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The 80/20 Principle Summary | Summary Lover

            The 80/20 Principle by Richard Koch

The 80/20 Principle Summary | Summary Lover

Blog Title : The 80/20 Principle Summary
Author : Richard Koch

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About the Author :-
Richard Koch was a consultant with the Boston Consulting Group and partner of Bain & Company. He co-founded LEK Consulting, rescued Filofax and Plymouth Gin from near death, built up Zola Hotels, started the Belgo restaurant chain, and played a key role in making Betfair by far the world’s largest betting exchange. He is the author of eighteen books, including the self-help guide Living the 80/20 Way. A self-confessed “lazy entrepreneur,” he lives the 80/20 way in London, Cape Town, and the sunniest part of southern Spain.

Disclaimer

Courtesy of the book publisher and author who worked to spread book’s knowledge. The 80/20 principle book summary is in no way to claim rights but a mere contribution to cultivate reading habit among youth and motivate them to buy the book.

           The 80/20 Principle Summary

Author Says the 80/20 Principle can and should be used by every intelligent person in their daily life, by every organization, and by every social grouping and form of society. It can help individuals and groups achieve much more, with much less effort. The 80/20 Principle can raise personal effectiveness and happiness. 

WHAT IS THE 80/20 PRINCIPLE? 

Author says the 80/20 Principle asserts that a minority of causes, inputs, or effort usually lead to a majority of the results, outputs, or rewards. Taken literally, this means that, for example, 80 percent of what you achieve in your job comes from 20 percent of the time spent.
The 80/20 Principle states that there is an inbuilt imbalance between causes and results, inputs and outputs, and effort and reward. 
In society, 20 percent of criminals account for 80 percent of the value of all crime. Twenty percent of motorists cause 80 percent of accidents. 
Twenty percent of children attain 80 percent of educational qualifications available. In the home, 20 percent of your carpets are likely to get 80 percent of the wear. Twenty percent of your clothes will be worn 80 percent of the time.

WHY THE 80/20 PRINCIPLE IS SO IMPORTANT 

Author says the reason that the 80/20 Principle is so valuable is that it is counterintuitive. We tend to expect that all causes will have roughly the same significance. That all customers are equally valuable. That every bit of business, every product, and every dollar of sales revenue is as good as any other.

Author says the 80/20 Principle also asserts that when we know the true relationship, we are likely to be surprised at how unbalanced it is. Whatever the actual level of imbalance, it is likely to exceed our prior estimate.
The overriding message of this book is that our daily lives can be greatly improved by using the 80/20 Principle. Each individual can be more effective and happier. Each profit-seeking corporation can become very much more profitable.
The second key insight the consulting firm had was that in any client, 80 percent of the results available would flow from concentrating on the 20 percent of most important issues.

 “The reasonable man adapts himself to the world. The unreasonable one persists in trying to adapt the world to himself. Therefore all progress depends on the unreasonable man.” - George Bernard Shaw

80/20 THINKING AND WHY IT IS NECESSARY 

Author says to engage in 80/20 Thinking, we must constantly ask ourselves: what is the 20 percent that is leading to 80 percent? We must never assume that we automatically know what the answer is but take some time to think creatively about it.
 Author says you can eliminate 80 percent of the waste by spending only 20 percent of what it would cost you to get rid of 100 percent of the waste.

Don’t plan to the nth degree on the first day. The return on investment usually 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.

WHY THE 80/20 PRINCIPLE WORKS IN BUSINESS 

Author says the 80/20 Principle applied to business has one key theme—to generate the most money with the least expenditure of assets and effort.
Creative systems operate away from equilibrium. Cause and effect, input and output, operate in a nonlinear way. You do not usually get back what you put in; you may sometimes get very much less and sometimes get very much more.
The art of using the 80/20 Principle is to identify which way the grain of reality is currently running and to exploit that as much as possible. 

The 80/20 Principle suggests that your strategy is wrong. If you make most of your money out of a small part of your activity, you should turn your company upside down and concentrate your efforts on multiplying this small part.

" Those who analyze the reasons for their success know the 80/20 rule applies. Eighty percent of their growth, profitability and satisfaction comes from 20 percent of the clients. At a minimum, firms should identify the top 20 percent to get a clear picture of desirable prospects for future growth." - Vin Manaktala

Selling is not just having good sales techniques 

  • Focus every salesperson’s efforts on the 20 percent of products that generate 80 percent of sales.
  • Focus salespeople on the 20 percent of customers who generate 80 percent of sales and 80 percent of profits. Teach the salesforce to rank their customers by sales and profits. 

STOP THINKING 50/50 

  • Expect 20 percent to equal 80 percent. Expect 80 percent to equal 20 percent.
  • Expect the unexpected. Expect 20 percent to lead to 80 percent and 80 percent to result in 20 percent.
  • Expect everything—your time, your organization, your market, and every person or business entity you come across—to have quality 20 percent.
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