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Operations Analysis – Devign Elements XR 360°

Operations Analysis

Operational Process Analysis in the XR Sector

An operational analysis comprises the gathering of information and research for purposes of locating and isolating problems in a business model, as well as, an examination of the proposed business systems for effectiveness.  Filmmaking and software development are both agile processes and share a lot in common in terms of operational processes. Let’s frame performance measurement goals, using a mid-size production studio as an example. Initial performance measures consist of answering two questions;

  1. How capable is the studio at supporting clients and stakeholders, and
  2. how effectively is the studio managed by leadership?

In order to answer these questions, data must be reviewed from a variety of sources, including financial records, correspondence and other internal documents. Once research has concluded, it is important to create a report detailing a series of final recommendations, possible solutions and opportunities for enhancement to operational processes. In this example, we will use queueing theory to determine studio capability and a series of diagrams and charts to begin exploring the effectiveness of management.  Then we will look at how to start the creation of a five year plan, which is a useful tool to present to potential investors.

Preparing an Operations Diagram

One of the most helpful charts to include in a operations analysis report is a operations diagram. In the below diagram, is a chart detailing the primary operations needed for our theoretical production studio. These operational processes help to facilitate the creation of value for clients and stakeholders. In the extended reality (XR) sector, value is often driven by a few areas;

  • the ability to create a compelling and engaging experience – typically though rich storytelling, intuitive UIs and ease of use, and
  • the desire to create the “ultimate” immersive experience that ideally achieves the highest level of immersion and the highest level of the 6-degrees of freedom possible, based on available technology.
Operational Diagram

For a startups with limited staff and capital, it is likely that individuals and departments will overlap greatly in the early years of the business. For instance, during year one, the only employees may be the Director, CEO and Operations Director, though it is unlikely they will use those express titles. During this year, things will be very hands on and to maintain the pace needed to grow, our theoretical studio might outsource large portions of work to vendors. Business process outsourcing (BPO) is a method of subcontracting any number of business-related operations to third-party vendors.

Business Process Outsourcing (BPO) Considerations

The extended reality (XR) sector is still relatively young, and as such, there are areas that are not as easily outsourced, such as programming and development. Although many tools and code, like Python, C, C++, C#, and Javascript are widely known, the nuances of how to design experiences for users in a 3D space and, moreover, the math and geometry to support such applications is much less commonly understood. Additionally, developers will frequently need to work with 3D games engines and very specific software development kits (SDKs) that vary in complexity and learning curve.

Extended reality (XR) programming is still a niche and many individuals who are technologically capable tend to run their own businesses or work already for larger-scale companies. As such, individuals who are very experienced are hard to come by, because the demand for them is high. In addition to a lack of experience, newer programmers may not have cyber security training or proper protocols in place to secure their devices when working remotely. On projects that are highly confidential or that use sensitive data, making sure assets are safe from cyber crimes is also a concern. This significantly impacts outsourcing these tasks. Thus, having the capability to innovate and troubleshoot new and often times untested technology must exist in operational leadership from the start.

Cost Cutting: Leveraging M/M/s/N Queuing Models

Production studios do not rely on a constant revenue streams, but instead operate on continuing investments. This often involves a parent company and/or angel investor(s) or venture capital firm(s) early on. In order to grow to a large major production studio, a startup will likely need to seek out the help of government grants, private corporate investment entities and seek other fundraising opportunities throughout the life of the business.

Generally, an extended reality (XR) production studio gets its main source of profit directly from the virtual, augmented or mixed reality (VR/AR/MR) experiences and the intellectual property (IP) that it creates. This underscores the need to produce a high-quality extended reality (XR) experiences. Because the extended reality (XR) field is in flux, during times of increased demand a production studio can profit greatly; if, its executive management team is capable of using its resources to deliver engaging immersive experiences that help drive demand and increase company visibility.

This puts extended reality (XR) production startups at a distinct disadvantage. Commonly, in the early stages, whole departments are nonexistent or underfunded when a studio is just starting out, especially in areas, such as, data capture, storage and analytics.

Let’s use a mid-size production studio as an example. Suppose that a proposed business model costs $449,000, including labor increases totalling $47,000 per production cycle. However, consider that the business plan could save an estimated $200,000 of loss per production cycle. Many business owners might stop with the exploration of the cost, but it is equally important to take a good look at the loss per production cycle when making a decision whether or not to fund a data science project.

