Last week I looked at the Pareto principle or the 80/20 principle. Richard Koch has written a number of books around the 80/20 principle such as, “Living the 80/20 Way” and “The 80/20 Principle”, and this weeks’ tip is again courtesy of Richard Koch…
For the creative business leader looking for an opportunity to view their business from a refreshing perspective, why not try one or two of the seven secrets of the 80/20 leader.
- It’s almost certainly true that 80% of your profits are made in chunks of your business that comprise less than 20% of your revenues. The ‘chunks’ may be particular products, customers, channels of distribution, geographies, stages of value added, or combinations of these. Do you know where your critical 20% lies?
- Once you know your critical 20%, you can try to multiply this type of business. It’s worth it - because adding another 20% of critical revenues could add another 80% of profits. Do you have a plan to double the critical 20%? Is it working?
- Probably 50% of your customers, products, components, suppliers, and stages of value added add less than 5% to your revenues and profits. Richard Koch call this the ‘weedy 50%’, because they are weeds that just get in the way. Do you know what your weedy 50% is? Are you acting to get rid of it?
- Review all your growth initiatives and new projects. Almost certainly 20% or fewer of them will add 80% of the extra future value. Prune the bottom 50% of initiatives and give the resources to the top 20%.
- Who are the 20% of super-stars in your organisation who will add 80% of the future human value? Do these few people get 80% of your time and attention spent leading, monitoring, mentoring, training and developing people?
- What is the 20% or less of your time that adds 80% or more of your value? Could you double the time on this? What is the bottom 50% of your time in terms of value? Stop doing these things yourself delegate them, or just quit them altogether.
- Organisations are successful when they are different from all competitors, provided that customers like what the business does when it’s different! Make a list of all the customer-pleasing things that are different about your company. What are the top 20% of these differences, the few really important differences that make a world of difference? How can you accentuate these differences, and multiply their impact?
Source: Richard Koch, The 80/20 Principle, www.the8020principle.com
