1. Introduction
To say that continuous improvement of processes is necessary to be and remain among the most competitive is something already known and of which much has been written and talked about, the important thing is to define the strategies and tactics to carry it out, as well as its measurement way.
kaizen-continuous-improvement-and-the-learning-curveRegarding the strategy to use to allow continuous improvement, we have the kaizen system based on the developments of Toyoda, Ohno, Ishikawa, Taguchi, Singo, and Mizuno among others, and compiled by Masaaki Imai, among which the teachings had phenomenal scope that on them they imparted American consultants of the renown of Deming and Juran.
It is worth wondering why kaizen is chosen as the system to apply, to which it is possible to answer, for two fundamental reasons. The first is that it was the first system to be developed and applied widely and in various companies, after which and as a result of the effects that this caused, they were imitated by Western consultants and companies. The second reason lies in the harmonious nature of its contents and philosophy, the latter allowing the incorporation of various techniques that allow enriching the practical face of its contents and putting it into action. His philosophy is based fundamentally on common sense, that is, common sense as opposed to many voluptuously contrived theories and impracticalities devised in the West more as a commercial fad than as an authentic contribution to the culture of production.
Kaizen in Japan is synonymous with continuous improvement, incessant search for better performance levels in terms of quality, costs, response times, cycle speed, productivity, safety and flexibility, among others. In this incessant search to improve these levels, it not only counts how to achieve it, but also how to measure the results of said actions.
The monitoring of the parameters through Statistical Process Control constitutes the way to measure the results in the short term, but when one must measure the result of the various efforts in the long term, and also make forecasts that allow fundamental strategic decisions to be taken the instrument is renamed the Learning Curve.
Learning curves or, as they are sometimes called, experience curves, are based on the premise that organizations, like people, do their jobs better as they are repeated. A learning curve plot, of labor hours per unit versus the number of units produced, typically has the form of the negative exponential distribution.
The learning curve is based on a doubling of productivity. That is, when production doubles, the decrease in time per unit equals the rate of the learning curve. Thus, the results of the activities, tools and methods applied to the achievement of continuous improvement can be measured, projected and plotted through the use of the Learning Curve.
It must be said that the first report on it, applied to industry, was published in 1936 by TP Wright of the Curtis-Wright Corporation. The direct application of the basic concept of the learning idea to strategic management has occurred more recently, since the early 1970s as a result of its application by the Boston Consulting Group and Conley.
A good example of the application of the learning curve is the Korean company Samsung. She entered the microwave oven market in 1978. On a makeshift assembly line, her production team began making one oven a day, then two, then five, as employees began to learn the assembly process.. With many hours dedicated to redesigning the chain, the engineers solved the problems detected during the day at night, thus managing to bring production to 10 ovens per day, then to 15 and later to 50. At the end of 1981, the learning process allowed us to reach 300 ovens per day. In 1983 Samsung was making 2,500 microwaves per day, and it continues to improve.
- Learning curve. Definition. Concepts. Types.
A learning curve is nothing more than a line that shows the relationship between the time (or cost) of production per unit and the number of consecutive units of production. The number of failures or errors, or the number of accidents depending on the number of units produced, can also be taken into consideration. The learning curve is literally a graphical record of cost improvements as producers gain experience and the total number of automobiles, television sets, VCRs, or airplanes that their factories and production lines increase. assembly produce.
Learning curves can be applied to both individuals and organizations. Individual learning is the improvement that is obtained when people repeat a process and acquire skill, efficiency or practicality from their own experience. Organizational learning is also the result of practice, but it comes from changes in management, teams, and product and process designs. Both types of learning are expected to occur at the same time in a company, and the combined effect is often described as a single learning curve.
As an example of individual learning, let's think of an administrative that must carry out a series of procedures before public bodies, the first time, the more there is of his theoretical knowledge, he will not know the typical errors that are committed, the specific places where they must be presented and the form of presentation for special cases. Then over time, and as you perform more procedures consecutively, your ability to perform the tasks will increase making these processes faster. What happens if the tasks are not carried out consecutively, well it will be subject to a certain level of unlearning as a result of forgetting. The latter can be partially remedied or avoided through an effective documentation process of the steps previously performed.
A sector where the application of increased skills over time and the number of units processed can also be clearly seen is in the meat processing industry where workers dedicated to slaughtering or cutting animals increase their productivity levels as they increase. your working hours.
