Commercial drones are here: The future of unmanned aerial systems
Investment
in unmanned aerial systems is soaring, but challenges remain. Here’s what
stakeholders need to know about the evolving landscape.
Most people think of a drone, also known as an unmanned aerial system (UAS), as
a sophisticated military technology or a hobbyist’s tool for capturing images
of foliage, sporting events, and cityscapes. But businesses across industries
realize that drones have multiple commercial applications, some of which go
beyond basic surveillance, photography, or videos, and they are already using
them to transform daily work in some industries. Insurance companies are using
drones to inspect damaged assets, for instance, and farmers are sending them to
monitor crops and collect soil data. Even more dramatic changes could be in
store as innovators explore new uses, including drone-delivery services for retail stores and air taxis for commuters.
The United States has been a particularly
strong source of commercial growth, with the value of drone activity rising
from $40 million in 2012 to about $1 billion in 2017. By
2026, we estimate that commercial drones—both corporate and consumer
applications—will have an annual impact of $31 billion to $46 billion on the
country’s GDP. Developments
within the United States could thus signal how commercial drone usage and
investment will proceed in other markets. (This article focuses on the growing
commercial market, as the military-, security-, and intelligence-applications
markets are already advanced.)
As with any new industry, the UAS market
could take some unexpected turns. Investment is soaring, but many companies are
directing their funds to untested applications. Take air taxis, which are
drawing much press attention. These technologies are still in early
development, and public acceptance is uncertain. Other hurdles involve
regulatory approval and infrastructure. Government officials will not
rubber-stamp a proposal for unpiloted flights, nor will cities automatically
invest in infrastructure for drone takeoffs, landings, and storage. The
situation with air taxis may be extreme, but similar issues could arise with
any UAS application.
Although some of the most innovative drone
applications may take years to develop, stakeholders—government officials,
investors, regulators, members of the UAS industry, and corporate adopters—must
understand how the landscape is evolving and begin refining their UAS
strategies now if they want to branch beyond their current uses and capture
additional value. This article addresses three topics that may help them sort
through the current uncertainty:
·
UAS value. What is the real potential of the market? Which
segments of the value chain are attracting investment, and are there areas of
untapped opportunity?
·
Factors influencing the
UAS market. What are the forces that will
determine how the UAS market evolves? What technologies provide growth
opportunities, and how can companies proactively shape demand?
·
Initial strategic
considerations. How can UAS stakeholders capture or
create value? What issues need their attention now?
Understanding
the UAS market
Originally viewed as a military tool,
drones have established a presence in the corporate world over the past five
years. Some big tech companies are investigating drone-delivery services, while
others are exploring whether specially equipped drones can supply Internet
connections in remote areas. Some players are also investigating
industry-specific solutions. For instance, construction-technology company
Veerum uses drones and 3-D imaging to create “digital twins” of projects,
accurate down to the millimeter, allowing companies to validate their work
against 3-D models.
Although the tech giants tend to grab
headlines with their drone initiatives, start-ups actually drive most UAS
activity; more than 300 have entered the space since 2000. These companies
typically focus on hardware, support services, or operations . The latter is a
broad category that includes software and services related to navigation,
unmanned traffic management (UTM), the mitigation of threats related to
unmanned aerial vehicles (UAVs), and the construction and maintenance of
UAS-related infrastructure, such as vertiports to accommodate drones that take
off and land vertically.
Start-ups have attracted more than $3
billion in funding to explore new UAS applications, industries, and geographies
(Exhibit 2).3OEMs
have received almost half that amount (about $1.4 billion), and other big
investments have gone to companies specializing in navigation and UTM ($371
million) or data management ($328 million). Businesses that compete in multiple
segments have also had a strong showing, receiving $356 million in funding.
As the market matures, more value will
migrate to software, especially for turnkey solutions that improve UAS
operations by enhancing detect-and-avoid systems, enabling analytics, and
assisting with navigation in areas where drones cannot rely on a GPS signal.
Companies would also value turnkey software solutions that support autonomous
flight and integrate air-traffic control of drones and planes.
Popular UAS applications
The most mature applications—and the only
ones where drones are widely applied in either the corporate or the consumer
sector—involve short-range surveillance and associated photographs or videos.
Drones capable of long-range surveillance—defined as beyond the visual line of
sight—may enter the market over the next few years.
Some drones that assist with operations
are on the market, and this category is still growing. They complete tasks
normally counted among the “three Ds”—dull, dirty, or dangerous, such as window
washing. Drones have also found a place in entertainment and advertising,
either pulling banners or putting on light shows.
Even more intriguing are the applications
that are still under development or in their early stages, including drones
equipped to emit radio or video signals or other forms of bandwidth for
connectivity. These might be most useful for extending connectivity to remote
areas or increasing it when demand surges. Drones for helping the movement of
objects are being used on a small scale, with UAS delivery services expected to
become available in the next five to ten years. More radical transport
uses—say, drone-enabled flights—would require a much longer development and
approval timeline.
