The 80/20 Principle

Most people spend most of their time on activities that are of low value to themselves and others. The 80/20 thinker escapes this trap and can achieve much more of the few higher-value objectives without noticeably more effort.

The 80/20 Principle asserts that a minority of causes, inputs or effort usually lead to a majority of the results, outputs or rewards.

Almost certainly, you don’t have an accurate picture of where you make, and lose, the most money.

80 per cent of the profits made by all industries are made by 20 per cent of industries.

The game is to spot the few places where you are making great surpluses and to maximize them; and to identify the places where you are losing and get out.

The truth is that the unprofitable business is so unprofitable because it requires the overheads and because having so many different chunks of business makes the organization horrendously complicated.

My effort is in the direction of simplicity.

Cutting the number of products, customers and suppliers usually leads to higher profits.

Outsourcing is a terrific way to cut complexity and costs.

The need for overhead coverage from unprofitable segments can disappear pretty quickly.