Own the Future: 50 Ways to Win from The Boston Consulting Group

Chapter 28

The Experience Curve Reviewed

Bruce Henderson

As the 1960s unfolded, fattish, complacent American companies found themselves confronted with competition from unexpected quarters—foreign manufacturers, smaller upstart enterprises in their own backyard. What was going on? What to do about it? The Boston Consulting Group had the answer to both questions in the form of the experience curve. The experience curve was, simply, the single most important concept in launching the strategy revolution…

While its basic truths are so ingrained today that we take them as eternal and unchanging laws of nature—“everyone knows that”—when first proclaimed, they were electrifying: businesses should expect their costs to decline systematically, at a rate that can be accurately predicted.

Walter Kiechel III, in The Lords of Strategy: The Secret Intellectual History of the New Corporate World¹

Experience curve is the name applied in 1966 to overall cost behavior by BCG. The name was selected to distinguish this phenomenon from the well-known and well-documented learning curve effect. The two are related but quite different. In this article, originally published in 1973, BCG's Bruce Henderson reviews the experience curve concept and describes its enduring impact on corporate strategy.

It has been known for many years that labor hours per unit decline on repetitive tasks. This effect was particularly ...