If there was just one principle I could focus on in order to achieve exponential results, it would be, hands down, the Pareto Principle – otherwise known as the 80:20 rule.
In case you aren’t familiar, the 80:20 rule states that 80% of the outputs come from 20% of the inputs. For example: 80% of your sales come from 20% of your customers… or 80% of your profits come from 20% of your products … or 80% of the peas come from 20% of the pea pods (a little abstract, I know, but you get the idea.) You can read a more elaborate description with examples here.
As always, the power of this principle comes from its application and not just having the knowledge.
So, how are you applying the 80:20 rule in your business?
Would you like some ideas?
Here are a couple of ways to use this valuable tool that has been most helpful, both for ourselves and for our clients.
Time (for you and your team)
The key question of course is “What are your 20% activities?”. (i.e. which 20% activities, of all the activities you do, are responsible for creating 80% of your results?)
If you look back at the results you created in the last 12 months, which actions where critical to making that happen?
These will usually be represented by categories vs. specific actions (i.e. hiring, nurturing key customers, etc). But once you’ve identified the key category, you can then drill down to identify the 20% within it.
Here’s a great article in Entrepreneur magazine (the video is only 6/10 in my opinion but we do feature Perry Marshall’s book below – he has some great stuff). The principle behind the first two items on the list are key. Note your responses as you read them. It could provide an opportunity for you to think differently.
In the video, Perry does mention Steve Jobs and his obsession with simplification. This is a key concept and a great book that explores it is Insanely Simple
After you’ve reviewed your 20% activities, pass the exercise to your key people. When everyone knows their 20% activities, it can really simplify the process of developing position contracts (aka job descriptions … fyi – I’m not a fan of job descriptions but that’s a topic for another episode…)
In short, think about:
- Which 20% of your people take on 80% of the responsibility.(note: looking at the characteristics of your top 20 percent-ers will likely give you the profile of your ideal recruit – in case you are looking)
- 20% of your sales team generate 80% of the sales.
- Which 20% of your people take up 80% of your management time.
Food for thought…
Sales and Profits
The best reading on this is the book I’ve highlighted below by Perry Marshall – 80/20 Sales and Marketing. He walks you through how to apply the 80/20 to marketing, sales and your customers in significant detail.
This 6 min video featuring Tim Ferriss talks about product selection and split testing on pricing (1:40 min mark). Given the choice and the same level of profit, would you rather have more or less customers? It’s worth watching.
Personally, I find reviewing some aspect of my time and my businesses through the 80:20 lens is a good quarterly activity. I won’t necessarily go into detail in every area but there will be one or two areas that I know need it.
Sometimes, it’s old behaviours that have just not changed (and perhaps up to a point were OK), and now to move to the next level, something has to shift.
Have some fun with it. And I’d love to hear some success stories or views you might have on the topic of the 80:20 rule.
Your Coach – Jamie
By Richard Koch
The original text that covers the spectrum of the 80:20 principle.
A great place to start if you want to better understand how to apply the 80:20 rule.
It always amazes me how deep this concept can go. It is way more than I’ve described here in this short newsletter.
80/20 Sales and Marketing
The gold standard in looking at how to apply 80:20 to sales and marketing.
It’s easy to follow and provides extremely powerful insights you can apply immediately.
If you have a sales and marketing focus right now, this will be a worthwile read.