A New Approach to Discovering Business Value
Untapped value is hiding in plain sight throughout every organization. The key is knowing how to find it.
The rooftop of a big-box store is:
- A flat expanse of hundreds of square feet exposed to the weather
- A great, if not perfect, way to protect what’s inside from that weather
- A power source for the building, and maybe for the neighbors, too
If you’re the Ingka Group, which owns IKEA, the answer is “all of the above.” As part of its commitment to use only renewable energy by 2020, the Ingka Group installed 900,000 solar modules on the roofs of IKEA stores and warehouses around the world, turning what would otherwise be vacant space into a literal powerhouse. These solar installations generated 155 GWh of electricity in 2018, enough to supply nearly 5% of IKEA’s global energy needs. In fact, according to Karol Gobczyński, the Ingka Group’s head of climate and energy, some locations are generating enough solar power to sell some back to the local electrical grid.
What holds companies back from coming up with breakthroughs like this in a systematic, repeatable way?
A failure of perspective.
Methodologies like Six Sigma and technologies like sharing platforms and AI-driven analytics are powerful tools to uncover new opportunities, but they are held back by outdated thinking. If they weren’t, digital transformations wouldn’t fail up to 80% of the time, and they’d meet or exceed expectations more than just 5% of the time. To be truly transformative – in other words, to get more than just incremental returns on investment – companies need to combine technology with a new way of thinking about what value is and where to find it.
Massive value is lying fallow in excess resources, like unused real estate, over-purchased software, and employees who aren’t being used to their full potential (people themselves are never excess). It’s concealed in underused resources, like vehicles that are on the road only a few hours a day, computing cycles that whir away pointlessly at night, and employees with untapped skills. It’s hiding in things that, according to current wisdom, have no value whatsoever, like production waste, “data exhaust,” and people who move on to other employers.
But waiting for the hidden value in these resources to reveal itself practically guarantees that it will remain unseen. Companies need to adopt a new mindset for systematically seeking out resources so they can extract more value from existing investments and encourage the development of potential new products, services, and business models. In other words, they need a capacity capture mindset.
Broadening the search for value
Capacity capture is about actively identifying resources that are underused, wasted, or discarded and coming up with ways to recapture, use, sell, or otherwise monetize them. Consider how much money real estate companies invest in building and maintaining parking lots in office parks, even though the parking spaces sit empty for 12 or more hours a day. In Europe, a technology platform that lets long-haul truck drivers reserve those spots overnight has created a new income stream for the office parks. At the same time, it gives drivers safer places to sleep than highway shoulders and on-ramps, which protects the drivers, their cargo, and everyone else on the road.
Capacity capture allows organizations to discover new areas of innovation that end up delivering bigger benefits than just resource efficiency. Imagine a factory that actively looks for ways to generate more heat during production because it can make more money by selling or repurposing that heat than it can save by minimizing it. In the Danish town of Kalundborg, for example, 13 different companies in the local industrial park use an elaborate system of pipelines to exchange materials and energy. Sludge, steam, and fly ash that are waste for some become valuable input for others, lowering the cost of energy and raw materials for everyone while reducing the amount and expense of waste disposal.
Using the capacity capture mindset, companies can also find ways to make their products more effective by capturing and using what would otherwise be considered waste. For example, MIT and Stanford scientists have invented a way to expand the capacity of rechargeable batteries by warming them while they’re first charging. A battery manufacturer could theoretically do this by capturing waste heat from the manufacturing process and then selling these higher-capacity batteries at a premium. Kohler, the tile company, is already doing something along these lines by repurposing waste from its tile manufacturing process, including broken tiles, cast iron slag, and leftover glazes, and using them to create a new line of designer tile.
The capacity capture mindset also encourages a deeper examination of experience as a resource. Just look at the Dutch city of Rotterdam, home to Europe’s largest industrial port and, like most of the Netherlands, below sea level. Rotterdam has tapped its underused wealth of institutional expertise in preventing and managing flooding to launch a consulting business. In guiding other coastal cities on how to cope with rising sea waters and worsening storms in the face of climate change, the city collects extra funding for the city budget, which in turn supports further innovations in flood-resistant urban renewal.
