The 80/20 Rule

Eighty percent of all our results in business and in life stem from a mere 20 percent of our efforts, says Suresh Raina.

Updated: Nov 26, 2013, 23:36 PM IST

Eighty percent of all our results in business and in life stem from a mere 20 percent of our efforts, says Suresh Raina.

The Pareto principal, also known as the 80/20 rule states that in most events, 80% of the results are derived from only 20% of the effort. Specialization is critical. It is better to specialize in a niche. Businesses that do not specialize are relegated to mediocrity. It is better to know a few things well and even better to excel in just one thing. In the 80/20 principal, the productive 5th of the effort is much more productive than the other 4/5th.

Business Activity: Corporations today are moving towards owning information and not land & assets. Knowledge is the key and allows you to understand your work, business and customers in a way that helps you build better products, deliver better service and increase profits. You must have the domain knowledge to be able to add value.

You can identify your niche or even invent it like Jeff Bezos did with Amazon. Closer home, companies like HDFC, Lemon Tree Hotels & Cafe Coffee Day also have created and focussed on their own niches. Only a niche delivers an exceptional return. It is important that you choose the niche that you really enjoy doing and where you excel. Specialization requires dedication and should be selected only if you are interested in it.

The same holds true for marketing. One must identify the niche target customer or market you want to cater to. Moving away from product centricity to customer centricity, work with customers who will value your niche product and service and your niche knowledge.

People Power: While machines are becoming more productive, how does one achieve the same in labour? How does a corporation get the team to deliver more for the same effort and time? An excellent example is the fast food giant McDonalds, where once an idea is proved in one market, can be leveraged by rolling out internationally. You will have to identify how to maximize your return with minimum effort, by making use of the 80/20 practices. Steve jobs, Bill Gates, Sergey Brin & Larry Page and Mark Zukerberg are the people who have created wealth by focussing on the niche.

Another key is to hire the 80/20 people, who have figured out how to maximize their efforts and can deliver significantly higher output with same effort. Enthusiasm drives achievement. It is contagious and becomes a force multiplier, spreading your zeal and excitement to the rest of the team of likeminded people.

It could be argued that a balance in terms of work skills could lead to mediocrity. It is better to find your strengths and build on those rather than to work on your weaknesses. You can’t excel in all areas. If you try to do that, you risk losing out. Focus on the niche and get other people to handle the rest, those who are good in those skills.

There is an inherent value in teams seen in the best organizations. Talent alone is not enough. For you to succeed by focussing only on the 20 percent of the activities that you excel in, you need the other team members to do the remaining 80 percent. Thus selection of the right team is the key to delivering success.

While following an effective 80/20 strategy, you should recognize that people come in various types:

  • Ambitious ones, who enjoy working in large, secured organizations with a defined structure
  • Professionals who are achievement led, ambitious, yet whose ambition is unforced
  • Professionals who build teams and organizations, entrepreneurial, need other people to work with them.

    Time is of Essence: Time is limited and this impacts one’s ability to get things done. Upon careful consideration you realise that the time taken to do a meaningful work is actually only a fraction of total time spent. The productive time may only be only 20 percent of the total time.

    Observe the happiness derived from your occupation. It is a result of only a limited number of activities done during only a small time window. Most of what we do is of low value. Realize that some fragments of time are more valuable. So it is good to reflect to see where you are spending your time and how!

    -The author is Senior Partner, Hunt Partners-India, executive search firm