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Developing business ideas for drone technologies
Developing business ideas for drone technologies

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2.1 The drone industry lifecycle

Every industry has a lifecycle which can be broadly divided into four stages: introduction, growth, maturity and decline. At the Introduction stage, there is a limited number of players offering differentiated products with a low level of competition. Rivalry is limited but profits are also low because of the amount of investment needed to start up. The demand is low because few buyers are keen on trying the new product/service. In this context, competition is focused on attracting and educating new customers and consolidating market shares.

Overall, the drone industry can be considered in its lifecycle Introduction stage (see Figure 6) with a convergence (or coming together) toward one or more dominant designs in products and services still to take place. Grant (2016, p. 207) remarks that it is when there is a convergence towards a dominant design that the industry moves from the introduction to the growth stage. This is because customers feel less risk in adopting a widely accepted solution, and companies are more likely to invest in creating production capacity. Large companies may be interested in entering the competition, to benefit from its high profits, as in 2016 with the rapid diffusion of fitness trackers.

Graph to show the four stages of industry lifecycle
Figure 6 Industry lifecycles

Researchers are now developing a greater understanding of what happens at the Introduction stage of an industry. The introduction stage can be divided into three sub-stages: incubation stage, Pre-Firm Takeoff stage and Pre-Sales Takeoff stage (Moeen et al., 2020). Each sub-stage might not progress to the next one if the knowledge that is developed is not at satisfactory levels, as will be explained in the next sections.

Graph to show the sub-stages of the introduction stage of the industry lifecycle
Figure 7 Introduction stage of the industry lifecycle

The different industry segments of the drone industry are at various substages of the introduction stage, with different competitive environments, different sets of stakeholders involved in innovation development, and different areas of focus for products and services.

Take for example the industry segment of drones dedicated to photography. When civilian drones first emerged they were primarily used by hobbyists and there was no clear market for them. However, as drones became more prevalent in photography and videography, through new designs with integrated powerful cameras of high quality and stability, business opportunities developed in the market as part of the ‘incubation’ stage. The launch of the ‘drone gimbal’ in 2012 then re-defined the meaning of drones as ‘flying cameras’ (or ‘eyes in the sky’), boosting their use for professional aerial photography, and giving new meaning to the use of drones. The drone gimbal reflects ‘first commercialisation’ in Figure 7.

Close up photo of a drone gimbal
Figure 8 A drone gimbal

Despite its success, the early versions of the gimbal were not attractive to the mass market as users needed to assemble its parts and install software. The need for greater flexibility and ease of use forced drone manufacturers and innovators to create the ‘ready to fly’ or RTF drone, a fully integrated drone, ready to use right ‘out of the box’. The RTF was very important because it made drones easy to use by amateur photographers, pushing industry sales further. At this point, the industry segment of photography drones progressed from the incubation stage to the ‘Firm Takeoff’ stage, thus attracting more companies to serve the increasing demand with more investment to back them.

In the next section you will look at the introduction sub-stages in more detail and relate them to the agricultural and rural segment of the drone industry.