The Economic Value Curve
The Economic Value Curve measures the relationship between a dependent variable and independent variables to achieve a particular business or operational outcome, such as retaining customers, increasing operational uptime, or reducing inventory costs. The Economic Value Curve measures the impact that increasing or decreasing one of the independent variables has on the dependent variable (the business or operational outcome).
In Figure 3.1, for example, if we want to increase the business outcome (dependent) variable "Uptime Percentage", then we must increase our spend or investment on the "Maintenance Spend" independent variable.
Figure 3.1: The Economic Value Curve
The challenge with the Economic Value Curve is the Law of Diminishing Returns. The Law of Diminishing Returns is a measure of the decrease in the marginal (incremental) output of production as the amount of a single factor of production (input) is incrementally...
