Wednesday, June 11, 2014

How to Use the 80:20 Rule to Focus on the Business Innovation Process - Guest Blog

by Steve Allen, VP Marketing and Innovation, ACL Staticide

Our guest blogger, Steve Allen from ACL, looks at how to apply the Pareto Principle’s 80:20 rule in your business practices

"There is nothing quite so useless, as doing with great efficiency, something that should not be done at all."—Peter Drucker

Italian Economist Vilfredo Pareto
The Pareto Principle (also known as the 80:20 rule), irrespective of the nature of your business, holds that 80% of the consequences of any action come from 20% of the causes. This principle can actually be applied to everything you do. At ACL, we implement 80:20 simplification and rationalization disciplines into everything we do, including new product development and commercialization.

The original 80:20 observation is attributed to Italian economist Vilfredo Pareto who, in 1906, noticed that 80% of Italy's land was owned by 20% of the population. He then carried out surveys on a variety of other countries and found to his surprise that a similar distribution applied. He and others later discovered that this principle is proven in many other areas of interest:
  • 80% of results come from 20% of effort
  • 20% of your customers will account for 80% of your profit
  • 80% of your sales come from only 20% of your total product line
Apply the 80:20 rule to the information you receive: 20% is useful, whereas 80% is not. The key is to identify and focus on that 20% and ignore or remove the rest completely.

The same is true of time expended for results achieved. Think of the benefits of applying the Pareto Principle to your time management and personal and business productivity!

Which one of these statements rings true for your business?
  • 80% of your business comes from 20% of your customers
  • 20% of your product or service range contributes 80% of your sales and likely 90% of profits
  • 80% of customer complaints originate from 20% of the causes
  • 80% of your business productivity loss results from 20% of the causes
  • 80% of the value in the business is generated by 20% of the processes
The common approach to business is to squeeze every last drop out of each opportunity, to go "100% all-out," without consideration of the impact on time, productivity, and waste. Simple, time-efficient businesses recognize that it is fundamentally inefficient to go for the "whole pie" when you can get the majority of results for the minority of effort. With knowledge of the 80:20 lean simplification principles, you can concentrate on what wins you customers and successes in the most efficient manner and in the shortest amount of time. Look at your business and concentrate on the 20% that produces the 80% of benefit. Spend 80% of your time doing the 20% that really gets you results.

It’s not just about working smarter—it's about working smarter on the right things that will get you the best results. Pareto rules allow us to launch the products we know our customers need (such as the industry top-selling items offered in our new PCB Electronics Rework/Repair Production Chemicals line), and that our key distributor partners and sales teams can effectively sell. 80:20 gives us insight into developing value-added products that solve real problems for our customers.

Q Source, once again, thanks ACL Staticide’s Steve Allen for his Guest Blog contributions to The Q Source Resource.

For information about ACL Staticide products, please visit our ACL Staticide Department at You may also contact us via email or phone at 800-966-6020 and one of our associates will be happy to answer your questions or assist you with an order.

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Steve Allen's Previous Guest Blogs

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