How Cheap Drones Are Upending the Big Business of Defence

The rapid proliferation of drones on modern battlefields has exposed the defence industry’s outdated business model. As Western militaries struggle to adapt to innovations in drone technology, smaller companies are dominating the market with low-cost, high-impact solutions.

The shift towards “drone Keynesianism” represents a fundamental transformation in how defence gear is designed, built, and sold. This new approach prioritizes speed, agility, and low cost over traditional emphasis on high-tech complexity. The contrast between nimble Ukrainian defence companies and the lumbering behemoths of Western defence manufacturing could not be starker.

While major companies like Boeing and Lockheed Martin are mired in long-lead times and cumbersome supply chains, smaller players can rapidly develop and deploy innovative drone solutions – often at a fraction of the cost. Cheap electronics, 3D-printed parts, and open-source autopilot code have democratized drone technology, enabling smaller companies to participate in the defence industry and disrupt traditional prime contractors.

The implications are far-reaching. Nations like Ukraine are practicing “drone Keynesianism,” which involves massive spending on production focused on rapid innovation and deployment rather than just brute force spending. As Lesia Bidochko noted, this approach combines high levels of investment with a focus on speed and agility.

The End of the Prime Contractors’ Monopoly

The rise of small, agile companies poses both a threat to traditional defence industry players and an opportunity for major contractors like Boeing to adapt and evolve. By embracing low-cost, high-impact solutions – as exemplified by Boeing’s ultra-low cost guidance system – these companies can remain relevant in a rapidly changing market.

However, this will require them to abandon their traditional business model and adopt a more flexible, collaborative approach that values speed and innovation over profit margins. This is a difficult task for companies accustomed to the high-stakes world of defence contracting but essential if they want to stay competitive.

The Learning Curve

Nations like the US face significant challenges due to the scale and complexity of their defence industries. Large legacy defence companies often struggle to produce drones at the speed or cost needed on modern battlefields, partly because they’re burdened by long-lead times, cumbersome contracts, and shareholder expectations for high returns.

Smaller companies, however, can focus on rapid innovation, collaboration, and open-source development – often with remarkable results. The use of open-source autopilot code has enabled companies like Freespace Operations to develop drones that last years at a fraction of the cost.

Implications for Defence Departments

As the defence industry continues to grapple with drone technology’s implications, several key takeaways emerge. First, the traditional business model is no longer sustainable in a market where speed, agility, and low cost are paramount. Smaller companies will continue to drive innovation and disruption – often at the expense of larger players who fail to adapt.

Secondly, defence departments worldwide must rethink their procurement strategies and adopt more flexible, collaborative approaches that value innovation over profit margins. This will enable them to stay ahead in a rapidly changing market where smaller players are increasingly driving the pace.

Finally, as we look towards the future of defence technology, it’s clear that drone proliferation will accelerate – along with the disruption of traditional industries and business models. The question is: can Western militaries keep pace?