BCG Experience Curve (PowerPoint PPT Slide Deck)

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This product (BCG Experience Curve) is a 22-slide PPT PowerPoint presentation slide deck (PPT), which you can download immediately upon purchase.

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.

This PPT provides a comprehensive analysis of the BCG Experience Curve, detailing its impact on cost reduction and competitive advantage. It includes a deep dive into Henderson’s Law and the mathematical underpinnings of the curve. The presentation also explores the eight primary drivers behind Experience Curve effects, such as technology-driven learning and product redesign. Key questions are posed to help executives evaluate the balance between fulfilling and shaping demand in their industries. Real-world examples, like Facebook's strategy to outpace Myspace, illustrate the practical application of these concepts. This resource is essential for leaders aiming to leverage experience for strategic gains.

Source: Best Practices in Experience Curve, Ambidexterity PowerPoint Slides: BCG Experience Curve PowerPoint (PPT) Presentation Slide Deck, PPT Lab

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Distinguishing Experience: Fulfilling vs. Shaping Demand

This PPT slide delineates 2 distinct types of experience: fulfilling demand and shaping demand. It emphasizes that both experiences are essential for sustained growth, though they are acquired through different processes. Experience at fulfilling demand is characterized by a logical, deductive approach. This method relies on repetition and incremental improvements, which are both explicit and implicit. The graphical representation shows a downward trend in marginal cost as cumulative volume increases, indicating efficiency gains as experience is accumulated within a product generation.

Conversely, experience at shaping demand is described as an inductive process. This approach involves hypothesizing consumer behaviors and testing these hypotheses through new offerings. The empirical measurement of results informs future product launches, allowing companies to adapt and innovate. The graph illustrates this experience as a separate curve, which can potentially lead to significant advancements across product generations.

The slide highlights that the interplay between these 2 types of experience is crucial, especially in a rapidly evolving market driven by technological advancements. Companies must navigate the transition between these curves to maintain relevance and competitive positioning. The insights presented suggest that organizations should focus on both fulfilling current demand efficiently while also investing in shaping future demand through innovative practices. This dual approach is vital for not just surviving, but thriving in an increasingly competitive environment. Understanding these dynamics can help executives make informed decisions about resource allocation and strategic planning.

Key Drivers of Experience Curve Effects

This PPT slide outlines key factors contributing to experience curve effects, emphasizing how learning and familiarity with products lead to improvements over time. It presents 3 main reasons: Product Redesign, Network-building and Use-cost Reductions, and Shared Experience Effects.

Product Redesign highlights that as manufacturers and consumers gain experience with a product, they identify areas for improvement. This iterative process enhances the manufacturing workflow, leading to better product quality and efficiency. The implication here is that continuous feedback loops between users and producers can drive innovation and cost-effectiveness.

The section on Network-building and Use-cost Reductions illustrates how increased product usage leads to greater efficiency. As more consumers engage with a product, they become adept at utilizing it, which can lower operational costs. The example of social networks like Facebook underscores this point, showing that the value of a network grows exponentially with the number of users, thereby reducing the cost per user.

Shared Experience Effects indicate that efficiencies can be transferred across products when they share common resources or activities. This suggests that organizations can leverage insights gained from one product to enhance others, creating a synergistic effect that amplifies overall performance.

The concluding note hints at potential disruptions to the experience curve, suggesting that technological changes can halt progress. This serves as a cautionary reminder for executives to remain vigilant about external factors that may impact their operational efficiencies. Understanding these dynamics is crucial for companies aiming to optimize their product strategies and drive sustained growth.

Balancing Experience Types: Strategies for Dynamic Industries

This PPT slide presents a framework for balancing 2 types of experience—diversity and dynamism—within an organization. It poses a critical question about whether the current approach to combining these experience types is adequate. The content emphasizes that the demand for shaping and fulfilling varies significantly, suggesting that organizations must adapt their strategies accordingly.

Four distinct approaches are outlined to achieve the right balance: Separation, Switching, Self-organization, and External Ecosystem. Each approach is positioned within a matrix that plots diversity against dynamism. This visual representation indicates that the suitability of each method depends on the specific industry environment.

Separation involves creating distinct units that operate under different styles, which may be beneficial in static environments where diversity is low. Switching allows for flexibility in moving between styles as needed, which can be advantageous in dynamic contexts. Self-organization empowers individuals to select the most appropriate styles based on situational demands, fostering adaptability. The External Ecosystem approach suggests sourcing styles from outside the organization, which can introduce fresh perspectives and practices.

The slide concludes with a strategic imperative: to surpass established competitors, organizations must excel in both shaping and fulfilling demand. This insight serves as a call to action for executives to evaluate their current practices and consider how these 4 approaches can be integrated into their operational strategies.

Understanding these frameworks can guide decision-making and enhance organizational effectiveness in navigating complex industry dynamics.