Learn from 80/20 Rule Menu

The Amazing 80/20 Rule has the power to grow your business up to 16 TIMES FASTER and make your life a whole lot less busy and complicated.  Got your attention? Work through this Menu to learn some of the best lessons 12Faces has to offer.  Yellow Belt

The 80/20 Rule is easy to understand but it can take you a lifetime to perfect.  But you can start benefiting from its amazing ability to simplify and focus straight away.

Goals

As usual, we strongly encourage you to set goals for applying 80/20 to both your business and your private life.  If you already have an understanding of how 80/20 works, and because we consider the 80/20 Rule such a fundamental tool, we strongly recommend you pause now and set goals for how you might apply 80/20.
Go to the article: How to do Goal Setting for Business
or go to the Leaders Briefing: LB3: Quick Goal Setting for the Time Poor

If you are not yet familiar with 80/20, you can skip this step until you know more about the Rule.

Introduction to the 80/20 Rule

The 80/20 Rule is widely referred to throughout 12Faces because we consider it one of the fundamental rules contributing to optimising your business for growth and productivity with least input of your time and resources.

If you do nothing else in this Menu, you should take the time to read the Skills Module introductory article: SM2.0 80/20 Sales Growth; Double Sales, Triple Profits
You will then have an understanding of what is implied when you see this link in other parts of 12Faces.

Business Applications of 80/20

Now that you have a grasp of the fundamentals of 80/20, let’s see how we can apply them to business situations.

Koch lists 10 areas where 80/20 can be applied in a business as the first 10 below.  We think there are others as well and have added them to the list.  

1. Strategy
2. Quality
3. Cost reduction and service improvement
4. Marketing
5. Sales
6. Information technology
7. Decision making and analysis
8. Inventory management
9. Project management
10. Negotiation 
11. Staffing
12. Time Management

The articles highlighted below are part of the Skills Module: SM2.0 80/20 Sales Growth; Double Sales; Triple Profits

1. Strategy

There are many ways to consider business strategy.  A sample of 80/20 Rule applications to strategy are covered in SM2.6 80/20 Business Analysis.

Also the discussion on “Where to Optimise” your business in the article: SM2.1 The Amazing 80/20 Rule Tool

4. 80/20 Marketing

Separate subsections on “Marketing”, “Customer Relations” and “Supplier Relations” are in the article: SM2.1 The Amazing 80/20 Rule Tool

5. 80/20 Sales

You can tune your sales process to improve sales and profit. Benefit from the multiplier effect of implementing comparatively small improvements, at several stages of your sales cycle/process, for a disproportionately large benefit.  

Covered further in the article: SM2.10 80/20 Sales Growth; Double Sales, Triple Profits Get an idea of how it is feasible to get double the sales and triple the profit from 80/20 type changes.

7. 80/20 Decision Making and Analysis

80/20 can help to quickly cut through to the core issues when solving a problem or moving towards a decision.

Covered in these articles SM2.2 80/20 Problem Solving and SM2.4 80/20 Decision Making.

8. 80/20 Inventory Management

If inventory plays an important part in your business, you may already be aware of the impact it can have on profit and cash-flow.  Inventory has a bad habit of suffering from bloat, as soon as you look away from it, for any length of time.  

The article – SM2.11 80/20 Inventory Management has suggestions on how the 80/20 Rule can improve your inventory management.

10. 80/20 Negotiation

See a discussion on this in SM2.1 The Amazing 80/20 Rule Tool

11. 80/20 Staffing

There are several write ups about 80/20 and its use in staffing issues.

See the SM2.9 80/20 Staffing article and the specific discussion on Sales staff in the SM2.10 80/20 Sales Growth; Double Sales, Triple Profits article.

12. 80/20 Time Management

See the subsection on Time Management in the 80/20 introductory article: SM2.1 The Amazing 80/20 Rule Tool

Combined approach

The 80/20 Rule suggests some useful business applications.

Other methods, theories and approaches in 12Faces approach the same problems from different angles. 

• 80/20 Rule and the Theory of Constraints 
  Go to the Skills Module introductory article: SM2.0 Theory of Constraints (TOC) 

Advanced 80/20

80/20 Analysis Methodology

In several places we suggest that you perform an analysis to determine what are the 20% of “things” (e.g… sales, staff, customers) that contribute the 80%.

This involves listing the candidate “things” in a spreadsheet and sorting them for analysis.

The article SM2.6 80/20 Business Analysis describes how to do this.

80/20 Multipliers

The introductory material on the 80/20 Rule describes the general use of the 80/20 Rule but it doesn’t introduce some of the real power of the Rule.

Used properly, the Rule has a multiplier effect that can lead to growth in your business in the order of 16 times (16X) more than you are presently experiencing with an unstructured approach to your business and your life.

There is a second multiplier effect available in the advanced use of the 80/20 Rule. 

Example:
Once you have some base line information on how many people will buy your product/service at a particular price. You can use the mathematics of the 80/20 curve to estimate the number of people who will buy a stripped down and cheaper version of your product, and alternatively, the number of people who will buy a version of your product several times more expensive. 

Elsewhere in 12Faces, we encourage you to consider Line Extensions. This multiplier effect of the 80/20 Rule will help you estimate what Line Extensions may work in your product range.  
This is covered in the article: SM 2.7 80/20 Multipliers.

80/20 Maestro

The 80/20 Rule seems very straightforward when you first come across it.  However, you can easily spend a lifetime perfecting your skills applying the 80/20 Rule.

Ideally you should consciously practice the 80/20 Rule until it becomes a habit and you do it routinely.  Until it is a habit, you are likely to slip back to your old, less efficient, ways. 
Find more on how to advance your skills in the article: SM2.8 80/20 Maestro 

Wrap-up

To maximise the impact, once you complete the Skills Module, we encourage you to:

1. Create a set of metrics that allow you to measure your improvement in applying and profiting from the 80/20 Rule.
   Go to the article: Importance of Metrics for Profit
2. Go back to the goals that you will set and refine those goals in the light of what you have learned about 80/20 since you first started.