The View of the Drone Industry from Zurich

September 3, 2018

Today, as we launch our first commercial product, the drone industry is flying into some mild turbulence. The early adoption phase—where innovators focused on drone design an0d getting their vehicles with cameras airborne, without crashing into a tree—is now transforming into a phase of both consolidation and fragmentation.

The non-military side of the industry, dominated to-date by consumer applications, has seen the emergence of a leading drone manufacturer, DJI, competing with a flock of smaller vendors in a highly commoditized space. We arrived at this state after several up-and-coming drone companies have either a) withdrawn from the space (e.g. GoPro), b) failed to successfully bring products to market (e.g. Lily), or c) pivoted their business models to focus on software and/or service development (e.g. 3DR, Airware).

Part of this transformation reflects a realignment of vendor strategies: from vertical solutions that bundle drone hardware, operating system, applications, and operations together in a single stand-alone product; toward horizontal solutions that deliver highly functional components that can be implemented across a wide range of vehicles and integrated with a portfolio of third-party services to target a wider variety of use cases and applications.

Growth in commercial drone applications

This industry transformation and realignment is also driven by the increasing prominence of commercial drone applications. The consumer market, focusing on a limited set of product requirements, was able to achieve product-market fit and significant cost reductions in quadcopter design, leading to consolidation in the number of drone manufacturers. Compared to the light-hearted fun of the consumer market, commercial applications must now confront a more extensive set of operating challenges and serve a wider range of use cases, while at the same time navigate the ever-changing and fragmented regulatory landscape.

Today commercial drones are primarily targeted at five applications: photography and video, survey and mapping, asset inspection, public safety and agriculture (source: Skylogic Research). But the full range of potential commercial uses will only become clear as drone technology develops further, and as customized software, applications, tools, and sensors are integrated or created to fully leverage aerial platforms.

Complex solutions will require multiple specialized developers

Satisfying these heterogeneous commercial applications will inevitably demand a broad portfolio of resources and talents to deliver vertical solutions. Such complex and complete solutions are difficult for a single vendor to successfully build and deliver.
Just as other significant technologies have seen initial market leaders cede ground to competitive players (hey Android smartphones, we’re looking at you), it is difficult for one dominant player to meet the diverse needs of the global commercial drone marketplace. We believe commercial drone solutions will increasingly require the combined efforts and creativity of multiple software, hardware and service development teams. A diverse and open ecosystem of companies, developers, service providers, and system integrators is better positioned to dynamically respond to the demand for commercial solutions in the widest possible range of market sub-segments. And an ecosystem built on global standards will ensure the broadest possible adoption and support for the ecosystem itself, by both developers and users.

An open source global standard will advance collaboration and fuel growth

A standards-based approach will effectively align the specialized development work of all industry players in support of a common software stack, API definition and data interface.  But how will an accepted global standard emerge? As we have seen in many other technological arenas, a top-down imposition is rarely embraced by a wide and diverse number of potential industry participants. However, standards that organically arise from the contribution of many players, that do not advantage individual players, and which are continually updated and refined have a track record of attracting the most global adopters.

Open source standards are an effective way to unify the forces of development teams worldwide, integrating their individual efforts into a more complete and effective whole solution. Customers gain access to multiple platforms that interoperate within shared standards, along with software, payloads and enterprise services from multiple competing vendors that can be easily ported across platforms. Likewise, component, software, module and service vendors are empowered to rapidly create unique and competitive solutions, secure in the knowledge that an open source standards-based ecosystem allows developers to freely value-price their products.

So how can the proliferating segments of the commercial drone market be satisfied with compelling and cost-effective products and services? We believe an open source ecosystem can more rapidly and cleverly satisfy the distinct needs of heterogeneous commercial applications and customer requirements. And by satisfying customer requirements, the industry will accelerate overall unit demand in the drone marketplace, inevitably benefiting all suppliers of hardware, software, and services as well as all successful industry participants.