A New Twist On The 80/20 Principle (That Can Change Your Life and Business)

One of the new realities of life in this century is that the number of options of possible things that you or I could do on any given day is astronomical. The world is literally at our finger tips. The problem, of course, is that when there is an increase in options there is corollary increase in the sense of overwhelm, followed by an increase in indecision. “Out of the 10,000 things I could do today, what should I do?” Virtually every business owner and/or entrepreneur I know feels this tension.

One management tool that’s been used to try to solve this problem over the past century has been the 80/20 principle which I’m sure you’re familiar with. If you’re not, it emanates from the observations of Vilfredo Pareto, an Italian engineer who became an economist and observed that 80% of the land in Italy was owned by 20% of the people. He also observed that 80% of the peas in his garden came from 20% of the plants. And from those observations, several heuristics have evolved like, 80% of a company’s profits come from 20% of customers. Note: my favorite is that at a church potluck, 80% of the food is consumed by 20% of the people.

However, even at 20% of the options possible, that’s still a lot of options. So, here’s a little twist that might help you develop even better focus and clarity on what you should be focused on—both in terms of your business and your own productivity.

The interesting thing about the Pareto Principle is that it works in sequence. In other words, 80/20 doesn’t just work once, it also works on it’s results, and the results of its results. For example, let’s say you have 1,000 leads. Depending on the size of your team, that could still be a lot of leads to follow-up on. So, you pull out your Pareto Principle and reduce that down to the 20% that you think could deliver 80% of the results.

However, if you have a small team, that’s still a lot of leads to follow-up on (200). So, here’s the new twist. What if you were to 80/20 the 20%? In other words, instead of pursuing 200 leads, you’re totally focused on the 40 (20% of the 20%) whom you think could produce the largest results possible for you and your company.

Are you catching on to how powerful this can or could be? You can even take it down another level or more (depending on the number of options you start with). Continuing with the example above, you could narrow down your top 40 by 20% and say that 80% of your results (from those top 40 leads) will come from just 8 of your top 40 leads. Now, that’s focus!

I. Use This in Your Daily Planning

Whenever you do your planning for the day (end of the day for tomorrow or beginning of the day for today), why don’t you try the Pareto Principle at two levels. For example, let’s say you have a list of 50 things you need to take care of today (emails, calls, meetings, reports to write and/or review, interview to conduct, marketing copy to write, personnel conflict to address, website review project, strategy review, financial review, checks to sign, networking luncheon, etc.).

You look at that list and think, “Where should I start?” If you’re like most business owners and/or entrepreneurs I know your first instinct will be to do those items you can check off fast. It’s human nature. Unfortunately, you’ll get to the end of the day and wonder, “What did I get done today?” You’ll have run into the problem that Alec MacKenzie identified years ago when he wrote.

“There is nothing easier than being busy. Nothing more difficult than being effective.”

So, instead of doing what’s natural, what if you used the Pareto Principle x 2? What if you said, “Out of these 50 things, what are the top 20% that will give me 80% of the benefit/result?” That would bring your 50 items, down to your top 10. And if that’s all you did, you’d be way ahead of most people.

However, if you want to take this to the next step and create the most optimal results for your day, you’d take your list and figure out the top two items of your top ten (the 20% of the 20%) that are the two most important things you could do for that day.

If you did that, you’d create even more impact and feel even more fulfilled because, while no one can get everything done that they want to get done in a day, if you could at least get the two most important things done that could have the greatest impact for you and your company, you’d definitely feel better at the end of the day than having completed 27 minor tasks that took up a lot of time but didn’t move the ball down the field.

Note: If you’re really good, you can just figure out the 4% (the 20% of the 20%). However, most of us mere mortals do better by doing this in rounds. It’s easier to figure out the top 10 activities in round one and then the top two of those ten than it is to look at a list of 50 and say, “Here are the top two (the 4%)”

II. Use This In Your Strategy and Marketing

Another common problem for most small businesses is narrowing down their niche (a strategy question). “We sell to everybody” is hard to target. But what if you were to list the different target markets and ask, “Which of these would be our 20%?” And then, if the list is still too large, “What would be the 20% of the 20%?” My guess is that you could quickly narrow down your target markets this way.

Likewise, when it comes to marketing, this twist on the Pareto Principle could pay huge dividends. Take your customer list. Do the 20% for the first round. Then do the 20% of the 20 percent. Those two rounds could help you infinitely. For example, how much more money would you be willing to spend on the 20% vs. the 80% to delight them and then to upsell them? And of that 20%, how much more would you be willing to spend to delight the 20% of the 20%? And how often would you stay in touch with your 20% of the 20%? I’m guessing you’d make some more personal calls from time to time just to check in and see how they’re doing.

In addition, as I hinted in the intro, I’d recommend using this in your prospecting—both in the lead generation and the lead conversion process. Work through your leads and do the 20% and then the 20% of the 20%. Then think through how much you’re willing to spend to move them from lead to customer/client and how you’re going to differ your marketing approach with them vs. the general public.

The 80/20 principle works virtually everywhere. So, use it to focus your strategy and marketing approaches (and market spends).

III. Use This In Your Hiring

The final application for this twist on the 80/20 principle is to consider using it in your hiring. One of the biggest mistakes that most business owners and/or entrepreneurs make in hiring is that they hire too fast and don’t consider enough candidates.

If you want to build a team of A players, you have to build a big enough pipeline of potential players to find the very best. Using the 4% rule, if you want to find one great A player, you probably have to sift through at least 25 people (20% of 25 = 5 and 20% of 5 is 1). If you’d like to like to increase those odds, keep upping the number of names you’re screening and asking, “Who are the 20%?” Then, “Who are the 20% of the 20%?” Imagine how cool it would be to have five candidates who were the 20% of the 20%—and then you’d get to pick the 20% of those best candidates.

If you use this process, you should never end up with a B,C, or D player. You should end up with the best of the best. And those are the kind of people you can build a highly scalable and successful business with.

So, if you want to get past those feelings of overwhelm, indecision and futility (“What did I actually accomplish today?”) and build a faster growing and better staffed company, why don’t you give this twist to the Pareto Principle a try and become hyper focused on the absolute best use of your time and resources. You’ll be glad you did!

To your accelerated success!

P.S. If you have some additional ideas for how to implement this principle, make sure you add them to the comments section below (or click here >> if you’re reading this by email or RSS)

Share This

Share this post with your friends!