The 80/20 Principle: The Secret Of Achieving More With Less
Author Richard Koch goes in depth on the commonly known Pareto Principle, offering tips for how to apply it in many facets of one’s life.
Most people have heard of the 80/20 principle and may vaguely know one example of what it applies to (you get 80% of the results from 20% of the tasks you do). What I was most curious on in reading the book was what other areas of my career or personal life it could apply to. What I have found is that this is a mental model framework that can aid with decision making. By studying this principle, forms of substitutions can result in better uses of time.
Inherently, there is an imbalance between inputs and outputs, causes and results, and effort and reward present in everyone’s lives. Using the 80/20 principle can be in thought of in two ways: 80/20 thinking and 80/20 analysis.
Applying the 80/20 principle, either in the form of thinking or analysis, fundamentally challenges conventional wisdom. It is implying that whatever strategy you have is wrong. How?
- Celebrate exceptional productivity vs. raising average efforts
- Look for shortcuts vs. going through full course
- Be selective, not exhaustive
- Strive for excellence in a few things vs. good performance in many
- Delegate, outsource, and automate in our daily lives
- Only do things we are best at and enjoy most
- Work where 20% of effort can lead to 80% of returns
How can this further be applied in business? For every step in business process ask yourself if it adds value or provide essential support. If it does not, find a way to eliminate it. More broadly speaking, take a department (marketing) and try to structure efforts so that the focus is solely on the 20 percent of customers that drive 80 percent of profits. While it may seem obvious, you should employ methods that have the highest ratio of output to inputs. Direct business uses in a marketing department can reallocate $, resources, and other components that dictate its performance. Apply this to strategy, quality, cost reduction, selling, IT, decision making, inventory, project management, and negotiation as ten business uses that scratch just the surface of this framework.
The framework is intertwined to business by role as well, with effective managers spending all their time working out which tasks are high value and who should do them, ensuring they get done. While this seems rather simplistic, spending a majority of time focused on these few things can yield optimal results. Tasks that are determined to be high value are a function of how to spend one’s time. Some examples of typical high value uses of time include things that use your own creativity, things other people tell you can’t be done, or things that are now or never as three examples. Low value uses of time examples are things that have been always done in a certain way, things that have predictable cycle, and things few other people are interested in.
Finally, the 80/20 principle framework can provide golden rules for career success. Identifying where 20 percent of effort gives 80 percent of returns, learning from the best, and realizing that compounding knowledge is power are just a few rules mentioned in the book that anyone can start to think about.
Reading this book and diving deeper into the 80/20 principle framework has me reevaluating how I spend my time, both personally and professionally. The common adage of “work smarter, not harder” manifests itself if we can focus on doing the small amount of activities that produce most of the results.
