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Are U.S. Drone Companies Ready to Replace DJI?  What the American Security Drone Act Means for the U.S. Drone Industry

I believe that these two questions asked together conflate two distinct issues and the question about replacing DJI is a false narrative.  No company needs to replace DJI.  DJI can live long and prosper in the U.S despite the American Security Drone Act in the consumer market. But if you're planning on using DJI technology in the DoD or for any type of critical infrastructure then there needs to be an alternative to DJI and there’s no good reason that can’t be a U.S based UAV manufacturer.

Like most professional tools in any other industry professional UAVs will be much more focused on specific applications or put another way, purpose built solutions.  Commercial drones have been used enough now so we can move beyond those hobbyists and prosumers who have pushed their way up from the bottom. Before I get a ton of hate mail, I’m referring to the early adopters who single handedly overcame the natural resistance to adopting technology that still contained a high degree of complexity and risk. For that, they deserve a lot of credit. The problem is, the success in the early market has provided the emerging commercial market with unreliable indicators of success. The result is that the commercial market has stalled in the chasm, that place between enthusiastic early adopters and mainstream pragmatists who think early adopters are idiots and where start-ups go to die. 

This is exacerbated by the FAA’s lack of understanding of the unintended economic consequences of their regulatory actions. I believe the DAC is limiting differentiation and does not accurately represent the future direction of the commercial UAV market. Also, the rate of technological change in this nascent industry is greatly over exaggerated, it’s only just the beginning. The gating factor for growth isn’t who or where the drone is manufactured. It has little to do with the drone and more to do with the transformation from analog to digital engineering. 

What is it going to take for this market to get to the other side of the chasm where success is directly correlated to commercial operators’ ability to field a complete solution for a specific niche? 

Markets are created, they don’t just appear out of nowhere. Many of the start-ups in the emerging “drone” market worked to overcome problems by using standard methods and technology that they were familiar with at the time. Multirotors were the result of the confluence of several technologies; online forums such as DIY, the democratization of the cell phone, Intel’s RealSense, and open-source flight controllers.  The Chinese may have some IP in the manufacturing process itself, but very little, if any of the IP used in the design of the “drone” is Chinese. DJI’s sense and avoid is a “clone” of Intel’s RealSense (a derivative of Movidius), their original flight controller came from OpenPilot.  Define “clone” anyway you like, the point is not to accuse anyone of misappropriating technology, it is to demonstrate that there is a lot of innovation in drone related technology outside of China. Much of it here in the U.S.

First generation drone manufacturers focused on development of components for primary flight control, anything beyond that became vertically integrated. But for the next generation of “intelligent” UAVs to solve important problems – the ones lives depend on, requires a much better understanding of the applications needed to provide a more direct linkage between analytical technologies and real-world problems. Key to providing accurate and repeatable aerial data solutions is coupling professional analysis tools with precision navigation and control systems. Consider that the Skydio2 is a real contender. A U.S. manufactured “intelligent” drone that customers consider a real alternative to DJI’s Phantom and Mavic 2 Pro.     

Ultimately, this isn’t just about the UAV, but in order to build a commercial UAV market that people believe in and stakeholders want to invest in, they need to believe that there is a broad trend towards aerial remote sensing where the data collected becomes hugely valuable and customers can build a platform of business on top of it. 

In the early market U.S. manufacturers were faced with the question, “how can our products meet potential customer needs better than off the shelf Chinese drones?” That’s a tough question to answer when potential customers understand so little about how drones might benefit them. The only thing customers initially cared about was how cheap they were. At that time, it wasn’t as important for the customers to understand the benefits as it was for U.S manufacturers to demonstrate how our technology enabled them to achieve their purchasing objectives. As with most things there’s no simple, right answer, but whatever the answer, it needed to serve as the building blocks for determining the entire value-chain. 

It’s easy to look at the applications of drones horizontally, where one drone is designed so that everyone can use it, but our experience suggests that won’t work. DJI’s work extremely well if they're used for what they were designed for. But because of its vertical integration DJI cannot deliver a complete value-chain, its mission profile is too narrow so if the customer wants to accomplish something different than what it was designed for, they need to modify the mission in order to accommodate the capability of the drone. This is antithetical to a complete value-chain. 

There are several articles on LinkedIn about the U.S. division over the Chinese drone ban. Why the division? In the early market U.S manufacturers tried to work with customers in an ad hoc way on their ability to add value to UAVs core technology such that drones became useful in a given application. But customers didn’t want that, they wanted the easy button, low barrier to entry and they wanted it cheap. There have also been a lot of articles by many of the early DJI enterprise customers regarding how difficult it is integrating DJI products as part of a successful UAV program. 

So now instead of being divided about the ban, CUSTOMERS should unite in favor of it. Stop spending money on ways to get around the ban and start spending it with U.S. companies who can provide you with a purpose-built solution made up of a complete set of products and services needed to fulfill your company's compelling reason to buy, not some Chinese company’s compelling reason to sell. 

Our success as an industry is directly correlated to our ability to field a complete solution for customer segments that need to solve serious problems. Just about every major infrastructure we depend on is below the standard necessary to sustain our growing population. That’s a compelling problem. The ban is resetting the bar. U.S. manufacturers can develop UAVs that are open, extensible and easy to reconfigure for a wider mission profile but they need input and commitment from the customer. By customers and manufacturers partnering, we can work through all the elements, thereby demonstrating our understanding of the different segments, and together overcome the resistance to adopting a digital engineering workflow. 

