80 and 20. For those who are familiar with management consulting techniques, these two figures may say a lot:
- 80% of a company’s profits come from 20% of its customers;
- 80% of a company’s complaints come from 20% of its customers;
- 80% of a company’s profits come from 20% of the time its staff spend;
- 80% of a company’s sales come from 20% of its products;
- 80% of a company’s sales are made by 20% of its sales staff.
The 80/20 rule basically states that, in many circumstances, 80% of the effects come from 20% of the causes.
This rule is formally known as the Pareto principle, after the Italian economist who, in the last decade of 19th century, observed that 20% of Italian population owned 80% of the land in the country.
Many business consultants built upon this intuition solid analysis tools in order to improve companies’ results, in terms of revenues, sales, profits.
But some of them, as Richard Koch, went further, trying to convince us that the 80/20 rule, like few more simple principles similar to that, “work extremely well for making money, for your career, and for your happiness and value to others.”
Image: Flickr – Keith Chu – 80/20: it’s a rule (CC BY-NC-SA 2.0)
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