Harvard Business Review

JULY 2, 2014

These costs are fixed because they will not change with the number of kites sold. Therefore, the unit variable costs to make a single kite is: $50 ($20 in materials and $30 in labor). What if we change the variable cost of producing a good? How much would sales need to increase to compensate for the extra cost?

Variable Costs 10

Variable Costs Fixed Costs Sales Sales 10

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

JUNE 14, 2016

Through digitization initiatives such as this, we now have a way to measure, monitor, and manage energy…this is huge since energy is typically a factory’s largest variable cost.” In the tech world, for example, energy is now the largest component of variable costs for running a datacenter.

Energy 13

Energy Variable Costs Operations Metrics 13

Harvard Business Review

FEBRUARY 7, 2012

The company can also reap the immediate variable cost benefits of free power. It also recognizes that, in the meantime, operational managers will gain valuable experience and knowledge about how to optimize the new power systems.

ROI 15

ROI Variable Costs Energy Scaling 15

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

Harvard Business Review

OCTOBER 14, 2014

Second, because they can’t yet afford the high-margin top brands, they’re not all that attractive to incumbents worried about generating enough cash to cover their high fixed and variable costs.

Variable Costs 15

Variable Costs Sales Sales Marketing 15

Harvard Business Review

MARCH 14, 2011

And without going into massive detail on economics, I've always liked the really simple logic around renewables — they have zero variable cost (wind, sunshine, and underground heat are free). In short, compared to focusing on energy efficiency, nuclear is really expensive.

Energy 17

Energy Transportation Variable Costs Insurance 17

Harvard Business Review

OCTOBER 29, 2015

This makes financial sense in industries with high fixed costs and low variable costs: larger sizes enable the company to charge higher prices that, even if they are just slightly larger, absorb a higher portion of fixed costs, while reducing packaging cost per volume and attracting value-minded consumers.

Fixed Costs 14

Fixed Costs Variable Costs Marketing Sales 14

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 12

Balance Sheet Variable Costs Telecommunications Fixed Costs 12

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

SEPTEMBER 22, 2015

The biggest expense of a new drug is R&D; once developed, the cost of producing pills is relatively trivial. Most important, everyone in the world can – and should – benefit from pharmaceutical advancements, especially since the variable costs are so low. the government simply specifies prices).

Variable Costs 14

Variable Costs Insurance Government Benefits 14

Harvard Business Review

MAY 8, 2012

Cloud service providers are increasingly proxies for utilities — they require 100% uptime, significant quantities of their own power, and predictable variable cost (which for renewables is nearly zero). Sales/Becoming the Vendor of Choice.

Energy 16

Energy Variable Costs Travel Operations 16

Harvard Business Review

MAY 14, 2012

Because when everything spent on you is ultimately a variable cost, your ability (or not) to plug in and immediately play goes straight to the bottom line. But in the mod-mod-mod-ular world of free agents, low friction is key, and an employer needs to know "How's your user interface?"

User Experience 16

User Experience Variable Costs Compensation Media 16

Harvard Business Review

JUNE 20, 2012

Instead, companies seeking to improve the lives of the world's poor should focus on a more realistic route to profitability: They need to elevate gross margins far above the company average by pushing down variable costs and boosting the price consumers are willing to pay for a unit of product.

Variable Costs 13

Variable Costs Banking Sales Sales 13

Harvard Business Review

JANUARY 27, 2015

Amazon’s Jeff Bezos recommends looking for opportunities to convert capital and fixed expenses into variable costs. So look for industries where upfront costs are high and new technology could offer similar services with little or no upfront commitment.

Small Business 14

Small Business B2B Variable Costs Scaling 14

Harvard Business Review

JULY 9, 2014

Thus, Uber is pricing below its variable costs. Interestingly, if Uber had a large market share (which to be clear, it doesn’t), pricing below its variable costs would have put the company at risk of being charged with predatory pricing by the Antitrust Division of the Department of Justice.

