On this weeks episode of Fortunes Leadership Next podcast, co-hosts Alan Murray and Ellen McGirt talk with Zipline CEO Keller Rinaudo Cliffton about building the largest commercial drone delivery system in the world. Their wide-ranging conversation covers: the reasons Zipline launched by partnering with countries that are consistently underestimated; the companys new home delivery technology; and, according to Cliffton, why the way we solve humanity-scale problems is with engineering and technology.
Later, Fortune senior writer Jessica Mathews joins Murray and McGirt to talk about the state of the drone delivery market and, even more importantly, where its going.
Listen to the episode or read the full transcript below.
Transcript
Alan Murray: Leadership Next is powered by the folks at Deloitte, who, like me, are super focused on how CEOs can lead in the context of disruption and evolving societal expectations.
Welcome to Leadership Next, the podcast about the changing rules of business leadership. Im Alan Murray. Im here with Ellen McGirt, my co-host, who just keeps getting better and better and better. Hi, Ellen.
Ellen McGirt: Hi, Alan. What a delightful introduction. Very zippy, one might say.
Murray: I got thatzip.
McGirt: Thank you. Our guest today is equally zippy, but actually might be changing the world. Hes Keller Rinaudo Cliffton. Hes the founder and CEO of Zipline, the worlds largest commercial drone delivery system. Since the companys founding in 2014, Ziplines autonomous electric aircrafts, smartly called Zips, have delivered hundreds of thousands of packages to people around the world, and its planning to complete 1 million deliveries by the end of 2023.
Murray: Yeah, thats right, Ellen. Ive been watching this company for almost a decade. Initially, they were delivering vital items like medicine and vaccines and personal protective equipment to people in remote African villages, which was a great way to test the concept. But they have big ambitions. So they started in Rwanda in 2016. Theyve expanded into Ghana, Nigeria, but also now in Japan, and in the U.S.
McGirt: It really is amazing. And believe it or not, I got the first ever pitch for what they were doing in 2015 in Rwanda while reporting a story for Fortune. So it was amazing to hear how far theyve come. We got a chance to talk to Keller about how Zipline views its partnerships with the African countries you mentioned as just thatand that thats importantthat theyre partnerships. This is not philanthropic aid. This is not a gift. But before that, we also talked to Keller about the consumer delivery side of his business, which includes a massive partnership with Walmart that started in 2021.
Murray: eah, Ellen, thats right. I mean, the day may be coming when we all have Zipline drones coming to our doors with vital packages. Their consumer delivery business is expanding. We actually had to sit on this interview for about a month, because Zipline had some big news they were waiting to break, and it just came last week. They announced four new domestic delivery partnerships in the U.S., including three regional health care systems and Sweetgreen.
McGirt: Thats amazing. Im looking forward to having my Fortune magazine delivered by Zip sometime in the future, too.
Murray: Right to your door.
McGirt: Right to my door, that essential print information. All of this though is a pretty major step towards having these little Zips delivering everything we need to our backyards instantly, a lot of interesting implications and opportunities there, which Keller will get into.
Murray: And later in the episode, were going to hear from Fortunes very own Jessica Mathews, who had the opportunity to go and see a Walmart Zip delivery in action in Arkansas. So shes going to tell us a bit about that and share some more context about the drone delivery market.
McGirt: Shes amazing, and were going to learn a lot from Jessica. But first heres our conversation with Keller Rinaudo Cliffton of Zipline.
Murray: So Keller, were big fans of what youve been doing. You recently reached a half million deliveries, drone delivery, youre saving lives in Africa. But tell us the origin story. You started this in 2014. Tell us what was going on. How did you get going?
Keller Rinaudo Cliffton: You know, our backgrounds were in automation, robotics, and software. And it seemed like there was a huge amount of technological innovation happening, but there werent that many really cool products being built that were actually impacting normal peoples lives. So we always kind of felt like, if we could take some of that technology that you see in academic robotics labs and then apply it to problems at global scale that could have a big impact in peoples lives, thatd be a great thing to focus on.
