The 80/20 Principle

Richard Koch richardkoch8020@gmail.com

HINT 3: ONLY WORK FOR AN 80/20 BOSS What is an 80/20 boss? Someone who consciously or unconsciously follows the principle.

The 80/20 Principle applied to business has one key theme—to generate the most money with the least expenditure of assets and effort.

But it is very rarely true that 50 percent of causes lead to 50 percent of results. The universe is predictably unbalanced. Few things really matter. Truly effective people and organizations batten on to the few powerful forces at work in their worlds and turn them to their advantage.

The reason that the 80/20 Principle is so valuable is that it is counterintuitive. We tend to expect that all causes will have roughly the same significance. That all customers are equally valuable. That every bit of business, every product, and every dollar of sales revenue is as good as any other.

It is important to focus on what you find easy. This is where most motivational writers go wrong. They assume you should try things that are difficult for you;

But profitability is only a scorecard providing an after-the-fact measure of a business’s health. The real measure of a healthy business lies in the strength, depth, and length of its relationship with its core customers. Customer loyalty is the basic fact that drives profitability in any case.

Related to the idea of feedback loops is the concept of the tipping point. Up to a certain point, a new force—whether it is a new product, a disease, a new rock group, or a new social habit such as jogging or roller blading—finds it difficult to make headway. A great deal of effort generates little by way of results. At this point many pioneers giv

All effective techniques to reduce costs use three 80/20 insights: simplification, through elimination of unprofitable activity; focus, on a few key drivers of improvements; and comparison of performance.