BCG's Experience Curve

Learning usually includes becoming more proficient at doing something while adopting processes that have proved successful to accomplishing similar tasks, coupled with the added benefit of experience about knowing how to deal with core routines which are necessary to drive business to success.


As a concept, the experience curve was designed by the Boston Consulting Group and  Bruce D. Henderson which basically states that proicess maturity follows experience, which in turn means more efficient uses of resources for higher return over investment. It can be said that the production of any good or service experiences this effect. As cumulative volume doubles, value added costs drop steadily. By value added costs it's meant to encompass administration, marketing, distribution and manufacturing. They tend to decrease over time. The experience curve can be expressed graphically by plotting the curve with the cumulative units produced on the horizontal axis and unit cost on the vertical axis. An effective experience curve indicates that unit costs should drop when compared to its original level.

Reasons for the effect

The primary reason for the validity of the experience curve effect is the long-term consequence of learning through hands-on experience in addition to reflexive analysis conducted on all the laboural processes involved in the production or performance of something. As learning begins with making succesively larger finds until a threshold is reached beyond which they become smaller and smaller. The common aspects that drive the experience curve model of growth are labour efficiency (employees becoming more dexterous at their assignments), standardisation, specialisation, methods improvements, technology-driven learning, changes in the resource mix and product redesign.