Going big on low investment

Vivek Bindra

Organisations have been constantly adapting several innovative models to scale up the business at a fast pace. Various alternate models have been upturned which encompasses the concept of Asset Light model. By practising such model a business firm can reduce its capital assets (land and building, office premises, plant, and machinery) in comparison to its operating assets in terms of costing and space allowing it to go asset light. It further influences the firm in gaining an edge towards competitive advantage with the firm engaged with asset-heavy based models. If you put weight on a kite it cannot fly, only a light kite will fly high….

Needless to say, success story of OYO Rooms, Alibaba, Uber, Ola and many more companies exemplifies the successful enforcement of asset-based model. Uber has created a wide platform of proving taxi services in the world without possessing its own cabs and drivers. By utilising the asset-light model in business, the company has generated good revenue and is expected to be on a growth path in the next few years too. Similarly another example of implementing the same model, What'sApp has no server of its own. Instead, the app creates its own operating system in customer’s mobile itself. Their business operations have been flourishing with less than 200 employees only. In a simpler sense, it is widely advised to business executives that investing in technology will enhance the scalability of a particular business. However, capital asset enhancement could become a contributor for weighing down an enterprise.

Here’s how a business can go for asset-light model:

1  Outsourcing: A business firm can reduce its operating cost by hiring  external vendors for a work assignment in order to build operational efficiency. For example, mobile industries like Apple and Xiomi are well-known cases of outsourcing where company generally concentrates on operations involving product designing, research and development, marketing and sales and has outsourced the manufacturing section by buying chips from Taiwan Manufacturing firm named Foxconn.

2 Asset-sharing model: It allows business firms to share those capital assets which have a semi-regular utility and are expensive in nature. A few companies come in a mutual agreement for asset sharing which helps in diversifying their risks and optimisation of their capital cost. Oil and natural gas Company, Oyo Rooms, Mahindra logistics, DHL and Cathay Pacific have implemented asset-sharing model in order to manage their business efficiently.

3 Franchisee: Asset light model is not necessarily restricted just to save the operational costs, but it can allow a business entrepreneur to explore more business alternatives and exploit new innovative methods to earn more profits. Franchisee is one of the business opportunities that allow a business firm in buying and owning assets by paying a fee for holding the name of a company for example, McDonalds, Pizza Hut, Barista, KFC are a few brand names offering franchisee options.

4 Pay per use: Sharing assets enable a business firm to pay for the assets when the utility of a product or service is measured only. Co sharing space or co working space can be  good examples of pay per use where a company in need shares the office space of another company to run its business operations with minimum costs

5 Licensing: Business firms choose licensing- based asset light model to make their attentiveness towards their core strength areas — be it manufacturing, processing, or any research and development. Generally companies license out their products or services in order to reduce their costs of research and development and devote their time more on innovation.

— The writer is an international motivational speaker, business consultant & leadership trainer