The pandemic has pointed out a potential flaw in our strategic business thinking. It has to do with how we view profitability. It also ties to how we organize and optimize our business for success.
Most companies optimize to hit profitability when they reach 75-100% utilization. Anything less and the company is losing money. Look at restaurants, airlines, and the list goes on. We optimize companies based on significant utilization.
What if we changed expectations?
How would success change if we changed expectations to hit profitability at 25% utilization? What questions would we ask differently? What changes in our business strategy would we make? How would we optimize differently?
Changing the mindset would change how we approach and optimize our organizations. It would instill a higher degree of flexibility and potentially cost. At the same time, it would lower the risk…and requirement to reach high levels of utilization.
Change the game, not the rules
Beyond the business structural components, the CIO plays a huge role in these shifts. Operating a business at 25% utilization suggests significant variability in operations and utilization cycles up and down. The data that underpins the business decisions and the shift in operations require a significant amount of IT ingenuity.
This is not a scenario where one simply scales up or down to meet demand. It requires a completely different way of operating.
The question is: If your business had to reach profitability at 25% utilization, what changes would you make?
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