Accounting Disrupted

CHAPTER 5Learning Is Everything

When the rate of change outside is more than what is inside, be sure that the end is near.

—Azim Premji, chairman, Wipro Limited

In 1922, T. P. Wright, who later co‐founded the Curtiss‐Wright Corporation, became interested in the cost of making airplanes.1 He pondered how it might be possible to satisfy an order by the Bureau of Air Commerce for 10,000 two‐seater airplanes at $700 each, given that the production costs per unit were much higher than this. He reported in the Journal of the Aeronautical Sciences that aircraft manufacturers could observe employee hours required to assemble planes going down as the number of planes produced increased. Wright observed that learning took place in a manner that was not random and that one could in fact work out quite accurately how much labor time would be required to build planes at different points in time depending on the number of planes already built. Thus, it would be a mere calculation to find out the profitability of selling this many planes, knowing that at the outset the selling price was below cost but profits would quickly ensue. During the World War II years, government contractors regularly applied Wright's idea that experience in production can be used to obtain estimates of the timing and costing for vehicles, planes, and ship construction at different volumes of overall production.

Accountants are fully aware that organizations develop knowledge about practices that continuously improve ...