In Bruce Henderson’s Words: The Experience Curve

In Bruce Henderson’s Words: The Experience Curve

          
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In Bruce Henderson’s Words: The Experience Curve

Strategy
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  • About This Podcast
    Read from BCG’s 1968 Perspective, “The Experience Curve.”

    Recorded

    2 Oct 2011

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    Bruce Henderson outlined what is now a basic tenet of business strategy: price and cost data show that, across industries, costs decline by a characteristic amount—about 20 to 30 percent—each time accumulated experience is doubled. Given this, a company can project not only its own costs but also how those costs compare to those of competitors.

    But BCG's founder also cautioned that the cost declines are not necessarily automatic. They depend crucially on a competent management that seeks ways to force costs down as volume expands. Production costs are most likely to decline under this internal pressure. Yet in the long-run, the average combined cost of all elements should decline if the company is to remain as profitable as possible. Ultimately, competition characteristically produces survivors who achieve the full potential.

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