fourthly, as a consequence of these three advantages, virtual reality offers the ability to provide an increased sense of flow or engagement for users [19, 23, 41, 52, 61]. These four capabilities form the basis of the three-level evaluative framework, portrayed in Table 2. It has been developed to assess the innovative offerings demonstrated by business firms. The capabilities outlined below are detailed in that table, which specifies the requirements for a “high”, “medium” or “low” innovation ranking in each of these four categories. 4.1 Measurement of the use of virtual agents The extent to which lead user business firms are innovative in their attempts to create an atmosphere of trust is assessed in this study by measuring whether virtual agents are being used, the characteristics of their appearance, and the quality of their interactions. These factors were selected as measures of trust, as they mirror traditional ways in which businesses establish trust with customers. 4.2 Measurement of the use of telepresence The extent to which lead user business firms are innovative in their implementation of telepresence is measured with reference to the richness of the visual scenery, the size of the setting, the number of locations used, and the display of business premises and products. These factors were selected as they all contribute to providing an aesthetically compelling and enjoyable destination in which lead user avatars can experience a sense of presence. 4.3 Measurement of the use of interactivity/bricolage The extent to which lead user businesses are innovative using increased interactive capabilities is measured by assessing the number of interactive offerings within the business firms’ sites, including navigational aids. Typical examples of virtual interactivity include multimedia offerings (audio and video), links to SMS communication devices and Internet websites, giveaway virtual items, interactive experiences, the capability of joining mailing lists and study groups, and hyperlinking and teleporting options for navigational assistance. The innovative use of bricolage is measured by evidence of object-building competitions or collaborative projects, or the availability of a sand box area where avatars can interact with object-building software. Quantitative measures were selected to gauge the level of interactive complexity offered.

K. Mackenzie et al. Table 2 Framework for assessment of innovation in business firms’ virtual reality sites Virtual reality con- Operationalised cepts concepts to be measured

Measurement of innovation by lead user business firms Low

Medium

High

Virtual Agents To what extent are lead user business firms using agents to develop trust with users?

Existence, appearance, function, quality of interaction and communication methods of agents

Not using agents

Life-like agent, “meet and greet” service only, text chat communication only

Unique appearance, team of agents, many functions provided, more than one communication method used

Telepresence To what extent are lead user business firms using telepresence to provide a sense of presence?

(a) Scenery, size and location; (b) premises; (c) products

(a) Bland, scenery, small site and single location; (b) no premises; (c) no product display

(a) Simple but pleasant scenery, Medium-sized site; more than one location (b) life-like premises; (c) static product display

(a) Rich, exotic scenery, large, expansive site, spread across many locations; (b) unique premises; (c) dynamic product display

Interactivity/ bricolage To what extent are lead user business firms providing interactivity and bricolage?

(a) Number of interactive offerings; and navigational aids; (b) number of bricolage opportunities

(a) No interactive offerings, no navigational aids; (b) no bricolage opportunities

(a) Some (1–5) interactive offerings, limited navigational aids; (b) at least one bricolage opportunity

(a) Many (>5) interactive offerings, extensive navigational aids; (b) more than one bricolage opportunity

Flow To what extent are lead user business firms providing a sense of flow for users?

Time taken to interact with all site offerings

Low = less than 15 minutes

Between 15 minutes and 1 hour

More than 1 hour

4.4 Measurement of the achievement of flow/engagement The achievement of flow or engagement is to a great extent dependent on the use of interactivity and bricolage, since these offerings contribute to a site visitor’s degree of absorption in the virtual reality activities being offered. Consequently, a metric for flow is difficult to establish. Although there is a wide body of existing literature that provides empirical models for examining flow for a variety of activities, including traditional e-commerce settings, it is yet to be extended into the commercial realms of virtual reality [42]. The measurement of flow or engagement will always be subjective, since it depends on the extent to which a visitor to a virtual reality site will maintain interest in the site. Therefore, the extent to which lead user businesses are innovating by providing users with a sense of flow was measured in this study solely


by the time it took one avatar to navigate the business firms’ sites and engage with all the interactive offerings and activities. This inevitably led to some researcher bias, since visitors to sites would normally only stay while their interest was captured, rather than being committed to staying in the site until all avenues were investigated.