In the construction industry, the application of the tool allows a continuous reduction in costs, and even more so if it is applied to the same types of works, since in these cases learning can be continuously improved through of its application both in planning and in the direction and operation of the work.
The same concepts can be used for the work of mechanics, bank tellers, data recorders to systems, dentists and any other profession or industrial, commercial or service activity. Hence the importance of flight hours, or the number of jumps of the skydivers, as well as not being the first to be a dentist client. Even if the goods or services are not exactly the same, the learning curve still applies.
Recognizing mistakes and correcting them is one of the most basic and most difficult tasks in any company. Hence the importance of carefully examining errors and taking steps to eliminate them. This is therefore where the importance of the systems and tools that make up Kaizen begins to be seen with total clarity.
Learning curves, and their close relatives, experience curves (also called organizational learning curves), show marginal and average cost reductions in the form of cumulative increases in production. The learning curves show how the average variable costs (per unit) vary according to experience. The experience curves also include fixed costs and represent average cost changes when all factors are taken into account. Both are shown in relation to cumulative production over the life of the product. They are a concrete expression of how line workers, supervisors, and top management learn to do things better. Learning curves depend on ability, and dedication,organization to make things better with each batch of production. These are practical tools that incorporate an old but important principle: the more you make of something, the more skill you get in its production.
Executives have two fundamental tasks: to make new and better things (improved goods and services) and to make the products that the company already produces faster, cheaper and with higher quality. Learning curves are very important tools to help you with this last function.
Learning curves are an essential component of a kind of circular race track found in many markets. This track evolves as follows:
- As volume increases, unit costs fall As unit costs fall, the company can reduce its prices without impairing profitability or cash flows As prices fall, consumer demand increases and share increases in the market. By increasing market share, the resulting benefits make it possible to make investments in marketing and technology that further reduce costs. By decreasing unit costs….., and so on.
The essential part of this circuit is the initial one, the reduction of unit costs by increasing accumulated production. This is the effect picked up by the learning curve. It serves to explain competitive patterns in sectors as different as video devices, motorcycles, airplanes, missiles, and automobiles.
Learning curve theory is based on three assumptions:
- The time required to complete a task or unit of product will be less each time the task is performed. The rate of decrease in time per unit will be less and less. The reduction in time will follow a predictable pattern.
Learning curves are useful for a wide variety of applications, including:
- forecasting internal workforce, scheduling production, setting costs and budgets, external purchasing and item subcontracting, strategic evaluation of company and industry efficiency.
3. Your calculation
A mathematical relationship allows us to express the time it takes to produce a certain unit. This relationship is a function of how many units have been produced before and how long it took to produce them. Although this procedure determines the period of time that is necessary to produce a given unit, the consequences of this analysis are far-reaching. Costs decrease and efficiency increases for individual companies and for industry. Therefore, serious problems appear in scheduling if operations do not conform to the implications of the learning curve. Learning curve improvement can cause production facilities and labor to be idle some of the time. Even more,companies may reject additional jobs because they do not consider the improvement that results from learning. The above are just a few of the consequences of not considering the effect of learning. The effects of learning curves occur in marketing and financial planning.
3.1. Arithmetic method
Arithmetic analysis is the simplest method for learning curve problems. Thus, each time production doubles, the unit labor force decreases by a constant factor, known as the learning rate. (Clarification: the unit concept must be applied appropriately, so if it is a question of tugboats, each tugboat will constitute a unit, but in the case of televisions the correct thing is to consider the units as production batches, whether they are 100, 500 or more units).
Thus, we know that the learning rate is 80% and that the first unit produced supposed 100 hours, the hours necessary to produce the second, fourth, eighth and sixteenth unit will be:
This method only allows calculation for units that involve duplication of production. The formula applied is TN = T1 x (L raised to n); where n is the number of times production is doubled.
Logarithmic scale Learning Curve graph
3.2. Logarithmic method
This method allows determining the labor for any unit, TN, by the formula:
TN = T1 (N ^ b) (N raised to ab)
where b = (logarithm of learning rate) / (logarithm of 2)
Different organizations and different products have different learning curves. The learning rate varies depending on the quality of the management and the potential of the process and the product. Any change in the process, the product or the personnel, breaks the learning curve. The same does not happen with the experience curve which admits the change in products, processes and personnel.
