Recently, I started doing some work with an already successful company in the throes of reinvigorating itself for the future. I hold them out as a good example of an organization that despite today’s economic climate remains forward-looking.

The principle they are using to guide their transformation efforts is embodied in a book entitled The 80/20 Principle: The Secret to Achieving More with Less, authored by Richard Koch. The headline for this blog post is the title of Chapter 5 in the book and captures the essence of the idea.

Yes, The 80/20 Principle is based on the patterns discovered by Vilfredo Pareto in the 1890s that many of us know as the Pareto Principle. But the book brings that principle alive and relevant to today. I recently completed reading Koch’s updated treatise and found it to be a good reminder to us all … in all things. While not quoted or referred to in the book, for me it comes down to this: Always keep in mind the “KISS” principle.

Here are a few key thoughts from The 80/20 Principle:

• “In simple terms, the 80/20 Principle asserts that a minority of causes, inputs, or efforts usually leads to a majority of the results, outputs, or rewards.” The author tells us that “the percentage is less important than the fact that there are patterns of imbalance” in most everything that we do. Whether the breakdown is 90/10, 80/20, 70/30, or whatever is not as important as the fact that there is imbalance that can be addressed for better results.

• “All organizations are a mix of productive and unproductive forces: people, relationships, and assets.”

• “Waste thrives on complexity; effectivness requires simplicity.”

• “In every important sphere, work out where 20 percent of effort can lead to 80 percent of returns.”

Obviously, the book goes into more background, examples, and concepts to consider, but here are some things for you to think about now:

• As you think about your entire business model, including your customers, your suppliers, your processes, etc., have you really looked at where you or your staff spend your time, effort, and money?

• Do you have some customers that require a lot of attention or additional costs (of any type … expense or capital) versus the level of revenue and profit they generate?

You might want to just take a few moments and brainstorm about the many facets of your order-to-cash process that could have improvement potential using 80/20 principles.

I am not suggesting that this is a simplistic idea that does not take thought and effort. It does. But I really believe that this guy Pareto was on to something! ###