Adopt An Asset-light Model
For any business to establish a sustainable base in the market, shaping its vision with a scalable business model is a necessity. Let me ask you this. What is common among most modern businesses and successful startups? The answer is – the simple fact that they tend to retain an asset-light structure that is more adaptable to changes and ready to move at a faster pace. As a result, they have fewer capital assets than traditional businesses, giving them the right edge over archaic competitors.
Let us take a closer look at some features that are the trademarks of the modern light business models.
Business expansions are not capital-intensive
With the Covid-19 pandemic shaking the foundations of the already recovering economy, massive investment in infrastructure, network, workforce, and R&D is not at all a popular choice. Managing the overall costs and time for such scenarios can bring about linear growth, at best. On the other hand, light business models ensure that their expenses remain steady during the sales increase. Without being held back by burdensome capital requirements, their growth rate is fast and quite often exponential.
“Often in, while experimenting in blue oceans, to capture uncontested market space, startups have to expand swiftly or roll back and extend in some other direction, only asset-light startups can survive the fickleness of these new consumers.”, says Shashwat Chugh, Senior Business Analyst, Gartner.
Among the premium brands in the world, Apple is one company that believes in maintaining a lightweight structure. They outsource a large segment of their sub-products from a wide range of vendors to ensure flexibility. Similarly, another prime example is Uber, which has prioritized growth by maintaining a lower cost of expansion.
Take a closer look, and you will find that Uber earns its revenue by providing a simple platform to bring the cab drivers and passengers together. Quite simply, neither the cabs nor the drivers are a part of its assets. What about the results? Admittedly, Uber India Systems profits grew by 63.41% in the FY2019, and it is ready to increase its profitability metric even further.
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Lowering the risk factor and enhancing scalability
For start-ups that follow the light business model, the central vision is to provide value to the customers and extract the most from the available opportunities. At the same time, with the right use of technology, they can reduce costs and eliminate the principal risk factors.
By being more flexible, such a business can also relocate or expand within a short period. Besides, companies can form strategic alliances at a quicker pace to evolve innovative solutions. But that is not all. These brands can also ensure maximum efficiency through the use of technology and exploit the revenue scopes at a faster pace. In many cases, there can be two companies sharing expensive assets to optimize the returns.
In the Indian scenario, Swiggy is a classic example of a brand that focuses on offering value to its customers while minimizing expenses on operational infrastructure. Swiggy focuses on specific value propositions and time efficiency in its business model. Note that the company’s scalability has allowed it to expand its footprint to almost 600 Indian cities within a short time. Not only that, but Swiggy also increased its operating revenue to INR 1,121 crore in FY19, a figure that is 2.7 times higher than that of 2018.
Investing in technology is the forward path
Today, businesses are not just looking towards scalability but at the rate at which the scaling occurs. In a dynamic market scenario, a brand that can respond quickly will be able to spearhead the change. For that, leveraging the available technology and removing existing bottlenecks in the system are essential. Also, technology can offer more in-depth insights into the various facets of the business and maximize productivity.
For any start-up to be successful, embracing the best available technology is the right path to fast growth. Many companies were able to earn a considerable share of the market within a short time due to the effective use of technology as a part of the business process. Note that such quick growth is not possible for an asset-heavy brand that relies extensively on social skills.
Note that most of the top international brands that follow the asset-light model are increasing their investment in technology. This includes brands like Amazon, Apple, and Facebook. Here is an example for you. The “technology and content” expense of Amazon increased by almost 25 percent to a figure of $9 billion during the second quarter of 2019.
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Conclusion
A small business can bypass the traditional pathway of growth by adhering to an asset-light model and making the correct use of technology. To sum it up, staying lightweight or asset-light is the key to success.