The War is over – at least for the foreseeable future. DJI has sewn up the Consumer Drone Market in a way that makes them untouchable for at least the next 5 years. While some of my fellow analysts will cry and moan “wrong”, DJI may have as much as 80% (and growing) of the “non-toy” under 2K Consumer Drone Business. That leaves the other 20% to all the other makers combined. Many of these would-be competitors have already closed the doors or shrunk to nothing. Some of them never introduced their products in bulk. A short list of the losers (USA centered, but probably accurate many other places, $400-$2,000), goes like this:
Walkera, 3DR, Xiro, eHang, Autel, Yuneec, Parrot, Upair, GoPro, Blade, Hubsan, Hexo+, Airdog and many more.
Putting the numbers in perspective, if DJI is going to sell a million drones in the USA (estimate), Canada and Mexico this year, only three of those companies have the possibility of 5% of this number (50,000 units). These companies are Yuneec, Parrot and Autel. All three companies have announced staff reductions and, according to our internal calculations, are losing market share and struggling to even break even. In the world of high-tech, unit counts such as 50K are not true mass production and therefore have a much higher cost structure.
Why? How? It’s an interesting exercise in competition and engineering to summarize how one company came to dominate the field. We have already written extensive articles on DJI and GoPro as well as a number of pieces touching on the “Drone sales wars” – however, since the war is over we felt a short history lesson might be in order.
Summary – Size Matters and Listening to the Market
The world of technology is moving quickly. A company like Tesla can now design a self-driving car – an item infinitely more complicated than a consumer drone – and produce it within approx. 3 years. With consumer drones, the development cycle for DJI is probably about one year…but, the big difference here is that it takes a smaller company 2 years to come up with a “so-so” new drone while DJI has, in the shorter time period, come up with something truly revolutionary (Mavic Pro, for example). To accomplish this, vast amounts of capital and credit are needed. DJI, given their reputation, has no problem raising money AND their cash flow is such that they often get paid for the completed quadcopters before they have to pay for the components (even many large customers prepay DJI for product!).
Another secret ingredient is people. DJI usually hires only the best for their higher level jobs in engineering, design and marketing. The smaller makers may be able to attract some dreamers, but DJI has the advantage of years of IP (design and engineering problems solved long ago), so their engineers have a head start in years in terms of the total product package.
DJI makes a lot of mistakes – but most of them are small and can be fixed in software. For the past couple years they have gotten most hardware right the first time…not unlike most smartphone and computer makers. This is no small accomplishment because making a consumer drone is actually harder than making most computers…since you can buy off-the-shelf components and operating systems for a desktop or laptop.
When I started following DJI in 2014 I noticed that they, unlike most fast growing companies, actually listened to consumers and made additions to features which were requested. Some of these changes were not easy – for example, the opening up of the Drone Operating System with an SDK (allowing other developers to create software that extended the uses) and the addition of Intelligent Flight Modes (point of interest, waypoint, etc.).
Organized, Chaotic but Eyes on the Prize
If you desire a mellow workplace where you can bring your dog and take thursday afternoons off to go surfing, ask GoPro for a position (but they are laying off, so it might be a long shot). DJI is the proverbial startup with employees working hard and long hours. Can a French company like Parrot, where the workweek may be 35 hours, keep up with a Chinese startup where it may be double that? This might be possible in an industry where robots do much of the work (German Auto Industry, for example), But when the work entails tens of thousands of small details, marketing, communications, engineering, etc. on a “manual” basis, the faster runner is going to win the marathon.
A number of other articles have mentioned that DJI has more trouble keeping Western employees than most companies (see Glassdoor or this article for some corporate culture). This seems to be a truism – probably due to long hours, less long term job security and the lack of a feeling of company ownership. I am unfamiliar with whether DJI awards stock to employees below the C-Suite, my assumption is that they do not to a large degree. However, word is that they pay well and that – combined with the status of working for a truly innovative company – can attract enough newcomers to keep the Drones flowing. In summary, only highly driven and very smart people should apply!
In short, DJI is organized Chaos – something my Dad (a businessman) told me should always be the case in a dynamic business. Despite the amount of work they have created for themselves (due to success), when they state they are going to do something – even smaller details – it usually gets done. As a comparison, I have reached out to Parrot and Yuneec a number of times to borrow review units or get “in the loop” for my blogging and videos and have yet to hear anything of note. This is/was over a two year period.
A Rat Race or Paradise?
Business often gets a sour reputation – consumers tend to think everyone is out to take their money and provide as little value as possible. Amazon, Apple and even WalMart have changed this to some degree…the customer is now considered “King” and just the opposite is true. The idea now is to delight the customer and provide maximum value. Doing so is much harder than it appears, especially with high technology flying machines. It took the hard-driven style of DJI CEO Frank Wang to successfully create a new product category – reliable flying machines which can be flown by millions. While other companies (especially Parrot) broke the new ground, they failed to listen to their customers and to give the market what was desired.
While the grind of daily business, especially in a Chinese startup, can be exhausting – the end result is the creating of world-class technology which will change the world in a positive fashion. Steve Jobs would be proud…and Elon Musk probably is.
What is the Future of DJI?
This is certainly an open question. Chances are they have been offered vast sums of money for the company and turned it down. To put things in perspective, DJI is probably worth much more than Whole Foods – which Amazon purchased recently for 13.7 Billion. A valuation of 20-30 Billion would not be overkill being as they were valued at 10 Billion 18 months ago…well before Mavic Pro, Spark and the end of the consumer drone wars. My prediction is that DJI is only getting started. Assuming Mr. Wang is healthy and happy, I can see this company staying private (or closely held) and continuing to innovate as if this is Day One of the Drone Universe. If they do go public, the shares are likely to command a premium and it is doubtful that DJI would give up the majority of the shares.
In many ways we’ve hit a “Drone Plateau”. Many of the original problems have been solved and the machines are reliable tools for many everyday tasks. My prediction is that evolution..rather than revolution…will define the next couple of years. Safety will become paramount – and the addition of additional sensors and software will groom the machines for additional work-related missions. We might say that – in the long run – the rise of Consumer Camera Drones created the cash flow to further advance what Drones are destined to become – commonplace aerial robots that do our bidding.