Episode 123: Enterprise Training in VR with Strivr CEO, Derek Belch

Jon Prial: Virtual reality, augmented reality. Let's take a short and interesting historic journey. Sometimes an old techie like me just can't avoid walking down memory lane. Here's my timeline. 1992, Neal Stephenson seminole book of fiction, Snow Crash, is published. I won't go into how much I love Neal's books, but I will tell you that in this book, he wrote about the metaverse, which includes, I'm shortening here, a virtually enhanced physical reality and physically persistent virtual space. Now the way to access the metaverse through personal terminals that project a high quality virtual reality display onto goggles worn by the user. Darn, that's some pretty good prognostication. Let's jump ahead a decade or so to the launch of Linden Lab's Second Life. In its first 10 years of growth, over a million online individuals interacted in this virtual world and they were represented as avatars. Let's thank Neal Stephenson for popularizing the use of the term avatar and let's think about how that might compare to today's massively multiplayer, online role playing games. That's huge. And of course, people then might be using cool hardware, a la Oculus Rift. Just for some numbers, what about Pokemon Go? No real extra hardware, but it peaked out at over 28 million users in a day. Now why do I share all this? Because all this is consumer facing, and there's no doubt that with where exception, consumer facing technology often informs enterprise solutions. I do want to thank Blackberry and RIM for leading the way by the way, for that thinking enterprise first. But today we are going to take VR into the enterprise for real, for ROI. And this is not fiction. I'm Jon Prial, and welcome to the Georgian Impact Podcast. So Derek, before we even get into STRIVR, I'd love to actually start with your personal story. There you are in college, playing sports, focused on media studies and all of a sudden you're in this non- consumer place. How did that happen?

Derek Belch: Yeah, my background, I grew up in San Diego, went to Stanford as an undergrad, played football there. I was a kicker on the team from'03 to'07. Those were the dark ages of Stanford football, for those who follow college sports. And then I went and worked in consulting for a couple of years and then I went to business school at USC. Well I really enjoyed it and learned a ton of things that I knew I didn't know, from a fundamental business perspective. I had this crazy thought in my head that if I didn't see coaching before I turned 30, I would regret it forever. So I called David Shaw, the head coach at Stanford, who I had played for, for one year, my senior year at Stanford, and I just told him what was on my mind. He's like," Well, to be honest, you're probably too smart to be a coach. I get a lot of these phone calls all the time. But if you want to, sure. But I can't, in my heart, have you come back and be an unpaid intern, because you're just too smart to do that. If you want a real coaching job, we have a graduate assistant role that would be open. You'd have to get into graduate school." I'm thinking, okay, I don't really need another master's, but okay, and" Come on up." And so that's what I ended up doing. I applied to another master's in the department of communication. I got in, I ended up coaching there for two years and because I was also a student, I had to do a thesis, and my thesis was to come up with a way to train football players using virtual reality. I partnered with a professor, Jeremy Bailenson, who now sits on STRIVR's board. We'll get to that a little later. And the academic project was so successful that David Shaw, two years later sat me down and said," Hey, you've been a great coach. If I were you, I wouldn't coach anymore. I would go do that thing over there because this is awesome. And you're probably two years ahead of anybody else. And I'd love to give you some money to get off the ground."

Jon Prial: So the kicker got the boot.

Derek Belch: Yeah. Yeah. Not too many people get fired with a$ 30,000 check in their hand from their boss to invest in them.

Jon Prial: Awesome.

Derek Belch: Usually it's severance. Yeah in this case, it wasn't severance. It was," Hey, if you want to keep coaching, go ahead. But if I were you, I'd get out of here. I'd love to stake your company if I could." That's how it played out. That's how STRIVR was born.

Jon Prial: That's so cool. So the thought of picking a market, obviously you were helping people, athletes get better. How did you end up picking your first market in STRIVR then? Tell us a little bit how you got to that point.

Derek Belch: Yeah. The sports part was simple because we had just done that, academically. And we had so many players and coaches that have been at other programs in addition to Stanford that had been through the office over the course of the 18 months that I did this project. And they were like," Damn, this is good. This is so cool. I'd spend a gajillion dollars on this if I could." Right? So it was tailor made to go in and sell into the sports world right away. And that's what we did. We took David Shaw's$ 30,000, that was all we raised. So we basically raised nothing to start. And before we knew it, we had three million in revenue within six months within the sports world and then another five million the next year. And then we got the phone call from Walmart about 18 months in and they said," Hey, we've seen what you've done in sports. We'd love to talk to you about employee training." And after my first meeting, two things stuck out to me very quickly. Number one, Walmart's problems are not that different than sports teams from a training perspective, right? So this formula was going to be very similar in the enterprise world. And then number two, I'm just doing the mental math on how big Walmart is, how big Fidelity is, how big this company is, right? And I'm like," Oh my God, Walmart could maybe pay us more than every sports team on planet earth combined." So just a much larger market was apparent right away. We're talking tens of millions for sports and tens of billions for the enterprise. And so that was very obvious, very quickly. And on the flight back after that Walmart meeting, I decided we're going to pivot the company to be more of an enterprise play. And that's what we did.