5 Second Life: applying the evaluative framework Twenty high-profile lead user business firms4 from a cross-section of industries, including IT, Retail, Auto, and Media and Communications, were purposively selected for the study. They are listed in Table 3. Honour Miles, the researcher avatar, accessed the Second Life commercial sites of these business firms over a time span of six weeks, finishing in September 2007. Data examined included the scenery, text, images, music, speech, video, links to web pages, and interactive objects, in order to evaluate the innovative application of virtual capabilities as outlined in the evaluative framework. Postcard snapshots were taken of many key features within the sites, and were retained as digital records by the avatar. Findings based on the framework in Table 2 are summarised in Table 4. 5.1 Innovative use of virtual agents The study found little evidence of the innovative use of agents to engage users. No firms achieved a high ranking, and only one firm, PA Consulting, ranked in the medium range. This firm, specialising in virtual business consulting, used a virtual agent to meet and greet users on entry to its site premises. The agent presented as a Table 3 Second Life sample: lead user business firms ABN Amro

Cisco

Intel

Sears

(Banking)

(IT)

(Computers)

(Retailer)

Amazon

Coca-Cola Ltd

KAWG

Sony BMG

(Books)

(Food/Beverage)

(Accounting)

(Music)

AOL

Dell

PA Consulting

Toyota–Scion

(Web Portal)

(Computers)

(Consulting)

(Automobile)

BMW

GM–Pontiac

Penguin Books

Vidal Partnership

(Automobile)

(Automobile)

(Books)

(Advertising)

Circuit City

IBM

Reuters

Vodafone

(Electronics)

(IT)

(Media)

(Communication)

4 Many of these firms were identified in media articles about commercial involvement in Second Life

[1, 29, 48, 62, 63].

K. Mackenzie et al. Table 4 Assessment of business firms’ sites in Second Life Virtual reality concepts

Assessment of 20 business sites in Second Life Low

Virtual Agents

Medium

High

19 (95%)

1 (5%)

0 (0%)

Scenery, size & location

1 (5%)

13 (65%)

6 (30%)

Premises

1 (5%)

15 (75%)

4 (20%)

Products

5 (25%)

13 (65%)

2 (10%) 6 (30%)

Telepresence

Interactivity/bricolage Interactivity & navigation Bricolage Flow

3 (15%)

11 (55%)

17 (85%)

3 (15%)

0 (0%)

7 (35%)

8 (40%)

5 (25%)

professionally attired female receptionist, who approached Honour Miles and asked (via text) if she could be of assistance. This was a new and intriguing experience for Honour Miles, however communication was limited to text messaging that was frustratingly slow and cumbersome. On a follow-up visit to the same site, a professionally attired male agent met Honour Miles, but in contrast to the female receptionist avatar, discreetly hovered in the background next to a reception desk rather than seeking communication. This created a sense of discomfort, as the two of them were alone in a large, empty space. Consequently, the visit was brief, and the required information was gathered quickly. Within the low category, only one firm, AOL, used a sales droid, a static human image directing users to an information board, as an agent substitute. On reflection, these limited agent experiences did not provide a sense of trust. It appears that using agents to serve customers in virtual settings is psychologically complex, and requires far greater understanding of the essential protocols required for building trust in cyberspace than those currently employed. As in real life, the interpersonal experience between researcher and agent was pivotal to representing the professionalism of the firm, and thereby impacting on the ability to build a trusting relationship. However, lack of knowledge may not be the only reason for the low levels of the use of agents by firms. The lack of users present in the sites of the business firms suggests that there was insufficient user traffic to warrant paying agents to act as virtual receptionists. Using agents may also be unnecessary due to the ability of business firms to provide extensive brochure-style information in the form of visual, text and interactive offerings, as in the case of Intel and Dell, and the use of instant messaging for immediate real-world follow up, as demonstrated by PA Consulting. Limited text communication capabilities also restricted the quality of user to user (face to face) customer service, however, this is likely to improve with the advent of voice-chat technology currently being tested and modified by lead user Second Life developers. Furthermore, a user needs to be assured that the agent is indeed an authentic employee of the firm, and that information exchanged observes the privacy and confidentiality codes of conduct expected in the real world. Such important is-