4. Estimation of the learning percentage
If the production has been going on for some time, it is easy to obtain the learning percentage from the production records. Generally speaking, if the production history is long, the estimate is more accurate. Many companies do not begin collecting data for learning curve analysis until after a few units have been produced, as various problems can occur early in production. For this, the use of statistical analysis will be necessary.
If production has not started yet, the estimate of the learning percentage becomes a guess, and you can select from three options:
- Assume that the learning percentage will be the same as that presented in previous applications within the same industry Assume that it will be the same that existed with the same or similar products Analyze the similarities and differences between the proposed startup and previous startups and develop a modified learning percentage that best fits the situation.
4. Causes of the experience curve
The effects of the experience curve do not respond to a natural law, so it is necessary to interpret its causes. The reduction of costs –which is a consequence of a reciprocal relationship- does not occur spontaneously, its possibilities must be known and exploited. The aspects that this involves are strongly interrelated, but can be identified through the following analysis:
12. The enemy of learning curves
Psychologist Chris Argyris has shown that the "assembly shop worker knew it was wrong." It describes a meeting with a dozen managers of an industrial plant in which a list of factors that had led to poor product quality and unnecessary costs was drawn up. They identified more than thirty areas of inefficiency and classified them for action on them. Then they chose six, on which they took action. Three months later, those six areas had improved, and management estimated the savings to be around $ 210,000. Argyris asked managers how long they had known about these defects and the superfluous costs that they entailed, to which they replied “Between one and three years. Everybody knew".
Argyris coined the terms single-loop learning and double-loop learning to illustrate the fundamental difference between two modes of learning that are necessary, but frequently oppose each other. Single loop learning is similar to a thermostat. When the room temperature rises, the thermostat turns off the heating. When it goes down, it plugs it back in. The loop is temperature-thermostat-temperature. This type of feedback system is what all companies need for their day-to-day operation. Quality control is one example. The discovery of an excessive number of defective units prompts examination of the assembly line to isolate the origin. It can serve to achieve goals such as reducing unsatisfactory units.
Successful companies need good single-loop systems for day-to-day operations. However, the better companies are at single-loop learning, the more unlikely it is that they will adopt the double-loop variety for long-term planning. Double-loop learning is learning that assesses not only current processes, but goes outside to ask: Is this the best way to do things? Should we do some important things differently? Should we alter our goals and our strategies to achieve them? In addition to the temperature-thermostat loop, in this system a second, or double, loop is added, in which the need, and the operation, of the thermostat loop is questioned.
Argyris describes an experiment he conducted on a large bank. The bank put in place a series of rules to staff its branches. A carefully developed formula (single loop) determined how many tellers, officers, and others were needed at each branch. According to the rules, as operations expanded, more staff were hired. The formula, a kind of single loop “thermostat,” seemed to work well. But Argyris suggested a double-loop experiment: “Let's get together with the workers in half the branches and let them decide how many workers to hire. If they hire less than the norms would indicate, that they obtain part of the economic benefits ”. This is double loop learning,because it replaces the single-loop personnel formula with a system that checks and evaluates the rules themselves. The bank complied, finding that the double-loop branches were reluctant to hire until they really needed them. If the number of business clients increased and the individual banking clerk was not very busy, he would come over to lend a hand. By the end of the year these branches carried out as many operations or more than the others, but with 25% fewer employees ”. Similar experiments carried out at General Foods for an animal feed factory, allowed a 30% reduction in personnel, with no decrease in production, compared to similar plants.it was discovered that the double-loop branches were reluctant to hire until they really needed them. If the number of business clients increased and the individual banking clerk was not very busy, he would come over to lend a hand. By the end of the year these branches carried out as many operations or more than the others, but with 25% fewer employees ”. Similar experiments carried out at General Foods for an animal feed factory, allowed a 30% reduction in personnel, with no decrease in production, compared to similar plants.it was discovered that the double-loop branches were reluctant to hire until they really needed them. If the number of business clients increased and the individual banking clerk was not very busy, he would come over to lend a hand. By the end of the year these branches carried out as many operations or more than the others, but with 25% fewer employees ”. Similar experiments carried out at General Foods for an animal feed factory, allowed a 30% reduction in personnel, with no decrease in production, compared to similar plants.By the end of the year these branches carried out as many operations or more than the others, but with 25% fewer employees ”. Similar experiments carried out at General Foods for an animal feed factory, allowed a 30% reduction in personnel, with no decrease in production, compared to similar plants.By the end of the year these branches carried out as many operations or more than the others, but with 25% fewer employees ”. Similar experiments carried out at General Foods for an animal feed factory, allowed a 30% reduction in personnel, with no decrease in production, compared to similar plants.
