The 80/20 Principle (book summary)

Intro

The 80/20 Principle says that 20 percent of something produces 80 percent of the results. This can be generalized as the principle of imbalance. Richard Koch's research on the 80/20 Principle found many examples of how to apply this knowledge to create increased results.

The critics of the book say his examples of 80/20 get weaker the farther from business he applies it. This does seem true. I think 80% of his examples will be useful to 20% of his readers. Everyone will find examples that can be applied directly in their life. Even better you can generate many indirect ideas from the examples.

Key Concepts

The principle of imbalance: for all of the effort toward a goal, whatever the goal may be, some things will be much more affective at getting results. Although 80/20 is common, sometimes there are other relationships.

80/20 analysis consists of gathering the data to clarify the cause and effects, and those which will have the highest returns when changed. It is important to gather data in many areas because the results you don't expect can be the most valuable.

80/20 thinking is useful for many decisions not important enough to spend time on analysis. Gathering the data is not necessary when you are generally familiar with the subject matter.

Taking Action

What's Working?
Figure out what works and keep it up, even increase it. There is not much sense in focusing on a new process without looking at what is working.

Enjoy Life

1. Get flashcards, or pieces of paper
2. Write down a bunch of your achievements
3. Write down a bunch of times you were happy
4. Sort out the top 20%
5. Decide to spend more time doing those things

Get Better Results

1. Determine the most important results to you
2. Take a look at what is leading to the best results
3. Expand those efforts
4. Look for the factors leading to only minor results
4. Reduce in these areas

What's Not Working?
Identify ways to cut back efforts on things that are not working. A customer costing your money can be strategically "lost" to your top competitor.

• Outsourcing anything not in your primary business
• Cut out a business segment not bringing in much money
• Delegate things not in your top priorities that another person can do

80/20/100 Decision Making

1. Get 80% of the data in 20% of the time
2. Make a decision 100% of the time
3. Move forward with full confidence
4. Verify your results, if not satisfied make a change

80/20 Examples

• 20% of your diet will result in 80% of your fat
• 81% of your time is spent on 15% of your customers
• 3 of your 16 projects will take the most time
• 80% of products make 20% of your sales
• 8 out of 32 salespeople will make 80% of the sales
• 20% of your products result in 80% of your sales
• 5% of your profit comes from 50% of your products
• 19% of your time results in 81% of your happiness
• 20% of your cost cutting effort results in 80% of your savings
• 80% of your energy will be spent on 20 percent of your results
• 80% of this list is read by 20% of readers
• 5 out of 34 calls will result in 80% of your leads