Experience and learning curves are behavioral models demonstrating that individuals and organizations learn and become more efficient through work. Experience and learning curves are a source of COMPARATIVE ADVANTAGE in competitive markets. The concept of improved efficiency and productivity through learning is relatively easy and can be understand by considering some new activity that has been initiated (learning a new software, language, sport, etc.). The more often one practices or studies, the more proficient one becomes at the activity. Generally everybody learns by doing, and while the results can be dramatic initially, eventually doing more of an activity results in smaller marginal improvement. The early 20th-century management consultant Frederick W. Taylor studied productivity under different working conditions, focusing on the size of shovel used at a coal company. He believed the company would be much more efficient if each worker learned to do a smaller portion of the entire job, which would increase overall workers’ productivity. Using observation and experimentation, he answered a few key questions:
1. Will a first-class worker do more work per day with a shovelful of 5, 10, 15, 20, 30, or 40 pounds?
2. What kinds of shovels work best with which materials?
3. How quickly can a shovel be pushed into a pile of coal and pulled out properly loaded?
4. How long does it take to swing a shovel backward and throw the load a specified horizontal distance at a specified height?
Experience and learning curves can be used to measure the productivity improvement of individual workers and organizations. Critical to the success of any organization is being able to respond quickly to opportunities and challenges. The collective knowledge within a business provides information about what has been done before, who knows where resources exist to meet an opportunity or challenge, or why something failed in the past. This collective experience allows a firm to act faster than competitors with no experience and to be more efficient by avoiding mistakes from the past. Experience and learning curves as a source of comparative advantage depend on retaining that knowledge and experience within an organization. With greater use of OUTSOURCING, contract workers, and turnover, particularly in knowledge-based businesses, it is often difficult to control the transfer of knowledge and experience among industry competitors.