LaChawn SmithBUS 624Final Project

Experience Curves

Concept Discussion: Experience Curves

Experience models have been developed on the basic premise that over

time as individuals and organizations get better at doing something. The cost of

doing that something decreases as the production of that something increases.

“By gaining experience through repetition, organizations and individuals develop

relatively permanent changes in behavior or learning” (Experience and Learning

Curves). Costs of the value added activities, net of inflation, will decline 25 to 30

percent each time the total accumulated experience has been doubled”

(Experience Curve). Figure 1 represents an Experience Curve.

Experience curves were first described

in 1960 by Bruce Henderson and were

used to examine the relationship

between the production costs and the

production quantity. Experience curves

look at a broad range of elements

including marketing strategies and costs, administration, cost of distribution and

the costs associated with manufacturing including raw materials.

Experience and learning curve models are often used interchangeably.

They however are slightly different. Experience curves are analytical tools

designed to quantify the rate at which experience of accumulated output affects

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Figure 1 Experience Curve

LaChawn SmithBUS 624Final Projecttotal lifetime costs and can be used to predict future costs in the market. Learning

tools are also analytical tools but are designed to quantify the rate at which

cumulative experience of labor hors or costs allows an organization to reduce the

amount of resources needed for a task (Experience and Learning Curves). Steep

Experience Curves exist most often in environments where there are high labor

inputs. Computers can not be taught new skills and typically operate at the same

levels of productivity. Mass production of similar items or services is also

necessary as well as long production cycles. Lack of radical product innovation

allows for the right environment for steep experience curves. Once innovation

occurs the Experience Curve is reduced and the industry has to begin again.

Also steep Experience Curves can exist when there is a transfer of experience in

an organization or company from one department or process to another

(personal communication, Galbraith, 2010).

Experience Curves helps organizations to understand future markets and

prices inside and outside of their organization. They also help to manage costs

and indicate to companies when it is time to reduce price or look for new

innovations. It also helps to manage competition. If there are companies that are

operating with significantly higher Experience Curves then others then this

indicates to those other companies either where they need to exit or enter the

market in order to make a profit (personal communication, Galbraith, 2010).

Interpretation

Relation to Education

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LaChawn SmithBUS 624Final Project

Educators often find themselves beginning new programs and evaluating

whether to discontinue or continue others. Examining the experience curves that

exist within schools and school systems as they relate to production of a desired

outcome ie.. student learning is very relevant. Educators could use this strategy

to evaluate whether the inputs outweigh the outputs when examining program

effectiveness. This might also help school systems to evaluate whether or not

certain services needed to be outsourced to organizations that had greater

learning curves in the area they are evaluating. Schools rarely evaluate outputs

or process in terms of learning or experience curves but in a declining and more

challenging economy it might be prudent for schools and school systems to

consider doing so in the near future.

Artwork

My art work depicts an Experience Curve that could be found in any

manufacturing environment. Initial production began with large circles with poorly

defined edges that indicate that processes had not been defined and that

because this was a new product productivity was down and costs were up. With

a doubling of production, the circles become more defined and with and

Experience Curve of 70% there is a decrease in costs of 30%. The circles are

much better defined, there is

greater detail, and greater

number and fewer resources

were needed. The circles are

formed tightly together and

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LaChawn SmithBUS 624Final Projectlittle opportunity for others to enter the market unless they present a new

innovation or can enter the market with the same Experience Curve being

presented. With the current Experience Curve, future costs, expenditure and

production rates can be predicted and costs can be managed. The larger circles

at the bottom of the art work represent a company trying to enter the market with

a similar product but without the experience of other companies in the existing

market and that they are unable to be completely on the canvas symbolizes that

because of their lack of experience and costs they are unsuccessful in their

attempt.

Evaluation of Project

I believe that I conducted far more research on the topic then if I had

completed the traditional assignment. I found myself researching and consulting

with others about different mediums in art and how they would work in conveying

the desired meaning of the topic. I read and re-read several sources in an

attempt to better understand my topic in such a way that I could depict it in a

physical sense and present its meaning and interpretation verbally. It is much

more difficult to convey the meaning of a complex topic without words than with

them. I definitely am able to relate to the “big picture” effect with this assignment.

I also consulted with several individuals including my art teacher about the

project and found that as I explained the concept over and over, I began to better

understand it and was able to convey a clearer picture to my audience each time.

I also found that because I was engaged and motivated by the task that I wanted

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LaChawn SmithBUS 624Final Projectto share it with others. There are quite a few people who now know more about

learning and experience curves then they ever realized that they would.

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LaChawn SmithBUS 624Final Project

References

The Experience Curve. Retrieved November 27, 2010 from www.netnba.

com/strategy/experience-curve.

Experience and Learning Curves. Retrieved November 27, 2010 from

www.reference for business.com/management

Experience Curve. Retrieved November 27, 2010 from www.sayeconomy.com/

experience-curve/.

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