Managing Director & Partner
Companies have only scratched the surface of what airborne drones can do. Over the next two decades, businesses will put industrial drones to work monitoring facilities, tracking shipments, and, perhaps even delivering groceries to your doorstep. BCG estimates that by 2050, the industrial drone fleet in Europe and the US will comprise more than 1 million units and generate $50 billion per year in product and service revenues.
Services that operate drones and manage drone data for end-user companies, rather than drone manufacturing, will generate most of the value because most end-user companies will turn over actual operation and maintenance of drones to third-party services. And the data that drones capture will create value for end users by helping identify new operating efficiencies. In some industries, drones will enable new business models and business opportunities. In agriculture, for example, next-generation drones could fly over fields, analyze conditions, and identify spots where more fertilizer might be needed to raise crop yields. DHL, Amazon, and Google are among the companies that are developing drones to automate deliveries. Insurers will sell drone coverage and are considering the use of drones for inspecting damage from storms and natural disasters. Telecom companies may sell drone data communications services for guiding drones and relaying the data that they collect.
Today, nobody can anticipate the full range of industrial drone applications. Some are obvious: sending a drone rather than a human to inspect the machinery atop an offshore oil rig, for example. But in many industries, companies have yet to discover specific applications for drones. Companies can start by thinking about the kinds of data that could be captured more efficiently with drones than with current methods and how they could use that data. Then they can determine how much drone expertise they wll need to reap the business benefits that they identify. Now is the time for companies to learn about drone capabilities and start building drone strategies.
Around the world, hobbyists and military forces have been using airborne drones for years. Now, drones are poised to become common in all sorts of businesses. Compact drones with cameras are being deployed to inspect oil rigs, monitor agricultural fields and mines, and check on telecom towers. Next-generation industrial drones will be dispatched to fly beyond the visual line of sight so that they can scan hundreds of miles of pipeline, deliver packages, or support search-and-rescue operations. Eventually, full-size pilot-optional cargo and passenger planes could join the airborne-drone fleet, which has important implications for aerospace companies that are planning next-generation products.
We see the use of industrial drones unfolding in three waves. The first, currently underway, involves line-of-sight applications in which an operator guides a drone and maintains visual contact. The second, ramping up within 5 years, will introduce remote applications, such as observation of ocean-going ships. The third wave, which could be up to 25 years away, would introduce full-size pilot-optional aircraft.
We expect very rapid unit growth of wave 1 and 2 drones through 2030 as companies build up drone fleets in Europe and the US, followed by steady growth through 2050, when the industry will be well established. (See Exhibit 1.)
As drone adoption accelerates, the value will quickly shift from drone makers to the providers of drone-related services. The shift will include drone operators that outsource drone work for companies and companies that can analyze the big data flows from drones. (See Exhibit 2.) It will also include telecom carriers: even as drones grow in sophistication and capabilities, we expect that most of them will remain low-flying craft, which means that they will likely rely on mobile-phone networks for communications, expanding demand for cellular service. There will also be opportunities for software developers, for example, to create user interfaces and operating systems for drone flight control. Systems integrators will have opportunities to help companies bring drone data into IT systems.
Industrial drones will create employment opportunities, too. Initially, there will be demand for drone operators to work for drone services or directly for drone users. But these jobs will become less necessary as drones become more autonomous. There will be steady demand for drone maintenance workers, and the growing prevalence of drones could contribute to employment in insurance, IT consulting, and other businesses that serve the drone industry and drone users. A recent report by the European Union’s Single European Sky ATM Research (SESAR) initiative describes employment opportunities and other economic effects of industrial drones, as well as the various regulatory and technical challenges that are associated with the evolution of drone use. See the sidebar “Clearing the Hurdles.”)
Unlocking drones’ potential to contribute to growth and productivity will require a regulatory and technological framework that makes it possible for drones to fly wherever they need to go. Achieving this goal will take a great deal of cooperative effort by government aviation authorities, the drone and aerospace industries, corporate drone users, the public, and other stakeholders. Wdespread drone use depends on a holistic regulatory framework that will allow drones to operate alongside other forms of aviation. This will require digitization of infrastructure—including a new traffic management system that parallels and is integrated with the systems that now guide airplanes—as well as changes to other infrastructure, such as cellular networks, to enable communication with drones flying at low levels. And new standards will be needed to ensure interoperability.
A necessary first step is the creation of a regulatory framework and an infrastructure that anticipate all the possibilities and ensure a future-proof design. These foundational steps will allow investors and innovators to move ahead with their work on the technical and business issues, help the industry ecosystem flourish, and build public support.
Identifying the actions needed to clear the existing hurdles was a major focus of a recent report about the European drone market.1 The report, supported by BCG analysis, identifies three priorities:
SESAR, working with the European Commission, is now preparing to convene European drone stakeholders and has sought cooperative arrangements with the US Federal Aviation Administration and the US National Aeronautics and Space Administration to establish international collaboration. This effort is intended to accelerate development of the large drone market that the EU believes will generate new sources of growth for European economies. In a recent speech, Violeta Bulc, the European Commissioner for Transport, said, “Drone technologies are a unique opportunity for the European economy to generate additional growth and prosperity: they open the door to new markets for innovative services with immense potential. I want the EU to remain on top of this, to steer and lead the global development of this technology.”
1. See European Drones Outlook Study: Unlocking Value for Europe, SESAR Joint Undertaking, 2016. For more information, please contact Alain Siebert, chief economist and master planning, SESAR Joint Undertaking, at firstname.lastname@example.org.
How can companies benefit from the use of aerial drones? And what should they be thinking about to prepare for the introduction of drones into their businesses? We look at these questions from two perspectives: how drones can enable new ways of doing things for companies that use them and how drones can drive growth in existing businesses.
How do drones enable new approaches and operating models? In many industries, companies can use drones to reinvent processes and raise productivity. Drones, for example, fit into evolving digital models for managing mines and farms and the equipment used in the energy sector. In other industries, such as insurance, they may enable all-new operating models. The following are prominent examples of emerging operating models that rely on airborne drones:
Where will drones drive growth in existing businesses? Large-scale drone utilization could create new demand in such widely diverse industries as telecommunications and aerospace.
Companies of all kinds should be thinking about what drones could mean for their businesses and competitive environments. Leaders should consider taking the following steps:
The march of the drones into industry is an exciting development. An industrial drone is a remarkable tool, combining IoT-like data-gathering capabilities with almost limitless mobility. Soon, drones will also be permitted to transport objects. We are just beginning to understand how companies can use this powerful combination of talents to function more efficiently and even to find entirely new ways of doing business. Today, companies should learn as much as they can to determine whether they need to be on the cutting edge of this emerging phenomenon.