The more we learned about automation and focused on automation, it seemed so obvious that logistics was the right place to start. Logistics is this massive global industry that, if youre in the richest billion people on Earth, you tend to sort of just take it for granted that it works well. And then if youre not in that category, 7 billion people on Earth have bad to no access to logistics. And we felt like there was a big transformation coming in logistics toward zero emission, autonomous 10 times faster, new modes of delivery, and that if we were going to build that kind of logistics system, we wanted to build the first logistics system that would serve all people equally.
Murray: Keller, you started in Africa and you started in health care, which in retrospect, turned out to be brilliant, right? I assume you are the worlds largest autonomous drone delivery company.
Cliffton: By several orders of magnitude, yes.
Murray: No ones even close. And so the question then is okay, it was a very smart move. Are you limiting yourself to health care in Africa, or where do you go from here? I mean, this is potentially a huge market, this last-mile delivery market with autonomous drone delivery. What is Ziplines ambition?
Cliffton: Yeah, youre right, Alan. I mean, for the first seven years of the companys history, you know, health care has always really been our bread and butter. But interestingly and again, you know, taking Rwanda I mean, Zipline, then launched in Ghana, Nigeria, Cote dIvoire, we actually just had our first commercial flights in Kenya two days ago. We also operate now, scaling quickly, in the U.S. and Japan. We leaned into those opportunities. The fact that Rwanda invested early and led the world being a role model showing how this technology can be used to save lives. Now, they want to apply that same technology and infrastructure to all these other national priorities, and were incredibly excited to support those efforts.
Murray: And so just to follow on that, you didnt necessarily start in Africa. But you did start in Africa. Why Africa, is the answer to that question?
Cliffton: Well, once we knew that we were focusing on logistics, you know, we knew it was going to be hard to get regulatory approval to build this kind of a system. And it was pretty clear to us that we needed to focus on the most important use cases out there if we wanted customers whod be willing to take that initial risk with us building something like this. And if we wanted a regulator who would support it. We wanted to focus on a country that had a public health care system so that immediately ruled out the U.S. And we had a sense that it would probably be a small country that would move quickly, and so we ended up in 2016 partnering with the government of Rwanda. Our initial goal was to serve every hospital and health facility and deliver all medical products in the entire country. But at the time, the minister of health pushed back and she said, Look, just do blood. You know, here are 21 hospitals. Deliver blood to these 21 hospitals and prove that that can work. And the reason it was a good idea is that bloods really hard, from a logistics perspective. You have all these different types, platelets, plasma cryoprecipitate, its packed red blood cellsjust a total logistics nightmare for the health system, and 50% of transfusions were going toward moms with postpartum hemorrhaging, and 30% were going toward kids. So in 2016, where everybody thought, you know, this was never going to work. We were told by every expert out there that we spoke to in global public health care that this wasnt going to work. But luckily, this one minister of health believed in Zipline at that time, and we started to begin to delivering to those 21 hospitals. And since then, Zipline has expanded from 21 hospitals to about 400 hospitals and health facilities across Rwanda. We expanded from delivering just blood to all medical products, now a wide variety of other products on top of that, and then we expanded into seven more countries. So today, Zipline serves about 3,400 hospitals and health facilities. Its become the largest commercial autonomous system on Earth of any kind. And were on track to be serving 10,000 hospitals and health facilities by the end of this year, just based on contracts that Zipline has already signed.
McGirt: Wow, you know, Ive been on reporting trips studying rural health systems in Rwanda, Malawi, and Nigeria, and I was actually there reporting a story on Bonos work for Fortune. Thats a person I know you know well. So, I have a firsthand sense of how how complex this is, you know, from start to finish. And it strikes me particularly, when youre working with health systems and governments, particularly post conflict or still emerging economies, that thats State Department-level complex, right? It becomes bigger than logistics. Could you talk to us a little bit aboutyoure nodding. Okay, you see, you see where Im going with thiscan you talk to us about what you needed to learn, or what youve learned about these kinds of complex partnerships?
Cliffton: You know, weve been lucky in that I think a lot of these countries have been perennially or, you know, just consistently underestimated. Like, I think so many people think that innovation, Oh, itll start in the U.S. and Japan, and then over time, itll trickle its way out to these other countries. That just isnt whats happening. And I think its kind of fascinating to see a lot of countries that are small, classified as developing economies, but they are willing to move fast. Theyre super hungry for innovation and they know that to lead the world and catch up, they need to take risk and actually lead in new kind of transformational areas of technology. So, you know, in many cases, I dont know if I have anything super smart, other than its just about partnership.
