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It is one thing to see the benefits of the 80/20 Rule and quite another to have the discipline to implement it. Read on to find our how to exploit this tool.  Yellow Belt

 Becoming an 80/20 Expert

Even if you are as smitten with the 80/20 concept as we are, putting it into practice takes a lot of willpower because there are just so many dimensions that you can work on at any one time;

  • save time
  • sell more
  • fewer staff
  • better lifestyle and so on

Pretty quickly, you get paralysed wondering which way to go next or start losing productivity by multitasking (see Multitasking Tool).

Why not apply 80/20 to your options and focus on the one that comes to the top of the pile as pay back for resources applied to it?

How about training staff to apply 80/20 all the time so the whole business moves as quickly as possible.

Alternatively, consider finding the 'constraint' in your operations and applying 80/20 attention there for maximum effect (see Theory of Constraints (TOC) )

Easing your way in

If you find the 80/20 principle a bit hard to stomach, you could get started with its relative: the 50/5 principle.

This says that typically 50% of the company's customers, products, components and suppliers comprise a tiny 5% or less of sales and profits.  If you prune some of the lower 50% you will find a comparatively small drop in sales and profits, but a large reduction in complexity and cost.  Perhaps to "get your feet wet", you could start by actually doing a 50/5 on one element of your business to see if this theory of 80/20 is likely to work.  Ideally, the first pass through would be a 50/5 analysis of each of your departments or products to identify where the most impact can be found and then apply 50/5 to that area.

Once you satisfy yourself that this fairly cautious approach works you will optimise much faster if you drop the 50/5 and go to the 80/20.

Recap

If we can pass on nothing else to you in Profit Savvy, we would like to pass on the enormous impact the 80/20 Rule can have on your business and your life.

We encourage you to always apply 80/20 thinking to business and life situations as there is a great deal (you might not be surprised to hear 80%) that you can prune away without making too much negative impact.

Resources

Wikipedia: Pareto Principal

You Tube: several videos

Books:  see Amazon for affordable eBooks readable on Kindle. Highly recommended reading.  Koch is the guru on this subject.

  • The 80/20 Principle (Koch, 1997)
  • The 80/20 Individual (Koch, 2003)
  • 80/20 Sales and Marketing: The Definitive Guide to Working Less and Making More (Perry Marshall)

 

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