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The Experience Curve, developed by Bruce Henderson and the Boston Consulting Group (BCG) in the 1960s while analyzing overall cost behavior. The premise of the Experience Curve is that for each doubling of "experience," there is a predictable reduction in our organization's unit production costs. Experience Curve In fact, research by BCG in the 1960s and 70s observed experience curve effects for various industries that ranged from 10-30%.

This classic Experience Curve is based on an experience in fulfilling demand. It remains valid today, especially in industries that are relatively stable, cost-sensitive, competitive, and production-intensive. With that said, in 2013, BCG published new thought leadership that modernized the Experience Curve to account for a second type of curve--one where experience is based on shaping demand. This adjustment is driven by how today's business climate is characterized by higher volatility, less stable industry structures, and much more frequent product launches driven by the Digital age and emerging technologies. The ability to gain and leverage experience on both curves is called ambidexterity. Ambidexterity is a powerful source of competitive advantage.

This presentation discusses both types of Experience Curves. Other topics covered include Henderson’s Law, Industry Diversity and Dynamism, and Experience Curve Effects.

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Source: BCG Experience Curve PowerPoint document

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Tag(s): Experience Curve Ambidexterity

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