Authored by industry expert Mike Blades of Frost & Sullivan, the 2020 Global Commercial UAS Market Outlook focuses on the trends, technologies and growth opportunities in the current commercial UAS market. Released just before the lockdowns associated with Covid-19 took affect, the report still manages to touch on the potential ramifications of Covid-19 but has much more information that is focused on long-term opportunities than short-term challenges.
We recently explored the potential impact of the pandemic during a live webinar, but what was especially telling about the effort to do so was how many questions people have when it comes to the global supply chain, how this situation changes the paradigm in certain industry sectors and what it will do to companies that have the biggest market share.
There are few people that have a better perspective to answer some of those questions than Mike, so we connected with him to capture a few of his answers. We talked though whether or not what’s happening changes the advice he’s given to service providers for many years, what this situation has done to DJI’s position in the space, whether or not we’ll be able to “get back to normal” with drones and much more.
Jeremiah Karpowicz: You’ve talked a bit about the insights that your report contains, but what makes it different from some of the other reports that are available? Outside of companies like Airware and Prioria not being part of it, which as you've pointed out, is somehow a differentiator.
Mike Blades: Yeah, you still see all kinds of "reports" that must be based on four-year old information. But even that might be giving them too much credit.
The thing about our reports is that we're not really trying to provide a market forecast. We're not getting away from forecasting, but we're also not trying to emphasize forecasting. We want to make forecasts to a certain degree, but that's not where we want to focus. The idea behind our research is to point out areas where people in the marketplace can focus on to help their company grow.
We have an entire section called "Growth Opportunities” to show companies where they can take action. It basically points out where there might be an acquisition opportunity on either side. We try to focus these reports on growth markets and it's one of the reasons that we don't issue a report every year. As an example of why that happens, I did a report on ground combat vehicles four or five years ago, but we didn't do another one until this past year because it wasn't a growth market.
Our reports are designed to be a mile-wide rather than a mile deep -- the mile deep issues are approached by our consulting services, but because of the timing we didn’t end up doing a whole analysis on how the pandemic impacts the market.
But that's actually not a bad thing since I imagine the information in this report is somewhat evergreen, which might clash with news or updates that are Covid-19 related which seem to change by the day.
Things are changing fast, but the situation is highlighting new use cases like anti-septic solution spraying and the delivery of critical supplies that will be part of the industry for the long run. These use cases will lead to a better awareness of what drones can do and of what companies like Zipline have been doing for years with the delivery of critical medical supplies, medicine, and blood. Drones can be used to deliver critical items to areas that otherwise can't get them and that's incredibly important in quarantine situations.
We're also seeing companies recognize what they could have been doing if they were up and running with a drone program and that’s going to be very eye-opening.
What do you mean?
I'll give you an example in the energy sector.
For the most part, if a utility company already had drones doing periodic inspections, they could still be doing those same inspections right now, without having to change anything, or at least not very much, about their current operational procedures because of social distancing mandates. That realization is going to make certain companies that much more motivated to integrate drones into what they're doing. They’ll be focused on ROI in the short term but will also know that if something like this happens again, or if we have some other kind of gray rhino or black swan event, they’ll still be set to conduct these types of applications.
It's why our report really focuses on the opportunities in the market moreso than just regurgitating a bunch of numbers.
The opportunities that exist for subject matter experts (SMEs) in industries like oil & gas and construction are very real, but those sorts of opportunities are something you’ve talked about for years now. Does Covid-19 change that paradigm?
I don't think so, but I do think Covid-19 is ultimately a double-edged sword for drone technology.
On the positive side, the situation is creating space for SMEs who can offer specialized services and define situations where the ROI jumps out at stakeholders. Those are applications where you don't necessarily have to do a case study to justify the investment, which is something we can see with using a drone to inspect a flare stack that prevents the company from shutting down the facility, which they would have had to do otherwise. That can save hundreds of thousands of even millions of dollars right there. There's no reason why every single refinery in the world shouldn't have that capability.
SMEs in oil & gas are the only types of people that can get specific about those services and uses, so that's why those opportunities continue to exist. Being the best in a certain area rather than trying to be a jack-of-all-trades continues to resonate and the evolution I'm seeing is more about how these SME's can get even more specific with their services and applications.
On the negative side, there's belt-tightening that's happening everywhere and it's making an impact. A real estate agent who might have been using a third party to takes pictures of a house they're selling with a drone can easily determine they don't actually need those pictures to sell the house. As the dollars dry up contracts are going to get cut or reduced.
Nonetheless, SME's have been and continue to be in the best position to sort through these challenges. Between finding the ROI and further enabling good news stories of what drones can do in response, I think that's gonna end up with a net positive.
