80% of value is achieved with the first 20% of effort.
o 80% of project politics come from 20% of your stakeholders.
o 80% of problems originate with 20% of projects.
o 80% of software problems are caused by 20% of bugs.
o 80% of customers only use 20% of software features.
16x Pareto Principle
80÷20=4
20÷80=0.25
4÷0.25=16 → 16x
The right focus with the Pareto principle to define and execute on key projects, clients, priorities, people, tasks, … brings you 16x more results = impact = success
I always include the 8020 principle in all strategy courses I give, as a key part to plan a successful year in order to deliver more customer + employee value and to receive more profitable growth for the company.
Through the years, I have seen that many CEOs, especially of SMEs, lack to see the BIG PICTURE; whereas the most successful CEOs have become 8020 masters because they lead their companies to achieve ambitious goals while focusing energetically on the most important actions to reach the higher goals, for instance:
- They visit and develop the relationship of their key clients and prospects to understand market needs and requirements.
- They talk frequently to and retain their key employees, especially key sales people.
- They are aware of disruptive trends and key challenges. Hereby, they are better prepared for an unpredictable crisis.
- They set clear goals and communicate the importance of strategy execution.
- They empower employees and show them the importance of the 8020 rule.
You need to focus perfectly on the 20% that will deliver you the 80% of the desired result. Every decision and action has to be made consciously if our time is used effectively.
These are 8 logic steps to become a successful "profitable growth company":
1. Set and remind the sales and EBITDA goals with the majority of your employees and quarterly reward those who achieved them.
2. Focus on high-gross margin projects, products, services and customers.
3. @CEO: Be the number 1 sales guy in the company that inspires customers to buy your products or services.
4. Hire and retain the best sales people in the industry.
5. Develop benchmark and 8020 sales & marketing channels. Very importantly embrace and dominate digital marketing because nowadays every client is digital.
6. Have strong partners and allies that help you to sell.
7. Cross-selling is key. Your adjacencies strategy has to be well defined and executed.
8. Measure and communicate your sales, profit and productivity indicators.
Now, let's have a look at one of the most admired companies in Germany. DAIMLER recently defined the following strategy focus*:
“Four future-oriented fields are set to radically change the nature of mobility: greater vehicle connectivity, advances in automated and autonomous driving, the development of digital mobility and transport services, and electric mobility.
Our objective is clear. We intend to continue to be a leading vehicle manufacturer while developing into a leading provider of mobility services. Every strategic action revolves around one thing, the customer. So also for the future, we will only be as successful as our products and services are in the market.
By means of five closely related components we are pushing forward the biggest changes in our company history - our 5C-strategy. We will be:
• strengthening our global core business (CORE)
• leading in new future fields (CASE)
• adapting our corporate culture (CULTURE), and
• strengthening our divisional structure (COMPANY).
• The benchmark for each of these strategic components is
our fifth and most important C: our CUSTOMERS.”
So, defending and strengthening your core business should always be the starting point of your strategy plan, unless you have proven data that your "core business" is threatened to lose more than 40% of sales and/or market share during the next 2 years. In times of disruption this might be a possible scenario but it is rare especially for medium sized enterprises. The core business is where your company generated the most gross profit during the last 3 years and strengthening this part is essential for maintaining profitable growth for the future.
Your culture and customer strategy focus are two more common key 8020s for every business. Culture is the values that define how everyone acts in your company regarding to customers, suppliers and other stakeholders. One of the most important organizational values is frugality. Rarely found in the today's company values but so crucial for profitable growth. Frugality means the quality of being economical with money. Being prudent and wise when it comes to investment and spending is a must have 8020 value. This is what my dad taught me and how German fathers educate their coming generations. At the end of the day, performance is key and you have to focus without distraction. More importantly, hire focused people.
Business owners are responsible for hiring focused people who are better than him or her and they should not be there to execute 80% of the whole work that by the way only results in 20% of the important results.
Never distract yourself from the 8020 zone.
Distraction leads to Procrastination
Please be aware that procrastination means postponing something. It is more and more common in a social world where the new generations loose so much time in consuming social media. But this time spent on video / audio may be out of the 8020 zone. So, a key challenge for Top Management in the next 5 to 10 years will be keeping people focused.
Let’s have a deeper look on why people are distracted or procrastinate key responsibilities:
• Too many tasks
• Unclear goals
• Fear of change
• Committing too much
• Fear of failure
• Social media or
• Mainly lack of communication and attention.