Defining the search grid body
The first step to capturing capacity is to understand what capacity is and where it might be found.
Types of assets
- Physical assets are tangible objects of any kind, from facilities and heavy equipment to lighting and office supplies.
- Digital assets include network infrastructure, software, data and metadata, and bandwidth.
- Human assets are people and their behaviors.
Areas of untapped capacity
- Unwanted assets are assets that are created or accumulated unintentionally or incidentally as a side effect or byproduct of another process.
- Excess assets are produced or gathered intentionally but become surplus either because there are too many of them or because the process that produced or gathered them is no longer in use.
- Underused assets are created intentionally and are in use but not to their full potential.
The following framework gives examples of these asset types and capacities and the questions a company might ask itself to discover them:
The boundaries between these different types of assets can be porous. For example, some physical assets also have characteristics of digital assets, as with autonomous vehicles. Some digital assets, such as servers and storage media, may be thought of as physical assets. What’s more, physical and digital assets often enhance human assets, a convergence that will accelerate as technologies evolve.
As a result, many assets will overlap several categories, and the process of considering where they might fit can generate further possibilities.
Categories of capacity capture in action
Unwanted. The UK’s Wensleydale Creamery works with a nearby bioenergy plant to turn the waste whey from its world-famous cheese into enough renewable biogas to heat 4,000 homes in the Yorkshire Dales. The bioenergy plant, which also processes leftovers from a nearby ice cream factory, pumps the natural gas from food waste back into the gas grid. What remains becomes fertilizer for local farmland.
Excess. Several European utility companies are working with automakers Nissan and Mitsubishi to develop services that let people sell the energy stored in their electric vehicle (EV) batteries back to the grid. Today, the return on the extra juice is limited, but as batteries continue their Moore’s Law-like improvement in cost and power, people who charge their EV batteries during off-peak times and sell power back to the grid during peak times could end up charging their cars for free – or even making a profit.
Underused. As early as 2012, Coca-Cola began partnering with pharmaceutical companies to deliver vaccines in developing countries using the existing refrigerated trucks and supply chain know-how that have made its products available around the world. By fitting medical perishables into the empty space in trucks that deliver soft drinks, the company reduced vaccine delivery times and increased the number of people getting vaccinated while boosting its brand reputation.
Unwanted. Companies of all types are offering data they collect that is incidental to their primary business models to other organizations who mine it for value. For example, health insurer UnitedHealth Group provides aggregated data from its claim forms to drug companies seeking insight into how their products are being used. This secondary income stream has been so successful that the resulting spinoff, Optum, has been more profitable and faster-growing than UnitedHealth itself.
Excess. As more streetlights are fitted with LED bulbs to reduce costs and save energy, it turns out that they can do more than their centuries-old roles of guiding travelers and making pedestrians safer. Visible light communication, or Li-Fi, transmits data by switching individual LED bulbs on and off at nanosecond speeds, much faster than the human eye can detect, so that the lights can still do their primary jobs while transmitting data at rates 1,000 times faster than traditional Wi-Fi over short distances.
Underused. Amazon famously created a significant new business model, Amazon Web Services, by renting out unused capacity on its flexible computing infrastructure. It’s now captured that capacity for a second time by creating a marketplace where it charges a 12% service fee to customers who are reselling their reserved but unused cloud instances.
When we talk about unwanted or excess human assets, we’re talking about roles, skills, and behaviors, not the people themselves. All people are valuable; indeed, they’re the only constant resource companies have, and digital and physical resources have no value without them. People can change their value throughout their lives through ongoing learning and development. It’s time to jettison the idea that someone stops being valuable when the workplace changes and instead quantify their value based on what they’re capable of doing and what they’re willing to do to keep pace with change.
Unwanted. Just a few years ago, employees could be disciplined or even fired for using their smartphone at a corporate event. At best, it was considered rude, and at worst, it was viewed as a potential breach of company security. Today, organizations actively encourage employees to brandish their phones to promote conference panels and other events on social media in real time.
