The global market for drones (also known as Unmanned Aerial Vehicles) has grown rapidly in the past decade, primarily driven by US military demand. Their technical capabilities have matured rapidly over this period, from lab concepts to battle-tested proven systems, underpinning the continuing development of military applications.
In parallel, these technical developments are enabling new commercial markets and driving high growth rates in a range of innovative applications. While early commercial markets include agriculture, environmental research, and security, the last two years has seen an explosion of interest in other markets. The transport, media, energy, oil & gas, minerals and telecoms sectors are among many rapidly developing new markets for UAVs. The cargoes (known as payloads) being transported in this panoply of new applications are typically freight (emergency supplies for disaster relief, pizzas, freight, etc) or simple imaging systems such as still or video cameras.
Underneath all the hype and excitement about the technology though, there is a serious challenge waiting for those looking to create sustainable businesses and business models in this sector. For many commercial applications, the ability to use drones extensively anywhere but in remote regions will be severely limited by the airspace regulations. Additionally, in still or video camera applications, technical inadequacies make them unsuitable for generating more than ‘snapshot’ views of sites, recalling the pedigree of drones as situational-awareness tools for the military. With low barriers to entry for competitors and a growing public concern over privacy issues creating pressures to limit their use, it is easy to foresee a situation where the market saturates rapidly, resulting in plateauing revenues and declining profitability.
However, there is a convergence of technologies happening that will enable drones to develop new high value markets based on sensing and instrumentation. The increasing capability and miniaturisation of consumer electronics is being mirrored in space by the development of smaller, lighter, cheaper remote sensing instruments for a wide range of applications. Many of this new generation of instruments will be deployable on small drones, enabling the acquisition of additional types of data that can be integrated into high value services.
For example, payloads that deliver images in the visible and near-infrared spectral ranges tend to be among the lightest and are common to nearly all UAV platforms, due in part to considerable advancements in consumer-grade imaging products during the past decade. However, when programmes require spatial analysis of imagery (such as importation into Geographic Information Systems), the simultaneous collection of imagery with positional data using GPS is required in order to provide for image geo-referencing. The positional data also needs precise attitudinal data which can now be obtained using Radar altimeters developed for space and military applications. Emerging applications will need more information than just an image and measurements on tree canopy density, crop health, ground moisture, wildfires, and Arctic ice cover are just a few examples of types of information that can now be obtained. And small Lidar systems are now coming to market for situational awareness, enabling operators to avoid collisions by knowing what is in the air around the drone.
It is important to remember that, while the public perception of drones is usually of small multi-rotor devices carrying a camera or pizza box (micro-drone), there is a wide range of other forms of drone, from the nano-drone that can be carried in your pocket, through mid-altitude drones, such as the Predator used by the US military in Afghanistan, to high-altitude drones that can fly for months with surveillance or environmental monitoring equipment.
Heavier sensors, such as Radar, weigh several kg and require power sources beyond the capabilities of micro-drones. Such payloads are more commonly found aboard mid-altitude drones, while exotic payloads such as atmospheric sampling or gas analysis systems currently require the capabilities only large drones can provide. Ongoing miniaturisation is already seeing these types of instrument cascade down the sizes of drones, enabling a whole range of future markets.
Of course, as an aerial platform, drones are emerging into a very competitive landscape, with satellites, aircraft, helicopters, zeppelins, balloons, ground and sea base platforms appearing to provide competing capabilities. These other platforms are often complementary rather than competitive. Satellites and drones can work well together, each providing data on a spatial scale and time frequency that complements the capabilities of the other, while helicopters and drones have differing advantages that make them suitable for different types of applications.
Undoubtedly, future markets for drones will be diverse and challenging. Drones offer the capability to extend the spatial reach of individuals and organisations at relatively low cost compared to the alternatives. So, applications such as extending the ability of field geologists to survey an area of land and automatically inspecting electricity distribution lines and pylons will have immediate market traction. Two major drivers for new markets are likely to be the management of our critical national infrastructure and management and/or exploitation of natural resources. Both have very high value, are mainly away from urban areas, and spread over large geographic areas making access difficult.
This growing diversity of markets and applications creates substantial opportunities for UAV vendors, from large defence contractors to small technology companies. It creates challenges for these companies and opportunities for new entrants. One challenge is the type of business model needed to create commercial success in these new markets. Civilian customers increasingly want to purchase data and information services rather than invest directly in the equipment. For capital equipment companies, especially those used to servicing military markets, this change in business model is a major challenge. Equally, service and data companies wishing to extend their product offerings now need to incorporate unfamiliar, expensive and challenging technologies into their business models.
UAVs sit in a complex ‘Value Web’, rather than a ‘Value Chain’. Understanding this Value Web for different markets and applications will give a clear guide to market positioning and business model selection. (See the diagram downloadable from the panel opposite.)
Companies may choose to position themselves as a provider of technology (airframes/sensors), operational services (UAVs/satellites/helicopters), or applications services (GIS/consultancy). A clear understanding of the best positioning will quickly identify suppliers, partners, and customers in any business model option. This will be challenging, and in this changing and unfamiliar world, fortune may well favour the brave – with success likely to be built on innovative and new business models.
Robin Higgons is a Director of Qi3 Ltd, a consultancy providing hands-on expertise in all aspects of marketing technology-based products, from strategy to implementation. Further information can be found at www.qi3.co.uk, or by contacting Robin directly : robin.higgons@qi3.co.uk.
