Challenges of Leveraged and Shared Assets

Understanding and mitigating the challenges of LSA are crucial for maximizing the potential of an ExO.  Here are some key challenges associated with LSA:

• Ensuring Unit Metrics Work Before Scaling: Before scaling a business using LSA, it is essential to ensure that the unit metrics are robust and sustainable. Scaling operations without solid unit economics can lead to the amplification of losses instead of generating profits. A notable cautionary example is WeWork, that scaled without addressing fundamental unit metrics, ultimately leading to financial difficulties.

• Increased Risk due to Leveraging Assets: Leveraging assets introduces an element of risk, particularly during challenging times such as economic downturns or unforeseen events like the COVID-19 pandemic. Reliability and availability of leveraged assets may become uncertain, potentially impacting business operations and continuity. Enterprises relying on shared assets must carefully assess the risks associated with their reliance on external resources and implement contingency plans to mitigate potential disruptions.

• Loss of Control: One of the trade-offs of utilizing shared assets is the loss of control over those assets. When an organization does not own its assets, it relinquishes direct control over their management, maintenance, and strategic decision-making. This lack of control can pose challenges in terms of customization, prioritization, and responsiveness to specific business needs.

• Inappropriate for Certain Situations: There are instances when Leveraged and Shared Assets may not be suitable for certain organizations or specific circumstances. For example, young technology companies with breakthrough products, like Tesla, may choose to own their assets to protect trade secrets and capitalize on future demand. In such cases, asset ownership becomes critical for maintaining a competitive edge and safeguarding intellectual property.