October 23, 2014

The 80/20 Rule – The Ultimate Leverage for Your Business

Perry Marshall’s book 80/20 Sales and Marketing is beyond thought provoking. Just when you think you appreciate the power of the 80/20 rule, Marshall introduces another concept that further expands your thinking.

What impacted me most in reading the book is that I thought I understood the 80/20 concept. What I learned was that the more you drill down into its implications, the more leverage you can get by applying it to different areas of your life and business.

These are some ideas to think about:

The 80/20 rule is pervasive. If you look closely you will see it in operation in many areas beyond sales and marketing.

As the risk of sounding overdramatic, starting to understand the 80/20 rule is like putting on lenses that can forever alter your perception of how world operates.

In the 4 Hour Chef Tim Ferriss talks about identifying a relatively small set of material or key concepts to focus on first when learning any new discipline – a form of 80/20 thinking applied to rapid learning.

The 80/20 Power curve, among other things, lets you know how much money you are leaving on the table if you don’t offer higher end products for those who want them.

The Power Curve also reinforces the importance of outsourcing less valuable tasks as soon as possible. Pay someone else to do the $10 an hour tasks so you can focus on the $1000 an hour tasks.

The average top 20% customer (or sales rep) is not worth 4X or even 10X more than the average 80% customer – they can be worth 16X or more than the average 80% customer.

The 80/20 rule applies wherever the natural law of positive feedback is operating. An example of positive feedback is water following the path of least resistance.

80/20 Saddle Curve illustrates how your opposition can actually work for you.

Social media is equally, if not more, powerful as a listening tool than it is for distributing your information.

One of the first questions that I had when I began the book was – when does the 80/20 rule not work? Perry answered this question towards the end of the book when discussing values. For example, while the 80/20 rule has a “survival of the fittest” element in its operation, our value of compassion drives us to help those less fortunate than us. Another instance where the 80/20 rule can be thwarted, again by human intervention, is in the case of negative reinforcement. An example of this would be a GPS system that intelligently corrects us when we go off course.

It goes without saying that I highly recommend this book. Please let me know what you think.

Comments

  1. Thanks for the provoking book recommendation. I always appreciate the suggestion of insightful reads.

    While I appreciate and believe the Pareto Principal I confess I might miss opportunities to properly apply it to my business. I look forward to exploring how this book can help in this regard.

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