And when we started, I was talking to President [Paul] Kagame [of Rwanda] yesterday and we were kind of reminiscing about 2016. I asked him, you know, we were a team of 15 nerds then. Why on Earth did you make that bet on us? And he said, Look, if it worked it was going to be totally transformational for the country. And if it didnt work, it wasnt that big of a deal. And he was like, I thought it probably wouldnt work but it seemed worth trying. And, you know, that is actually a sort of revolutionary attitude for a government leader to take. Thats typically not how governments work. And I think over seven years, that partnership has really blossomed. Today Zipline delivers 75% of the national blood supply of Rwanda, outside of Kigali, fully autonomously and instantly, as well as everything else, you know, infusions, transfusions, infusions, vaccineswe can talk more about that in a sec. But weve also, you know, they have all these other national priorities. We started focusing on childhood malnutrition with them. We started focusing on agricultural productivity and animal health care. Were now a major deliverer of artificial insemination products in the country, as crazy as that sounds, for cows and pigs and chickens, because this is how you increase the productivity of farmers. They are building a new national postal service. Were working with them to to do that on top of Zipline infrastructure. So this has been a seven-year partnership and I think it just all comes down to trust, and year after year executing against what you promised.
[Music starts]
Murray: Im here with Joe Ucuzoglu, who is the CEO of Deloitte and had the good sense to sponsor this podcast. Thanks for being with us and thanks for your support.
Joe Ucuzoglu: Thanks, Alan. Pleasure to be here.
Murray: So Joe, this new wave of business technology, artificial intelligence, Internet of Things, the ability to make intelligence out of data, is creating huge opportunities for companies. But a lot of the CEOs I talk to feel daunted by it. Its like, where do they get the imagination to rethink their entire corporation? How do they deal with that?
Ucuzoglu: The opportunities are immense, particularly when you look at not just any one of these technologies individually, but the convergence of all of them collectively, creating the opportunity to truly transform business models. And I know it can seem daunting, but the reality is taking a first step in actually produces a huge benefit. Because what were finding is that many of the cutting-edge applications are not coming out of the corporate headquarters. Theyre coming out of putting the technology in the hands of our people on the front lines. They find new and innovative uses, we then funnel them back up and leverage them across the entire client base.
Murray: Yeah, it really gets to the importance of a culture of innovation at the company.
Ucuzoglu: It is essential that our people feel empowered to take the latest and greatest and to find new and innovative ways to use it for productive purposes.
Murray: Thank you, Joe.
Ucuzoglu: Alan, its a real pleasure.
[Music ends]
Cliffton: Everything that Zipline has been operating over the last seven years is really what we think of as our enterprise product. Thats a product designed specifically to deliver to hospitals, health facilities, and businesses. And obviously that product has scaled exponentially over the last couple of years. To put it into perspective this yea with that platform, well do two times as many deliveries this year, as we did in all previous seven years of the history of the company combined. Were doing about a million flights this year, and then were going to repeat that feat next year. So its in the middle of a really exciting, crazy exponential ramp. But all of our customers, you know, for the last four or five years has been very clear: Theres really this one fundamental capability that is needed, is very hard to do well, but its going to change the world when it actually exists and scales. And thats automated home delivery. So all of the customers that we work with really want the ability to have, we often jokingly talk about it as teleportation. They want to be able to teleport products directly to customers homes 10 times as fast in a more cost effective way and zero emission. And so that is a big transformation thats occurring. What we just announced is Zipline has spent the last four years quietly building this next generation home delivery technology. And there are a whole bunch of different customers in the U.S. and in a lot of the African countries that we serve who have already signed on to adopt this home delivery service and start delivering to millions of homes at scale, both across health care as well as other verticals.
Murray: Are we talking Walmart, Amazon, or do we not know yet?
