Saving money – part 2

Saving money is good. It doesn’t just happen by spending less, either. A friend of mine, who is reading a book called The Boston Consulting Group: On Strategy told me about a chapter he read in which the writer makes this point:

“Cost of value added declines approximately 20 to 30 percent each time accumulated experience is doubled”. (Bruce Henderson, p.15)

That is fascinating to me! In general, I’m sure we’ve known it to be true – the more often you do something, the faster you get at it – but the writer of this chapter has put some numbers to it: When your experience on something doubles, the cost of adding value to your service declines by 20% to 30%.

Of course that doesn’t mean that you can provide a service twice and expect your costs to drop 30%. The writer goes on to describe exactly what accumulated experience means – both to a specific business in a few weeks and across an entire industry over decades. This “accumulated experience” is made up of:

• Learning: How much you have to learn to do a project once and how much you have to learn to do that same project again. In some projects it’s very low; in others, it’s very high.
• Specialization: Focusing on just one specific topic, deliverable, market, or line of business allows you to focus your efforts and discover new and efficient ways of doing things.
• Investment: What equipment, processes, or staff-time you buy in order to become faster at what you do.
• Scale: How frequently you need to perform the same task, or how many products you need to create.

So, there are plenty of ways to save money (and I mentioned a few in a previous blog) but one really effective way that the Boston Consulting Group suggests is to accumulate experience at delivering your product or service and learn, specialize, invest, and scale in order to drive your costs down.

Jessica Routier, IAC-EZ

Jessica Routier

Jessica wants to talk to you! She is who coordinates the contests, travels to all the conferences, and interfaces on a fun level with customers on a daily basis in order to bring our users together as a community.

Jessica has a B.Admin and an MBA. Her background in business, along with a diverse skill-set (including a diploma in Medical Transportation, retail experience, and experience as a paralegal) make her a valued, highly flexible team member.

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