Harvard Business Review

MAY 2, 2013

The key components that lead to a solution are as follows: Understand the dynamics of a high fixed cost/low variable cost industry. While pharma companies spend billions on research, the actual cost of manufacturing a treatment (such as a pill) is minimal. This cost structure enables pricing flexibility.

Variable Costs 10

Variable Costs Fixed Costs Cash Flow Revenue 10

Harvard Business Review

MAY 8, 2012

Bharti's innovative business model converted fixed costs in capital expenditure to a variable cost based on usage of capacity. Through the outsourcing arrangements, Bharti dramatically lowered its costs while ensuring high quality for customers, since vendors had world-class competencies in their domains.

Balance Sheet 13

Balance Sheet Variable Costs Telecommunications Fixed Costs 13

Harvard Business Review

MAY 9, 2013

In every part of the industry, the open innovation model is changing the economics of advertising by switching significant fixed costs to variable costs and sourcing creative from more relevant and, many times, lower cost sources.

Advertising 14

Advertising Variable Costs Media Fixed Costs 14

Harvard Business Review

JUNE 4, 2015

Since theme parks are high fixed cost/low variable cost entities, revenue from discount-enticed new customers is virtually all profit… free money. By offering deeper discounts on off-peak days, customers who otherwise would not have enjoyed Disneyland could now do so. This would result in growth.

Variable Costs 12

Variable Costs Fixed Costs Implementation Travel 12

Harvard Business Review

SEPTEMBER 4, 2013

For example, a decade ago, it''s unlikely that small-business owners would have told you that they needed a flexible way to host data and applications, one that preferably turned the fixed cost of computer hardware into a variable cost of renting capacity. When the company rides an enabling trend.

Fixed Costs 8

Fixed Costs Variable Costs Assets Banking 8

Harvard Business Review

JULY 27, 2017

And the fixed cost from “touchpoint-to-pilot” are immense. For example, in the case of a $100 million CVC fund, which can close five to 10 investments a year, these costs typically range from $1 to $2 million per startup — not including the administrative and variable costs of the pilot itself.

Fixed Costs 8

Fixed Costs Variable Costs Administration Media 8

Harvard Business Review

NOVEMBER 30, 2018

Capital-intensive factories have a high-fixed-cost, low-variable-cost operating model. If you greatly reduce the production volume, the cars that do come out have to absorb more of the fixed costs, and that eventually sends the product into a profitability death spiral.

Fixed Costs 14

Fixed Costs Assets Cash Flow Variable Costs 14

Harvard Business Review

FEBRUARY 22, 2011

As each of these companies expands its fixed-cost infrastructure, profits grow geometrically because the additional variable cost of adding each new user is near zero. Adding a profile on Facebook has little to no impact on Facebook's operating costs. Greater scale bestows greater competitive advantage.

Advertising 16

Advertising Variable Costs Scaling Media 16