Cliffton: Walmart is one of our biggest customers in the U.S. Weve been working with them for about two years. In fact, Zipline has a distribution center set up in Bentonville in partnership with Walmart, and weve been operating that distribution center for the last year and seeing the customer response to instant delivery has just been completely mind blowing. I mean, its funny, we often joke, because we saw this in Africa and now we definitely are seeing it in Bentonville. You know we have this benefit of customers thinking its so cool and sci-fi. For about seven days theyre in complete amazement. Wow, you can press a button on your phone and have an autonomous aircraft deliver exactly what you need five minutes later. And then on day eight people are completely bored by it but theyre also totally entitled.
Murray: I want it now.
McGirt: Wheres my drone?
Cliffton: Ive had a doctor look at her watch, and then look at me and say, its 30 seconds late, with a scowl on her face. Yeah, its amazing how quickly we as humans, we go from science fiction to entitlement in about seven days. And weve seen that exact same thing happen for a lot of our U.S. customers. You know, we have customers who are placing orders many times a month as families, they rely on it completely. Its completely normal and boring at this point. But you know, we deliver 24,000 of the 29,000 SKUs of that Walmart store that were attached to. And yeah, its I mean, its its kind of amazing to see the level of adoption.
McGirt: Congratulations. That is good news.
Cliffton: Oh, thanks.
Murray: Yeah, Keller, two questions about this about the service, particularly now that youre talking about moving into the U.S. starting in Bentonville. One is the economics. Like, when does it make sense? If youre going to deliver me a life saving medicine or life saving blood supply, then obviously, thats extremely valuable. If I say I need a new toothpaste, a new toothbrush, and Id like it in five minutes, thats probably not going to be a good case for drone delivery. So question one is when do the economics work for drone delivery? And then question two is you started in Africa because you thought itd be easier to deal with regulators. When you get into Bentonville youre in FAA territory. How is the regulatory issue working for you in the U.S.?
Cliffton: So you know, from a unit economics perspective, I think this is another one where people just dont quite have an intuition for how much the system has scaled. You know, its seven years of operationally evolving and improving. All of Ziplines mature distribution centers today are gross margin positive. And in fact, by the end of this year, Zipline on a continent-level basis, all the continents where we operate will also be fully gross margin positive on a continent basis, including our sort of young, nascent distribution centers that are still scaling and so may not yet be profitable themselves. You know, when you think about the big picture, I mean, yes, certainly, theres a generally a higher willingness to pay for an emergency medical product being delivered to save someones life. But instant delivery is a very well understood market both in the U.S. and globally. Therell be billions of instant deliveries done in the U.S. this year alone, and were using a 3,000 pound gas combustion vehicle driven by a human to deliver something that weighs, on average, five pounds. And this is quite insane. If youre reasoning from a physics or first principles perspective. That is surprisingly slow, its very expensive, and it is catastrophically bad for the environment. So actually, already, the services that Zipline is operating across all these different verticals generally out compete on price alone, using a human driving a 3000 pound gas combustion vehicle to do the same delivery and probably shouldnt be all that surprising that it does.
McGirt: I want to move into philosopher king territory a little bit here, Keller, if thats okay with you. Alan, this is always his favorite part of these interviews. I learned when I was preparing that the precursor company to this, [hard to hear], which made a really adorable robot, like really just adorable, was originally a Kickstarter business, Alan.
Murray: Oh, wow.
McGirt: I know. We just talked to the CEO yesterday for this podcast. So its a wonderful legacy there. But youve been doing this for a while. You had one of the best demo days of the Seattle Techstar era. I remember that. And you were an exciting entrance. Unexpected, but you know, definitely part of the of the zeitgeist of last decade. Im curious about two things. One is your extraordinary sense of purpose. You know, youve mentioned it several times. Youve mentioned the environment. Youve mentioned making sure that everybody has access to the critical things that they need. When did this become part of your personal operating principle? And when did you know that you could build a business on this?
