In this week's special episode of Industry Focus: Financials, host Jason Moser interviews Brian Ballard, co-founder and CEO of Upskill, which helps enterprise companies implement augmented reality (AR) solutions. Tune in to learn more about where AR is taking off, the challenges that keep it from taking off on the consumer side, and what it can do for industries like manufacturing and technology. Plus, Ballard shares some of the most exciting companies in the space, what kinds of companies Upskill works with, some names that AR-interested investors should add to their watch list, and what skeptics should consider before claiming that AR is dead.

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This video was recorded on July 15, 2019.

Jason Moser: Welcome to Industry Focus, the podcast that dives into a different sector of the stock market each day. It's Monday, July 15. I'm your host, Jason Moser. On today's show, we bring you another installment of Between Two Fools

Brian Ballard is the co-founder and CEO of Upskill, a company focused on building enterprise software for augmented reality devices. I recently sat down with Brian to talk more about Upskill and where he sees augmented reality taking us in the coming years. I hope you enjoy our conversation!


Moser: OK, Brian, first things first, let's talk a little bit about what Upskill is. While it may not necessarily be a household name yet, we think it will be, and we can certainly see you're on your way. Tell us a little bit about the company, what it is you do, and why we should be excited about the company and the augmented reality space.

Brian Ballard: Upskill is a connected worker company. What that means is, we're trying to bring information, ideas, better access to data, all the way from your industrial corporate data centers all the way to the people who are the front line of the workforce. We do that by not putting information at the tip of their fingers, but into their field of view, using augmented reality as our primary interface. Think of us as upscaling blue-collar, new-collar workforce roles that drive almost half of the economy. Traditionally speaking, the current type of digital devices, whether it's computers or mobile phones, laptops, whatever, have not been the right tool for those jobs when you need to work with your hands on something other than a keyboard. That's where AR is a transformative approach to solving problems that have existed for decades.

Moser: I'm glad you mentioned that phrase "field of view." I was looking through your website, and I saw some of the industry research there. It's fascinating to me to think about the fact that, we've seen smart glasses and Google Glass and whatnot, that's never seemed like it took off on the consumer side. But the thing that consumers, investors, often don't see, and I was fascinated to see this, the number of behind this ABI Research that shows that 42% of U.S.-based industrial companies currently use smart glasses as a part of their workforce. Most people don't see that from the consumer side.

Ballard: I think you're right. A lot of this happens behind the scenes. Just as you don't actually see how the warehouse worker engages with the Amazon delivery place, you don't see a lot of the industrial machinery that happens when you get the end consumer output of this massive industrial production engine that powers the economy. But that's exactly where this technology has incredible outsized impact. It's solving a real problem. It's not just a fun mechanic to play with. It's a tool. 

Moser: Speaking of which, we've talked about some of the challenges perhaps on the consumer side, understanding how it impacts our lives, not seeing the day-to-day. What are some of the bigger challenges that you're facing in this space today? What are some of the challenges you've been working to overcome at Upskill as augmented reality becomes more of a known force?

Ballard: The real heavy lift for a company like us that's on the software side, is in this industry auto-transformation that's happening. That's not an overnight thing, you don't show up with smart glasses, and all of the sudden, this takes off. There is a significant amount of complexity in how these large organizations, even small ones, to some degree, operate at these incredible efficiencies. That means you have to plug into these systems without breaking them. That means there's an operational technology component, there's an information technology component, that haven't traditionally collaborated in reinvigorating their own industrial practice. That's something that's changing right now. That's probably the single biggest challenge. All of the things that we do at the edge that touch the person, it's battery-life management, it's prescription lenses, it's comfort. Those are things that, in the grand scheme of things, are simple problems to solve compared to the complexity of an industry transformation.

Moser: One of the more enjoyable things for me digging into this space, and then helping to bring this service to our members, has been learning about all the different markets where augmented reality is having such a great impact. Most people today think gaming or entertainment, and they really don't think or see augmented reality as having a huge impact beyond those spaces. They don't think it's a thing yet. But one of the markets I've enjoyed learning more about is healthcare. Given that, I wonder, what are some of the industries that you're most excited about, where you feel like augmented reality is having the greatest impact?