Variable Costs 8

Variable Costs Transportation Government Telecommunications 8

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 13

Advertising Variable Costs Media Fixed Costs 13

Harvard Business Review

FEBRUARY 5, 2014

Ultimately, second path is clearly the most likely, and the clean economy will dominate over time on purely economic terms — a variable cost of basically zero for renewable energy will win out. But moral campaigns are highly unpredictable and we can’t count on this path to get us there.

Assets 13

Assets Energy Variable Costs Government 13

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 25, 2012

The cost of using renewable energy, either through power purchasing agreements that cost nothing up front or through direct investment, is dropping fast. Upfront costs are falling, which makes the ongoing variable cost of renewables — that is, zero — even more attractive.

Energy 10

Energy Variable Costs Media Revenue 10

Harvard Business Review

MARCH 11, 2014

First, making significant amounts of your own power at zero variable cost is more than nice; it’s a hedge against volatility and smooths out expenses, which makes business planning easier.

ROI 9

ROI Variable Costs Energy Benefits 9

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.

Fixed Costs 8

Fixed Costs Variable Costs Assets Banking 8

Harvard Business Review

FEBRUARY 19, 2014

All of sudden what was an additional engineering and development effort now became a small, variable cost. This meant that Ceres didn’t need to build an aerial infrastructure – it already existed. As a bonus it meant the 1,400 aerial applicator companies could be a potential distribution channel partner.

Variable Costs 8

Variable Costs Engineering 8

Harvard Business Review

MAY 7, 2015

By comparing the costs to the hospital of dealing with the negative outcomes to the positive benefits of using the drug, Medicines Co can decide which type of patient to target (it turns out that Angiomax has a very high EVC for high-risk patients) and a lower EVC for low-risk ones) and how to price the drug to the hospitals.

Benefits 14

Benefits Variable Costs Hospitality Marketing 14

Harvard Business Review

AUGUST 3, 2018

The company should separately present fixed and variable costs, and to the extent possible, detail the variable costs associated with a unit of activity. For example, Twitter provides “cost per ad engagement.”

Variable Costs 8

Variable Costs Revenue Assets Cash Flow 8

Harvard Business Review

APRIL 5, 2013

Dynamic pricing makes sense for baseball as it shares key qualities that have enabled other industries (airlines, hotels, and rental cars) to prosper from this strategy: fixed capacity, low variable costs, and a "product" that expires at a certain time.

Variable Costs 8

Variable Costs Travel Revenue Sales 8

Harvard Business Review

MAY 18, 2018

per month per subscriber, and three movie tickets costs nearly $30, on average, meaning it’s losing nearly $20 per month per subscriber on a variable cost basis. The problem is that MoviePass collects only $9.95 This is a problem that scale (meaning more subscribers) cannot solve.

Advertising 8

Advertising Variable Costs Revenue Operations 8

Harvard Business Review

OCTOBER 25, 2017

It is easier to price a product, for which most of the fixed and variable costs are known, than a project, which is influenced by many external factors. This will affect the way revenues are recognized, as well as accounting policies and the overall company valuation. Pricing model. New pricing models will need to be developed.

Revenue 8

Revenue Variable Costs Sales Sales 8

Harvard Business Review

OCTOBER 11, 2017

Financial measures report variable costs broken out by a few major categories (including supplies, drugs, and staff) along with revenue and margin measures. The clinical team works together with finance and quality-measurement staff to update this box score every week.

Manager 8

Manager Hospitality Variable Costs Implementation 8

Harvard Business Review

JULY 27, 2017

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

OCTOBER 8, 2013

For example, it has the potential to give them a net increase in margin, because many of the sources of savings are either variable costs to these providers (e.g., If contractual terms are fair, REBP can deliver meaningful value to acute-care providers in particular. pharmaceuticals, physical therapy, skilled nursing facility care).

Hospitality 9

Hospitality Variable Costs Implementation Administration 9