Once seen as the survival mechanism for underperforming companies’ asset-light strategies and business models, it has become an essential tool to fuel growth and strengthen an ecosystem of partnerships. Companies aggressively adopt creative revenue models that capitalise on underutilised or non-core assets. This shift allows companies to optimise cash flow, reduce operational overhead, and improve return on investment (ROI) without the burden of extensive asset ownership. According to the research conducted by EY, companies, regardless of their position in the market, achieve higher total shareholder returns (TSR).
Further, the asset-light strategy webcast poll conducted by EY included responses from more than 1000 C-suite-level officers. It states that 25% mentioned using asset-light strategies to meet customer demand, while 21% indicated that capital requirements to support growth motivate them to explore such strategies. And 31% of them mentioned that because of the explosive growth of digitalisation, they adopted asset-light strategies.
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Understanding Asset Light Approach
This approach entails transferring capabilities—such as personnel, processes, and technology—to “better owners,” enabling companies to convert fixed costs into a variable cost structure, increase agility, and reallocate resources to concentrate on core strengths.
For example, companies such as Airbnb and Uber utilise digital platforms to connect asset owners and users, creating value without ownership costs. By doing so, these companies increase their flexibility and can scale more rapidly than traditional models requiring significant capital for asset acquisition.
Importance Of Asset Light Approach
The Asset-Light approach has now become a fundamental strategy for businesses to thrive in the post-pandemic era. According to Willem Appelo, the former Worldwide Vice President of Supply Chain, Strategy, Innovation, and Deployment of Johnson & Johnson, “Today, companies of all types and sizes are using asset-light strategies to deal with massive market disruption and drive continued growth. To remain competitive, they must make changes irrespective of their financial position.”
At its core, the asset-light strategy focuses on forming mutually beneficial partnerships that enable each party to concentrate on and manage the areas where they excel, ultimately driving higher profits and shareholder value for the entire business ecosystem.
Beyond total shareholder returns, there may be additional financial advantages. A recent study by Ernst & Young LLP found that companies that relocated manufacturing before a sale were 17 percentage points more likely to exceed valuation expectations for their remaining businesses and more likely to achieve a higher divestment price.
Monetisation Strategies for Underutilised Assets
Some of the most effective monetisation strategies for businesses, such as leasing and subscription models in manufacturing, can provide businesses any opportunity to bring down their costs or earn more revenue. In fact, Caterpillar’s rental services saw a 5% growth in revenue in 2022, reflecting an increasing trend toward renting heavy machinery rather than purchasing. These leasing and subscription models cater to companies needing specific assets temporarily, making the approach beneficial for businesses with fluctuating demands.
Moving to another strategy, real estate and infrastructure monetisation. According to the report by PWC, many companies are reconsidering their options to monetise their real estate through REIT conversion, spin-off, and nonrecourse financing. For instance, the National Highways Authority of India (NHAI) launched InvITs for toll roads, securing funds for future infrastructure projects while transferring management responsibilities to investors.
Another strategy that has been greatly successful for the technology company is licensing intellectual property. According to the Verified Markets Report, in 2023, the IP property licensing market was valued at USD 13.23 Billion and is forecasted to reach a valuation of 40.12 Billion by 2030.
Key Considerations and Challenges
While asset monetisation offers flexibility and potential revenue, inherent challenges exist. For instance, transforming assets into income streams requires robust management and clear strategies to ensure profitability and minimise risks. Furthermore, establishing and maintaining investor trust is critical in asset-backed monetisation methods like structured bonds and securities, as these investors must have confidence in the future cash flows and the company’s overall risk profile.
The Future of Asset Monetisation
As companies continue to explore innovative ways to maximise revenue from underutilised assets, advancements in technology, digital platforms, and sustainability will play a critical role. For instance, blockchain and AI can improve transparency and efficiency in asset-sharing markets, further enabling monetisation while reducing operational risks. The shift toward a leaner, more flexible asset-light economy is poised to redefine revenue generation in the coming decade, allowing businesses to unlock new financial potential in their otherwise dormant resources.