Excess. Many companies make decisions about whether to lay off high-salary employees to cut costs by looking at their roles in isolation, without considering how those employees enhance the value of the people they work for and with. Finding a way to capture and quantify the value of an employee’s contribution to the organization will encourage companies to consider whether letting someone go will cost the company more than it saves. Similarly, companies can reduce retirement-driven brain drain by inviting retiring employees to become “business angels” who coach new teams. They could even partner with similar companies in a consortium that captures the untapped value of people who just missed being hired by sharing these candidates with and recommending them to each other.
Underused. The Hilton Worldwide hotel chain keeps a record of every employee’s specific skills, such as language ability and local connections, even if those skills aren’t immediately relevant or used in the employee’s current role. That gives the company fast access to internal people when they are most needed. For example, if the company plans to open a hotel in a new location it can easily search for an employee who is a native speaker of the language and has connections in that market.
Once you’ve developed a list of potential resources, don’t get bogged down in trying to evaluate them all at once or even in groups. Focus on each one with the presumption that it’s inherently valuable and that your job is to determine its value.
As you assess each potential resource, consider how you might extract the value:
- Reuse. How could it benefit another part of your organization? Extend and combine. What other things could you do with this resource, alone or combined with another resource?
- Spin off. What could you do with this resource if you removed it from its current context to stand alone?
- Maximize. How could you create and use even more of this resource?
- Sell. Under what circumstances might someone else value this resource enough to buy it from your organization?
- Recycle. How could another organization use this resource when you’re done with it?
- Donate. Could you create nonmonetary value, and save the cost of disposal, by giving this resource away?
It isn’t as odd as it may seem to take this approach to human assets as well as physical or digital assets. Your company already knows how to reuse people’s skills by shifting them to other departments and maximize them by providing more training. It could just as easily spin off a group of especially unconventional thinkers into a skunkworks or “donate them” by encouraging them to share their skills with volunteer organizations.
This process is intended to generate ideas through rapid iteration and participation from a variety of people across the organization. There are no wrong answers, only creative possibilities.
As with other transformations, it makes sense to begin experimenting with capacity capture in one small, distinct area as a proof of concept. Setting up new business models – especially outside of a company’s existing industry – used to be a huge hurdle, but emerging technologies and technology-enabled platforms (think Airbnb, Lyft, and Spotify) make it more affordable to experiment and test the market. A small-scale, iterative approach that keeps the cost of entry low lets you continually spin up new opportunities instead of passing on something promising because you lack the visibility and depth of understanding about its potential.
Capacity capture as strategic imperative
Another key aspect of the capacity capture mindset is that you aren’t trapped (or protected) by your existing business model or industry. If your explorations uncover a newfound opportunity that you don’t want to ignore but also don’t want to make your primary focus, you may decide to pursue it through a joint venture with an existing partner, a company you wouldn’t ordinarily have a reason to do business with, or even a competitor.
As business shifts to a capacity mindset, it could make sense to carve out a top management role – maybe even a chief capacity officer position – with ultimate responsibility for identifying capacity throughout the organization and driving innovative projects to capture it for business benefit.
This role would require a knowledge of where end-to-end processes are and what they need, credibility with colleagues across functions, and the ability to think creatively. A business leader with established ideas about the right way to run an organization may not be as good a fit for the role as someone with talent and enthusiasm for spotting unused or overlooked resources in their own, and other, departments.
A company fortunate to have multiple people with the necessary skills may decide to create a capacity capture team. An organization that develops expertise in capacity capture may even develop or spin off a consultancy that helps other businesses shift their own thinking around resources, as the city of Rotterdam did with its water containment knowledge. That is itself an opportunity to capture underused human capacity.
Researchers at the Global Footprint network say the human race now consumes renewable resources at almost twice the rate the earth can replenish them. Capacity capture provides an alternative to working within the limitations of what we perceive as our available resources. It lets us question our perceptions – and therefore our limitations – about what we have to work with in the first place.
Featured Artist Kotryna Zukauskaite
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