The 80/20 principle

The 80/20 Principle book summary

There are only a few theories that cut across all segments of society, and the 80/20 principle happens to be one of them. It’s commonly called the “Pareto principle,” named after Vilfredo Pareto who was the first to discover it. The 80/20 principle is a book written by Richard Koch and here is a short summary of the book.

  • By studying economics of nations and how resources were distributed among people, it was discovered that wealth of every nation was controlled by just a few minorities.
  • Individuals that understand the 80/20 concept have been using it to maximize personal and corporate productivity ever since.
  • Simply put the 80/20 is a principle holds that a minority of causes, inputs, or efforts are responsible for the majority of the results.
  • Only a few things are responsible for the vast results we see around us.
  • Just as only a few people control the majority of the world’s wealth, and only a few students come out top in their class. If you take time to observe, you’ll see the pareto principle at work all through life.

There is an imbalance in life; causes and effects are not always-if ever- in the 50/50 ratio.

  • The 80/20 principle doesn’t necessarily connote that exactly 80% of results come from exactly 20% of actions. The percentages are not always consistent.
  • What’s consistent is that few actions are really important in the whole scheme of things. Understanding this will help you prioritize the things that matter.

The reasonable man adapts himself to the world. The unreasonable one persists in trying to adapt the world to himself. Therefore all progress depends on the unreasonable man.

Richard Koch
  • Imagine only 20% of company’s customers account for 80% of the sales. what will the company do to make more sales? A reasonable approach is to find creative ways to satisfy the 20% that matter.
  • Many organizations across the globe use the 80/20 principle in their business activities to make the most of available resources. you too can apply the principle to your business, its not difficult, but a bit analytical.
  • How many products or product lines do you produce in a month, in six months, or a year, and what are the sales and profit for these products?
  • You will understand what customers patronize you the most, and how often; as well as those that do not contribute significantly to your sales. you will most likely find an imbalance- only a few percent of your total customers contribute to the bulk of your business profit.
  • Your market share is determined by the number of people who love and consistently patronize your products.
  • One of the creative ways to maxmize your products, boost sales, and increase profits is to focus on serving the top 20% and make efforts to reduce losses coming from the bottom 80%.
  • Its also a great idea to study your competitors. Understand if you have the same product line as them and if their market is moving.

Things that matter most must never be at the mercy of things that matter least.

Richard Koch
  • Sales is like a twin brother of marketing. One can’t function without the other. Any business with a weak sales force will eventually crash, no matter how good its products or services are.
  • Research shows that less than 50% of the sales team in a company accounts for most of the sales. Identify this minority in your sales force, and seek help from them to hire folks like them.
  • Don’t be afraid afraid to lay off underperforming workers. Business is Business. Your goal is to maximize profit using elite resources, not keek paying people that can’t produce the results you’re paying them for.

Don’t be afraid to lay off underperforming workers.

  • To effectively maximize the 80/20 rule, you need to first understand that the imbalance in our world is real and natural.
  • Nobody else can do crticial thinking for you, because it applies only to your personal life.
  • 80/20 thinking for effective time usage is all about brainstorming creative ways to leverage time. Approximately 80% of our results come from 20% of the time put in.
  • Most people aren’t productive 24 hours a day, there are specific times when each of us is highly productive.
  • Reflect on your most productive days and figure out what you did differently, then do it again the next day.
  • You can also use a similar exercise to improve your happiness level.
  • you will find gems that will become your secret productivity tools, when you involve in deep thinking and mentally tasking activity.
  • Blaming people won’t help you make progress.
  • When it comes to relationship, choose quality over quantity.
  • ” Choose your relationships wisely “. we can’t do relationships, Life isn’t meant to be lived in isolation, so we would always nned people by our sides. It’s pride to say you don’t need anymore.
  • For every relationship you form, there are five attributes that determine if the relationship will work or not. They include mutual enjoyment of each other’s company, respect, shared experience, reciprocity, and trust.
  • Yes, you can live the lifestyle you’ve always dreamed of.
  • For most people, certain lifestyles remain a dream that will never come true. The main reason for this is that the majority of such people have limiting beliefs that keep them stuck in lifestyles they don’t like. They hate their work, they don’t like their relationships, their bank account is nothing to write home about, but they can’t seem to do anything to change their situation.
  • Another set of people similar to these are those that doesn’t even know what they want out of life. These people just go through the motions, taking whatever life throws at them.
  • Don’t be stuck in a career you don’t like without an escape plan.
  • As important as work and career are, it’s still important that you live a balanced life. you should be happy on all fronts. If you’re not and you may need to 80/20 thinking to bring balance to your life.
  • The 80/20 principle advocates focusing on the top 20% that brings the most results, while neglecting-or paying less attention to-the bottom 80%.
  • Doing this will not in any way cause the bottom 80% to be entirely neglected; the 80/20 principle is the nature’s way of balancing itself.
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