Plenty of Room at the Top
It’s been over half a century since Feynman’s ‘Plenty of Room at the Bottom’ speech where he pointed out that there is ample space just beneath the visible world, and that space can be utilized to develop what we call electronics and nanotechnology today. Although the definition of all words in that headline changed over the years, as we dived deeper into and gained more understanding of the universe we live in, the underlying meaning remains: There is ample unutilized capacity, and it seems to be increasing as we dive further, and not in one direction only.
Thanks to the technological advancements as a result of focusing at the bottom, we have realized: There is plenty of room at the top as well! Anything lying idle can potentially be utilized and capitalized on. We realized there is enormous unutilized capacity around us, which laid the foundations of the sharing economy. This is a fundamental change that is here to stay and evolve.
The glass: Is it half full only?
To better spot the opportunities that make up the sharing economy, we need to change some of our long lasting habits which include the frameworks we use in thinking. For a long time we have been teaching ourselves to focus on the half-full portion of the glass; focus on what is done and achieved. For example, I am using this laptop for 8 hours a day, so it has a utilization rate of 33%, assuming no sleep. The vacuum cleaner has a utilization rate of 5%. Average utilization of a strategy consultant is 60%. Everything around us has a utilization rate which indicates how much it is benefited from.
But that view of the world actually inhibits our ability to spot opportunities. It focuses on the wrong part of the glass. The glass is not only half-full, it is also half empty! When we focus on the empty portion of the glass we see that the ‘opportunity rate’ of the laptop is 67%, of the vacuum cleaner is 95% and of a strategy consultant is 40% which gives us the free capacity that can be utilized and capitalized on. It is a simple change in looking at the world with fundamental impacts.
There is ample opportunity available for the curious eye and we see more and more businesses set up to capitalize on them. For example, there is ample capacity in restaurants, whose utilization tends to peak during lunch and dinner hours. The opportunity rate maximizes during the times in between. A start-up, Mogl sells unutilized restaurant capacity via a real-time discounts platform. The restaurants can give discounts to attract customers during high opportunity hours. Restaurants make extra money, customers get good discounts: a win-win situation. Similarly, bicycles which lie idle for most of the day exhibit ample opportunity rates, especially in Europe. Donkey Republic sells bicycle capacity from bicycle owners to fellow cyclers who don’t own a bicycle or don’t have a bicycle with them: another win-win situation. Uber sells car capacity and Airbnb sells accommodation capacity. This is only the beginning.
What if… there is no glass
As technology and sharing economy evolve and as people get more connected, the opportunities and challenges of supply chains shift. It is a new game. Supply Chains are evolving into Value Chains, which in turn evolve into Virtual Chains. It used to be about moving goods to a given place and time. Now it’s about meeting needs at a given place at a given time, both of which might be virtual. The opportunity rate leads to pooling of resources.
Let’s go back to the laptop which has a utilization of 33%, which translates into an opportunity rate of 67%. Do we really need to have a physical CPU sitting next to the screen 24 hours a day while we are using it only for 8 hours? Can’t we have a virtual CPU somewhere on the net which we can use on demand (which solves the carrying/weight complications as a bonus). To meet the demand for the current Laptop which has utilization of 33%, the OEM needs to plan delivery of the parts to a physical location, assemble and deliver to sales points by performing optimization on stock levels and analyzing postponement options based on own supply chain strategy. To meet the demand for the hypothetical computer whose CPU might be in Singapore, storage in New Zealand and monitor in my kitchen all linked up wirelessly or via fiber cables; the OEM / original service provider hybrid has to do a different type of optimization and synchronization over components some of which it doesn’t own and which don’t necessarily need to move.
Similarly, why should we store and maintain dresses if we can just print them on demand? We definitely have some part of our history carried with some dresses that make us difficult to depart from, or we might have favorite dresses that we would like to keep. The question is addressed for the remainder of dresses. The dress we have now requires a producer company collating all the raw materials to production facilities. The printed dress requires a last mile solution where raw materials are delivered to the home or a hypothetical printer around the corner. We might see pipelines for raw materials similar to water pipes as a more permanent solution.
Another interesting insight emerges when we consider the example of the vacuum cleaner. 95% opportunity rate implies that the cleaner is basically sitting idle most of the time. Sharing might not make sense as well due to costs involved: i.e., people might just buy a cleaner and let it idle rather than travel a distance to pick up someone else’s cleaner, use it and return it back. We might see new models emerge in such cases where the opportunity rate is high, but sharing economy doesn’t make sense. The new models will still promote pooling; we might see centralized vacuum cleaning services emerge, either as mobile cleaning services or integrated to apartments, or something we can’t think of right now. Whatever the way things evolve, the pooling will bring about new opportunities. In case of vacuum cleaning, we will realize that we have huge amounts of what we call dirt today collected from floors and carpets, pooled and packed, which can be recycled to new products and services with upcoming technologies. This might drive development of an ecosystem of reverse logistics- large amounts of material flow from the traditional last mile to production / recycling centers.
Exciting times ahead. When we focus on opportunity rates, we realize the immense unutilized capacity and start pooling resources: the glass disappears.
Haci Ahmet Kurtaran graduated from the MIT-Malaysia Master of Science in Supply Chain Management (MSCM) Class of 2014. He is presently a freelance Strategy Project Manager in Kuala Lumpur.