Ballard: The large-system manufacturing space has been absolutely fascinating to observe the transformation they're going through. We work a lot with aerospace and defense companies, building things that you might fly in, you might ride in, could be some of the heavy equipment that's building the building that you live in. What we can do for the workforce is transformative. Watching how these systems are brought together is one of the coolest take-yourself-to-work days, not take-your-kid-to-work day, that we get to see. It's pretty cool. There's a lot of industries that, if we can drive value there, there's a lot more that follow suit as the technology, muscle memory of how you implement this, becomes more accessible.

Manufacturing is one I'm super passionate about. We're seeing really interesting things happening in the back office side of retail, as you're moving goods and services. We tend to think of things in three functions -- make, move, and maintain -- across the product life cycle. Augmented reality can touch each of those human roles.

Moser: You mentioned retail. What has been unbelievable to me, in such a short period of time, it's just a little simple tool, but when you see it on apps like Amazon or Wayfair or even Home Depot's, you can put the item in that room in your house or in your yard or wherever and actually see if it's going to work. Does it fit? Does it look good? I've actually used that function to buy furniture for our house, and it does work like a charm. It really is a sales converter.

Ballard: Yeah. If you think about like that as a consumer experience, you could also have a consumer experience using AR to help you then assemble furniture, like if you did something like IKEA. The world we operate in is more like in the IKEA factory, like how are they maintaining the machines? How are they doing the QA [quality assurance] processes on the production side. But AR is going to bleed into the home life, too, both in a B2C [business-to-consumer], as well as, as you said, the gaming and brand experience side of things, too.

Moser: Yeah, I'd love to see some of those famous IKEA instructions a little bit easier to follow. That's probably a big opportunity there. Speaking of the companies that are using AR, of course, we're an investing company, we're looking for the businesses that we feel like are changing the world and recommending them to our members. What are some of the companies in the space -- these can be private and public -- that you have your eye on, the ones that you feel like are making such a great impact today? Other than Upskill, because clearly, you guys are doing a lot of good stuff. But what are some of the other companies that you pay attention to in the space?

Ballard: In the public space, where there's scuttlebutt about it, obviously Microsoft is a big one right now with what they're doing with HoloLens, too. Again, a lot of this is focused on the enterprise or industrial side of it. But that is an incredibly important advancement for the mixed reality market, which is the more immersive, wearable side of augmented reality. Go down the stack a little bit, Qualcomm, which is a company that has obviously been a major driver in the handheld mobile revolution, is getting into the AR space. I've said this in blogs for years, there's going to be an entire class of new silicon that's coming out to take advantage of these specialized form factors. Right now, most chips are just cellphone chips stuck in an AR headset. Qualcomm is thinking about things in terms of where's the technology going, how are they going to be the folks that win the future market. So, that's one I keep an eye on. 

You've got the consumer companies like Googles, Apples, Facebooks. They each have their own flavor of stuff they're working on. Google's the only one that has a set of glasses in the market, unless you count Oculus for the VR side. But they each bring their own unique capabilities that are already part of their core competencies into the market, particularly Apple with a developer ecosystem, and Google, too, on AR Coordinator, ARKit. You're building a community that knows how to produce content, optimized around these new interactions, and that lets the creativity accelerate. We obviously saw that play out with the App Store revolution. 

I'll throw a competitor out there. PTC, they're a company that was traditionally known for their CAD design tools. Jim Heppelmann had a vision for connecting the entire product life cycle, and saw the same thing we did around, how do you do that with the workforce in the moment that they're doing the work. I like what they're doing. It's definitely a new take on their business. They're a worthy competitor. 

Those are the ones that are top of mind for me in the public market space.

Moser: It's interesting that you mentioned PTC. While it's not a company that we've recommended, it is one that I've got on my watch list. It's one I found to be very similar to another company in the service, Autodesk. Generally, that CAD software, the 3D design, those engineering firms are taking technology and doing some really cool stuff with it. I'm glad we're able to put PTC in that context. You've piqued my interest even more with that company now. 

We talked about the companies that you like, but also, let's talk about some of the industry experts that you like. There's a world of talent out there, teaching us all about AR and its potential there. What are some of the resources, who are some of the resources that you look to as a way where we can learn more about augmented reality?

