Written by: Michael Cook, Executive Contributor
Executive Contributors at Brainz Magazine are handpicked and invited to contribute because of their knowledge and valuable insight within their area of expertise.
The Pareto Principle, or the 80/20 rule, states that for many situations 80% of the result comes from 20% of the effort. Named after Vilfredo Pareto—an Italian economist—who, back in 1895, noticed that about 80% of Italy’s land belonged to 20% of the country’s population.
Although the principle originally referred to the distribution of wealth, it has since been seen as one of those immutable laws of life, applying to a wide variety of contexts. As an example:
Taxation—where 80% of tax money comes from about 20% of society.
Project Management—where 80% of the effect results from 20% of the effort.
Businesses—that get 80% of their income from 20% of their customers.
IT—where 80% of system crashes are caused by 20% of bugs.
In a series of articles, though, we will also seek to show how it also lurks unhidden in many businesses and what those leaders can begin to do to first address it, and then tackle it.
Let us explain. Since the financial collapse in 2007, the world has stumbled ever more quickly from crisis to crisis. Whether the EU debt crisis in 2011, Brexit in 2016, Covid in 2020, the logistical crisis due to the Suez blockage in 2021, and just as the world came out of lockdown, to of course the fallout from the conflict in Ukraine in 2022. These so-called ‘black swan’ events left many companies reeling, especially as so many were unprepared.
Yet while they are referred to ‘black swan’ events because they were so hard to predict, there is a startling parallel we have been drawing from our work and to the way that most company’s run their business: so much of the effort is spent on areas that matter very little to the longer-term success and survival of the business.
So many companies succumb blindly, day to day, to the perils of 80/20. Busy being busy, focused on what they believe to be all-consuming and important, while missing the underpinnings of success, securing, and monitoring the essentials, the areas that without which the company will not succeed, even survive.
The 80/20 Business Consultancy help those companies who feel they may identify with this to better put in place what they need.
Established business thinking, originated by Charles Hummel, coined the expression ‘Tyranny of the Urgent’, and it quickly became a business classic. There is a regular tension between things that are urgent and things that are important—and far too often, the urgent wins. Deeper analysis though will often show that what appears on people’s desks as urgent usually has a familiar feel, and common cause.
Yet the urgent nature of the issue means the ‘step back, pause and reflect’ process doesn’t happen, especially within the cycle of other pressing day-to-day matters. Many organisations help the processes that tackle the actions needed, whether it’s communication, delegation ability or conflict handling, yet the calm analysis and decision-making often gets parked to when things are quieter. And when did we last have a quiet day?
It was on one of these ‘quiet days’ though, that a client’s board took our challenge to run a ‘root cause’ analysis. Not only was it clear what was prompting the tyranny, but what was missing in their leadership and thinking. Their revelation went something like this.
Vision: Vague, little out of date given market and competitive changes
Imagined position 5 years on: Not considered
Alignment one management layer below: Unclear
Future threats: Several, some of which entirely new
Weaknesses: Good levels of consciousness, little sign of action to address
Opportunities: Several and which highlighted gaps in vision and imagined position
Strengths: Varied but were a matter of some debate and challenge
Execution ability: Poor, due to lack of clarity and accountability
One strength that did surface, was the variance of thinking processes that existed across the top team, as well as the immediate layers below. One idea that flowed from this was to better focus these thinking strengths to where they could have the most impact.
So what happened?
The more creative formed part of a ‘future team’, charged with imagining what the company could become with the right effort and what a 5-year horizon could deliver.
The more risk averse and cautious looked at the risks along the way, and how best to mitigate those as well as create early warning flags. Whether in the supply chain, financing constraints, or the economic outlook that may impact input prices, revenue or debt financing.
Those driven by action focused on delivering, becoming the ‘present team’. Managing projects, driving deadlines, getting into detail and being clear on process.
Those motivated by team harmony looked at what would allow the ‘present team’ to get their messages across the organisation and in a way that smoothed the path and ensured the harmony needed to keep delivering.
Sure, they could be hit by another ‘black swan’, but they sailed into the future more confident than before that they at least had considered what the future could be like, as well as what they needed to do to get there.
And what’s more, they then worked as a team, using their collective strengths to get there. Focusing on what mattered most given where they intended to go.
Michael Cook, Executive Contributor Brainz Magazine
Michael Cook is a leading thinker on how to get out of the weeds of what you do, and into the realm of creating what you want to happen. So why 80/20? The pace of life, not just business, means that we rarely spend the time building a plan, a strategy of how to get to where we are headed. And for understandable reasons. Our desks get filled with the now, whether urgent issues, other people’s problems or simply the habits we’ve grown accustomed to and which is probably the combination of same. Naturally this leads us into reactive mode, rather that the proactivity we need to avoid future issues, build the relationships we need and influence those we need to. His clients are those who see the value in that.