Cliffton: One of the convictions that weve had since we started building Zipline was that working on something this hard, I mean, hardware is hard. Its expensive. Its risky. You sort of have these existential crises where youre bringing a new product to market and you have to figure out manufacturing and supply chain and engineering and operations. The only thing that has really driven us, the thing thats enabled us to build the team that Zipline currently has that, you know, has been able to deliver on these goals that everybody else thought were impossible, has been Ziplines mission and the fact that we believe very strongly that the most important problems that humanity faces are not going to be solved with philanthropy because philanthropy doesnt scale to serve 7 billion people. The most important problems that humanity faces are only going to be solved with technological innovation brought to bear by mission-driven for- profit companies. This is something that we felt very strongly about. And, you know, when it comes to something like logistics, healthcare logistics, building the first logistics system that serves all people equally, this is an area where profit and purpose are fully aligned. We always had these dreams that like, Hey, if we could, if we could make health care logistics better this, this probably would have a bigger, big impact on patient health. We never knew for sure, you know, the University of Pennsylvania just published a study a couple months ago showing that Zipline has been able to reduce maternal mortality at the hospitals we serve by 88%.
McGirt: Wow.
Cliffton: Theres a study in The Lancet from a year ago showing that Rwanda has been able to reduce its national blood waste rate by 67%, for example. So were just scratching the surface of starting to get to show the impact of better logistics enables these other major institutions that we depend on, like health care systems, to serve patients better, save money, save lives.
Murray: Which kind of leads to the obvious next question, Keller. I mean, you didnt put a number on the total addressable market but everything you said indicates its massive, its huge. I mean, if, if it can be economic for all kinds of products, and the whole world wants instant delivery, and needs instant delivery would make lives better in so many ways. At what point does Zipline sell to a FedEx or UPS or a Walmart? Or even a manufacturer? Or somebody who can take you to scale faster? Or can you do it by yourself?
Cliffton: Well, the great news is, you know, Zipline has really not had to do things by ourselves. Weve been able to partner with some of the most innovative governments and countries and companies in the world. You know, two of those companies you mentioned are customers to Zipline. So you know, both UPS and Walmart are two of our biggest customers. And, and so, I dont think you know, we never think of it as we have to go it alone. The reality is, it is 12:01 a.m., when it comes to this industry. Its so early, and I often joke with our team, you know, although were almost about to cross 40 million commercial autonomous miles. I think its easy to look what Zipline has already done and think, you know, thats cool. Thats impressive scale. The reality is were going to look back on this in 10 years, and its going to seem so incredibly primitive. It will blow our minds that it ever worked at all. There is a huge amount of innovation and evolution that is still happening with the technology. Were in the very first inning. And so to me conversations about selling the company or something like that, its just, you know, were having a lot of fun. We know exactly what the mission of Zipline is. Zipline has a lot of the best investors in the world backing us. And we do believe that someone is going to build an automated logistics system for Earth over the next five to 10 years. I think that that company is going to be not just one of the most economically valuable companies on Earth, but I also think it will have a tremendously positive impact on humanity as a whole. And so life is short.
Murray: Go for it.
McGirt: Before I let you go, I just want to circle back on the perfect sort of Zipline story, the delivery story for anybody who may not be fully aware of how it operates. So my setup is going to be Im standing in a rural village in Rwanda, and the local health care worker needs something. What do they do?
Cliffton: The way automated logistics works, the way that Zipline builds it, we want it to be incredibly simple to use. Theres a lot of technological complexity that happens in the background. And not only does Zipline need to build autonomous aircraft and design battery packs, but we also have to design all the avionics, we have to write all of the software, the multi-vehicle deconfliction algorithms, the data logging the, you know, automated preflight checks, air traffic control software that we provide to regulators. Alan, you asked about the FAA. All of those things have to work. But at the end of the day, none of our customers care about any of that complexity. All our customers care about is teleportation. Does the thing go from point A to point B fast enough to impact a patients life or save a life or create an important opportunity for business? And so from from a customer perspective, this system really is as simple as pull out a phone, press a button in an app or place a phone call, and then well deliver to your GPS coordinates, you know, somewhere between five and 45 minutes later, depending on how far away from our distribution center you are.
McGirt: My question goes back to the underestimated innovators out there that you mentioned. I was so happy to hear you mentioned them that you know, theres all kinds of people around the world who dont have pedigree access. They dont even have ramen money or the vibe to get to pattern match with a with an investor. What do you think needs to happen in the investor ecosystem to make sure that the next great idea out there doesnt get lost in the shuffle?
