How Loft Dynamics Turned Service Infrastructure Into Competitive Advantage

How Loft Dynamics Turned Service Infrastructure Into Competitive Advantage

In a recent episode of Category Visionaries, Fabi Riesen, CEO of Loft Dynamics, a flight training platform that’s raised over $29 million, revealed a decision that most hardware founders actively avoid: “We also had to create a huge organization which takes care of the customer that machine is always qualified, gets re-qualified, is maintained and so on.”

Read that carefully. A huge organization. Not a support team or customer success function, but an entire infrastructure dedicated to ensuring devices remain compliant with regulatory standards continuously.

Most founders see this as overhead to minimize. Fabi recognized it as the product itself—and the sustainable competitive advantage that would keep competitors at bay even after they eventually achieved their own regulatory qualifications.

The Problem Pure Hardware Doesn’t Solve

To understand why service infrastructure matters so much, you need to understand what Loft was actually selling. On the surface, it’s flight simulators. But their new customer base—small helicopter operators—weren’t buying hardware. They were buying the ability to conduct compliant training without the infrastructure training centers possess.

Traditional simulator customers were “simulator centers” with dedicated engineering teams. When devices needed maintenance, they had technical staff. When regulatory requirements changed, they had compliance experts. When re-qualification came due, they had people who understood the process.

Small operators have none of this. They “somewhere in a hangar, build a small loft, add the simulator there.” They have flight instructors and pilots, not engineers and compliance specialists. For these customers, a simulator that requires ongoing technical management might as well not exist—regardless of purchase price.

This is where most hardware companies fail in market expansion. They reduce prices to reach new customers, but don’t adapt their service model to match those customers’ actual capabilities. The device becomes affordable but not actually usable for the new buyer segment.

Loft made a different choice. If customers couldn’t handle regulatory compliance, Loft would.

What “Huge Organization” Actually Means

When Fabi talks about creating a huge organization for qualification management, this isn’t generic customer support. It’s building internal capability across multiple specialized functions.

You need people who understand regulatory requirements deeply enough to ensure every device meets current standards. You need systems to track qualification status across dozens of installations in different jurisdictions. You need processes to manage re-qualification cycles before devices fall out of compliance. You need technical expertise to maintain devices remotely when possible and dispatch teams when necessary.

Most importantly, you need all of this to work reliably enough that customers can treat the simulator “just as a tool embedded in their regular workflow.” The moment customers need to think about compliance, qualification, or regulatory requirements, the service infrastructure has failed.

This represents massive ongoing operational cost. For many hardware companies, this would be prohibitive. For Loft, it became the business model.

From Cost Center to Competitive Moat

Here’s where the strategic insight emerges: what looks like operational burden is actually sustainable competitive advantage.

First, service infrastructure creates switching costs. Once Loft manages a customer’s regulatory compliance, switching to a competitor means rebuilding that capability. Even if a competitor eventually offers similar hardware at similar prices, the customer would need to either bring compliance management in-house or establish it with the new vendor. Both options carry risk and cost that make switching unattractive.

Second, ongoing service creates continuous customer relationships. Loft isn’t just selling hardware and hoping customers remain satisfied. They’re actively ensuring compliance every day. This creates visibility into any emerging issues, opportunities for upselling, and natural expansion into fleet deals as customers add more devices.

Third, the service infrastructure compounds with scale. The first five customers require building the entire capability. The next fifty benefit from established processes, proven systems, and experienced teams. Competitors starting from scratch face the same initial investment without the same utilization to spread costs.

Fourth, service excellence becomes a sales tool. When Loft demonstrates that customers won’t need to worry about qualification, re-qualification, or regulatory compliance, it eliminates a major adoption barrier. The value proposition isn’t just “better simulator for less money”—it’s “better simulator with zero compliance burden.”

The Market That Service Infrastructure Unlocked

The decision to build service infrastructure enabled the entire market transformation. “Three years ago, there were two simulator centers in whole Europe where it was possible to get a check ride on the H-125 simulators,” Fabi explained. Today, Loft has “already 15” installations with “nine will follow very soon.”

Each of those 15 installations exists because service infrastructure made adoption viable. Without it, small operators would still face the same choice: travel to distant training centers or don’t use simulators at all. The affordable hardware created the opportunity, but service infrastructure made it real.

