Jul 12, 2019
Think of your firm as a Boeing 777 airplane. When United Airlines places a Boeing 777 in service, it adds a certain capacity to its fleet. However, it goes one step further, by dividing up that marginal capacity into five segments. Your firm has a theoretical maximum capacity and a theoretical optimal capacity, and it is essential to see how that capacity is being allocated to each customer segment. Your maximum capacity is the total number of customers your firm can adequately service -- not how many hours you have -- while the optimal capacity is the point where customers can be served adequately and crowding out does not affect customer behavior. Usually, for most professional firms, optimal capacity is between 60 and 80 percent of maximum capacity. The lesson from this model is that you cannot treat all customers equally. Join Ed and Ron for a discussion of this model and how pricing and project management can be used to achieve optimal capacity.