What practical steps can managers take to make their companies flexible, capable of learning, and competent in reassessing their goals and how to achieve them?
- Start at the top. If middle managers openly conduct double-loop analysis and their managing directors do not, an explosive situation can develop. Modifications to the way organizations learn should begin with the managing director and his / her group of senior managers. Encourage the ability of staff to confront their own ideas and reexamine the things they take for granted. Help them “open a window into their own mind.” When defending positions, principles, and values, you must ask and reflect, then proceed to challenge existing ideas and paradigms. Be clearly aware of the ways and situations in which you acts defensively against criticism and strives to avoid any possibility of this happening.Encourage others (and yourself) to say everything you know, even if you are afraid of the consequences.
It is therefore necessary to clearly establish the existence of three situations:
- That of non-learning, in which the same action is repeated without taking into account the result, and without paying attention to the feedback. An example of this are habits, the use of the same scripts without taking into account the results. Simple learning, consisting of paying attention to feedback and changing our actions based on the results obtained. Both the options and the actions taken with this learning are given by one's own mental models, which remain intact. Examples are trial and error; routine learning and the acquisition of a specific skill. Generative learning, in which feedback influences the mental models that we have applied in a given situation and transforms them. In this way,New strategies and new types of actions and experiences emerge that would not have been possible before. An example of this is learning to learn; questioning one's assumptions and seeing the same situation differently.
Generative learning opens up new possibilities. It can lead us to see a situation that we previously knew in a completely different way. To question fundamental assumptions. The basic questions that guide generative learning are as follows:
- What are my or our presuppositions about this? How else could I think about it? What else could it mean? What else could it serve?
13. Quick Learning Organization
A Rapid Learning Organization (ORA) finds out more quickly than its competitors what works best; In this way, it obtains and maintains a competitive advantage, that is, the ability to generate and maintain its profits and its place in the market. When an organization knows what works best, it uses that knowledge to create superior products and services that customers will always choose.
The key idea is that "the only way to gain and maintain competitive advantage is for management to ensure that your organization is learning faster than the competition."
Learning-based organizations focus on getting work done better every day. They see learning as the ideal way to improve performance in the long term.
Learning "faster" does not mean "hurried." Faster learning requires simpler and more efficient methods of learning, fewer steps in the learning process, and more attention to opportunities that offer benefits. Faster learning may involve slower and more reflective thinking, in order to focus on what is important.
An ORA quickly closes the performance gap between itself and its performance-focused competitors. Meanwhile, the gap between an ORA and its competitors continues to widen.
Work comes to depend on the ability to understand information, respond to it, control it, and create value from it. Consequently, efficient operations in the informed work environment require a more equitable distribution of knowledge and authority. The transformation of information into wealth means that it is necessary to give more members of the company the opportunities to know more and to do more.
The managers of a company cannot sit idly by observing how employees accumulate knowledge and skills as a result of their working hours and quantities produced. Managers must actively participate by training staff to work in groups, detect and solve problems, handle the various management tools and understand the importance of continuous improvement at all levels.
When an ORA takes on the challenge of reducing cyclical time, it focuses more quickly than its competitors on what content to learn and how to learn that content. Maybe you don't really think faster. But it does engage with deeper and more focused thinking that is conducive to more effective action.
