Balancing Growth and Differentiation: Navigating the XR Space

A month after the official reveal, Apple and its upcoming Vision Pro Extended Reality (XR) headset and associated platforms remain in the spotlight. Potential customers are excited by any new device, especially one with a different approach from the norm. Apple’s focus on user experience and building its end-to-end platform out with XR will put pressure on other technology vendors to compete on both hardware and platform fronts. Most critically, Apple’s (likely) success in delivering a cohesive user experience across devices, software, and services, is something that will become more in demand from competitors, as users get their hands and eyes on Apple XR. Few companies are positioned as favorably as Apple for delivering an end-to-end platform, so this creates a difficult balance between building a user base, software library, and enabling platform ecosystem for companies that traditionally do not operate that broadly on their own.

For a full XR platform competitive with Apple’s offering, it’s not just an XR headset paired with a content store. More specifically, this includes something unique in the XR hardware (e.g., gesture input, facial passthrough), and specialized chipsets and operating systems as a foundation, making any existing content usable in XR (e.g., smartphone apps), encouraging new XR-specific content with developer support and toolsets, partnering with in-demand content owners (e.g., Disney), and making all of this available easily, ideally through brick and mortar locations to give potential buyers hands-on experiences.

When laid out in this way, it’s easy to see why Apple positioned Vision Pro and visionOS as it did. Each component is well catered to by Apple, both with existing capability and potential. Apple Stores serve as touchpoints for the device, valuable content is available at launch, and familiar design and experiences are possible from the start.

Few companies can compete in exactly the same way, although there is certainly room for adaptation from some potentially competitive vendors. Many vendors will hope to compete in one or two areas—pure hardware capability, content partnerships, in-store experiences, etc. For full end-to-end competition, the list is shorter. Samsung is perhaps closest to Apple in terms of building out an in-house ecosystem, complete with a unique OS (Android version), applications, accessory devices, etc. Google could also venture into XR hardware in a similar vein, which would have accessories, retail stores, marketing, and other components to complete in the ecosystem. However, Google has not shown any sign of getting back into the XR hardware space after pulling back from its Iris smart glasses project.

While it’s too early to see fully baked go-to-market changes from XR players in response to Apple, there is an impending shift toward the entire XR experience as the selling point, rather than a device/application/use case. This follows other markets, where companies innovate, mature, and then expand horizontally. On average, the XR market is in between innovation and maturation—significant innovations are still possible in areas like smart glasses displays, while VR headsets are more mature. Apple’s building of Vision Pro as a Virtual Reality (VR)-first device (as opposed to smart glasses with transparent displays) highlights this.

Any major moves by XR players will inevitably be seen as reactionary to Apple—there’s no avoiding this and it is not an inherently bad association, but it is something to consider. The danger is that there is no guarantee that Apple turns this hype into success—a handful of major stumbling blocks both before and after launch can severely hamper potential Vision Pro adoption, which remains true for any competition as well. Apple also is not targeting substantial shipment numbers for this first product version, with both manufacturing and price constraints making it purely a target for developers, enterprise, and very passionate early adopters. Second-generation products are traditionally the first to see actual scale, so 2024 is not necessarily a golden window for a successful XR launch.

Companies looking to compete directly with Apple need to prioritize the holistic experience over any single facet of XR. Those without the breadth and depth of Apple—nearly every potential competitor—will fill gaps with partnerships and key investments. It is imperative these partnerships and investments fit into an overarching vision that accounts for user experience as a core tenet. Nailing a handful of high-value use cases is more important than enabling a higher quantity of average experiences.

Those watching Apple through a partnership lens, however, need to maximize their niche. Every company will need to partner somewhere in the end-to-end value chain, Apple included, and partners that are best in class, even if smaller in scope or reach, will be the most valuable partnership targets. Making these different pieces work together seamlessly is a value add itself, and one that could be monetized on its own and/or baked into platform and service offerings.

Ambition is not always rewarded, which makes the next few years in XR both exciting and dangerous. Companies have to both make substantial bets and broaden offerings without creating pain points and fragmentation that reaches the end user. Not all of these bets will pay off, but those that do will do so significantly, especially if Apple’s view of XR and spatial computing as the next wave of compute comes to fruition.