Focus for Success

“Vilfredo Pareto was an Italian economist who in 1906 observed that 80% of the land in Italy was owned by 20% population. He further developed his theory noting that 20% of the pea pods in his garden contained 80% of his peas”

Do you hear today people say “Things are not what they used to be” and “Years ago there were more opportunities”?

Do you really think this is the case?

I would venture that the real issue is that today we face too many opportunities and we have too little focus. We get busier and busier and seem to achieve less and less, fighting bushfires rather than preventing them in the first place.

The reasons for this are many.

Often we place our attention on things ‘we enjoy doing’ rather than what we should be doing. We are in our comfort zone. For example, a manager meets with the people they like or get on with, avoiding dealing with those who are difficult or are problematic. A sales person calls on those clients and prospective clients who are close by or are easy to deal with. We are all guilty of doing this.

Have your heard of the Pareto Principle? This is often called the 80/20 rule where:

80% of sales come from 20% of our customers

20% of our customers give us 80% of our problems

20% of our customers demand 80% of our valuable time

80% of sales come from 20% of our products

Time, expertise and money are a limited resources.

Therefore it is important to try and apply Pareto’s Principle in our business and work life to get the best return. I once worked for a transport company who identified a market niche and specialised in this niche. They were extremely focussed on staying in this niche and were not tempted to expand outside this niche. The company had less than 6 customers, the profitability was many multiples of the industry average and was eventually sold for an exceptional profit.

What was the lesson?

I think it is obvious. Identify the areas that give you the greatest return for your time and resources and do not be distracted by other issues. Focus on what is important and not what you like doing. This requires discipline and is more easily said than done.

Here are some practical applications:

To reduce costs, identify which 20% of your customers are using 80% of the resources. With those who are not top profit generators, charge them for the resources they consume.

To maximise personal productivity, realise that 80% of your time is spent on the many trivial activities. Analyse and identify which activities produce the most value to your company. Then focus and concentrate on the vital few (20%). With the ‘left overs’ delegate or discontinue doing them.

To increase profits, focus your attention on the vital few customers (top 20%). Identify and rank your customers in order of profits. Then focus your sales activities on them. The 80/20 Rule predicts that 20% of the customers generate 80% of the revenues, and 20% yield 80% of the profits, however these two groups are not necessarily the same 20%.

If you wish to use the Pareto Principle to your advantage, the first step is to get started. Put your ideas down on paper – do not think too hard about it as you may become distracted. Once down on paper you can then work through your list and prioritise. A great tool to use is the 4 Segments diagram below…………. it makes decision making so much easier.

 

Achieve

Do you want it?

If YES then achieve it.

Preserve

Do you have it and want it?

If YES then keep it.

Avoid

Do you want it?

If NO, then avoid it?

Eliminate

Do you have it and don’t want it?

If YES, then eliminate it.

Now it’s up to you…………..

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