A Learning Curve is a graph that shows the knowledge (wisdom) of an organisation compared to the knowledge of its competitors. If graphed periodically, the Learning Curve can also show the increases in knowledge over time by the players in the market. What the entrepreneur wants to do is reduce the time involved in gaining that knowledge.
When we say knowledge, we are not only referring to the intellectual property (IP) that an organisation may hold, but also to the processes that run the organisation, the experience of the employees and other experience-related activities.
The longer you take to acquire the knowledge that your competitors already have, the riskier your venture will be. However, if you have that knowledge and your competitor doesn’t, you can use that knowledge to expand the gap between their organisation and yours. The greater the time (to gain the knowledge) the greater the (financial) risk.
If your organisation has a higher risk due to a low or slow Learning Curve position, your organisation will have a longer negative cash flow.
The importance of the Learning Curve regarding survival and competition cannot be underestimated. The Learning Curve is all about the compression of time. The longer it takes you to learn something, the longer it will take you to save or make money – in fact the lack of knowledge may even end up costing you money.
You may be wondering how to shorten your Learning Curve. Well, get educated, invest money in books on business, marketing and finance, and read industry-specific publications. Search the web to learn what people in your industry are doing in other countries, and see if these strategies are being used in your country – if not, why not?
Does this present you with an opportunity?
You can also seek out a mentor who will help with the compression of time on your Learning Curve. Look for a mentor who has experience in your industry. If you are unable to find a mentor who has experience in your industry, at least try to find one who has had a successful background in setting up and running their own organisation.
The longer your organisation is exposed to the market, the longer you might experiment with new products and processes. However, it is important that you don’t make those same mistakes time and time again. And unfortunately in business, mistakes are inevitable. However, it is the way that you learn from and react to your mistakes that will have a lasting effect on your organisation.
If you are unable to learn from your mistakes, your organisation will suffer. A better way to avoid mistakes is to learn from the mistakes of others. If you can learn from someone else’s mistakes as opposed to your own, you will save yourself a lot of money, time and energy.
The best way to remember what a Learning Curve is, is to think of this example:
You run an organisation and you need some legal work done to protect the IP of your organisation. You have two choices. Go to university and study for six years to become a lawyer, or hire a specialist IP lawyer to do the legal work for you. Simply put, if you lack the experience, buy it in.
Consultants are hired to reduce the time it takes to get from A to B – to sharpen the
Learning Curve, to make the organisation smarter.