Jon Prial: That's awesome. Many years ago, I was responsible for sales enablement for thousands of reps and tech reps. And I always struggled to find something new. Those days, it was going from talking heads to maybe bite- size knowledge. What were the different learning techniques? Back then whiteboard selling became hot, but there was no AI. So now with AI and VR, how's your view of training? How has that changed?

Derek Belch: It's super interesting because we see this insatiable desire in the enterprise for new technology, new tools, new toys, anything to increase employee engagement, anything to increase retention, real- world performance, et cetera. And that is juxtaposed with many, many, many large companies that still have training materials in binders. Some of them are," Yeah, we're in the middle of our migration to e- learning." I'm thinking," Oh my gosh."" We're putting our PowerPoints online. VR will be a 2022 thing." It's like," Oh wow. Okay." And then others are just ready to go right now. So again, a very, very interesting juxtaposition. I think as it relates to the new trends of AI, VR, AR, XR, all these things, machine learning, I think the thing that is most exciting about what we're doing, that we're certainly excited about internally, and then you paint this picture for the customer, and they get excited as well, the fundamental premise behind VR is no different than what pilots have been doing in flight simulators for decades.

Jon Prial: Nice.

Derek Belch: Yeah. And you can put an employee through a learning by doing experience. And then where does the AI and the ML and all this stuff kick in? Well, when you think about the fact that people look around a headset, just like they do in real life, you're basically getting a nice little slice of, okay, how is this person going to actually perform in the real world right here in this training simulation. It's not a pencil and paper test where it's like, yeah, I got the question right. But who knows what they're going to do when the live bullets fly, metaphorically. That is what's exciting is we can literally give them a blueprint and a printout and a score for," Hey so- and- so is not ready to do the job," or I know you need 10 hours of training. Historically, this person just showed they're ready to go in 20 minutes. Get them going. Right? That's what we're really excited about and that's where I think we start to see the conversions of a lot of these tech trends with what we're doing.

Jon Prial: That's exciting. So let me talk about some of the segments then, within a training market. I'll throw some ideas. Management training, how to deal with people, how to interview people, how to avoid bias. That's just sitting across the desk. How does something like that work?

Derek Belch: Virtual reality in that sense, a very awesome tool that can be complimentary, supplementary and maybe even all out replacing role- plays. And it's kind of like role- plays on steroids, visualization on steroids. What we're seeing with VR is, all right, I go into this virtual world, I'm sitting across from an avatar and people take it very seriously and they fumble their way through it, or they do really well. Their hands sweat. They'll take off the headset and say," I don't like firing people and I was really uncomfortable doing that." Okay, good. Go get some more reps so we can get you comfortable with it. And then the other big piece here is what ROI are you looking for? They all have money to experiment and do some innovation things and have some fun. But at the end of the day, they're not going to do an enterprise wide deployment without some sort of ROI attached to it. And they say," Okay, what should my ROI be here?" So that's really a big one is we help guide them to the ROI they're going to need to show to the CFO to sell this across the organization. No different than any other enterprise software scale over the last 30, 40 years.

Jon Prial: Can you talk to me about the data that you collect and how you make that a virtuous cycle and keep getting things better?

