Life follows this principle (or pattern) where 80% of your outcome comes from 20% of your effort.
This is a principle that is used frequently in business.
How can you use it in a practical way on a day-to-day basis?
I’m a big believer that principles are great but they are only as great as their implementation. It’s about you taking a great concept and applying that in your life and business on a consistent basis and turning that insight into a habit.
It’s through those habits over a consistent period of time that enables you to create a powerful change in your life.
The way that you might apply the 80/20 principle in your day is looking at the actions you take and considering “What actions am I taking that are giving me the the most results?” and then make sure you prioritize those actions and always focus your attention on those actions that are providing the best results.
It’s about identifying the outcomes that you want to measure and identifying the actions that have contributed to them.
Here’s An Example
If we take an example from a financial planning firm that I used to work with, we had about 130 clients. Of those, we had them broken into 3 segments; high net worth, mid net worth and lower net worth. What we realised was that the high net worth individuals were producing 80% of the revenue but only taking 20% of the work.
The lower net worth were producing 20% of the revenue (or less) but generating 80% of the work!
By getting really good at analysing the company data and getting really clear on our segments, asset value and income, we could then target and focus our attention on where most of our revenue was coming from. We then looked to build on those clients that produced the most revenue for as minimal work as possible.
That’s great business. You want to get the most outcome for as little input as possible.
Where and When to Apply This Principle
Where the 80/20 rule becomes really powerful is when you apply it in your life on a consistent basis in all areas.
In business you might look at your client bank and think about where your profits are coming from…
You might think about the clients that are a pain, that take up a lot of time but don’t produce a lot of revenue…
It’s being bold and brave enough to say “no” to certain people. Considering if you want their business, if it’s worth the work and input. Would you rather focus your time and attention on clients that you love working with, who provide good income, pay on time and produce most of the income for the business? Of course you would!
What you’ll find by practising the 80/20 principle is that you’re constantly recalibrating and being open to not always getting it right, it’s a continuous improvement.
If we take the philosophy of Kaizen, when applied to the 80/20 principle, that tells us that we need to be doing the above on a consistent basis, constantly questioning ourselves, constantly questioning the way that we are working and constantly evaluating how we are operating in life to make sure that we’re getting the maximum outcome for the minimum input.
How would you apply the 80/20 principle in your day and your business? Please comment below.