80/20 Principle (zt)

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thinkarete Notes on™ The 80/20 Principle We’ve all been exposed to the 80/20 Principle at some point in our lives: The principle states, quite simply, that 20% of efforts lead to 80% of results. Whether you know it as the “Pareto Principle” or the “Principle of Least Effort,” it’s an incredibly powerful concept. Although many authors discuss the 80/20 Principle as a core component of their time management and self-development programs, Richard Koch (a former Bain & Co and BCG Consultant) provides an entertaining and practical application of the theory in his recent book The 80/20 Principle: The Secret to Success by Achieving Less. Disclaimer: This overview is not intended to be a comprehensive treatise. We do hope, however, that the ideas will get you thinking about how you can focus your time and energy on the activities that give you the most results. Hope you enjoy! Overview of the 80/20 Principle It was 1897 when Vilfredo Pareto, an Italian economist, was studying wealth and income distribution in 19th Century England. During the course of his studies, he discovered that the majority of land and income was controlled by a minority of the population. In fact, 20% of the population controlled 80% of the wealth and income. On further analysis, mythical lore says that he found that this principle held true not only in different countries and different time periods, but also in contexts such as his garden—where he discovered that 20% of his peapods yielded 80% of the peas that were harvested! Since our pal Vilfredo identified the trend, many researchers have been busy pointing out some additional modern applications. Check these out: 20% of criminals account for 80% of crime 20% of motorists account for 80% of accidents 20% of married individuals account for 80% of divorces 20% of your carpet probably gets 80% of the wear 20% of streets account for 80% of the traffic 20% of product flaws account for 80% of problems 20% of clients usually account for 80% of an organization’s profits I could go on, but I think you get the idea! Oh, why not a few more? 20% of the clothes in your closet are worn 80% of the time 20% of beer drinkers drink 80% of the beer OK. I’m done for now. Your job, however, is not complete. Look around you. See where you spend your time. See where you get your results. Is it 50/50 or more like 80/20? As Koch advises: “80/20 Thinking requires, and with practice enables, us to spot the few really important things that are happening and ignore the mass of unimportant things. It teaches us to see the wood for the trees.” The next logical question is clearly, “OK, so how does this apply to me?” Well, experts on time management would suggest we take a closer look at some of our everyday behaviors. As Koch states: “20% of what we do leads to 80% of the results; but 80% of what we do leads to only 20%. We are wasting 80% of our time on low-value outcomes.” His advice? Rather than pursuing every available opportunity, Koch suggests we “calm down, work less and target a limited number of very valuable goals where the 80/20 Principle will work for us.” Simple Real-Life Applications Business Do you know where your revenue comes from? Find out. Do you know where you spend your time? Find out. Here’s what the book would suggest: You make at least 80% of your profits in 20% of your activity, and in 20 percent of your revenues. The trick is to figure out which 20%! Application: I recently applied this concept in my work with a client who provides financial management services. He was looking to expand his client base and wanted to prospect most efficiently. Unfortunately, he barely had enough time to manage his current clients, let alone expand. 80/20? Almost exactly. And, the most “amazing” part, according to my client, was that the top 20% were the ones he really liked working with the most whereas the other 80% didn’t produce much revenue and produced most of the headaches! We’ll see how this affects his bottom line in months and years to come. thinkarete Tip: Figure out what products or clients constitute your top 20% and spend as much time as you can on them! Learning How do you read a book? Do you go from cover to cover? Why? You’re wasting a lot of time. 80% of the valuable content can be found in 20% of the book...and, according to Koch, absorbed in 20% of the time it takes most people to read the entire book. Application: I recently applied the 80/20 principle with one of my younger clients (age 10) who was struggling in school. She learned to read the conclusions, check out the graphs and charts and pictures and leading questions, and then read and mind map* the content. Her C’s went to A’s in about a month and a half. And, more importantly, she liked herself and learning a lot more. thinkarete Tip: Unless you’re reading a book for pleasure, read the conclusion then the intro, check out the graphs and pictures and then the conclusion again and maybe some sections a little deeper if you find it particularly interesting. If you’re reading a novel or a book for pleasure, read at your leisure. If you are looking for the most efficient way to learn, think 80/20. Social 20% of your friends account for 80% of your enjoyment and satisfaction. thinkarete Tip: Might sound harsh, but why wouldn’t you spend a lot more time with the group that gives you so much pleasure and a lot less time with the other?!? Your Diet My diet? Yes, your diet. My guess is that you spend a lot of time bouncing from one diet to another--never really receiving a whole lot of consistent energy as a result. The reality: 20% of your healthy eating habits account for 80% of your health gains. Guess what? If you ignored the fad diets and just focused on the fundamentals, you’d see a lot of results. Consistently. Application: With our clients, we focus almost exclusively on the 20%: The fundamentals. What are the fundamentals? The obvious stuff that we all know we should be doing but few of us actually do. Are you drinking enough water (at least 8 cups a day)? Eating breakfast? Eating a lot of fruits and vegetables? Avoiding sugar? And, avoiding saturated fat? You do these things and you’re 80% there. And, you'll be surprised how quickly your energy will increase (not to mention how quickly the number of compliments from your spouse/significant other will increase!). thinkarete Tip: Focus on the 20%. Drink 8 cups of water every day this week. Already doing that? Good. Eat breakfast every day this week. Got that down? Good. Eat a salad with lunch and dinner. etc. etc. thinkarete Quotes on The 80/20 Principle “Things which matter most must never be at the mercy of things that matter least.” ~ Goethe "The reasonable man adapts himself to the world. The unreasonable one persists in trying to adapt the world to himself. Therefore, all progress depends on the unreasonable man.” ~ George Bernard Shaw “The few things that work fantastically well should be identified, cultivated, nurtured, and multiplied.” ~ Richard Koch “Conventional wisdom is not to put all of your eggs in one basket. 80/20 wisdom is to choose a basket carefully, load all your eggs into it, and then watch it like a hawk.” ~Richard Koch Conclusion As Koch says: “The 80/20 Principle, like the truth, can make you free. You can work less. At the same time, you can earn more and enjoy more. The only price is that you need to do some serious 80/20 thinking.” Get to work! Figure out where you can focus your efforts and get more for your precious time and energy. Will 20% of the people who read this account for 80% of the results achieved by applying the principle in their lives…hmmmmm…Not these areté thinkers! Remember: Less Effort, More Results = Good. Find your 20%’s and multiply your results. thinkarete, -Brian

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