Derek Belch: From the very basic, who used it? How long were they in the training? What answers did they get right and wrong? All that, right? Just the basic, basic stuff. Don't no different than pencil and paper, e- learning, et cetera, any sort of training or quizzing or testing. So we're doing all that. That's the easy part. And then we start to get a little more advanced. We do capture a lot of data related to head tracking when someone's in the experience. Eventually you're going to see eye tracking and other biometric markers. When you start to add that up, okay, now we can go a little deeper and we can say," All right, you told us that in this learning module at minute three, second 17, you want everyone to be looking at that thing over there in the corner, in this safety module." And guess what? The data says that only 30% of your people were actually looking at that thing. Right? So either we have a training problem here, or we have a real world operational problem or whatever, right? So there's a lot of inferences you can draw. That's when we start to go even deeper. And then when you think about something that I know Georgian is very passionate about and the future of what we're going to do, then when you think about AI and machine learning and all this, well data begets data, right? It becomes like this infinite loop, all right, the more people that are using the training, the more data we're collecting. The more data we're collecting, the more data we have to build the models. The more data the models have, go all the way back to the more people who are using it. Right? And on it goes. It just circles itself again and again and again. And I think interesting parallel for STRIVR is self- driving cars. A lot of the companies that are trying to build the best self- driving car software, it's those that have been doing it for the longest that have more data than anybody else that can make their models smarter. And you look up and 10 years later, why have some companies won and other companies lost? Well, they just had more data from the beginning, and that's kind of where STRIVR is right now. We have probably 100 to 1, 000 times more data than anybody else. And so our models will be that much further along when they start to become more refined and more specific.

Jon Prial: And you could leverage the data across companies as anonymized. So if someone's in a management training session, what you learn, you'll be able to share vertically across different companies in the same space?

Derek Belch: Yeah. We don't own any PII or any employee specific information, but we do own the aggregate data associated with the usage of the product, the answers to questions, other things. And then eventually, okay, how do these map back to performance in the real world? And we can create a model off of so and so employee at this company did this. And that's interesting because the other employee at the other company has this reaction time combined with this head movement, they do this. And we can start to piece all that together. I think our vision is not that different from what we've seen with adaptive exams, the GMAT and other exams out there where it's not only from a content perspective, it's like adaptive learning. But then from a data perspective, you're going to be sent down certain paths based on how you perform and that's going to impact your score that is spit out at the end. So super, super interesting and then the sky's the limit with what we can do.

Jon Prial: That's awesome. Let's talk a little about the ecosystem and the ROI. What different types of companies do you partner with? Because I don't think you make some of the hardware, for example.

Derek Belch: Yeah, so we're not a hardware company. We do do a lot with the hardware. We touch the hardware, literally and metaphorically in many ways. But we've mainly used hardware from Oculus, the Facebook company. To date, they have the best user experience out there relative to other headsets. We're starting to look at other headsets as more and more companies invest in this space. We're continuing to work with Oculus on things they're doing. But I certainly see a world where down the road, STRIVR is Switzerland and we'll just pick the best hardware for the job, right? Or customers will buy hardware and we'll make it work no matter what hardware they want. So there's that. And then outside of that, most of our work today is internal, but we're starting to partner with production companies, with 3D modeling companies, with other learning companies, to where we can start to teach our methodologies to those folks. And we can start to not only empower our customers by letting them use our software tools around content creation and device management and data and all this, but we also can start to empower partners. So for example, if today our customer solutions team is 50 people, I would love to not have to get it to 500 people to grow that part of the business. Instead, get it to 100 and then slow drip the hiring from there, because the ecosystem has started to take over. No different than what Salesforce and Workday and a lot of these other SAS companies have done.

Jon Prial: Yeah. You don't need to be the one that builds the internal structure of every building and every office building or resales. That's a great thing to outsource to the creators that do that, right?

Derek Belch: Yeah. We feel very strongly about our model, so we're going to keep going with us, and then eventually we'll start to open it up. Our mantra is," We'll do it for you, we'll do it with you and then you'll do it yourself." And then that's kind of the approach that we're taking.

Jon Prial: Give me a couple of cool ROI stories, maybe a couple of different verticals in terms of the benefits that your customers are seeing. Because I think people will find this really interesting.

Derek Belch: Yeah. I love this question. It's really pretty simple with a bunch of nuances below the surface. So there are two major buckets of value that our customers are seeing. Number one is time savings and therefore cost savings. We've literally put, for example, 20 minutes in a headset, side- by- side with an hour in front of the computer in e- learning, or three hours in the lecture or whatever they used to do. And lo and behold, the learning is what I like to say neutral to positive. At worst, it's just as good as what they used to do in a longer amount of time. At best, it's even better because it's a learning by doing experience. So when you're a company, a large organization and you say," Okay, I have a 100 hour onboarding program for this role, oh my gosh, can I get that down to 50?"

Jon Prial: Wow.

