By: Don Shaughnessy
Vilfredo Federico Damaso Pareto was an Italian Renaissance man born 250 years too late. He was an engineer, an industrialist, a philosopher, a sociologist and best known as the first modern economist. He is the one who noticed the 80-20 rule. The Pareto Principle.
It would be hard to find someone who has not heard of Pareto. 20% of the effort gets 80% of the results. Focus on key customers, key markets, key products, key processes. Focus will make you rich. Might be true, but all that focus causes you to miss another important aspect of the principle.
The Pareto Principle is a power law. That means that you can go further. If 80% results from 20% of the effort, then 80% of the 80% resulted from 20% of 20% of the effort. The 64-4 result. The third is 51.2% for 0.8% of the effort. More follow but the point is clear. There are only a few things that really matter.
51% of the result for 1% of the effort is a nice deal, but, there is a lot of clutter to toss before you can see how.
You start by thinking about where the 1% may or may not be.
It won’t be in filling out forms for the government or collecting receivables. Planning a better parking lot or counting inventory won’t help much either.
Cost analysis, automation, engineering and marketing are worth looking at but might not include the 1%.
The 1% most probably is in freeing time to do only those things that you are the best at doing. It is not enough that you are the best, it must be your best best.
You might be the best salesman in the room but you are only that by a narrow margin. You may be the best customer relations person or the best inventor or the best leader by a much wider margin. Let the others carry the ball where they can do nearly as good a job and spend your time on the things that may include the 1%
Sweet reward here! Employees will like it and do better than before.
People who have searched for the 1% found important things:
If you have no idea of what the 1% might be, you could stop doing it by
It is not the same 1% all the time and in every situation.
Your employees know and will do more than you think. Let employees be
creative and helpful.
Customers know the difference between price and value. Deliver value.
Customers know how they will be changing in future, ask them.
Customers know what they don’t like. Ask them and listen.
Looking for the 1% works. No one ever finds it, but finding a little of it is a big win.
Don Shaughnessy is a retired partner in an international accounting firm and is presently with The Protectors Group, a large personal insurance, employee benefits and investment agency in Peterborough Ontario. [email protected]