As a powerful example of Japanese companies that applied Kaizen as a form of learning aimed at consistently exceeding performance levels, we have Toyota. Toyota's production line in the 1950s and 1960s had all the hallmarks of an environment of scarcity and deprivation, with much time spent on trivial matters and in a perpetual cycle of putting parts together, taking them apart, and putting them back together. However for the sensei (Japanese teacher) Ohno was the perfect environment in which to learn. Despite the fact that, to some degree, Toyota's strategic learning has already been absorbed into the fabric of American manufacturing, Toyota has not stood still. Just as the rest of the world starts catching up with Toyota's production system (Just in Time),the company is adapting to accommodate new workers and advanced technology. This is so much the product of applying the kaizen strategy, whereby through an endless effort to make things better, Toyota officials appear to be adaptable to an almost infinite degree. Toyota's production system is difficult to copy. Ohno wove technology and intellect into a seamless cultural web. But ultimately, the success of the system was based on the fast learning environment that Ohno had cultivated.Toyota officials appear to be adaptable to an almost infinite degree. Toyota's production system is difficult to copy. Ohno wove technology and intellect into a seamless cultural web. But ultimately, the success of the system was based on the fast learning environment that Ohno had cultivated.Toyota officials give the impression of being adaptable to an almost infinite degree. Toyota's production system is difficult to copy. Ohno wove technology and intellect into a seamless cultural web. But ultimately, the success of the system was based on the fast-learning environment that Ohno had cultivated.
14. Team learning
The essence of a team is the interdependence of its members. Each of them needs the others to carry out their work, because a team cannot be successful if even one of its components does not perform its function. Interdependence creates collaboration, and these two qualities lead to a high-performing team.
Team learning, the process members use to find out what works or what works best, focuses on answering four questions:
- What are the team processes that add the value our (internal) customers need to work better? How can we make those processes work better? How can we accelerate our learning about the ways in which we can improve those processes? How can we capture our learning, document it, and transfer it to other team processes or other parts of the organization?
The team can be seen as a parallel process between the members: an individual has an idea, tests it, shares it with others and receives immediate feedback from the “parallel processors”. In this way, individuals stimulate the learning of others.
To encourage team members to learn together, the leader must emphasize that their livelihood depends on such learning. The leader must also add an air of attraction to teamwork and must interest the members in a compelling way.
15. Strategies based on the learning curve
The experience curve is a concept that has application both in tactical or operational areas, such as production, as well as in the field of strategy formulation and implementation. The most generally accepted consequence of the experience effect is a stimulus to accumulate production by the company, as long as the effect is applicable and significant, in order to obtain a reduction in costs as quickly as possible. It is considered that reaching a high level of experience grants a competitive advantage, in terms of costs, over the rest of the companies that compete in the same market with a technology that places them approximately on the same experience curve.
If a company wants to be more efficient and thus achieve a low-cost position, it should try to get to the experience curve as soon as possible. This involves building efficient-scale manufacturing facilities even before there is demand, and a determined pursuit of cost reductions from learning effects. The firm could also pursue a vigorous marketing strategy, by reducing prices to a minimum and emphasizing intense sales promotions in order to generate demand and thus accumulated volume as soon as possible. Once the experience curve is lowered, due to its superior efficiency, the organization is likely to have a significant cost advantage over its competitors. For example,Texas Instruments' initial success is claimed to have been based on exploiting the experience curve. Texas Instruments (TI) found that lowering prices could lead to big jumps in demand. The extra demand, in turn, accelerated the progression down the learning curve, due to the increase in output. The lower costs then provided the flexibility for further price cuts and for another cycle of this process. In the case of the handheld calculator, advances in semiconductor technology and high demand-price sensitivity provided opportunities for great growth. When TI entered the fray with a learning curve strategy, costs per calculator went from thousands of dollars to just $ 10 in less than 10 years.Sales skyrocketed, and IT reaped the benefits of being a leader rather than a follower.
Similarly, Japanese semiconductor companies vigorously used such tactics to catch the experience curve and gain a competitive advantage over their US rivals in the DRAM chip market; And one reason Matsushita came to dominate the global VHS video recorder market was to base its strategy on the experience curve.
It's critical to understand your competitors before embarking on a learning curve strategy. A competitor is weak if he is undercapitalized, trapped with high costs, or does not understand the logic of learning curves. Strong and dangerous competitors control their costs, have strong financial positions to make the large investments needed, and have a history of using an aggressive learning curve strategy.
The BCG used this instrument to identify the possibilities for cost reduction and also as a dynamic instrument to describe the struggle between competitors offering the same product and to influence it. If it is found that a particular company has not reduced costs according to the experience curve, the event is seen as an opportunity to reduce costs. The beauty of the method is due to the fact that it determined exactly the point that the costs should have reached, and consequently it set a firm and clear objective for the managers. In this way, costs were greatly reduced, and in a systematic way.
