Throughout my career, I have operated by the core belief that, within companies, there is always spare capacity that can be turned into equity. I have seen this across many industries and believe it is applicable for both small and big businesses, with the biggest opportunity for the smallest companies.
What does spare capacity look like?
Spare capacity can be found in every business. For example, in one of my past roles, we had hundreds of products built for specific applications and had no limitations in terms of capacity. We started to look at the elemental capabilities of these applications, unpacking them down in many cases to the API level detail. We then started to combine these with other internal applications and partner applications (partners who also had modular APIs) to address unsolved structural and business problems within our company, as well as in several industries where other structural inefficiencies existed.
This approach took us as far and wide as maritime shipping, travel, parking systems, public transit, international trade and even the live music industry. We found that through unconventional combinations of solution components and APIs, we could uniquely address these structural inefficiencies in extremely fast and incredibly cost-effective ways that would be difficult to match through conventional development.
I believe every company out there has a spare capacity that can be turned into equity. Today, we already see this at work within major companies like Uber, Lyft and Airbnb. (Disclosure: I worked with these companies in a previous position.) Both ride-sharing companies have utilized spare capacity in available vehicles and spare time, which has now turned into a multibillion-dollar industry. We see the same kind of ingenuity with the online lodging marketplace Airbnb. They have utilized available resources in underused homestays and vacation rentals and turned them into equity. Even on the micro-level, independent restaurants often use pop-ups, delivery and ghost kitchens as ways to earn income on the valuable commodity they already possess: licensed commercial kitchens and liquor licenses. This directly turns their spare capacity into new equity. They address structural inefficiencies through recombinant solutions that bring together spare capacity, both technical and operational, into solutions that create new equity.
How does spare capacity impact small businesses?
For small businesses, spare capacity can be the difference between remaining in business and closing. In my view, the small business sector is the driving engine of the world’s economy. According to data from 2017, in the U.S., there were 31.7 million small businesses compared to 20,139 large businesses. In addition, small businesses were often the most heavily impacted by the Covid-19 pandemic, which amplified the current challenges, specifically with customers, suppliers and cash flow. Due to this, it’s crucial to capitalize on spare resources, time and money to create new equity.
For example, small businesses are often drowning in point-to-point solutions, none of which connect or communicate with each other for increased efficiency. My company found that, on average, small businesses utilize 25 different solutions, many of which they are unaware of. These solutions only use 10% of their feature functionality and spend an average of $60 to $300 per month on each solution. Additionally, these solutions account for 15% of total expenditure in many cases.
To start uncovering and converting spare capacity into equity, take the following steps.
Identify and evaluate inefficiencies.
As a small business owner, it is critical to identify your structural inefficiencies in your business, like certain processes or point-to-point solutions, that could have spare capacity to be leveraged into new equity. When considering your day-to-day solutions, are you using them to total capacity? Could any solutions be combined or removed altogether? Are there solutions that meet multiple needs? Are you fully aware of each solution’s capabilities?
In order to capitalize on structural inefficiencies, you need to understand them. When reviewing your current processes, systems and solutions, search for ways you can streamline and improve while also saving precious time and money. For small businesses with 25 or more solutions, identify the use cases and importance to your business’ operations, and then look for ways to combine or connect these solutions or remove them entirely.
Look for unconventional and clever solutions.
The next initiative is to leverage new capacity for equity. Look for solutions that integrate critical processes and can directly address your needs. Additionally, identify any new revenue streams or business opportunities that can be derived from the inefficiencies you’ve discovered. It’s not just an opportunity to discover areas for improvement—it is also an opportunity to use the increased equity capacity to your advantage.
Convert spare capacity into equity.
Lastly, once you’ve identified the issues and put new systems or processes in place, then it’s time to convert that spare capacity into equity and drive your business forward. Allow the new solutions to work for your business. Take advantage of any new opportunities and stay on top of business trends you could potentially leverage.
I’ve found the most difficult challenge for any business owner is moving beyond traditional business models and revenue structures and empowering your team to think differently. By identifying and addressing these structural inefficiencies, your company will be able to convert spare capacity into equity while also significantly impacting society and communities on a national and international scale.