Exploit the 80/20 Rule in Business
Most people have heard of the 80/20 rule. It comes in a diverse number of forms but originates from the simple Pareto Principle that,
"Roughly 80% of the effects come from
20% of the causes"
The principal was outlined after it was observed that 80% of land was owned by 20% of the population. Since then, many more 80/20 relationships have been identified now making it an accepted 'rule of thumb'.
The interesting thing is that it also holds true in business, such as;
- 80% of profits come from 20% of customers,
- 80% of sales come from 20% of products, or
- 80% of complaints come from 20% of customers.
But it's not these above examples and others like them which are of significant interest. These are merely a reactive analysis of a business' performance, a given if you will. It's a process of identifying their particulars.
What's more important though is the proactive plan regarding how to address these particulars.
So how does that work into the 80/20 rule?
The answer is quite simple, you do less. Outline a plan that involves actioning only 20% of what you or your customer ultimately needs.
Wait, what?
Let me clarify. This is not to say that you should outline an entire plan, only to then implement a random 20% of it. Instead, identify the core competencies and then pick just the 20% with the expected highest return and focus on that.
Subconsciously we use the 80/20 rule in most things we do in life. It's a way by which we are able to quickly identify and prioritise tasks ensuring we use our time more efficiently. We probably wouldn't get much done if we didn't. So it only makes sense to also apply this method to business.
In fact, when applied to a business situation this works out to be an extremely efficient approach. As it turns out when assessing which new business changes to implement, approximately 20% of the identified competencies (causes) account for 80% of the return on investment (effects). This is more commonly known as a Pareto Analysis. The remaining 80% of competencies are most likely to be secondary information which are either currently unknown, not required immediately, or required infrequently.
This method carries a number of key benefits:
Task Delivery
For all people involved, this keeps the number of tasks to be delivered with focus and on topic. Tasks are also a disruption which needs to be kept to a minimum. The secondary tasks are considered background noise and can be ignored.
Cost
Whether it be for yourself, your business, or your customer, by focusing on just the core competencies the costs will be lower. Specifically, if this is for a customer, then they will be thankful for it and likely to return in the future.
Confidence
In the case where you are providing for a customer, it allows them to finish off the process themselves, i.e. the secondary tasks. This is where they get the opportunity to hone their new business skills by building on top of the solid framework you've just delivered.
Satisfaction
Whether it's your immediate manager, your company CEO, or your customer, if you are able to deliver more efficiently and at minimal cost then this reflects positively on yourself and your company.
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Every individual and company is different, but chances are there is an opportunity to execute the 80/20 rule from the smallest of tasks up to the largest of business changes. You just need to keep it simple and focus squarely on that 20%.
It truly is a simple rule to live and work by, and one that I exploit when integrating business systems to my customers.