'Lights on' costs refer to the day-to-day operational costs that a business incurs. Examples include rent, utilities, salaries, and maintenance costs. These costs can be optimized by implementing cost-efficient strategies such as negotiating better contracts, reducing energy consumption, automating processes, and outsourcing non-core activities. It's also beneficial to benchmark these costs against industry standards to identify areas for improvement.
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"Not required" costs are those that can be eliminated or cost reductions that cost more than the organization saves due to sacrifices to quality that increases churn. These should be pared down or eliminated completely. "Differentiating capabilities" are costs that provide a competitive advantage or core competency. These are okay to spend more on because it sets you apart. "Lights on" costs are the day-to-day operational costs like rents or utilities. These costs should be reduced to the "best in class cost level." "Can't avoid" costs are the cost of doing business. Execs should also aim for best in class cost level with these. (Slide 6)
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