Derek Belch: And achieve the same results, 50 hours, times 12 bucks an hour times 100,000 people. That's a lot of money saved, right? That is a very, very clear and obvious bucket of value. And then the second bucket of value is what I like to call real- world performance improvements. And that is the notion that, okay, people actually are going to learn more coming out of this, and therefore they're going to perform better in the real world. And unfortunately, I can't say specific customer names tying to specific outcomes, but we can connect the dots on a few things. We are seeing our customers report back to us. They are more operationally efficient. Their are people are performing better. Operations are 3% better. Well, when you extrapolate that out across the chain, that's tens of millions of dollars, right? Fortunately, for STRIVR and for these individuals, unfortunately for the world, we have seen some of our customers have store robberies and active shooters and the things that they've been training their associates on, and we've seen people come back and have said verbatim," I think this helped save my life because I was calm, I knew what to do, and I may have done something stupid if I hadn't gone through the training." Right? So emotional preparedness, operational preparedness in the face of danger, we are seeing this work. It is working.

Jon Prial: Derek, just kind of take me through how you define the market, where you see this as going, where we are today and what the future holds?

Derek Belch: Yeah. Super interesting and exciting time to be at STRIVR and the VR AR world. I think, especially in the current climate, obviously no one could have predicted the magnitude and swiftness to which the pandemic has changed things. But a lot of what we're seeing today was already happening with video conferencing and remote work and work from home and flexible and faster ramp time to proficiency and all this stuff, right? It was already happening anyway. And then in comes COVID, and now things that were on strategic roadmaps for three to five years, happened in three to five days. We've seen our customers and the world move very quickly and to change and to adjust to this new normal. Now as you think about, okay, we were already going down a path for VR to be impactful in many ways, and now even more it's accelerated that. And we're seeing a juxtaposition between, I can't think about anything until COVID lifts. Okay. We respect that. With this insatiable desire for more information about virtual reality and augmented reality, and how are these technologies going to impact the workforce going forward? How can these technologies impact my workforce that's going to be working from home or that we're not going to be traveling as much, or all these things? I used to be able to send X number of people to a corporate headquarters for a training. We're not going to do that anymore. How can VR be a tool that can be valuable? And that's happening right now. And so we're very excited about the fact that we were already doing some really interesting things and some category creation and market disruption things, and now even more so, the world is very hungry for what this affords to end users and organizations.

Jon Prial: I'd like to wrap it up with just one final discussion. I'd like to talk a little bit about trust. Here we are, we're asking people to put on a VR headset. They know, they somehow in their hearts understand they are being tracked by their employer. How do you think about that? How do your customers think about that and what does the end user feel and what kind of messages do you deliver and do the companies deliver?

Derek Belch: Well, first and foremost, we're very honest with the legal teams that we talk to. We say," Hey, here's what we're doing. Here's what our product does. Here's what it doesn't do. You've never seen anything like this before, so let's just tell you how it works." And they don't have any one legal agreement that encapsulates what STRIVR does, start to finish. And we actually don't see the end user really bringing this up. And I think it's a pretty simple as to why. It's fun for them. We see a lot of the frontline workers or a lot of our end users right now, a lot of them are younger and or they have different education levels than some of the knowledge workers. And they play video games for fun and they learn differently. They'll be the first people to raise their hand and say," I am a visual learner. That reading and being lectured to thing doesn't work for me." Right? When you add all that up, whether someone is 17 and working in a Jamba Juice, or 60 working in a BMW plant, they've been there for 30 years, it's different, it's engaging, it's fun. And to them, it's like, okay, no different than putting my answers in on an e- learning module. Right? And here's an anecdote that has been one of my favorites over the last five years. We were kicking off with one of our customers that is a logistics company last year. And I believe he's 67 or something, one of their frontline workers. And he goes through the training and he takes his headset off. And the first thing he says is" I can't wait to tell my grandchildren what I did at work today." That's it. I mean, it was fun, right? And because it was an awesome user experience, because it felt very lifelike and real, he had the trust right away, not only with the experience, but with his employer for investing in him and bringing this new tool to his learning. Now for STRIVR and for our customers that are building and administering that training, we can't violate that trust. Right? That's something that we take very seriously, data breaches, very, very real in the world. And so I'd be remiss if I didn't say that we take all those things very, very seriously, and we make sure we address them upfront.

Jon Prial: And if you told me I had to take 10 hours of training and I did such a good job I'm done in three, I'd be a very happy camper.

Derek Belch: Yeah.

Jon Prial: That's that's a great story.

Derek Belch: Yeah.

Jon Prial: Derek Belch, thank you so much for taking the time. This is a really fascinating place. I can't wait to see where this is going. My thanks to our future prognosticators, Neal Stephenson, going back to the nineties, and this is real world, real time. It's a pleasure. Thank you so much.

Derek Belch: Yeah. Thanks, Jon. I appreciate it.