The
factors influencing the UAS market
The value of commercial drone
manufacturing and related service activity in the United States could rise to
$8 billion to $20 billion by 2026.4The
future of this industry is still up for debate in many ways, since it depends
on five factors that will dictate its value and influence (Exhibit 4). First,
and perhaps most vital, is the issue of public acceptance. Several surveys have
demonstrated that people have reservations about drones; in a 2016 poll, only
44 percent of US respondents supported their use for delivery services.5Attitudes
may soften as drones become more common, but the industry has to build a lot of
confidence before people will accept thousands of them flying overhead or board
UAS air taxis.
As with any industry, economic drivers
will also shape demand. In the United States, companies may unlock the greatest
value from drones that streamline operations and facilitate automation rather
than more headline-grabbing applications, like drone delivery and transport.
This is part of a broader move to automate and digitize operations, and the
best companies will keep such economic drivers at the forefront as they develop
their UAS strategy. Although these uses may not attract as much interest as
those related to transport and delivery,
they are more attainable and potentially more lucrative, at least over the short term.
Finally, there are some practical factors
related to technology, regulation, and infrastructure, and they will largely
determine which drone applications are feasible. We looked at each of these
areas in detail to determine what needs to happen before companies can unlock
maximum value from drones.
Technological capabilities
Drones rely on a number of sophisticated
technologies, but many of these are still under development. Until we see
improvement in the following areas, many of the most innovative UAS
applications will remain at the concept or pilot stage, including those related
to drone delivery and transport.
·
Autonomous flight. While a few drones can already fly without a user
directing their path, this technology is still emerging. Over the next five
years, system-failure responses, dynamic
routing, and handoffs between human and machine controllers should improve.
With greater autonomous control, companies will be able to pursue uses that are
now elusive, such as the repeated and unpiloted surveillance of pipelines,
mines, and construction projects.
·
Battery
performance. Rapid
improvements in battery technology will
also unlock new value from drones. The energy density of lithium-ion batteries
is improving by 5 to 8 percent every year, and their lifespan is expected to
double by 2025.6These improvements will
allow commercial drones to fly for more than an hour without recharging,
enabling many new uses.
·
Detect-and-avoid
technologies. These systems, which help drones
avoid collisions and obstacles, are still in development, with strong solutions
expected to emerge by 2025. (Drones that hobbyists use have some
detect-and-avoid systems, but they are relatively unsophisticated.)
·
Integrated air-traffic-management
(ATM) systems. Drones currently fly below the
height of commercial aircraft because of the collision potential. UTM solutions
that can track drones and communicate with air-traffic-control systems for
typical aircraft are not expected to materialize for more than a decade, making
high-altitude flights impossible until that time.
·
Location technologies. Drones must be able to identify their location
even in areas where GPS signals are limited or degraded, such as densely built
cities and remote locations. Like air-traffic-management integration, the
widespread rollout of a GPS alternative is more than ten years in
the future.
Regulation
Most countries are now grappling with
regulatory issues related to drones, as they would with any innovation that has
implications for public safety. The United States, for instance, now has a
Drone Advisory Committee, which includes regulators and industry stakeholders
tasked with integrating drones into the national airspace. Regulators are
charged with thoroughly evaluating the implications of new UAS uses, including
potential safety issues, before they reach the market. That means the
regulatory process and timeline will ultimately determine when many UAS
applications become viable.
Within the United States, regulators might
develop a comprehensive suite of regulations that covers three areas: UAS
vehicles, operations, and operators . For instance, regulators could consider
whether drones can operate beyond the visual line of sight, with a positive
decision enabling more uses, such as the delivery of medications to patients in
remote areas. Based on safety analyses, regulators could also issue new
guidelines related to autonomous flight, weight and altitude restrictions, and
other areas. Such regulations might remove additional roadblocks for drones.
Infrastructure
Most current UAS applications have modest
infrastructure requirements. A drone to map construction sites might simply
land on an empty patch of dirt and recharge its battery using the same power
outlet other devices do. But as UAS sophistication increases, so will
infrastructure requirements for charging stations, landing facilities, and
other assets. Such issues may not seem like a pressing concern given current
infrastructure needs, but private investors and public officials are aware that
the future UAS landscape may look very different. Some have already begun
constructing supporting infrastructure or acquiring air rights, since first
movers can claim prime locations.
While requirements will vary with every
application, robust UTM systems are essential to enable safe, low-altitude
operations within the national airspace. The beacons and other infrastructure
are not yet in place for such systems. (As noted earlier, applications that
require high-altitude flights will not be viable until UTM systems can
communicate with air-traffic-control systems for commercial aircraft.) All UAS
applications also require counter-UAV solutions to detect and safely disable
unauthorized vehicles in the airspace.
