Wilson PonAre you using the 80/20 Pareto Rule for profit and success in your personal and business life?
August 7th 2008 06:51
Are you using the 80/20 Pareto Rule for profit and success in your personal and business life?
There are many economic conditions, for example the distribution of wealth and resources on planet earth, where a small percentage of the population controls the biggest chunk, which clearly demonstrate the 80/20 Rule.
There are countless business examples such as 20 percent of employees being responsible for 80 percent of a company's output or 20 percent of customers being responsible for 80 percent of the revenues. If you look at many key metrics in your life and your business dealings there is definitely a minority creating a majority.
At a micro level just by looking at your daily habits you can find plenty of examples where the 80/20 Principle applies. You probably make most of your phone calls to a very small amount of the people you have numbers for. You probably spend a large part of your money on just a few things such as rent, mortgage payments and food. There is a good chance that you spend most of your time with only a few people from the entire pool of people you know.
The German owned Aldi supermarket chain is a very good example of a business using the 80/20 Rule to benefit it's customers with lower prices, to prosper and grow it's business and to generate profits. Instead of attempting to emulate it's competitors who offer two or three varieties of any given product, Aldi concentrates on it's own single brand of core items shoppers expect to purchase from a supermarket. Most supermarket sales (80%) come from just 20% of the range of products on the shelves.
Some industries with huge stock ranges have adapted the 80/20 Rule to identify their fast selling lines (80% of their business, which comes from just 20% of their range) and increase the prices of their slow moving stock (80% of their stock) to reflect the cost of holding slow moving, low turnover stock.
In other cases some businesses have divested themselves of many of their 80% customers who generate only 20% of profit. Invariably these same 80% customers take a lot of time and cost to service and in 80% of cases have trouble paying their account on time.
Any person with entrepreneurial flair will almost certainly be able to identify with and use the 80/20 Rule to further their business ideas. As George Bernard Shaw wrote long before 80/20 became a business tool: "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."
It follows that any venture or person could achieve much more while using much less time. The 80/20 Principle even suggests that you could work a two-day week and still achieve 60 percent more than you do now.
There are many economic conditions, for example the distribution of wealth and resources on planet earth, where a small percentage of the population controls the biggest chunk, which clearly demonstrate the 80/20 Rule.
There are countless business examples such as 20 percent of employees being responsible for 80 percent of a company's output or 20 percent of customers being responsible for 80 percent of the revenues. If you look at many key metrics in your life and your business dealings there is definitely a minority creating a majority.
At a micro level just by looking at your daily habits you can find plenty of examples where the 80/20 Principle applies. You probably make most of your phone calls to a very small amount of the people you have numbers for. You probably spend a large part of your money on just a few things such as rent, mortgage payments and food. There is a good chance that you spend most of your time with only a few people from the entire pool of people you know.
The German owned Aldi supermarket chain is a very good example of a business using the 80/20 Rule to benefit it's customers with lower prices, to prosper and grow it's business and to generate profits. Instead of attempting to emulate it's competitors who offer two or three varieties of any given product, Aldi concentrates on it's own single brand of core items shoppers expect to purchase from a supermarket. Most supermarket sales (80%) come from just 20% of the range of products on the shelves.
Some industries with huge stock ranges have adapted the 80/20 Rule to identify their fast selling lines (80% of their business, which comes from just 20% of their range) and increase the prices of their slow moving stock (80% of their stock) to reflect the cost of holding slow moving, low turnover stock.
In other cases some businesses have divested themselves of many of their 80% customers who generate only 20% of profit. Invariably these same 80% customers take a lot of time and cost to service and in 80% of cases have trouble paying their account on time.
Any person with entrepreneurial flair will almost certainly be able to identify with and use the 80/20 Rule to further their business ideas. As George Bernard Shaw wrote long before 80/20 became a business tool: "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."
It follows that any venture or person could achieve much more while using much less time. The 80/20 Principle even suggests that you could work a two-day week and still achieve 60 percent more than you do now.
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