Get More With Less Effort By Applying The 80/20 Rule
The 80/20 Rule (a.k.a. Pareto Principle) will change your whole life if you apply it wisely.
It will surely not have escaped your attention that the majority of what you get or succeed in getting actually comes from a minority of the things you do. Thus, in a company, we observe that the majority of sales often come from a small subset of the product catalogue. Very often, this ratio is in the order of 20 to 80%.
The 80/20 Rule Is An Empirical Phenomenon
As an entrepreneur, you will also be able to see that 80% of the income you generate comes from 20% of your customers, for example. As an individual, you will finally notice that 80% of the results you obtain come from 20% of the efforts you make.
This empirical phenomenon is called the 80/20 Rule or Pareto Principle. In practice, you may observe that this ratio may be even more pronounced in some cases where it can be as high as 99/1 or more moderate in other cases with a 60/40 ratio.
In any case, the key is to understand that there is a non-linear relationship between inputs and outputs. Thus, the efforts produced and the results obtained are not always proportional. Released in the early 2000s, Richard Koch’s book “The 80/20 Principle: The Secret to Success by Achieving More with Less” is a must-read for anyone who wants to understand the 80/20 Rule and then applying it for get more with less effort.
Feedback Loops Produce An Imbalance
The British inventor Sir Isaac Pitman discovered that about 1% of the words in the English language represent more than 80% of what we say every day. Why is this unbalanced relationship happening? It appears that feedback loops generate this type of disproportion.
Richard Koch explains in his book “The 80/20 Principle: The Secret to Success by Achieving More with Less” that many goldfish still grow in very different sizes even if they live in the same pond. Why is nature made this way? At first, some fish were slightly larger than others. This gave them a small advantage and allowed them to catch more food and eventually grow faster than other small fish.
This cycle will increase with each iteration with a difference in size and growth rate that will increase. All this leads to a substantially different size between fish. Some people tend to consider these imbalances to be unfair.
This example can thus be applied to the distribution of wealth, which is an even more famous example. Everyone knows that 1% of the world’s population has more than the combined wealth of 99% of the rest of the world’s population. This clearly seems unfair.
People wrongly believe that work and the associated reward should have a fair ratio of 1:1. This is a utopia because the laws of nature do not work that way.
How To Apply The 80/20 Rule To Get More With Less Effort
You have to face the facts and keep in mind that if 20% of your work represents 80% of your results, it means that 80% of what you do is terribly inefficient. You should therefore analyze what you do differently during that 20% of your time when you are most effective in order to apply it regularly. This would increase your results.
If 20% of the efforts produce 80% of the results, we have to make a ratio of 4, which means that if you extrapolate from 20% to 100% efficiency for your efforts, you will get a result of 400%. This sounds huge but it is even possible that it is higher since there could also be feedback loops that increase this disproportion.
A typical example of the application of the 80/20 Rule is the peak in productivity that tends to occur when people approach the deadline for the submission of a project or work.
You could identify what makes the first phases of your project less productive. It could be overthinking or procrastinating. By ensuring that you reorganize your process to avoid these errors, you will significantly increase your productivity.
The 80/20 Rule In Companies
If you want to optimize your work in the company with the Pareto Principle, the first thing to do is to identify the products that provide you with the greatest source of income. These are the famous 20%.
The second step is to focus on these products and reach their full potential. This can mean doubling production until the profit ratio falls to normal. Richard Koch told the management of an electronics company that their only goal should be to double the sales of their 3 best products, even if it means ignoring everything else.
Reduce Complexity By Focusing On The Essentials And Economy Of Scale
A study of 39 medium-sized companies found that the least complex companies were in fact the most successful. By selling a narrower range of products with fewer suppliers, they could focus more effectively on their profitable products, allowing them to make higher profits.
Most people think that more generates more and more. Thus, a larger company with a wider range of products should have more profits. This is not always true because it turns out that there are many hidden costs due to complexity.
A wider range of products will require more complex logistics, more training for salespeople and much more administrative work. If these expenses are equal to or even greater than the money that these additional products bring in, these additional products actually have no interest!
Often, a company can do better by focusing on a few important products and acquiring a thorough knowledge of them. This simplifies administrative work and can also lead to significant economies of scale by reducing production costs and thus increased profitability.
The 80/20 Rule Can Be Applied To Everything
Richard Koch points out that the 80/20 Rule is incredibly versatile. It is thus possible to apply it to almost anything. Let us take the example of negotiations. When you negotiate something, instead of trying to defend all the points, you should identify and then target those that matter most to the company and then focus on them rather than defend all the points in a sterile way. Getting the focus on these key points is probably more relevant to you and your company.
Marketing is another good target for the Pareto Principle. Focusing on 20% of the customers who generate 80% of your revenue could significantly increase your revenue. Being more loyal to these profitable customers will improve your service offering and allow you to offer them more targeted and relevant customer service.
For Nicholas Barsan, known as one of the best real estate brokers in the U.S., a group of clients selling their homes earn more than one-third of the $1 million he earns in personal commissions each year. Clearly, its strategy focused on these clients is a cost-effective strategy.
This example is just one of many examples of people getting more by focusing on the 20% of what pays the most.
Learn To Think In A Non-Linear Way
To fully benefit from the 80/20 Rule, you must first change your way of thinking. We tend to think in a linear way, assuming that causes and inputs are of equal importance. This is the conventional way of thinking. Children are taught that all their friends are equally important.
Rather, in this scenario, we should, without diminishing anyone’s inherent value, affirm that not all relationships have the same value. A subset of your friends will thus produce the greatest “value” for you. These are, for example, those who bring you the most joy or help you achieve your goals by inspiring and motivating you.
This type of 80/20 thinking is applicable to many areas of your life and can help you go further. It is therefore essential to stop thinking only in a linear way.
Focus Your Efforts On Essential Tasks Is The Key
Instead of adopting a traditional management approach based on time management techniques, it is better to focus on the important things.
When you have identified the 20% that give you the most results, you will already have reached 80% of your results. All you have to do now is reorganize your priorities to target that 20% and always start with the important things. Then, if you have time left, and only if you have time left, you can take care of the remaining tasks.
Thus, you will be able to take benefits from the 80/20 Rule for getting more with less effort in all the domains.
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