Cliffton: Its such an important point. And, you know, a lot of our partners, for example, you know, some of the countries we work with in Africa, you know, you constantly hear this refrain of we want trade, not aid. Trade, not aid. I think this is something that the people in the U.S. havent quite gotten, like through their heads, which is, you know, these countries want economic growth, economic independence, you know, they want jobs, foreign direct investment, technology and entrepreneurship. And I think that the reality is, you know, even some, when Zipline was starting in the early days, I think a lot of people said, well, you know, are you going be able to hire like the right kinds of teams? Are you going to be able to get access to the talent that you need in these countries? That bias was so far from the reality. I mean, the operations teams Zipline has been able to build across Rwanda, Ghana, Nigeria, Cote dIvoire, Kenya, are not only as strong as the operations teams weve hired in the U.S., some of the people leading operations in the U.S. we pulled from our Africa teams because our African teams are actually the ones who know how to operate this technology at scale, and have been doing so for the last seven years. So its not even a matter of equality, its a matter of, you know, these countries are leading the way. They are the paradigm for how technology is being applied to the problems that are most important for humanity to solve over the next 10 to 20 years.
Last time I checked, and maybe I have these numbers a little wrong, but there are about $4 trillion of foreign direct investment happening in the world every year. And almost none of that is flowing into these countries that actually have a lot of the problems that are most pressing and urgent to, to solve at a humanity level. You know, I read the other day 75, like something like 75% of births over the last over the next 50 years are going to occur in Africa. Isnt that mind blowing? So I think we have this sense that like, oh, thats for philanthropy. So if youre starting a technology company, lets focus on serving, you know, rich people who happen to live on the coasts of this one country or something like that. But the reality is, the way we solve humanity-scale problems is with engineering and technology. And by taking the you know, the smartest people graduating from the best schools and applying them to these humanities scale problems. Im not saying it isnt important to go and help a search engine sell like .001% more ads. I mean, someone has to do that, too, I suppose. But what I know for sure, is we have got to get the smartest minds of my generation, of the next generation focused on these important mission-driven humanity-scale problems. And theres a role for investors to play because if we start to show that you can actually build valuable technology companies serving these kinds of markets, solving these problems, then capitalism is ultimately the driving force thats going to enable these solutions to scale and serve billions of people.
Murray: Its so impressive, I have to say. You came to Fortune Brainstorm Health in the early days. Maybe it was 2015 or 2016? When you were just really getting your first Rwanda projects off the ground. Really impressive to see what youve done and to imagine where it might go. And thank you for articulating it so well. You are changing the world. And as you said, youre just at the very, very beginning of what can be done so keep it up. Well be watching. Well have you back in 10 more years, and you can tell us where you are then.
Cliffton: Its a big honor. Thank you for inviting me.
McGirt: So after talking to Keller, the Leadership Next team was curious to learn even more about the drone delivery market that Zipline is a part ofwhere its at where its going and what challenges its facing. So we sat down with Fortune senior writer Jessica Mathews. She reports on VCs and startups and writes Fortunes Term Sheet newsletter. Shes written about Zipline and the drone delivery market a few times. In late 2021 she actually had the chance to visit the airport in Pea Ridge, Arkansas, where Walmart dispatches deliveries using Ziplines drones. She explains how that visit came to be.
Jessica Mathews: Yeah, so its kind of a funny story. One of my friends actually was shopping at the Pea Ridge Walmart and saw some drones flying behind the store and called me up almost immediately after and said, Hey, you have to come check this out. Theres drones flying around Pea Ridge, Arkansas. I of course was super fascinated. So I reached out and asked if I could get a tour to see what they had going on. It was shortly before they launched their initial testing service with Walmart.
McGirt: Unfortunately, the day Jessica went to Pea Ridge, it was raining, so no drones were able to take off. This is because of visibility regulations we will talk about in a moment. But she did see a Walmart box being stuffed with healthcare and pharmacy items and attached to the drone before it went through safety checks and was set on the runway for its eventual takeoff.
