Look up! It’s a Market Disruption

Four Perspectives on Living With Drones 

Tiny unmanned aircrafts will soon swarm your neighborhood delivering everything from hot burritos to medical prescriptions. Fulfillment will take minutes instead of days or hours, and big commercial carriers will face pressure to adapt or die. That’s the promise of some visionaries. But how much of the hype surrounding delivery drones is real? University of Maryland experts from the Robert H. Smith School of Business and A. James Clark School of Engineering discuss the viability of delivery drones from policy, technology and commercial perspectives. 

Policy / Regulating the Skies 

Matt Scassero
Director of the University of Maryland’s Unmanned Aircraft Systems Test Site, Clark School

Federal regulators have jurisdiction over U.S. airspace, and current policies do not allow for everyday use of delivery drones. Concerns about hijackings, terrorism, privacy and other issues create complications, and the Federal Aviation Administration will need at least five years to implement a policy framework. 

“Government, primarily through the Department of Defense, has learned voluminous lessons over the last two decades that need to be taken into account,” Scassero says. “Industry is ready and willing to put forth not only their requirements, but their capabilities as well.” 

Test sites like the one Scassero directs at the University of Maryland are bringing academic, government and industry organizations together to accelerate the process. 

“The unmanned aircraft system must be integrated into the national airspace system,” Scassero says. “It cannot be segregated or merely taken into account.” 

Technology / Delivering Solutions 

Sean Humbert
Professor of Aerospace Engineering and Director of the Autonomous Vehicle Laboratory, Clark School 

In conjunction with the ongoing policy discussions, teams must scramble to solve lingering technology challenges. One big challenge is completing the final 20 feet of the drone journey — the product exchange with the customer. 

“If cleared to operate now, the small helicopter drones could use GPS to fly to a front door and text message its delivery recipient to go to the drone and take possession of the package,” Humbert says. “However, drones need further development before they can arrive and deliver packages safely.” 

Drones also need better (and lighter) detect-and-avoid technology to navigate obstacles such as trees, wires, people and cars. 

Humbert says his own lab has produced technology behind a possible detect-and-avoid system called the Panoptes eBumper. The product, with acoustic sensors that detect obstacles within 10 feet, was introduced to the hobby drone market in summer 2014. 

Marketing / Beyond the Buzz 

P.K. Kannan
Ralph J. Tyser Professor of Marketing Science, Smith School 

Even when policy and engineering issues get sorted out, questions will remain about how to build viable markets for delivery drones. 

“Besides technological advancement, commercial viability depends on whether the technology can be operated profitably,” Kannan says. “This depends on factors including costs incurred in securing the delivery of goods and ensuring that drones are not hijacked by hackers.” 

Companies must also explore the relative costs of drones compared to traditional delivery methods, the volume of goods handled by drones, and the premium prices that customers might be willing to pay for expedited deliveries. 

“If traditional delivery costs are low, drones might not be viable for transporting low-priced items,” Kannan says. “On the other hand, high-value deliveries might attract hackers and hijacking activity. Thus, even assuming that the technology is sophisticated and that a policy is in place for commercial operations of drones, we might not see extensive deployment in the initial phases other than as attention-grabbing ploys.” 

Strategy / A Long-term View 

Hank Lucas
Professor of Information Systems, Smith School 

High barriers to entry initially will favor companies such as Amazon at the expense of traditional package carriers. 

“Strategically, delivery by drones would greatly benefit a company like Amazon, which incurs very high UPS and Federal Express bills,” Lucas says. 

While big carriers have trucks full of parcels for delivery along given routes — too much to load onto drones — Amazon might have three parcels for delivery in a specific neighborhood. “Amazon could send its octocopter drone out three times to deliver packages because it has a small payload,” Lucas says. 

Eventually, drone technology will advance enough for smaller organizations to get involved. Lucas says this will disrupt the U.S. Postal Service — or whatever is left of it. “A common mistake is to believe technology is too expensive or unproven,” Lucas says. “To quote an old adage, technology always gets cheaper, faster and smaller.”