Our recent webinar touched on the implications of the pandemic for everyone from the FAA to commercial operators. One of my biggest takeaways from that discussion was around how the “normal” we’ve fallen into over the past few weeks and months is now our new normal. Is anyone who talks about “getting back to normal” wasting their time?
I think so. I think anybody that thinks things are going to be the way they were before Covid-19 is not considering the big picture.
This is going to linger for quite a while and I don't think aviation is ever going to get back to where it was. And if it does, it's going to take a very, very long time. We're hearing about how not every airline is going to come back from this. How air routes are being impacted. There are going to be a lot of jobs that don't come back. There are companies that won't come back.
It's going to be different, and we might see more opportunities with drones, but it not going to be like it was before.
We had some really great audience questions come in during that panel, and I wanted to get your thoughts on a handful of them. One of the recurring questions that came up during the Q&A had to deal with how the coronavirus will ultimately impact supply chains and DJI's market dominance. There’s no easy answer to either question, but what are some of the factors that need to be considered for each?
I don't think the Covid-19 situation directly affects DJI. I'm seeing this whole pandemic have more of an impact on the political side than anything else. What I mean by that is the desire to blame China for everything us being accentuated. You can see that with people like Congressman Matt Gaetz saying and tweeting that the DJI drones being used by first responders are a "trojan horse spying operation" that allows the Chinese to look at our infrastructure.
The thing is, the phones we all carry around have way more data than any DJI drone can capture. The people inspecting critical infrastructure make sure there's a firewall. There's plenty of software that you can use to provide complete control over the data.
I think Covid-19 is going to be used to make us more anti-China and the political fallout is what's going to hurt DJI more than anything. The biggest issue that DJI faces is associated with the conspiracy theory that DJI is stealing data and that was something they were going to have to sort through regardless. Covid-19 just makes it that much harder for them.
How do you see that impacting the issues with supply chains?
There's a major impact, but we've done it to ourselves.
For almost a decade now, there's been no real effort to develop an industrial base in the United States to try and compete. 3DR tried and got smashed. GoPro tried and they also got smashed. Skydio is trying, but they've halted their production, which tells me they're having supply chain problems related to the Covid-19 response.
I'm all for a strong industrial base here in the United States but the problem is that everybody wants it, but no one's willing to invest in it. The Air Force has made an investment in this sector, which you can see in the Agility Prime event but that's focused on cargo delivery and larger platforms. That support isn't there for small UAS.
We also had some industry-specific questions come in, but most of them were focused on opportunity and timing related to the adoption or integration of drone technology in the midst of this pandemic. Are there some specific opportunities that you think are out there for anyone outside of the SMEs that we mentioned previously?
I think there's a very real opportunity to fix these things when they're damaged or broken. Robotic Skies knows this, but fixing drones is a good idea, and it's a service that's only going to be become more popular. The release of the M300 underscores that potential. Companies are building drones that are really robust and can operate in all weather conditions and can operate for a longer amount of time. They won't be disposable, which means they'll need to be fixed.
And this was touched on directly, but there's big time opportunity with inventory management with drones inside of warehouses.
Yes, that's something Ian Smith directly addressed and talked through.
To me, it's a no-brainer. I have a list of five or six companies that have deployed related solutions, and that's undoubtedly non-exhaustive and poised to grow. At some point we'll likely be looking at an entire system or service that might use a drone in combination with other pieces. Maybe that's an inventory process that sees a drone combined with a ground vehicle. Regardless of the details, you can set something like that up to take place at night or when everyone is gone for the day. You can use RID tags to keep track of everything and actually know what inventory is on hand.
Covid-19 is going to have companies looking very hard at anything that can be automated. All of those capabilities are going to be explored in a whole new way.
What’s one thing you want to see happen with drone technology or in the drone industry as a direct result of COVID-19? Are there any new drone technologies that you think will emerge?
Honestly, I don't think it's the technology that's the issue. I think we have technology to spare.
A very robust sense-and-avoid system would push us forward though. That would really drive safety and how well we think the drones can perform autonomously. If we're going to be starting to deliver things under Part 135, and these devices are going to be that much bigger than they are now, they're all going to have to be certified airworthy. To get there at these sizes, will we need titanium engines? Multiple parachutes? Redundant communications? Those aren’t really technology questions, so rather than sort through what technology needs to be advanced, we should be talking about what can be integrated. That's the only way we're going to be able to comply with whatever safety is required to operate BVLOS.
I think that's happening, but it's not really about advancement, but instead understanding. We have to understand how manned and unmanned systems are going to be able to share the same airspace.
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