Better, Simpler Strategy

14

Learning

When Henry Ford first started making the famous Model T in 1909, producing each vehicle cost the company $1,300.1 By 1926, wages at Ford had increased threefold, while the cost of producing a vehicle had dropped to $840.2 Ford’s secret? The learning curve.3 As companies increase the cumulative volume of production, costs often decline because employees gain familiarity with the product and processes, and they find ever new ways to improve productivity (figure 14-1). By the time Ford had produced 10 million cars in 1926, learning alone had reduced costs by more than one-third.

Figure 14-1 Learning through greater cumulative production ...