Here’s how Exponential Organizations use the growing shared economy to leverage resources and assets to cut costs and remain agile.
How to build a lean business with leveraged assets
Exponential Organizations leverage shared assets to reduce fixed costs and remain agile in a continuously adapting business environment.
The last decade has seen the growth of “the sharing economy”—a peer-to-peer activity of acquiring, providing or sharing access to assets and services often facilitated by digital platforms.
More and more organizations are building their businesses without actually “owning” many assets. So, rather than trying to own assets, organizations rent or share assets.
Shared and leveraged assets are among the 11 Exponential Organization (ExO) attributes used to help ExOs attain agility while minimizing fixed costs, ensuring they grow at an above-average rate. Here’s more on why this trend is growing and how best to use leveraged assets to grow your business exponentially.
Ownership in business is inefficient
The fundamental idea driving leveraged assets is that ownership is inefficient. In business, many assets sit idle a lot of the time. Cars spend most of their time parked in garages, boardrooms sit empty (especially after the pandemic), and hardware like printers and scanners are hardly used.
As a result, businesses with these assets have found a way to share them with other people and organizations. And successful ExOs are leveraging these resources to build their own business without ever having to own the assets themselves. ExOs optimize existing assets delivered via an “as-a-service” model, delivered through the cloud—think of services like Uber, Airbnb and Amazon Web Services.
By doing so, you get all the benefits of the resource without the additional costs, admin and risk that come with owning it.
Examples of leveraged assets
Renting, sharing and leveraging assets such as office space, production machinery, copiers and even office furniture has been around for decades. But these days, organizations are increasingly outsourcing even mission-critical assets. Major companies outsource essential business functions like manufacturing to ensure that they don’t own unnecessary assets.
Examples of leveraged assets are cloud computing (e.g. Amazon Web Services), transport (e.g. Uber and BlaBlaCar), DIY workshops and fabrication studios or even assets from your customers. Digital assets (e.g. Google Maps or Access to AI such as GPT-3) are also assets that can be leveraged.
Another popular example of shared assets is coworking spaces. Organizations can rent big offices full-time or, instead, rent desks and boardrooms as and when they need to. Many coworking spaces even offer a virtual office rental, meaning that businesses can get a business address and other secretarial services without ever having to enter the physical office.
Leveraging coworking spaces is ideal for organizations during the era of changing employee requirements, where many employees opt for flexible, hybrid or fully remote working structures.
Airbnb is also one of the most commonly referred to organizations when discussing the “shared economy” created by leveraging assets. As a significant disruptor in its industry, Airbnb has leveraged technology to become one of the biggest accommodation providers without owning any properties. Airbnb also leveraged Google Maps as a digital asset. If Airbnb had to create its own Mapping service, it would never have been able to scale as it did. Airbnb provides the platform, and the hosts provide the properties. Effectively, the marginal cost of a new room to rent for Airbnb is zero. This is harnessing the power of shared assets at its best.
How leveraging assets helps you grow your organization
Renting, accessing or sharing assets, even those that are mission-critical, allow an organization to stay nimble and unencumbered.
The marginal cost of supply is significantly lowered—to virtually zero in the case of a highly scaled model. By not owning physical or digital property, you remove the costs associated with managing it and all related infrastructure costs.
Here are the major benefits of leveraging assets:
- Allow quickly scalable products
- Lowers marginal cost of supply
- Reduces managing assets
- Great for the balance sheet
- Increases agility and nimbleness
Doing all the hard work
1. What type of fixed costs can we move off the balance sheet by renting them?
Fixed costs are associated with your business’s product that must be paid regardless of how much you sell. Reducing these costs means improving your balance sheet. Examples of fixed costs include:
- Depreciation: The gradual deduction of an asset’s decline in value. A physical asset is gradually expensed over time down to a value of $0.
- Insurance: The insurance to cover your physical and digital assets.
- Rent/Mortgage: The rent or mortgage you pay for your office, factory and storage space.
- Utilities: electricity, water, and other utilities.
2. What processes can we outsource?
While outsourcing service-based tasks refer to the staff-on-demand ExO attribute, specific processes require physical assets. A major one is your manufacturing. Many product sellers choose to outsource this step to avoid the high machinery costs.
Shipping and logistics is another possible area to look at outsourcing. For example, instead of using your own vehicles for delivery and transport, you could look at outsourcing that department completely.
3. Is there spare capacity lying around that we could repurpose?
While maintaining spare capacity—human and physical—is important, there are times when you can repurpose it. If you have assets that aren’t being used at their full capacity, perhaps look at how you can leverage them further. Either by using them for a different purpose or renting them out to other organizations.
Lean organizations are built to survive
If the pandemic taught us anything, it’s that you want your organization to be as agile and lean as possible. Cutting down your list of fixed costs by leveraging assets is a great way to survive anything thrown at you. Thanks to the growth of the sharing economy, you can still benefit from the many resources your business needs without the ties and high costs that come with them.
To learn more about the other attributes, click here.