The BCG was able to explain the success achieved by Japanese companies such as Honda in the motorcycle sector by means of “cost reduction according to the experience curve” (precisely Honda, like Matsushita, are Japanese companies that apply Kaizen). Finally, the experience curve was used to explain the effects of the preference for the short term that the Western economy showed until approximately 1985, and the consequent loss of global market share, this being another element in favor of Kaizen who It favors a long-term focus and processes, as opposed to Western companies strongly focused on short-term results.
16. Risks and dangers
The company that lowers the experience curve the most should not be satisfied with its cost advantage. In general, there are three reasons why companies should not be satisfied with their cost advantage based on the efficiency derived from the effects of experience. First, since neither the effects of learning nor economies of scale are eternal; the experience curve is likely to level off somewhere lower; indeed, it must by definition. When this happens, it will be difficult to obtain additional reductions in unit costs from the effects of learning and economies of scale. Therefore, other organizations can catch up with the cost leader in time. Once this situation arises, several low-cost firms may have cost parity with each other.In such circumstances, establishing a sustainable competitive advantage must involve other strategic factors in addition to minimizing production costs through the use of existing technologies (factors such as improving the ability to satisfy the customer, product quality or innovation).
Second, the cost advantages gained from the effects of experience may become obsolete due to the development of new technologies. For these purposes, the Fosbury Effect should be mentioned. For many years the most common way to perform the high jump was the "roller jump": the athlete ran up to the bar and launched himself in a rolling motion. During the games held in Mexico during 1968, the athlete Dick Fosbury surprised the world by establishing a new Olympic brand and winning the gold medal with a new technique he had worked on for several years: the "Fosbury jump" consisting of running towards the bar and pass it by jumping on your back. Fosbury "changed the model" in the high jump, replaced a model by a new one in its entirety.Applying these concepts to the area of production, administration and management of companies, this implies that it is necessary to adopt the new techniques if the company is to be kept in competition, it is no longer useful to perfect the old methods.
In these times the greatest danger is the possibility that a competitor changes the basic rules of the game in the industry in which the company is inserted. If the company continues to play by the old rules, the source of its competitive advantage could disappear.
Now let's look at an industrial level case. The price of picture tubes for televisions followed the pattern of the experience curve from the introduction of television in the late 1940s to 1963. The average unit price at the time fell from US $ 34 to US $ 34. S 8 (price of the dollar in 1958). The arrival of color television interrupted the experience curve. The manufacture of picture tubes for color devices required new manufacturing technology, and the price of these tubes rose to $ 51 in 1966. Then the experience curve reaffirmed itself, The price dropped to US $ 48 in 1968, US $ 37 in 1970 and US $ 36 in 1972. In short, technological change can alter the rules of the game,by requiring former low-cost carriers to take steps to restore their competitive advantage.
The third case to consider to avoid conforming is that high volume does not necessarily provide the company with a cost advantage. Some technologies have different cost functions. For example, the steel industry has two alternative manufacturing technologies: an integrated technology, which depends on the oxygen-based furnace, and a mini-plant technology that operates primarily with electric arc furnaces. While the minimum efficient scale (EME) of the electric arc furnace is located at relatively low volumes, those that operate on oxygen are located at relatively high volumes. Although both operations are operating at their most efficient production levels, mills with oxygen furnaces do not have a cost advantage over mini-plants. In consecuense,The search for economies of experience by an integrated company that uses oxygen-based technology may not generate the kind of cost advantages that would lead you to assume a naive reading of the experience curve phenomenon.
Other risks inherent in this type of strategy are given that the market that the company serves has limits in terms of the amount of products it can assimilate. On the other hand, not all companies are capable of adapting and making the leap from a medium or small size and an innovative and dynamic orientation, to a larger size and an emphasis on increasing the volume or series produced. Not only are there financial, production, etc. conditions that limit the chances of success of such adaptation; the most important restriction is surely in the mindset and management philosophy of the company's leaders.
Furthermore, an emphasis on reducing costs through the experience effect can lead to errors in judgment. Deciding in favor of expanding and boosting production capacity can cause a difficult situation for the company when the market reaches maturity, and due to product saturation, it is not possible to sell all production or operate at full capacity when several companies they have followed the same strategy. Both the larger size is due to an emphasis on economies of scale and the effect of experience, a larger size makes the company more vulnerable to drastic changes in the environment, be it due to technological changes, consumer tastes or new competitors among others.