Mathews: So Zipline was the first drone site that I ever visited. Ive been to a few more now. So at the time I remember thinking the technology was just really exciting. But I think I was personally just really surprised at how far that the technology had come and what it was capable of. Because again, youre not seeing drones actually delivering stuff to people on a large scale yet and so it still feels very futuristic, even though in a lot of cases, the technology is actually there, the drones are operational. It was just really exciting to get to see in person.
McGirt: So yes, the technology is there. And yes, the drones are operational. So why arent we all seeing little Zips flying by our window dropping packages into our backyards? Whats preventing consumer drone delivery from going mainstream?
Mathews: Theres definitely a few pieces to this. But the biggest one for sure that any drone company would tell you is regulation, and thats been the biggest hurdle for years. So the FAA, which is the governments aviation regulator, has been developing drone-specific regulation for several years now. Because right now drones operate under the same rules as airplanes, even though theyre autonomous. They dont carry people. Theyre way lighter. Theyre just not as risky as airplanes. But at the same time, theyre operating in airspace, so they have to meet the same regulations. That being said, the FAA has issued some exemptions and certifications that drone companies can apply for to be able to not have to follow all of the airline regulations that are out there. That being said, its still really onerous process to go through all the regulation. Theres still a lot of limitations that are basically keeping companies from able to scale this. The biggest one would be BVLOS, which means beyond visual line of sight, and theres rule that you cant fly a drone beyond a persons visual line of sight unless you have a specific exemption. Really until the FAA comes out with widespread drone-specific regulation, which theyre working on now and should be out in the next few years, were really not going to have it become an everyday part of life.
McGirt: Jessica also mentioned that companies like Zipline have better luck scaling outside the U.S. because America is very protective of its airspace and the FAAs regulations are more restrictive than other countries. The FAAs timetable for establishing new regulations is unpredictable. But demand for drone delivery is high and a lot of companies are investing money to meet that demand. Zipline has big competitors like Matternet, Amazon, and Wing which is Alphabets drone subsidiary.
Mathews: I think the biggest opportunity is specifically around delivery of health supplies right now. In particular to rural communities where its just harder to access them by roads, whether its flooding or if theres a natural disaster. Theres also just a huge opportunity for businesses in terms of efficiency and their supply chain. If you can get trucks off the road and put things in the air, theres a lot you can do for reducing emissions, which is a big priority for a lot of businesses right now. And also, if you can get to the point where you can have a scalable drone operation, then theoretically youre able to operate a whole fleet with maybe one person managing the whole fleet, and they can do so completely remotely.
McGirt: Theres also a bigger question of whether scaling drone delivery is good for society, for people or the environment.
Mathews: I mean, I think one thing that people are concerned about is exactly that, the business efficiency. I mean, is this going to reduce jobs? And theres also questions about noise and whether its going to disrupt people, and whether drones could potentially disrupt wildlife.
McGirt: Ultimately, Jessica was clear on the most exciting and profitable opportunities for drone delivery, and those opportunities dont include having your dinner dropped from the sky onto your doorstep.
Mathews: So, as exciting as it might be to think about getting your Ben & Jerrys delivered to you on demand and dropped off in your backyard, the most exciting things about drone technology are the opportunity that there is to save peoples lives. And that would be delivering emergency supplies after a flood or a tornado to places that are really hard to reach or dangerous for people to reach. Or also things like delivering organs or delivering blood transfusions. I think thats also where theres probably more money to be made at this point in time, too, because the demand is just higher and the need is greater. A lot of people get excited over things like oh, my Dominos Pizza is coming in the sky. DoorDash and other food delivery services have made it pretty clear its really hard to make money in the instant delivery space, and so it might actually be more lucrative for drone companies to work with bigger businesses and hospitals and to actually work in trying to deliver emergency supplies and ways to ultimately do a better service to people anyway.
Murray: Leadership Next is edited by Alexis Haut. Its written by me, Alan Murray, along with my amazing colleagues Ellen McGirt, Alexis Haut, and Megan Arnold. Our theme is by Jason Snell. Our executive producer is Megan Arnold. Leadership Next is a production of Fortune Media. Leadership Next episodes are produced by Fortunes editorial team.
The views and opinions expressed by podcast speakers and guests are solely their own and do not reflect the opinions of Deloitte or its personnel. Nor does Deloitte advocate or endorse any individuals or entities featured on the episodes.
