80-20 Rule - How it works ?

I do agree that reading is a good habit. That develops the thinking power, mental health, 360 degree views in any situation, improve literacy and general knowledge, reduce stress and many more. But do we often read all good books? May be yes, maybe not. Do we have time to read everything? Or it’s a time to get the CRUX of the book? What is more important reading or understanding the pivotal aspects? Think and answer.

I do believe, in our personal and professional life, 80-20 Rule does work. I am into logistic, shipping and education industry since four decades now and I have experienced how 80-20 rule is applicable in most of the situations whether it’s marketing, sales, office work, strategic alliance and development etc.

Let me try to put in layman language what is this rule all about?

When I was a student, I was following this practice. I usually covered my 80 percentage of the study in 20 percentage of the efforts. We may call it smart work. First, I Segregated the syllabus, referred last 5 years of test papers and noted down repeated questions. I used to focus on MCQ and easy chapters to complete first rather than the lengthy ones.

You can see and observe this from your surroundings that, when a student actively studies, there are plenty of things that are competing for their attention alongside the study materials. There are physical needs, like thirst, hunger, the need to go to the bathroom etc. There’s also social media, friends, and family. There are countless hours of great video waiting for them on Netflix, Amazon Prime, HBO, or Hulu.

It’s very likely that, more often than not, these distractions get the best of us. It wouldn’t be a surprise if 80% of what students learn comes from 20% of the time they believe they are studying. But that’s okay. As long as they understand this, students can get the most out of that 20 % and find ways to deal with the remaining 80%.

Same goes with the organization in most of the cases, however there is no proven scientific research study in all cases. Suppose, you have a team of 200 people, but ask yourself are you going to share, expect every task get completed by all of them ? The answer is NO.?You often interact with hardly 20-25 members on day to day operations level and majorly you have full confidence and trust on them, that’s why you keep giving them all the important tasks to complete before the deadlines, they do also in most of the cases. This give sometime feeling of overburden to key people and rest people may enjoy the less burden but not the privileged of being counting in pivotal team.

80% of outcomes (outputs) come from 20% of causes (inputs). Now, take a one minute to think on it. Refer your business revenue, turnovers. Listed down a few important clients and calculate your total sales and profit gaining from them. You get the answer.?

Let me also clear that, the rule is often used to point out that 80% of a company's revenue is generated by 20% of its customers. There's another way in which the 80-20 rule is misinterpreted. Namely, that if 20% of inputs are most important, then the other 80% must not be important. This is a logical fallacy. The 80% can be important, even if the decision is made to prioritize the 20%. I would like to narrate this in below examples.?

? 80% of real estate deals are closed by 20% of the real estate teams.

? 80% of the world’s wealth was controlled by 20% of the population.

? 80% of a typical business’s revenue comes from 20% of its clients.

? 20% of criminals commit 80% of crimes

? 20% of drivers cause 80% of all traffic accidents

? 80% of pollution originates from 20% of all factories

? 20% of a company’s products represent 80% of sales

? 20% of employees are responsible for 80% of the results

? 20% of students have grades 80% or higher

And so on….

The 80-20 rule in real estate investments can help you identify your most valuable clients or partners. It can help you determine where you should concentrate efforts and where divesting might be the best plan.

If you are planning to establish new real estate project, I suggest to identify first your key 20 percentage clients who gave you maximum business in the last projects. Study their liking, preferences, inputs and try to incorporate them into your next projects. First you focus on them, take them into your decision making and make them feel they are actually paramount for you. That simply does not mean you forget other clients. You need to take care entire market segment but here we are talking about specifications and result oriented approach.

Same with if you are into any service industries like Tourism, Logistic and Shipping Solutions, Education, Media, IT, Entertainment etc. or Manufacturing industries, you see your company’s past performances and study the key clients, customers who gave you the maximum business. So, here nothing wrong to mention, 80 percentage or maximum business of your company is depending on 20 percentage or a selected customer range.

The 80-20 rule reflects the unequal distribution of outputs and can be used to determine the best way to focus efforts. However, it’s important to note that the rule is not a mathematical concept and doesn’t apply in every situation.

However, the 80-20 rule is an invitation to examine where the highest profits or losses, productivity or lack of it and resources are being deployed.

When the 80-20 rule is used in businesses, it is easy to identify what works and what doesn’t. For example, if 80% of your profits come from 20% of your real estate investments, then you should focus on that investment type.

Share your feedback in the comment box!