The 80/20 Rule … also known as the Pareto principle … is one of my favourite “strategies” for improving productivity.
I say “strategy” in this way as of course it’s not actually a strategy, it’s a rule, or a principle … or one could say even just an observation.
But it is an uncannily accurate observation that almost never fails to be true, which means that it can be utilised as a strategy: a way of thinking, of planning, of prioritising … in order to be more productive; of improving one’s time management. Or more to the point, in order to be more effective.
Because doing lots of things means you are busy.
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But doing, or prioritising, the most valuable things means you are EFFECTIVE.
So, what is the 80/20 Rule? Who or what is Pareto? And how can you use this principle to your advantage?
The 80/20 Rule Explained….
The Pareto principle came from the Italian economist Vilfredo Pareto, who – legend has it – first noticed the phenomenon thanks to the peapods in his garden.
He realised that 80% of the peas he was producing were coming from just 20% of his peapods. Which intrigued him. So he looked for similar patterns elsewhere, and found that 80% of the land in Italy was owned by just 20% of the population….
Expanding on this, he … and many others since then … have proven this rule time and again:
– 80% of the world’s income comes from the richest 20% of people
– 80% of a country’s taxes typically come from the top earning 20%
– 80% of a company’s sales typically come from 20% of its customers
– 80% of a firm’s revenue is typically generated by just 20% of its employees….
Essentially, 80% of all outcomes (or “outputs”) typically result from just 20% of all causes (or “inputs”).
And so became “the 80/20 principle”.
Of course, it’s not exactly 80/20 every time … it may be 75% of a company’s revenue coming from 25% of its customers. It may even be 80% of their revenue coming from just 10% of its customers – the fact that 80 + 20 = 100 is coincidental; the inputs and outputs represent different units so there is no need for them to add up to 100.
The point is that, for the most part, there are a “vital few” inputs that account for the majority of an output … ergo, success.
So, does the 80/20 rule mean that ONLY 20% of the things we do are important?
But it DOES mean that 20% of the things we do are MORE important….
Which means those are the things that need to be PRIORITISED.
And by identifying what they are, and by ensuring we do them first, best, with the most focus, we can increase their value … improve their efficiency … and MAXIMISE their output.
We can be more productive.
And we can maximise our success.
The Benefits of Identifying The 80/20 Principle in Your Business
Identifying your 20% of vital “inputs” enables you to see the different benefits that the 80/20 rule can bring to your own business.
Think of Pareto’s peapods.
Initially, he was more than likely spending time tending them all equally … they all technically need the same care and attention, after all.
But once he’d realised just 20% of these pods were producing the vast majority of the peas, do you think he carried on tending them all equally? Or do you think he made some changes?
After all, every pod that he tended to required a bit of his time … meaning that by tending to every one of them equally, he was BUSY, but he wasn’t spending his time EFFECTIVELY.
So, maybe he decided to stop tending to the other 80% completely – freeing up a whopping 80% of his time to focus on other things, yet only losing 20% of his total “pea” output….
Or, perhaps he chose to PRIORITISE the 20% of pods that were producing the most peas … giving them more time and attention so as to yield even more from them … but also continuing to tend to the other 80% – with the time that he had left – so as to continue to benefit from whatever little they were able to produce.
Of course, by prioritising the best-producing 20%, he’d more than likely be learning things that would help him yield even more from that other 80% … which would undoubtedly help him increase their yield, too. Win-win.
Or, perhaps he studied that top-performing 20% so as to understand exactly why they were producing so much more than the others, so that he could move, or alter, or replace that other 80% as necessary so as to replicate the success of that top-producing 20% and try and generate similar numbers from 100% of his peapods….
He likely wouldn’t be regaining any time … but he’d be focusing his time more effectively – on the things that were able to bring him the most value – and thus potentially be quadrupling his original production.
Of course, I don’t know what he did … or if those peapods even existed … but it shows how the simple act of IDENTIFYING the most valuable 20% of “inputs” provides various options, that have various different positive outcomes … in Pareto’s case: more time, or more peas.
Just as identifying your own 80/20 rule inputs and outputs can present you with similar options….
The Reality of Applying The 80/20 Rule in YOUR Business
If 20% of your clients account for the vast majority of your total revenue, is there any logic in giving every one of your clients the same amount of your time and energy?
If 20% of your marketing activities are generating the biggest returns, is there any sense in continuing to spend the same amount of time, and money, on those that aren’t working as well?
If 20% of the services you offer account for 80% of your orders … is it worth focusing your time and energy on trying to promote and build the others?
The answer to all of these, for the most part, is no.
It’s not worth spending EQUAL amounts of time on the things that aren’t as popular, aren’t as lucrative, aren’t as successful. All that will achieve is you being busy, without maximising your returns.
It’s easy … and common … to develop long lists of actions and activities that we start to do on repeat, not always stopping to think about what they actually bring us.
But by applying the 80/20 rule to every task on your to-do-list … looking at every client, or customer … at every “thing” that takes up time in your day to day – and calculating what it really contributes to your overall goals, your overall revenue, your overall success … it is easier to identify what the really important things are.
Spending equal amounts of time on every little thing means you will be BUSY … but you’ll not be EFFECTIVE.
Treating everyone, or everything, in the same way only leads to “busyness” … because everyone is NOT the same.
It may sound unfair, or un-PC … but it doesn’t change the reality.
Some clients require more time … they warrant being prioritised … because they are the ones generating more revenue, or important connections, or longer-term business.
Understanding what your “most important” activities are … and learning to prioritise them … means you are prioritising effectiveness over busyness.
Which, simply, leads to superior results.
The 80/20 principle isn’t a hard and fast “law”, but it’s the clearest way to remind yourself of your true priorities … your “vital few” … so as to become truly productive, and effective, and successful.