Production Queue Flow Chart

Let’s take a look at one way to quantitatively evaluate a production workflow model. Production workflow models are good candidates for the use of queuing theory for quantitative evaluation, because a production queue is really a queue of queues. Consider that for each phase of the production, encompassing project files are in use from department to department, with overlap of use and reiteration of processes taking place many times over. For more information on general queuing theory and a tutorial, check out Dr. Kardi Teknomo’s person site, here.

The number of immersive experiences that a studio might release in a year might start at just one or two per year during the early years of the business. Over time, however, this may grow to 20 to 25 releases per year, as the business matures and the market demands grow. Therefore, by studying queue times for each project from the onset of the business, decisions can be made much more quickly and promote the active streamlining queues and allocation resources, as necessary. To measure of effectiveness of a extended reality (XR) queue using queue theory it is possible to start by considering the following quantitative factors;

  • average waiting time per project in the queue,
  • average processing time,
  • average waiting time per project in the system (average waiting time in queue plus average processing time),
  • average number of projects in the queue, and
  • the average number of clients in the system.

Let’s use the M/M/s/N queuing model to analyze the effectiveness of the two models. If you would like more information of this model, there is a great write-up and tutorial by Dr. Kardi Teknomo here. For the first model, let’s assume an arrival rate of 5 projects per year, a service rate of 2, a capacity of 3 and our current number of servers as 1. A quick analysis reveals the queuing intensity would be 2.5, utilization 96.059%, length in queue would be 1.478, length in system would be 2.438. Based on these figures the delay in the queue would be 0.769 and the delay to the system would be 1.269, with the probability of an idle server at 3.941%.

Based on the revised workflow proposal the arrival rate of 5 projects per year would stay the same, a service rate would increase to 3, so would capacity to 4 and our current number of servers would double, bringing us to 2. Under the newly proposed model the queueing intensity would drop to 1.667, utilization would drop to 70.322%, length in queue would drop to 0.500, length in system would be 1.906. Based on these figures the delay in the queue decrease to 0.118 and the delays to the system would fall to 0.452, with the probability of an idle server at 16.188%.

Probability of n Projects in the System

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Queuing Delays

  • Queue
  • System

Queuing Intensity

  • Intensity

Probability: Original Model

  • Idle Server
  • Busy Server

Queuing Utilization: Original Model

  • Server Very Busy
  • Server Not Busy

Probability: Proposed Model

  • Idle Server
  • Busy Server

Queuing Utilization: Proposed Model

  • Server Very Busy
  • Server Not Busy

Operations Report: How to Craft a Five-Year Plan in an Emerging Sector

When doing bigger, bolder things; optimism alone is not enough to ensure success. The only way to handle risk is to have enough capital to offset failures and to accommodate R&D efforts. In these times of economic and political uncertainty, investors are more particular about the companies they choose to devote time and resources to and may invest more sparingly. For these reasons, planning ahead five years in the extended reality (XR) sector can be a daunting task.

Get smart about collecting data.

While the goal of a five-year plan is to offer succinct and pertinent information to investors in a convincing manner, the sector suffers with excessive hype, a lack of expert guidance and a general lack of capability relating to data analysis efforts. Thus, it is important for companies to illustrate their ability to cultivate insight capability from the onset as soon, as possible.

Consider the moral and societal challenges of mitigating human emotional responses and their impact on a studio. Immersive experiences commonly provoke a deep emotion response in participants and for safety and compliance these areas should be studied and careful consideration to the handling of data and privacy addressed in the early stages of any projects. Some experiences can even cause participants to become physical ill and experience motion sickness, which can have a devastating impact on the studio in the long term. Savvy investors are aware of these issues and expect studios to be able to offer ways to address them. It is possible to make a two or three year plan, however, five years is typically preferred by investors.

By testing and measuring responses to the experience, before mass release, studios can manage these side effects quickly and provide clients with a safer, more controlled experience leading to more positive outcomes for the business. Additionally by collecting data, many other areas of risk can be addressed and decisions by stakeholders reached with more certainty and positive outcomes. Let’s see what a five-year plan entail.

