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The Wright Rule (also called Wright’s Law) is an economic principle that says:
For every cumulative doubling of units produced, costs fall by a constant percentage.
In simpler terms:
As you produce more, you get better at it, and your costs per unit drop.
It was first observed in the aviation industry by Theodore Wright in 1936. He noticed that every time airplane production doubled, the labor hours needed to build a plane dropped by about 20%. This became a broader economic concept: the more you do something, the more efficient and cheaper it becomes.
How does the Wright Rule apply to small businesses?
For small businesses — especially where margins are tight and competition is tough — Wright’s Rule teaches us a very important thing:
Efficiency improves with experience.
Every extra unit you produce, every additional customer you serve, every process you repeat — you learn, improve, cut waste, and lower costs.
Over time, your business becomes more profitable even without raising prices.
Examples in Malaysia:
- A small cafe in Penang finds that after making 1,000 cups of coffee, their baristas are faster, waste fewer ingredients, and reduce electricity use, lowering costs.
- A homegrown e-commerce seller in Shah Alam finds that after shipping 500 packages, they can negotiate cheaper rates with couriers and pack faster, saving money.
- Examples in Malaysia:
- A small cafe in Penang finds that after making 1,000 cups of coffee, their baristas are faster, waste fewer ingredients, and reduce electricity use, lowering costs.
- A homegrown e-commerce seller in Shah Alam finds that after shipping 500 packages, they can negotiate cheaper rates with couriers and pack faster, saving money.
- A small trading business in Johor Bahru selling imported electronics finds that after completing 100 shipments, they optimize their inventory management, reduce stockouts, negotiate better prices from suppliers, and lower their per-unit import costs.
Why is Wright’s Rule especially important for SMEs?
Thin Margins: Many small businesses operate on very tight margins. Efficiency gains are the difference between survival and closure.
Scalability: Malaysia’s government promotes SME digitalization (e.g., grants like SME Digitalisation Grant) — Wright’s Rule encourages small businesses to embrace digital tools early to maximize these learning curves.
Global Competition: As Malaysian SMEs open to ASEAN markets, competing against efficient neighbors (like Vietnam and Thailand) means local businesses must drive costs down rapidly.
Practical Tips for Malaysian Small Businesses:
- Track Metrics: Measure your costs per unit/customer/project regularly.
- Embrace Process Improvement: Every cycle is a chance to find small improvements (kaizen mindset).
- Use Technology Early: Automation can accelerate learning curves.
- Standardize Operations: Create SOPs once you find better methods — this locks in efficiency gains.
- Negotiate Bulk Deals: As your volume grows, renegotiate supplier deals or logistics contracts.