Ballard: I joke that there's a bunch of OGs in the space. Every Thursday night, we put on our smartglasses and hold a meeting virtually, kind of like a scene from Kingsman. Actually, there's a lot of incredible talent that helped get this industry off the ground. A lot of it is still involved in the market, whether you have folks building smartglasses, delivering capabilities. We do a lot with folks like Accenture and their augmented reality XR practice feeding into their industry practices. There's a lot of expertise at Intel that's still very active in the market. 

There's also some folks that had an early plan they really doubled down on and created entire business models around helping others understand what's going on. Tim Merel's one from Digi-Capital that has a data-driven insight platform that's been really interesting to watch enrich a data-driven model around where AR is happening. It helps you remove a little bit of your own bias of being too close to a particular segment of the industry. You can zoom out and take a bigger view. 

There's quite a bit of resources out there. I will say, from the days when it was the Wild West to now, where there's a lot of practical problem-solving happening for real ROI [return on investment], it's been an incredible industry to engage in. There's a lot of people that care about what they're doing, and they're very helpful in sharing that experience.

Moser: I want to wrap up here with a question regarding the skeptics that are still out there. I want to refer to an article I recently read, which grinds my gears a little bit when I hear this stuff. It was an article talking about the new Harry Potter: Wizards Unite game. I'm always fascinated by all of this technology. So, I downloaded the game and checked it out. The article says that the game is off to a slower start than maybe they had predicted. They were thinking they would take some of the lessons learned with Pokémon Go to make the Harry Potter game better, and that the slow adoption of this game is a testament to the fact that the masses aren't buying into AR yet. I feel like, even in our interview today, already, we've explained to people that AR is so far beyond just games and entertainment. What do you say to the AR skeptic out there who thinks that AR is just limited to things like Pokémon GO or Wizards Unite, or that sort of game experience?

Ballard: Yeah, it's funny, because one side, I'm like, are there any AR skeptics left? 

Moser: I thought the same thing when I asked the question, but there are some out there.

Ballard: I'm not doing my job. I feel like I've spent a long time Johnny Appleseed-ing that over the last eight years. To zoom out for a second, AR has existed for a long time. It's been over 20 years since that yellow line of scrimmage graphic in football game broadcasts rolled out. That's augmented reality. Take that for a second say, they use AR to make an already good game so much better to engage with for the fan experience. Could you imagine going back to watching an NFL game or any game without that experience enhancing it from your home? I can't.

Take the Pokémon GO example. That game would have been a hit whether or not it had AR. It was a fun scavenger-hunt game. AR is a feature that you could turn on or turn off. I actually don't know the data split between which way people prefer to engage with it. But it was a geocaching game that was fun for people to play. You start with that. You have something that's going to drive value for people in the first place. Can you solve a problem? Then you need to ask, why would AR make that better? You take Pokémon GO, AR wasn't the core experience. But if you apply that back to the football example, it enhanced something that was an incredible engagement mechanism for the people involved. 

I really don't hear much of the "if" anymore. It's "when" -- when is AR going to take off -- and you apply it by domains. In the enterprise domain, there is real core problems that need to be solved right now where I'm getting data to people. And you look and say, can I do this on a computer? Yes, but it's a terrible experience. Can I do an augmented reality? Yes, and this person can now do their work while they're looking at their work with their hands on it. So, you solve the same problem, but with an incredible experience layer on top of it. I think if you look at each domain, the problem sets around it, if AR can solve a problem there in a way that you can't right now, it's just a matter of when it becomes cost effective to do it. 

That's the point of view we bring into wearable AR, is looking at it as, is this new natural interface going to be the driver for change in those industries. But it has to solve a problem first. We look at that when we do mechanics online, regardless of the industry. In field service environments, if they already have a tablet, and that works for them, and it's the same fix every time, maybe they don't need this real-time info. But if it's a game changer for them, that's a market we want to go after.

Moser: We'll leave it there. Brian Ballard, thanks so much for taking the time to speak with us today!

Ballard: You are very welcome!


Moser: As always, people on the program may have interest in the stocks they talk about, and The Motley Fool may have formal recommendations for or against, so don't buy or sell stocks based solely on what you hear. An affiliate of The Motley Fool LLC manages a vehicle that holds an interest in Upskill. Today's show was produced by Austin Morgan. I'm Jason Moser. Thanks for listening! And we'll see you next week!