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It all started in the 1990s with the fast advent of new technologies and democratization of the world wide web. Today, what has baptized the economy corresponds to the huge establishment and development of startups in the global markets. As per researches, currently there are 3.2 million startups across the world. Amidst all this, the travel industry has grown exponentially over the past two decades owing to the gigantic wave of digitalisation. Reports show that the travel industry has more than 6,000 startups all across the world with an average valuation of USD 4.1 million. But, staying in the business, indeed has become a tough job today. These latest travel startups which look after curating travellists, making travel arrangements, offering foreign exchange, handling the back-operations of travel and other related works, have all brought to existence a highly competitive travel and tourism industry. But, fear not, because today, we bring to you the perfect way which can hold your startup up and leading in the list- The Asset Light Model.
UNDERSTANDING THE TERM
No wonder that modern day startups are always keen on coming up with new and innovative methods and strategies to scale up faster effectively and efficiently. This has given birth many alternative models of operations, including the concept of going asset light. Companies do this by owning fewer capital assets as compared to their operational assets. Therefore, by lowering the number of capital assets for example, land and building, plant and machinery, cars and computers, companies definitely get a great competitive edge over their competitors that are asset heavy.
ITS WORKING MECHANISM
To understand the working of the Asset light model, take into consideration this simple example:
Say, an individual wants to start a business and needs some land resource to build an office for the same. Now, acting smart and money wise, instead of paying a truckload of money to buy the land, the business owner can enter into an agreement with the land owner, sharing a certain percentage of profit. And this, is exactly what the asset light model does!
This business model is also famous as the capital-light business model, the reason being: it doesn’t require huge amounts of money to put any sort of business into action.
Be it the required labour force, the infrastructure, Research & Development operations, or even the network, instead of splurging hefty loads of money, to just acquire the ownership of all, all you need to do is pay a certain amount of capital to get all things put in place and just, at the end, share the profits.
COMPETITIVE ADVANTAGE OF USING THE ASSET LIGHT MODEL
- Time flexibility
This factor does rely on your startup and its nature, but focus on your core and major competencies without any need for developing parallel capabilities or operations nor having to fundraise for such capabilities, will enable you to launch faster and with much smaller initial funding. With on-demand resources, in place of the riskier and costlier sunk capital investments, you will be quite flexible during the product launch and be capable of making any quick adjustments and improvisations.
Startups will benefit immensely in this case as they will be able to scale up faster and better. Startups will get enabled to develop their business at a lower marginal cost through access to more abundant on-demand resources in their partner networks. Thus, more number of consumers will be able to access the innovation your startup brings, in shorter time too, thus effectively democratizing the new product or service that are brought into the market for them.
3. Better Innovation
Owing to the benefits of specialization and differentiation, there’s no denying that whenever the entrepreneurs of the startups target only on what they do the best at the same time, getting complementary capabilities and inputs from other organisations of the outer world, then they always have the potential of getting even better and better while execution in a partner network always found to be much more effective and efficient.
Added to this, leveraging the skills and abilities, resources and perspectives that exist in the former’s network of business partners always lead to the path of better innovation and development.
A FEW NOTABLE EXAMPLES
Globally, the cab service firm, Uber is an outstanding example that has adopted very successfully the asset light model. The company owns no cars instead, it invests heavily on technology. Uber is well over 50 billion dollars worth and continues to rise and shine with its massive presence in over 63 countries. Airbnb, Lyft, Liquid, Zaarly, Getaround are also other pioneer companies based on the concept of asset light model business.
All the contemporary startup models have their own set of boons and banes, thus, it is quite imperative for the budding entrepreneurs to be cent per cent sure that they take all the factors into account before the establishment of their travel startups.
The asset light business model is clearly gaining a rapidly growing popularity for the startup ventures especially. And taking account of its global adaptability and immense scalability, and the ever increasing usage of internet, it won’t be wrong to say that Asset Light Model is indeed the Asset Right Model for all startup businesses in today’s era!