sues must be addressed in order to provide users with a trusting commercial virtual experience. 5.2 Innovative use of telepresence Firms’ innovations were ranked in each of the three sub-categories of telepresence: scenery, size and location, premises and products (see Table 2). 5.2.1 Scenery, size and location In contrast to the lack of agents, there was extensive evidence (low 5%, medium 65%, high 30%) of the innovative and creative application of scenery, size and location to provide a rich sensory experience for the user. This was evident with the wide variety of aesthetically attractive visual scenery and stimulating interactive offerings, enhanced with multi media capabilities observed in many of the business firms’ sites in both audio and video formats. Examples of appealing scenery in Amazon’s Life2Life site, ranked medium, included a lush garden with a fountain and sculptures. Dell’s site, ranked high, enticed visitors down rustic cobble-stoned streets, and provided a café in which avatars could sit down and rest, alongside a Second Life/Dell souvenir shop. AOL, also ranked high, provided an appealing skateboard playground complete with graffiti, while other innovative applications included many open-air sitting areas, executive training rooms, cinema lounges and cocktail bars. Even the small and conventional life-like sites that were evaluated as low level innovations, such as Sears and Circuit City, provided a sense of familiarity that was possibly less confronting compared with highly innovative and more complex settings. Most firms (90%) were located on their own unique islands that incorporated some form of structural premises, display of products and information, and means for further contact. A number of large technology firms, such as Intel and Cisco, were located across multiple islands. The assessment was made that simple settings were less likely to disorient the user, whereas within the larger, more complex maze-like sites, it was easy to become lost and frustrated. This suggests that business firms should be mindful of a balanced approach when designing with telepresence, providing a unique and stimulating setting while also maintaining some familiarity with the real world. There was no obvious distinction between sector types in this category, except that the sites of retail firms reflected more of a general consumer appeal, in comparison with professional firms that used a more business-like display. 5.2.2 Premises Only one of the advertising businesses (5%) had no premises and was accordingly ranked low. The majority (75%) of sites were ranked medium, presenting single, small, life-like buildings such as those in the Circuit City and Sears sites. High ranking (20%) sites such as technology firms Intel and Cisco presented large open-air, multi-platformed sites that were linked to multiple locations by walkways, sky roads, or teleport-facilitating objects. Transparent walls, floors and ceilings that had a glass appearance were widely used, and allowed users to see beyond boundaries into adjoining spaces, which provided a unique extended visual perspective compared to

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real-life settings. This advantage was particularly beneficial when used to display products, and was predominantly used by retail firms. 5.2.3 Product display Only two retail firms (10%) provided “dynamic” capabilities that hyperlinked to interactive purchasing systems in external websites. This was the case in the site of Life2Life–Amazon, where musical notes, suspended in mid air, denoted audio products. This provided the capability, when the symbols were approached, of ordering products. Sites that were rated medium (65%) provided static product displays. Examples included Sears’ model kitchen display, which offered users the opportunity to change the laminate finish, cupboard display, and appliance options on touch, and provided a sense of immersion within a real-life kitchen. Another example was Circuit City’s retail store that used transparent shelves to display an entire range of product offerings simultaneously. A number of sites (25%) displayed no products at all. Despite the innovative nature of some of the product offerings, many were somewhat confusing, particularly in cases where Honour Miles was unaware they represented products until she ventured close to the symbol itself. Based on these observations, retail business firms must indicate clearly their product offerings, as it would be a futile exercise to provide an innovative product representation that is either not recognised as a product or is not easily accessible for instant purchasing. Overall, most firms displayed and promoted only a small selection of products, which reflected initial test marketing and trial applications only, 5.3 Innovative use of interactivity, navigation and bricolage 5.3.1 Interactivity and navigation Based on the number of interactive offerings, three firms (15%) offered no interactivity within their present offerings and were rated low. At a medium level, eleven firms (55%) offered up to five offerings, and only six firms (30%) were ranked high by providing more than five interactive experiences. Despite only a small range of interactive examples across the twenty firms, however, they were generally far more complex and engaging than traditional e-commerce interactive offerings, due to being embedded within a rich three dimensional telepresence setting. Novel interactive examples included free giveaway objects such as branded clothing for an avatar to wear (AOL), branded drinks for an avatar’s hand (Coca-Cola), a jet back-pack to make an avatar fly (Intel), pre-set dance moves to make an avatar dance (AOL), a skateboard that enabled an avatar to skate (AOL), and a baseball bat with which an avatar could hit a baseball (Cisco). Other innovative examples that offered a sensory experience included the ability to dance inside a bottle to music surrounded by bubbles (Coca-Cola), the ability to become immersed in a psychedelic music and light show (Coca-Cola), the ability to drive a virtual motor vehicle around a sophisticated test drive circuit (Toyota–Scion), the ability to jump on the giant keys of a typewriter and type a message (Penguin Books), and the ability to place a user’s name on footpath paving and take a photo snapshot (AOL). Most of these innovative


