The 80/20 Principle: The Secret of Achieving More with Less

by Richard Koch

people of equal intelligence, skill and dedication can produce quite unequal results, as a result of small structural differences. Events cannot be predicted, although predictable patterns tend to recur.

It is almost inevitable that you are doing too many things for too

many people.

Business strategy should not be a grand and sw...

you make at least 80 per cent of your profits and cash in 20 per cent of your activity, and in 20 per cent of your revenues. The trick is to work out which 20 per cent.

by product or product group/type by customer

or customer group/type

geographical area or

distribution channel

competitive segment.

26 per cent of the business (old clients) made up 84 per cent of the profits: an 84/26 rule.

Segmentation is the key to understanding and driving up profitability

break it down into competitive

segments.

A competitive segment is a part of your business where you face a different competitor or different competitive dynamics.

If you are up against a specialist competitor, your profitability will depend on the interaction of your product and service against theirs.

simplicity. The winners sold a narrower range of products to fewer customers and also had fewer suppliers.

Because business is wasteful, and because complexity and waste feed on each other, a simple business will always be better than a complex business.

The large and simple business is the best.

real wealth, happiness, knowledge, and perhaps virtue, can be constantly increased.