Why startups with asset-light business models become successful | 10,000 Startups | A NASSCOM Initiative

Why startups with asset-light business models become successful

1The success story of Uber or OYO Rooms is not unknown to anyone who is trying to build a new business. Needless to say, along with a brilliant product, and technologies, what made them click is the fact that they were asset-light. They experienced stupendous success in about three years from initiation. Compared to traditional asset-heavy businesses they scaled up much faster and sustained the market competition as well.
An innovative idea for a startup is definitely needed, but even before launching, it is important to come up with a scalable model for the business. This is also a good way to ensure that you get enough attention from the investors.
Traditional business models that relied highly on assets and needed to invest in infrastructure, development, employees and networking would find it impossible to scale up in a short time. It would involve a huge amount of money and a considerable amount of time. Neither of which is available in today’s fast growing economy.
Asset-light models, on the other hand, incur very low costs and risks too. It is easy for this kind of startups to expand to new cities and even countries. They can do it just by adding new business partners. Outsourcing and asset sharing and licensing are two ways to become asset-light. By doing this, companies can cut down on costs and can concentrate on building a better product, do research and development work, build a stellar network, form crucial alliances.
Take the example of Apple. The company buys its chips from Taiwan Semiconductor Manufacturing Company. It is a good case of outsourcing where the parent company does not spend in manufacturing and has outsourced it.
OYO Rooms came up with a brilliant business model, where they did not have to build hotels from scratch. They just partnered with existing hotels and got some percentage of commission from them. In doing this, they saved not just money but a huge amount of time. Small wonder, they are on the exponential growth path.
Another aspect of going asset-light is relying on game-changing technology. A great idea armed with modern technologies can very well become the deciding factor for your business. Using technology instead of manpower will make your business less reliant on people and at the same time give more accurate results. This creates more productivity. Which is why technology should be an integral part of the business strategy and not just some means to run the business.
An asset-light, tech-enabled company holds the key to success in today’s economy. It has several advantages and definitely a first choice for startup entrepreneurs who want to set up their business.

 

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