[INTERNAL MEMO]

Team,

I wanted to share a concept I've been thinking a lot over the last week or two about capacity and how we tend to misunderstand what it truly means to us and our business.

Most believe growth is limited by the market. In reality, businesses usually hit a ceiling because their capacity won’t allow them to absorb opportunity when it shows up. As Sharran says, the only thing he learned in business school is this (LOL) you put inventory before the bottleneck. ((The same is true in leadership. If we wait until we “need” capacity, we’re already late.))

The Core Idea

Capacity = our ability to say yes when the right opportunity appears. PERIOD!!!

If we don’t build it before we need it, we end up calling constraint “strategy” and convincing ourselves it was the right decision when we were actually just underprepared.

The Four Types of Capacity

Every team has some mix of these constraints:

  1. Financial Capacity

Cash, margin, risk tolerance. Can we say yes to expensive opportunities without breaking the business?

  1. Human Capacity

Bench strength and leadership bandwidth. Who has room to take on more, and who doesn’t?

  1. Operational Capacity

Systems that hold up under pressure. If volume doubled tomorrow, what actually breaks?

  1. Cognitive Capacity

Decision-making bandwidth. Do we have enough mental space to think, prioritize, and choose well?

A business can only capitalize on the opportunities we have capacity to absorb!!!

Three Patterns We Break When We ‘Get This’

  1. Seeking market shifts we can’t act on

We recognize the opportunity, but we’re stretched thin. No spare people, no slack, no buffer.

Result: others capitalize on it while we get frustrated.

  1. Having good ideas we can’t test

Innovation requires people and systems that aren’t maxed out.

At 95–100% utilization, innovation becomes deprioritized.

  1. Passing on objectively good opportunities

Strong partnerships, distribution, good deals - we say no because the balance sheet or team capacity can’t support it. Constraint disguised as strategy.

A Simple Capacity Diagnostic

I want you to ask yourself three questions about your team/function:

  1. Demand Stress Test

If demand doubled tomorrow, what breaks first?

That’s your constraint :)

  1. Opportunity Audit

What opportunities did you pass on in the last 12 months due to constraint, not because it was the wrong idea?

Name the constraint: cash, people, systems, or bandwidth.

  1. Utilization Check

Where are you running at 100% that should realistically be at 70–80%?

100% utilization leaves zero room for opportunity or testing!

By the way, you will notice the theme here, which is that this is all another way of thinking about constraints. Something good to think about when you are working with our clients or partners as well.

TL;DR

Capacity is not the output of success. It’s the input! Our job as leaders is to build the infrastructure - financially, operationally, and mentally - that allows us to say yes when the right opportunities show up.

Have a great week 🙏🏼

Leila

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