Now we see in a mirror darkly, but then we will see face to face. Now I know in part; then I will fully understand.
1 Corinthians 13:12
The 80/20 Principle is not widely celebrated, but it is well known among successful businesses and individuals. There are many articles on the subject and only one book that I know of, The 80/20 Principle by Richard Koch. It’s almost as if the successful have realized the importance of the 80/20 Principle and want to keep it a secret to protect their good fortune.
The quality revolution
Between 1950 and 1990, the quality revolution transformed the quality and value of many of the products we use today. The objective was to obtain a zero defect rate for the products, while at the same time reducing the cost. Joseph Juran and W. Edwards Deming separately developed quality control procedures based on the 80/20 Principle, but were able to find companies in the US that were interested. Japan took an interest and they both moved to Japan in the 1950s, the rest of the story is history and Toyota is now believed to be the best car manufacturer in the world.
Juran commented that the “losses” do not arise from a large number of causes:
Rather, the losses are always poorly distributed such that a small percentage of the quality features always contribute a high percentage of the quality loss.
His approach was to identify the problems causing the lack of quality control and rank them from most important to least important. They then focused their efforts on the bottom 20% instead of trying to tackle all the problems at once.
The information revolution
The information revolution began in the 1960s and has transformed the work habits of many companies. The 80/20 Principle played an important role with its concepts of selectivity and simplicity.
Think small. Don’t plan to the nth grade on the first day. The return on investment generally follows the 80/20 rule: 80 percent of the benefits will be found in the simplest 20 percent of the system, and the final 20 percent of the benefits will come from the most complex 80 percent. of the system. Chris Vandersluis (May 25, 1994 Computing Canada)
The 80/20 Principle remains the best kept business secret
The 80/20 Principle remains untapped, even by those who recognize the idea. It is extremely versatile. It can be profitably applied to any industry or organization, any role or job. Companies that use the 80/20 Principle will be successful in markets where it is possible for that company to generate the highest revenue with the least effort. Companies must direct their resources towards the most profitable segments.
Companies must also identify the parts of the company that generate the most profit and give them the most power and resources. At the same time identify the parts of the company that generate the least negative income and take away their resources.
Jesus taught in the parish of talents:
For to everyone who has, more will be given, and he will have an abundance. Whoever does not have, even what he has will be taken from him.
Matthew 25:29
Although the teaching here is much deeper and is about our spiritual lives, it also literally applies to how we should conduct our business. This parable is a great example of the 80/20 Principle, in this case 30% of the workers produce 70% of the profit. One servant doubled his five talents, another servant doubled his two talents, and one servant did not get any of his talent back. His one talent was taken and given to the servant who had ten talents.
Recommended Reading: The 80/20 Principle, by Richard Koch, ISBN 0-385-49174-3
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