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Mind your drone business

Amazon is just the tip of the iceberg – companies are pouring hundreds of millions into the development of commercial drones

Military inventions have a knack for taking the commercial markets by storm. Think of innovations such as the jet engine, microwaves, GPS, and even disposable razors – all these started their lives on military drawing boards, and all have risen to become multibillion-dollar commercial industries. Now there’s another innovation on the cusp of joining that list – the drone.

Despite its cutting-edge image, the drone, or unmanned aerial vehicle (UAV), might be the oldest of the lot. The first recognisable “drone” dates back to 1849, when it was just an unmanned hot air balloon used to drop bombs on enemy cities. The concept of pilotless aircraft developed during both world wars, and reconnaissance drones featured heavily in the Vietnam war. Nowadays, drone warfare in areas such as Afghanistan have redefined the theatre of war.

Yet it is only comparatively recently that drones have taken off beyond these military origins into the commercial and consumer markets. In the past 10 years, this branch of drone tech has come a long way.   

The oft-cited example is, of course, Amazon, which has long been hitting the headlines with its delivery drone programme. Amazon has a splendidly simple vision, if hard to put into practice – to escape the messy problems caused by roads and humans and go fully autonomous, up in the sky. There is still a lot of groundwork to do before this vision can fly. Yet, as a concept, it encapsulates the bold and disruptive potential offered by drones.

But the truth is that Amazon is not the only one to see this potential – it is just the tip of the iceberg. This market is expanding rapidly at a grassroots level. In 2017 alone, $200m of investment was directed towards drone startups as venture capitalists raced to acquire a stake in this high-growth market. Goldman Sachs has predicted a $100bn market opportunity for drones between now and 2020.

The evolution is happening as we speak. In the commercial sector, drones are already changing the way businesses operate. Take the construction industry, for instance, where drones are being used to inspect and survey sites, issue progress reports, locate defects and drive safety improvements. And in agriculture, aerial surveillance drones are assisting with precision crop monitoring, soil mapping, field analysis and yield optimisation.

There are plenty more possibilities, with drones beginning to impact weather forecasting, shipping, search and rescue, right through to law enforcement and wildlife monitoring. Even in insurance, drone data is being used to assess risk and calculate premiums. And that’s before we consider the thriving consumer market, where nearly two million recreational drones were sold to members of the public in 2016 alone.

This is still a relatively young market, and the defence industry still takes the biggest share – about 70%. But it is the commercial sectors that are growing at the fastest rate, and despite making up only 13% of the current market, commercial drones are expected to dominate in the future. The UK is expected to account for 10% of drone spending between 2017 and 2021, making it a market leader for drone investment alongside the US, China, Russia and Australia.

And there is another element to this lucrative industry. The rapid growth of commercial drones is expected to open the floodgates in merger and acquisition activity as vertical integrators vie to consolidate the industry and horizontal integrators seek to buy capability. It’s not just the efficiency of labour that drones are altering, but the very way businesses do business.

So, curious as it seems, an invention that started life as a crude balloon used to rain down fire on society from above may now come to revolutionise it from the ground up.

This was last published in July 2018

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