The 80/20 principle can be applied to every area of life. There’s a quote credited to Bill Gates saying that he would rather give a complex problem to a lazy man because the “lazy man” would find an easy way to solve the problem. Getting more done with less effort sounds like an oxymoron.
The world is changing and there are new rules. If you doubt this, how do you comprehend a world where the biggest cab service, Uber, has no single car of its own or the hotel business, AirBnB, with the highest number of rooms available for booking, has no single property of its own as at the time of writing this article? How do you explain a situation where the world’s largest retailer, Alibaba.com, has no single inventory and TESLA recently booked $12 billion in sales of cars yet to be produced. It is a weird world quite alright and, yes, you can get a lot done with less effort.
The 80/20 principle known as the Pareto principle was a result of research and observations of an Italian economist, Vilfredo Pareto. He studied and observed that 20% of the population controlled 80% of land and wealth. He drew several inferences from observations that you really could see in action in any system. Let us bring this home. 20% of the drivers on the road create 80% of the traffic with their impatience, of course. 20% of students in the classroom answer 80% of the teachers’ questions, etc.
As business and career-minded people, the best use of our understanding of the Pareto principle should be in management. The 80/20 principle should allow us see how we manage ourselves, time, money, efforts, creativity and relationships. It should allow us see which 20% of our activities produce 80% of our results. It is to bring to our attention time and other resources that we can’t afford to jeopardise; resources that have more far-reaching effects on our results.
Take me for example, I do a lot of writing, reading, praying and creative thinking. These are the 20% efforts that create 80% of my results and they must happen before 8 am. So let us look at this principle and how it plays out in different areas of our lives.
Applying 80/20 Principle In business
80% of your margins will come from 20% of your products and services. All your products don’t deliver the same margins, why then are you giving them equal attention? Identify the high-margin products and concentrate on them. If the high-margin product doesn’t sell quickly enough, concentrate on a product with lower margins that sell in volumes.
Not all customers are equal. Some stress you, negotiate all your margins out of your price, and keep taking your time after the sale has closed. You need to group your customers based on the volumes of business you get from them.
20% of your marketing budget and efforts brings in 80% of the business. When new customers do business with you, always ask them how they heard about you. This allows you to know which of your marketing efforts work the most and which to intensify and give more attention to.
Applying 80/20 Principle In The Workplace
20% of your efforts will account for 80% of how you will be appraised. The 20% could be sending a particular report on time every time or managing a particular group of customers very well. It could also be making your boss look good at all times. Identify these activities and do them diligently.
20% of the relationships you cultivate at work can influence your career growth 80% of the time. Not all your work colleagues can help you beyond discussing weekend events on Monday mornings. But there are others that mentor, challenge, support and help out with the job. Those are the people you should spend 80% of your time with.
20% of your creative ideas will yield 80% of your results. When it comes to creativity, get as many ideas as possible. You can’t be too certain on which will give the result you want.
Applying 80/20 Principle In Life
20% of your friends add 80% of value to your life. Show me your friends and I will tell you your future. You should do away with friends that drain your resources (time and money especially) without giving anything back to you. When you become empty, such “friends” will simply move on and find other people. Don’t start feeling special too early. If you lose your status, income and privileges, how many of your friends do you think will stick around?
20% of your needs gulp 80% of your money – school fees, mortgage, rent, credit card payments, car loans, club membership and you would realise almost all the money is gone. Look critically at your expenses and see which of them you can cut off even if it translates to slight adjustments to your lifestyle.
Saving and investing 20% of your income would create 80% of your wealth. Eventually, you will stop working, either by choice or design and the 20% you have saved and invested if you have been constant and diligent, would be more than sufficient for you to live off of.
The focal point of the 80/20 principle mindset is in its usefulness. It is being aware and taking control of the time and other resources that control our outcomes. It is also a corrective measure to enable us line our ducks in a row when they seem out of line. So it becomes less of trying harder and more of working smarter. The most successful and creative people understand that 20% produces the 80% and they play constantly to the 20%.
Let’s create visibility for your brand and put your business on the world map. Contact us today to make your brand the preferred choice for our audience of entrepreneurs and business leaders.