As a whole, the experience curve is an important concept that should be taken into account when designing the business strategy. The existence of an experience curve does not constitute a solid barrier to entry into the market for other competitors. The effect of experience is difficult to protect effectively through patents and other rights. Leader follower companies, who have entered the market later, can avoid mistakes made by pioneers and advance faster than those in reducing costs. In addition, following a strategy based on accumulating experience usually means, as already expressed above (Fosbury Effect), that less attention is paid to alternative technologies,and that management's commitment to the fundamental technology of the production process with which experience is being accumulated be intensified. This leads to unpleasant and costly surprises that occur when a new, more efficient technology emerges that makes obsolete the one to which the company has adhered in the past. Companies that adopt the new technology are likely to oust those that have followed the old technology.
Another fundamental aspect to consider is given by the loss of knowledge as a result of staff cuts. There are cases of companies that lose knowledge when they do without knowledge workers. At times, restructuring involves mass layoffs, which is done without considering how this would affect the company's knowledge base and therefore its experience curve. The results can be catastrophic. DAF, the German vehicle manufacturer, lost a considerable proportion of its know-how employees during a large-scale downsizing operation. According to calculations, up to 70% of DAF's knowledge base was hurt by the layoffs. Similar mistakes have been made at IBM and the chemical giants Dow Chemical and ICE.This was the product of not knowing, among other aspects, the importance of the internal accumulation of skills. Collective knowledge is a fundamental element in competitive strategy. Organizational competencies generally consist of very different resources and elements of individual knowledge, interwoven to form a whole that is often difficult to define. Unlike raw materials or manufactured components that competitors can purchase in an open market, capabilities are not bought; they are the result of a process, often lengthy, of internal accumulation and are therefore particularly valuable as competitive assets.Collective knowledge is a fundamental element in competitive strategy. Organizational competencies generally consist of very different resources and elements of individual knowledge, interwoven to form a whole that is often difficult to define. Unlike raw materials or manufactured components that competitors can purchase in an open market, capabilities are not bought; they are the result of a process, often lengthy, of internal accumulation and are therefore particularly valuable as competitive assets.Collective knowledge is a fundamental element in competitive strategy. Organizational competencies generally consist of very different resources and elements of individual knowledge, interwoven to form a whole that is often difficult to define. Unlike raw materials or manufactured components that competitors can purchase on an open market, capabilities are not bought; they are the result of a process, often lengthy, of internal accumulation and are therefore particularly valuable as competitive assets.Unlike raw materials or manufactured components that competitors can purchase in an open market, capabilities are not bought; they are the result of a process, often lengthy, of internal accumulation and are therefore particularly valuable as competitive assets.Unlike raw materials or manufactured components that competitors can purchase in an open market, capabilities are not bought; they are the result of a process, often lengthy, of internal accumulation and are therefore particularly valuable as competitive assets.
A transcendent and fundamental aspect to be duly taken into account is that the mere fact of increasing production does not imply a correlative increase in experience and learning, and therefore cost reduction. This occurs in situations that were previously described as “non-learning”, a situation that occurs above all at the individual level, but nothing prevents it from also occurring at the group level.
- Kaizen and the learning curve
The application of different tools and methodologies such as Statistical Process Control, small group activities such as Quality Control Circles, the systematic elimination of waste (dumps), standardization processes, PREA circles (Plan - Perform - Evaluate - Act), the various and numerous management tools, and the suggestion systems within a Just in Time system that sets and continuously manages to overcome new challenges in terms of quality, costs, productivity, delivery times, delivery times. preparation, accidents, damage (repairs), spaces and production cycles among others. Throughout the exhibition, it has been possible to see how various Japanese companies achieve formidable advances in productivity and costs,this being nothing more than the concrete result of the kaizen strategy. The concentration of kaizen in the processes, the lower employee turnover in Japanese companies (a product of the kaizen philosophy itself), the important training periods, the significant number of employees / workers who participate in the Quality Control Circles, Open communication, rotation through different positions in the company, high versatility and participatory systems are fundamental aspects that allow to consistently reduce average production costs, systematically raise productivity levels and continuously improve productivity. quality of products and services. This is greatly facilitated thanks to the application and strict monitoring of the Statistical Process Control charts.
Japanese companies combined the learning curve and continuous improvement through kaizen as fundamental strategies for reducing costs and conquering international markets.
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