The 80/20 Principle

**PROPELHER’S BOOK CLUB READ**

Richard Koch’s The 80/20 Principle is  is based on the Italian economists Pareto’s theory. in essence, it examines the considerable imbalance between Input and Output, Cause and Consequence and Effort and Results.

Richard applies that theory to how it works in business and then in your personal life.

For corporate success Richard suggests focusing on the small line of products and/or customers that generate the most profit. He states that “simple is beautiful” and that really for businesses to succeed they need to concentrate on “additional scale, without additional complexity, will always give you lower unit cost”. I found this particularly interesting because there is so much focus on scalable businesses. For anyone starting a business people always ask is it scalable. They are asking this because they want to see if it can truly grow into a major company and has the potential for commercial growth. The problem is usually that as businesses grow they become more complex and as a result the cost per unit increases.

Richard states “Do not agonise over unimportant decisions”. The idea of decision making is an reoccurring theme in leadership books. Make unimportant decisions quickly and move on. Leave the brain power for the decisions that need it. This completely makes sense because  “a few things are always much more important than most things”.

Now we get on how this relates to your life

First Richard discusses the idea of being free and that “choice can always be exercised”.  Everyone has the choice of how they live their life. The problem is often we let life happen to us rather than shaping our own lives. Does that resonate with you? Are you in control of your life right now, or is it just happening?

Having highlighted that time is important you need to free yourself from obligations imposed by others. Do not be unhappy and fill your time with tasks that are merely serving others. Remember that “you can always get what you want”.

There is a whole chapter on friendship and the no-one can achieve alone. Richard states that “Nothing is more important than your choice of alliances and how you build them… without them you are nothing”. This is very true and we all know the importance of good relationships in order to be successful. However, I had never come across the idea of the village theory, which states there is only space for a certain number of strong relationship in your life. In Richard’s example that number is 8. 8 felt like a very low number so it is important, if the theory is true, that you choose wisely.

To conclude, life is not balanced or fair. If we are honest we know that. The challenge is to identify what works so you can be as effective in your work. Then in life our aim is to “Expand happy times. Reduce unhappy times”.

I loved the theory of this book, but did find the book repetitive. There were a lot of examples of how it could be applied, especially in the business section, which I felt weren’t necessary. The book could definitely be shorter.

I read this book as part of PropelHer’s Book Club for ambitious women. For more information and to join PropelHer click here.