An Innovation System
AeroVironment’s two businesses look discrete, and indeed Wall Street analysts treat the company as an unmanned aircraft system pure play, ignoring the charging business. But the two sides of its operations are, in fact, tightly linked, and the capabilities built in one strengthen the other.
Consider the firm’s use of lithium-ion batteries. First developed for laptop computers and cell phones, these batteries now provide power for the new generation of electric cars, like the Nissan Leaf and Tesla’s Roadster and Model S. Although AeroVironment’s industrial charging business has relied primarily on conventional lead-acid batteries, the company uses lithium-ion cells in its unmanned aircraft, taking advantage of the new technology’s superior power-to-weight ratio. Because thousands of its airplanes are operating in war theaters around the globe, the company has developed an unmatched knowledge of how lithium-ion batteries respond to hard use and frequent recharging—intellectual assets it has now successfully leveraged in the consumer auto market.
But given the long stretch of hurdles that still block the path to widespread adoption of electric vehicles, superior charging technology alone is no guarantee of commercial success. The infrastructure to support it is every bit as essential. Indeed, what made the difference in AeroVironment’s win of the Nissan Leaf contract was the combination of AV’s field experience and the systems approach it took to recharging. Its bid on the job not only specified the capacity and cost of its chargers, but also spelled out how the company would create a nationwide network of trained installers, so that Leaf customers would have a seamless purchase and delivery experience. Today, all the public and private chargers AV has installed are linked through the Internet to servers that monitor the health of every battery in the field. In the future, they will communicate wirelessly with every electric vehicle, so finding a quick charge will be no more challenging than finding a gas station.
The casual observer may be tempted to find a disconnect here. On the one hand, AV prays to the gods of high risk and fast experimentation. It is steeped in a tradition of jumping on challenges for challenges’ sake and of creating new technologies to meet needs yet to be defined. The company can appear downright whimsical. On the other hand, it is winning business through a shrewd commercial mind-set, one that displays a deep understanding of the needs of its customers. In reality, however, these two seemingly disparate mind-sets are highly complementary. Great change starts with crazy ideas, but true disruption occurs only when there are ways to carry those ideas forward. This is not a revelation that emerged overnight, but what AeroVironment has learned is how to build a system for disruption.
That system is a way to innovate and a way to market. It is even a way to think and to talk. Semantics count for a lot at AV. Just as the company always speaks of efficient energy systems when referring to its chargers and battery analysis equipment, its aircraft are never referred to as drones, but as unmanned aircraft systems. One system, the Raven, for example, is sold with three aircraft, two ground stations, and varying levels of personal support, for a complete cost that ranges from $100,000 to $200,000. AV has support personnel on the ground in Afghanistan and other conflict sites around the globe. More than 10 percent of its employees are veterans, and many have Special Operations experience. As with the battery chargers, the customer is buying not just equipment, but also the framework that enables it.