interactive offerings, however, were aimed at a juvenile age group, and while appropriate for a general retail audience, their relevance within a professional business setting was somewhat doubtful. More business-focused examples drew on common features from websites and included the ability to access news releases and blogs (Cisco), sign a guest book (Penguin Books), provide site feedback (Circuit City), join special interest groups (BMW) and instant message a firm representative (PA Consulting). The ability to watch video clips or movie trailers was a common method used to retain user interest in sites, as demonstrated by Circuit City, AOL, Cisco, Sony BMG and Intel. Advertising upcoming live events was also a frequent theme to encourage return visits. Two firms, AOL and Intel, provided interactive gaming offerings to engage avatars, however their compatibility with commercial offerings was also questionable. Further interactivity compatibility issues included challenge levels, ease of engagement, relevance, and the constructive use of time. Interactive offerings should ideally be compatible with the business objectives of the firm, and reflect the interests of their market demographics in the real world. Text-based information was the main navigational means used by all firms to communicate their offerings, entice users around the site, and encourage return visits. Large billboards, sitemaps, notice boards, and street signs, were common message mediums, with the large signs with big text being easier to read from a distance, compared with small signs that were often ineffective and sometimes illegible. Teleporting capabilities were also an effective means for transporting users instantly to specific destinations, but clear and accessible return teleport options were often lacking, leaving Honour Miles lost and frustrated on a number of occasions, owing to the lack of a “back” command in Second Life during the time the study was conducted. 5.3.2 Bricolage Most firms (85%) provided no bricolage opportunities, with only three examples evident, in the sites of Coca-Cola, and IT firms, IBM and Intel. Coca-Cola had launched a competition inviting users to build their ideal virtual vending machine, however, a billboard advertising a long overdue closing date displayed no evidence of a winner, or completion of the process. IBM advertised that they were going to provide tools for users to build custom motorbikes to ride around in Second Life, however no dates or further details were provided. Only Intel displayed a sand-box offering a free construction area for users to build objects, but signs warned of the consequences of displaying anti-social behaviour, suggesting this facility had been previously abused. Consistent with earlier findings, there was no evidence of users engaging with the firms’ interactive offerings. Further, dates of upcoming events and competition deadlines were often in the past, and initiatives appeared to be abandoned, resulting in an empty “ghost town” atmosphere. As with the use of agents, harnessing bricolage appeared to be a great challenge for firms. This may be due to the lack of user interest, the lack of interesting and engaging bricolage challenges, the lack of suitable rewards or incentives, the inability to compete with other more meaningful in-world financially driven bricolage activities, or the inability of firms to understand, design or conceive a warranted bricolage program. This finding was particularly surprising, as there was no evidence that IT firms

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attempted to harness the skills, knowledge, and collaborative ideas of “techno-savvy” [53] lead user avatars publically, within the open innovative environment. 5.4 Innovative achievement of flow/engagement Innovative levels of flow depend on the creative synthesis of the effective use of agents, telepresence, interactivity, and clear navigational aids, and, as already highlighted, this provides a challenge to the measurement of flow or engagement. As the above findings reflected differing levels of innovation between these individual factors, a corresponding variety of different flow times eventuated. These findings are displayed in Table 4, with 35% ranking low, 40% medium and 25% high. Times ranged from ten minutes for the smallest and most basic site, KAWG, to over two hours for the largest and most complex sites, AOL, and IT sites Cisco, Dell, IBM and Intel. Understandably, sites developed by IT firms were far greater in size, complexity and number of offerings than any other firm sectors. Overall, however, the rich, exotic visual and interactive offerings collectively created by business firms in Second Life provided a far greater sense of flow, compared with the limited two-dimensional offerings of these firms’ e-commerce websites. However, as avatars would have a variety of reasons, other than research, for visiting business sites, their experiences of flow could vary widely.