Executive Summary

For startups seeking loans, grants or other investments, this is the most important portion of the business plan. The Executive Summary briefly introduces the studio’s;

  • goals,
  • objectives,
  • strategies, and
  • expertise, as well as, providing a roadmap for how the studio plans to successfully obtain their forecasted results.

In an ideal world, stakeholders would recognize the need for agile, high-value analytics solutions for early on, because having access to charts and analysis reports makes the writing a plan much easier. Even limited data, is better than no data at all.

Management Team

Leadership will ideally have strong educational backgrounds, in addition to, relevant and translatable experience. Technical skills, such as; human computer interaction, real-time 3D computer animation, computer science, television and film production, engineering and dynamics are necessary to understand the intricacies of the landscape. In addition to strong technical skills, the executive management team must be equipped to handle social, political, and economic issues with an equal robustness.

Societal, political and economic issues have a huge impact of the short-term outlook for extended reality (XR) content creators. Leadership must be competent to find the great opportunities in the marketplace, as they arise, and appreciate the need for close looped experiments and data cultivation for quick decision making by stakeholders and key decision makers.

Company Structure

The studio set up in this example might operate as a Limited Liability Company (LLC) incorporated under the laws of the state of its home state. However, these ideas could be configured to work with a corporation or sole proprietorship, just as easily. The founder of the studio, in this example, would function as the Director, along with two to three additional key management members. Further, a formal advisory board is to be formed and expert consultants sought out.

Products & Services

Let’s use the extended reality (XR) business model proposed in the Introduction,

First year products and services will consist of all aspects surrounding the creation, delivery and support of narrative immersive experiences and immersive digital environments for the location-based entertainment (LBE), film and television industries. Throughout the second year, clients will see product enhancements relating to the 6-degrees of freedom and the level of immersion offered, as the studio shifts into incorporating positional tracking, stereoscopic 3D and surround sound acoustics. In the third year, product focus will be on delivering higher quality visual displays and tackling perception issues. In the fourth year, customers will see more product enhancements in terms of interaction, as improvements to motion tracking, interactive user-input, controls and computer vision are realized. In the fifth year, customers will see the expansion of support capability and additional services.

One of the strongest threats to studios entering the extended reality (XR) content sector is competition from pre-existing companies with massive social media platforms. The big four; Google, Amazon, Facebook and Apple are known for creating visionary products and have the proven methods of distribution and the market reach needed to ensure success. Each of these four companies have platforms with the abilities to reach billions and billions of users and are currently producing original content.

Financial Projections: Overcoming the Folly of Forecasting the Future of VR & AR

In this early stage of the extended reality (XR) sector, businesses entering the marketplace face high levels of risk. Historical company information, in and of itself, often falls short in terms of accurate prediction. This is largely because most prediction models do not work well in the current environment given the level of volatility and the unknowns surrounding the security and market index.

The rate of extended reality (XR) trend growth and mass adoption in the economy is one of the best predictors of success for companies in the sector. In the charts and diagrams below, is a sample of a financial projection for the 5-year strategy plan

Data Tables

Design Visualization

Below are interactive bar and line charts. Depending on your formatting, interactive charts are nice to include, however, not necessary if the report is only going to be printed. On the charts below, please note that y-axis figures are millions of dollars.

On these charts, one of the items to note is that the y-axis scales do not match. If being presented side by side like this, this can be misleading. If this was a formal report these scales would be aligned to tell a better story based on the actual data being used.

5-Year Revenue Forecast

  • AR
  • MR
  • VR
  • Other

5-Year Operating Activities Forecast

  • Totals

5-Year Cost of Sales Forecast

  • AR
  • MR
  • VR
  • Other

5-Year Cumulative Cashflow Forecast

  • Totals

Final Recommendations

Although many ideas were introduced on in this section, there is one major takeaway. The studio must begin to cultivate data and prepare it for the analytics process, as soon as possible to maximize on benefits and for presentation to potential investors. Quantitative analysis is essential for enticing savvy international investors, who may be bombarded with pitches from startups seeking capital.

Remember, investors want to how studios measure success and how well do they run their core business. Simply, being creative is not enough. Additionally, in China, where the “gold rush” for VR funding is currently taking place investors are highly aware of the market. A studio must be able to show the benefits of funding operations, able to demonstrate how costs will be cut, solve problems with production and processes and plan for the future using methods similar to the ones proposed above.