So, there are tons of news stories and articles about the benefits of UAVs but no one seems to be making very much money with them. “Hello!” Welcome to the chasm.  

In order to get out of the chasm U.S companies need to create a set of assumptions around which a whole product solution can be built. To do that we need U.S customers to work with manufacturers and developers to better define the requirements. Prior to the ban on Chinese manufactured drones U.S. companies might have had time to gather more focused market data, but now they must act quickly so they need to approach the decision of manufacturing UAVs from a different vantage point. That will be difficult because U.S. customers only know DJI. So, U.S. manufacturers will need to rely on “informed intuition” rather than a more traditional “analytical” approach. This does not sit well with investors.

This is important because in the past startups emphasized opportunity based on revenue and stakeholders evaluated them based on that data. Although there are a lot of claims regarding the size of the “drone” market, that data supports a yet undeveloped concept, so this new emerging market depends more on promised future data rather than present data. The trouble is that most of the discussion about the ban and the commercial drone market in general, has been focused on defining market segments, agriculture, first responders, industrial inspection for example, and validating ‘drones” to meet their needs. However, most investors regard business results, not validation, as the measure of progress. 

Unlike an established market, where a product category itself is the reference point, an early or developing market can be thought of more as the customer’s market, not a product market. So, although UAVs effectiveness in the commercial market is not nil, it is adjunct. So, it’s much more likely that what supplants DJI in the commercial market in the U.S is not a UAV manufacturer at all but a consolidation of companies around a technology with a compelling must have proposition.  A tightly vertically integrated drone cannot compete in a horizontally integrated ecosystem. The problem for DJI is that their current value chain is not capable of delivering order-of- magnitude benefits while creating sufficient barriers to entry. You can do one or the other, but not both.  

This type of ban should have happened decades ago before the U.S. lost its culture of manufacturing.  

Another important issue to investors is making whatever they invest in proprietary. How do U.S manufacturers make UAVs proprietary?  If you think of a UAV as just an unmanned thing that can fly, then yes anyone can build a “drone,” but an important distinction between a “consumer drone” and a commercial UAV is that a commercial UAV needs to be defined around a must-have value proposition. The application of the UAV is where U.S developers can drive value and build a moat. As a result of the ban the opportunity to manufacture UAVs is at an inflection point, we only need to look at the beginning of the automotive industry for a comparison to understand that there are similar barriers to entry for manufacturing UAVs than there were for automobiles in the early 1900’s. 

Cars have wheels, an engine, steering wheel, four seats, lights etc., all the details got better but fundamentally the market fit for cars has not changed much in a hundred years. The number of car manufacturers in early 1900 grew from one or two people working in a barn, building a couple of cars a year to more than 2500 by 1915. In 1915 there was a steep drop-off in the number of manufacturers because the complexity reached a level where they couldn’t build everything in the barn. Bolts, nuts, screws, wiring, were all custom made. Standardization in the mechanical industry didn’t happen in Germany with DIN until 1917, and in the U.S in 1918 with ANSI. This standardization is what led to automated production lines and large scale innovation.

That’s pretty much where manufacturing UAVs in the U.S is today. Very few U.S. UAV manufacturers have a (automated) production line. We can’t have a true American alternative until a production line can be developed that can scale to a point where it is actually relevant as an industry. So, what would the ANSI equivalent for manufacturing UAVs be today?

Open Source. Open Source is the agile approach to standardization. By developing a reference implementation in open source while concurrently defining the requirements, you end up with something that’s shared, that’s common, that’s a known quality, without the full overhead of the standardization process. Once the reference standard is proven to work, it becomes the de facto standard. Probably one of the most challenging problems to solve for open source development is the validation of the solution in real world conditions and the relationship between the customer and developer.

Once again, this is where the ban levels the playing field. If this ban directly affects you, work with U.S. manufacturers and system integrators not simply to understand how you benefit from UAV technology per se, but instead how you redress the economic conditions and consequences currently being endured under the status quo. The goal is to create a partnership to fulfill the requirements to complete a whole product solution.  

There are certainly U.S. companies that have worked with the open source community to develop purpose-built solutions for specific markets much better than any of the Chinese manufacturers.  

Here’s a video of one of them.

 

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  • 2 weeks later...

I realize this is a long post but this is a serious topic.  I have said many times that as a result of the DoD ban on DJI this industry was going to go through significant changes. I get that people are reluctant to challenge the prerogatives of DJI but whether the changes are a result of what I have been saying or the economic shutdown, the World is changing.  

I've been on several conference calls with what some consider industry leaders and all of them are discussing the changes that are happening now.  Although they might not agree with what the changes are or what to do about it, they are at least acknowledging there's a change.  

This thread is simply a response to Zack's article.   There's a lot there to choose from but the important thing to keep in mind is that the changes that are occurring will be influenced much more by serious debate than they will be by purchasing a drone and shooting some property videos.  You can do both, but there is scant debate on this forum.

If you don't agree with what I've written and you think I'm full of crap, then say so, but make a compelling case for why you think that way.  If you don't understand the debate ask questions and hopefully the more experienced members will share their experience.  

Either way, don't be a cheerleader standing on the sidelines waiting for something to cheer about.

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