The transformation extends beyond just more installations. It changes how training integrates into operations. Pilots can now “come back from a long flight leg and quickly jump in the simulator to complete the check rather than going home.” This workflow integration only happens because the simulator requires zero ongoing management from the operator.

Consider the alternative: if operators needed to manage qualification themselves, simulators would require dedicated staff time, creating friction that prevents casual usage. The device might sit in the hangar but wouldn’t actually get embedded into daily operations because every use involves considering compliance status, documentation, and maintenance schedules.

Why Competitors Can’t Just Add Service Later

One might assume competitors could eventually replicate this approach—just add service infrastructure after achieving regulatory qualification. But service infrastructure built from day one creates fundamentally different capabilities than service added as an afterthought.

When you build service infrastructure as part of initial product development, your entire system design accounts for it. Hardware includes remote diagnostics. Software enables monitoring. Documentation supports systematic maintenance. Everything aligns around enabling centralized service management.

When you try to add service infrastructure to existing products, you’re fighting design decisions made without that requirement. Devices weren’t built for remote monitoring. Documentation wasn’t created for service team use. Processes weren’t designed for centralized compliance management. Retrofitting all of this requires essentially rebuilding the product.

There’s also an organizational challenge. Service infrastructure requires different team composition, different processes, and different metrics than hardware companies typically build. It means hiring compliance specialists, building service operations, and creating systems for proactive maintenance. Companies built around hardware development struggle to shift organizational DNA toward ongoing service delivery.

Loft faced these challenges from the beginning. The service requirement was clear when they decided to serve small operators. They built teams, processes, and systems aligned with that requirement from day one. This head start compounds—every month of operational experience makes the service infrastructure more efficient, more predictable, and more valuable.

The Business Model Implications

Building service infrastructure also changes the business model in ways that strengthen competitive position. Pure hardware sales create one-time revenue. Ongoing service creates recurring relationships that can evolve into subscription or service-based pricing models.

Fabi hints at this when describing their approach: the organization “takes care of the customer that machine is always qualified, gets re-qualified, is maintained and so on.” This ongoing responsibility creates natural opportunities for service contracts, maintenance agreements, or subscription models that provide predictable recurring revenue.

These recurring revenue streams make the business more valuable and more defensible. Competitors who simply sell hardware don’t capture ongoing value from the relationship. They need to constantly acquire new customers rather than expanding relationships with existing ones.

What This Means for Hard Tech Founders

If you’re building hardware for regulated markets, Loft’s approach reveals a counterintuitive strategy: plan for service infrastructure from day one, and treat it as core product rather than necessary overhead.

First, understand what your customers can’t do themselves. Don’t assume they’ll hire people or build capabilities. If they could, they would have already. Design your service model around their actual constraints, not ideal scenarios.

Second, build service infrastructure into your initial budget and hiring. Don’t wait until customers demand it. If serving your target market requires ongoing service, that’s part of product development, not a post-launch addition.

Third, design hardware and software with service infrastructure in mind. Remote monitoring, diagnostic capabilities, documentation systems—all of these should support centralized service delivery from the beginning.

Fourth, recognize that service infrastructure cost decreases with scale while switching costs increase. The first customers are expensive to serve. But each additional customer spreads infrastructure costs while making the value proposition stronger.

Fifth, treat service excellence as a sales tool. The ability to remove operational burdens from customers is a feature worth paying for. Make it central to your positioning.

The Path to Market Leadership

Loft’s timeline demonstrates how service infrastructure accelerates market leadership. From deciding to seriously commercialize in 2018, they reached breakeven in 2022 while completely transforming their market. That speed comes partly from reduced adoption friction—customers don’t need to build compliance capabilities before buying.

The approach also changed investor perception. “Every day we get more requests to be part of the Loft capital,” Fabi shared. “The moment it’s understood how that several billion business is getting disrupted, the appetite is increasing.” Investors recognize that service infrastructure creates more defensible businesses than hardware alone.

Most hardware founders see service infrastructure as a burden to minimize. Fabi saw it as the product that enables market transformation. That reframing—from cost center to competitive advantage—is what separates market leaders from also-rans in regulated hardware markets.

Building a “huge organization” to manage ongoing compliance isn’t overhead. It’s the moat that keeps competitors at bay even after they replicate your technology. For hard tech founders entering regulated markets, that lesson is worth remembering: sometimes the sustainable advantage isn’t in what you build, but in what you maintain.