Exploring Drivers of a Rapid Venture Scale-up for BlueDrone: Identifying Strategic Options
“Thinking is the capital, Enterprise is the way, Hard Work is the solution.”
– Dr. A.P.J. Abdul Kalam
The drone industry is in the ‘era of ferment’ in the technology cycle. Drones are Unmanned Aerial Vehicles (UAV) with applications spanning across various industries. Initially, developed and used for military applications, drones have now penetrated the commercial and personal consumer segments of the industry. The hype in drone industry is noted with large number of ventures entering the industry across various segments.
In 2007, Rahul Mittal (Mittal), a dynamic first-generation entrepreneur, and his team incubated a platform and drone focused venture – BlueDrone – at the Society for Innovation and Entrepreneurship (SINE), Indian Institute of Technology Bombay (IITB). Mittal successfully sailed BlueDrone through the early ‘Valleys of Death’ (Exhibit I).
However, by 2016, Mittal was contemplating over options for survival and scale-up, as discontinuities were cropping-up at an accelerated pace. Financial priming by major countries to moderate collapse post ‘Financial Tsunami of 2008’ was reaching limits. Aggressive support for ventures through initiatives such as ‘Start-up India’ by the new government in India in 2015 motivated the start-up boom, but many ventures were unable to cross the ‘Valleys of Death’. Election of Donald Trump as the US President and his aggressive approaches (for example, ‘Trade Wars’, Visa Restrictions, etc.) could create major discontinuity engulfing many countries and threatening world peace and growth. BlueDrone sustained early challenges, owing the success to able founding team along with the support from parent institute, IITB. Though BlueDrone had a long list of customers including paramilitary forces, state police departments, armed forces, DRDO labs, CRPF, UP special task force, NDRF, Indo-Tibetan Border Police, etc., customer base was narrow and restricted to defence and security bodies.......................
Expected Applications and Segments in Drone Industry
Initially focusing solely on military applications, drones have evolved into a technology with potential market in many industries. The application of drone technology spans various industries such as toys, agriculture, surveillance, monitoring, logistics, etc. Drones provide promising solutions in various industries ensuring increased operational efficiency. In the years between 2016 and 2020 the drone market was expected to be dominated by the military sector comprising 70% of the total drone market followed by the consumer and commercial sectors comprising 17% and 13% respectively of the total drone market.............
BlueDrone: Venture Scale-up
Drone industry seems to have the potential to become ‘winner-take-all’ market, if standards can shape dominant designs. For instance, in ‘education application’ segment in India, application platform (Pluto, for instance) being developed by Drona Aviation can become a candidate for dominant design in Maharashtra.
Worldwide, very large number of competitors (around 1000 in the year 20188) indicate that the drone industry may be in ‘era of ferment’ of the ‘Technology Cycle’. Experts debate on the factors that may decide the selection of dominant design (for example, some regulation in the USA/China /EU; or which bundle of features that best meet the requirements of majority of producers and customers {Schilling, 2008}). BlueDrone may like to benefit maximum, from the fluid phase of the industry, before technical standards get formalized post-emergence of dominant design and large incumbents take the advantages. Given the current state of the drone industry, accelerated scale-up or rapid venture scale up becomes essential for BlueDrone to derive maximum benefits........................
Drivers of Rapid Venture Scale-up
Technology ventures often focus on slow scale-up as it takes considerable resources to develop technology and resources are often scarce, particularly in emerging country context such as India. Nevertheless, there are examples of technology-based firms from India that are climbing heights (for example Zoho and Jio) before opting for international funding (for example, InMobi and Flipkart). Drivers of rapid venture scale-up include Intellectual Capital (HR), innovation, finance and detailed knowledge of business and technology............
Intellectual Capital (HR): Intellectual capital and financial capital are often considered to be key driving factors of rapid scale-up. Among alternative dimensions of intellectual capital, ‘innovation capital’ (which includes human capital; for example Gargate and Momaya, 201810) is considered to be more important....
Innovation: Innovation can be a real driver of rapid scale-up. Technological innovation can provide competitive advantage, if built on strong foundations of Management of Technology (MoT) and innovation (Sahoo, Banwet and Momaya, 2011; Momaya and Lalwani, 2017). Less ability to develop new technologies and unique business models, emerged to be the key reasons for low innovation capabilities of firms of Indian origin (Bhat and Momaya, 2017).........
Finance: While scale-economies have been leveraged in the past by erstwhile ventures (for example, Walmart and Jio), their role in emerging information economy is debatable......
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Options for BlueDrone to achieve Competitiveness and Scale-up
BlueDrone must overcome challenges of the next valley by evaluating and choosing options that are significant for achieving international competitiveness and scale-up. Challenges are on multiple fronts – from gaps in resources and capabilities to arenas such as IP, standards, dominant design and drivers of exponential scale-up. Successful exponential scale-up that same-age ventures such as DJI are achieving (Exhibit IV and Exhibit V) indicate that dominant design can originate from emerging countries.
Drones face complex regulatory regimes as they are admittedly a different matter altogether when compared with Autonomous Ground Vehicles (AGVs). Drones fly overhead and will thus be more disconcerting to the public and constitute a bigger change from the norm than AGVs.............
Assignment Questions
I. Identify CSFs for the segment/industry related to core business of BlueDrone. How does BlueDrone fare on the CSFs22? Which among them can also be CSFs of bigger related segments or drone industry?
II...............
Acknowledgements
We are thankful to IIT Bombay and the Industrial Research and Consultancy Centre (IRCC) for providing financial support to Amruta for internship. We also thank entire SJMSOM for providing infrastructure to work on this study. Inputs provided by Dr. Pankaj Dutta, Dr. Arti Kalro and associates of Group on Competitiveness (GoC), IIT Bombay, Dr. Sundar Parthasarathy, Sneha Bhat, Ankur Basumatary, Shakti Tripathy and Bhavya Pande are acknowledged.
Exhibits
Exhibit I: Working Definitions of Select Terms
Exhibit II: Market Value Estimates of Drone Applications across Various Industries for the year 2020
Exhibit III: Estimated Drone Spending (FY2017 - FY2020)
Exhibit IV: Comparative Study with Leading Ventures and Giants in the Drone Industry
Exhibit V: Successful Exponential Scale-up of DJI
Exhibit VI-A: Commercial UAVs on Gartner Hype Cycle for Emerging Technologies, 2016
Exhibit VI-B: Commercial UAVs on Gartner Hype Cycle for Emerging Technologies, 2017
