Learning Curve
Effect
As individuals and/or organizations
get more experienced at a task, they usually become more efficient at
them. The learning curve effect and the closely related experience curve
effect express the relationship between experience and efficiency. Both
concepts originate in the adage, "practice makes perfect", and both
concepts are opposite to the popular misapprehension that a "steep"
learning curve means that something is hard to learn. In fact, a "steep"
learning curve implies that something gets easier quickly. (For other
uses of the expression "steep learning curve"
Later the term acquired a broader meaning. The learning curve effect
states that the more times a task has been performed, the less time
will be required on each subsequent iteration. This relationship was
probably first quantified in 1936 at Wright-Patterson Air Force Base
in the United States where it was determined that every time total aircraft
production doubled, the required labor time decreased by 10 to 15 percent.
Subsequent empirical studies from other industries have yielded different
values ranging from only a couple of percent up to 30 percent, but in
most cases it is a constant percentage: It did not vary at different
scales of operation.
The experience curve effect
is broader in scope than the learning curve effect encompassing far
more than just labor time. It states that the more often a task is performed
the lower will be the cost of doing it. The task can be the production
of any good or service. Each time cumulative volume doubles, value added
costs (including administration, marketing, distribution, and manufacturing)
fall by a constant and predictable percentage.
In the late 1960s Bruce
Henderson of the Boston Consulting Group (BCG) began to emphasize the
implications of the experience curve for strategy. Research by BCG in
the 1970s observed experience curve effects for various industries that
ranged from 10 to 25 percent.
These effects are often
expressed graphically. The curve is plotted with cumulative units produced
on the horizontal axis and unit cost on the vertical axis. A curve that
depicts a 15% cost reduction for every doubling of output is called
an “85% experience curve”, indicating that unit costs drop to 85% of
their original level.
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