In addition to these universal
requirements, most future applications have other significant infrastructure
needs. Consider a few facilities that companies, governments, or fleet
operators might need to create to support transport and delivery:
·
vertiports with multiple takeoff and
landing pads for drones transporting people and cargo; single vertistops with
one landing pad may suffice for smaller stations
·
service centers where air taxis and other
transport vehicles can be stored, inspected, and repaired
·
distribution hubs to load and receive
goods from drones
·
charging stations for UAS batteries
·
receiving stations (such as lockers,
boxes, or platforms) to receive objects delivered by UAS
When stakeholders research such
infrastructure costs—and many are now in the process of doing so—they may find
that some of their most ambitious plans are unfeasible or cost prohibitive.
Public versus private funding.
As the UAS market increases, industry and
government leaders must determine the right mix of public and private
investment—but the answer may vary depending on the proposed application. For
instance, some vertiports may serve a handful of niche businesses and thus
provide minimal public benefits. In such cases, it might be difficult to argue
that the government should play a role in development, operations, and
maintenance. But the opposite might be true for a vertiport used in a transport
system where any citizen could purchase a ticket or for one used by emergency
responders.
Funding decisions that are made today will
have major repercussions down the line. In locations where the government does
not have a stake in UAS infrastructure, businesses could create a closed system
of vertiports or other assets for their exclusive use. They could then refuse
access to other companies or force them to pay a tariff, creating a monopoly.
The potential for this scenario could give governments an incentive to create
their own infrastructure or purchase a partial stake. Alternatively, government
regulators could opt to play a larger role in ownership and access rights for
privately owned UAS-infrastructure systems.
First
steps in forging a UAS strategy
Success in the UAS world requires a
balance of optimism and realism, action and patience, confidence and restraint.
The following considerations can help stakeholders begin building the right UAS
strategy:
Members of the UAS industry
While it may be tempting to focus on UAS
applications that are making headlines, industry players such as manufacturers
and software providers might achieve better returns through less flashy
investments, such as drones that help companies automate manual tasks. OEMs and
component providers should also determine which areas of the value chain are
already crowded with competitors, since they may achieve better returns
elsewhere. OEMs should try to determine what drone elements they would like to
build and what they would like to outsource, as well.
Corporate UAS adopters
Companies have a lot of options when it
comes to drones and may be tempted to pursue multiple applications. But these
are not just fun toys—they often require big investments, and they need to be
fully integrated into work processes to produce a significant impact. That’s
why a winning approach often involves focusing on a limited number of
applications that solve critical problems or deliver a real bottom-line impact.
Winning companies should also consider how they will use drone data as they
design their initial strategies. For instance, UAS images may show how remote
physical assets typically deteriorate, allowing companies to develop better
predictive-maintenance schedules.
Investors
Drones sometimes require more time to
deliver value than typical investments do, so investors need to think about the
long game as they develop their strategies. They may also benefit from focusing
on areas of the UAS value chain that have received relatively little
investment, such as infrastructure, or drone-related services.
Regulators
As regulators begin to shape guidelines,
they could build their understanding of the evolving UAS market by
collaborating with a broad range of stakeholders, ranging from traditional
aviation leaders to drone specialists to end users in the private sector. This
outreach will give them a better perspective on potential UAS uses, product
development, and technological or infrastructure constraints.
State- and local-government officials
At all levels, officials should consider
the government’s role in the UAS world, including the use of public funds for
infrastructure. The plans and budgets that they develop today should consider
the potential role that drones will play in new mobility models over the next
5-, 10- and 15-year horizons, as well as the associated infrastructure needs.
During these early days, officials might benefit by investigating creative
partnerships with private companies to design and fund critical projects, such as
vertiport construction.
Although drone-enabled deliveries, air
taxis, and many other UAS innovations will not be widely available for years,
they could rapidly transform society when they do. That gives all industry
stakeholders a large impetus to identify roadblocks and realistically consider
potential applications now. Within the United States, where the estimated GDP
impact is expected to reach $31 billion to $46 billion by 2026, the stakes
are particularly high. Some of the best opportunities may arise in areas that
address current business problems, such as low productivity, rather than more
transformative applications, like air taxis, or areas that are only just
beginning to generate interest, like infrastructure. Can government officials,
regulators, innovators, and other stakeholders come up with solutions that will
make the most innovative UAS applications feasible and drive demand? If the
answer is yes, the next decade might see the introduction of a new technology
that could be as disruptive as the advent of automobiles.
By Pamela Cohn, Alastair Green, Meredith Langstaff, and Melanie
Roller December 2017
https://www.mckinsey.com/industries/capital-projects-and-infrastructure/our-insights/commercial-drones-are-here-the-future-of-unmanned-aerial-systems?cid=other-eml-alt-mip-mck-oth-1712
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