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You can segment your data – let’s say customers for this example - in a number of ways. If you have 1,000 customers, 200 plus or minus of them will account for 80 percent of the sales. Now if you look at that 200, roughly 40 of them will account for 80 percent of those sales. Taking it further, roughly 8 or so will likely account for 80 percent of those top 40. Even of the eight, most likely one or two will account for a large proportion of the sales of that eight.
Here are a couple of examples:
- 1. 20 percent of the customers account for 80 percent of the sales
I gave the illustration of the breakdown above. However, what does it mean, and how can you use it to create value? If you can identify what is responsible for your success with those ‘top of the top’ customers, you can tailor your offering and find more of those customers. You might also find that you can forego some product features that might appeal to the few at the bottom, in favor of what appeals to those at the top. Stratifying your customer list using the 80:20 rule can focus you on doing more of what matters most and less of what matters least to your customer base.
- 2. 20 percent of the employees do 80 percent of the work
As with the example for top customers above, you can break down your employees into 80:20 producers in the same way. In addition, there will be many implications to this. It could be, for example, that the bottom 20 percent of the employees are simply not up to the job. It could be that there are some things that the top 20 percent of employees are doing that could be replicated by the other 80 percent to boost overall performance. It could also be that there are specific types of positions or roles, team dynamics, work conditions, opportunity sets, and other nuances that effect how some people perform, and that could provide insights as to what can be done to raise the overall performance and satisfaction.
What strategic data about your operations do you have, and how can you stratify it using 80:20 thinking to analyze it and create more value?
Put Your 80:20 Practices into Overdrive
This series on the practice of leveraging 80:20 thinking for tremendous benefits looks at how you can apply 80:20 thinking to virtually any and every human situation or experience and using it to become a more effective project manager.