6 Discussion and conclusions While the use of virtual reality sites for social networking has grown exponentially in recent years, its application to business has been much slower in developing. This study of the offerings of business firms within the Second Life platform was grounded in the concept of lead user innovation, and identified three groups of virtual reality lead users: the Second Life site developers, business firms, and avatars. This paper extended key e-commerce principles into a virtual reality setting, developing an evaluative framework for assessing the extent to which innovative virtual reality practices have been used within business sites in Second Life. Using an avatar researcher, the Second Life offerings of twenty business firms were examined for their use of virtual agents, telepresence, interactivity, bricolage and flow. An unexpected but important finding of this study was the apparent inability of business firms to attract, engage, or sustain engagement of Second Life lead user avatars. This was despite evidence of the innovative application of telepresence, interactivity, and flow as presented above. In contrast, many Second Life high traffic hotspots were filled with lead user avatars engaging in virtual life activities. Popular activities drawing avatars to hotspots included the ability to earn virtual Linden dollars, obtain free giveaway fashion and accessories, enjoy themed dance venues that provided continuous music and “step into” instant dance steps, as well as many X-rated activities. The study revealed that little use was made of virtual agents, indicating that there is a challenge for businesses in establishing trust and maintaining authenticity and confidentiality. Firms’ use of telepresence was extensive, but revealed a challenge in


selectively capitalising on the potential of virtual reality in presenting sites and products without creating confusion. While business use of interactivity was of a medium to high level, there were few examples of bricolage, indicating a major challenge for firms in providing satisfying and engaging experiences that tap the interest and talent of lead user avatars. Flow, which depends on the previous three factors, also requires clear navigational aids, and while sites evaluated provided better experiences than traditional e-commerce, greater efforts are needed by business firms if the potential of virtual reality for business applications is to be harnessed. Therefore, despite firms demonstrating a good understanding of the fundamental technological applications of telepresence and interactivity within their virtual settings, far greater efforts are required in order to understand and provide for lead user needs in their business sites. The limitations of all qualitative studies apply to this study. When assessing the findings from a study of one virtual reality setting and twenty firms, the subjectivity of the data collection and analysis processes must be taken into consideration. In this case, data was gathered only from the public domain area of Second Life, whereas further private commercial activity may have been occurring in restricted and secure areas of the virtual setting, and therefore inaccessible to Honour Miles. The measurement parameters established in the evaluative framework were rudimentary, and require further refinement. These limitations are due, to a large extent, to the pioneering nature of the Second Life site, and to the early stage of research on virtual reality use by businesses, and can be addressed in future studies. The nature and rapid development of virtual reality for business purposes offers a wealth of many research possibilities. The virtual reality framework developed in this study could be applied to other virtual reality settings in its present form, or it could be refined further, for example, with the development of a more sophisticated metric for “flow” or “engagement”. A qualitative study of individual firms, to ascertain their motivations for establishing sites in Second Life, could provide fruitful insights about the benefits firms perceive in being at the cutting edge of technological innovation. Another important avenue of research could be to assess the extent to which business firms solicit or respond to feedback from avatars. In addition, greater opportunities for research into the virtual reality innovations of lead user businesses will occur as greater virtual reality uptake by firms eventuates, either within the Second Life site, or as an extension to the sites of individual businesses. Then a study could be undertaken with a larger sample of firms, classifying them by industry group, in order to determine which industries were embracing virtual reality technologies in the most innovative way. Alternatively, a study of the social impacts of virtual reality technology, as it applies to business, could also yield profitable findings, as issues such as the power dynamics of virtual reality implementation, inter-generational challenges, and the impact of virtual reality on work/life balance are likely to arise as virtual reality is increasingly adopted for business purposes. In identifying three lead user categories, and developing and applying an evaluative framework to a selection of Second Life business firms, this timely study seeks to contribute to the growing awareness of the innovative possibilities virtual reality technology offers to business.

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Kim Mackenzie is a Ph.D. candidate, School of Accountancy, Queensland University of Technology. Kim’s background is in creative industries, customer service and administration. Her original interest in the use of the Internet for business purposes arose from running her own online art business. She has developed her expertise in this area by undertaking undergraduate studies in e-business, and postgraduate research in emerging Internet technologies and their business applications. Sherrena Buckby is a Lecturer, School of Accountancy, Queensland University of Technology. Sherrena has held previous positions in professional accounting firms and mining companies. Her teaching and research focuses on electronic commerce issues, business intelligence, audit committees and IT governance processes. Helen Irvine is an Associate Professor, School of Accountancy, Queensland University of Technology. Helen’s early professional life was in a large chartered accounting firm. Since entering academic life, she has developed research interests in the areas of financial accounting and accounting for nonprofits, with a particular focus on qualitative research and methodological issues such as the use of theory.