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The 80/20 Promise (2of4)

March 05, 2015
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Actively Embrace the AMBIGUITY Factor:

In the last blog we talked about what the 80/20 rule is; e.g. a power law that confirms things aren’t equal, and that a small percentage of any distribution controls or impacts the majority of the outcome.  We also reviewed examples of what it isn’t, specifically it’s not a day-time scheduling device.  So that’s behind us, let’s get on with the first of three tips on how to successfully apply the 80/20 rule to your situation – which is to “actively embrace the ambiguity factor.”

The 80/20 has wonderful predictive capability, even if the numbers aren’t precisely in line with the Pareto curve.  As an example in the US, “following the Great Recession which started in 2007, the share of total wealth owned by the top 1% of the population grew from 34.6% to 37.1%, and that owned by the top 20% of Americans grew from 85% to 87.7%.” 

Ok, so 20% of the US population owns 88% of the wealth, instead of 80%, e.g. it doesn’t exactly match the curve.  But the biggest challenge isn’t numbers that may only roughly follow the Pareto curve, it’s the problem is that we’re often confused, or perhaps more accurately inaccurately myopic, in identifying what the 20% is that’s going to generate 80% of our success.  Given that the 80/20 rule is fractal (80/20 applies to the 20% as well as to the 100%), think about these numbers for a moment and ask yourself “Do I know specifically what falls in each group?”

  • 20% of whatever you work on or work with generates 80% or 4/5ths of the results, but
  • 4% of whatever you work on generates almost 2/3rds of the entire results, an
  • 1% can generate up to half of the total results.

But here’s the thing, or the troubling question:
How do you or your staff know what the 1% ,the 4% or even the 20% is that drives such highly leveraged results?”

The truth is most of us are pretty fuzzy on exactly what comprises the 1, 4 and 20% categories. Worse yet, like the parable of the blind men and the elephant, we tend to inaccurately identify the tasks that comprise the 4% on personally or locally based results, not on over-arching business results.  Frankly it’s often difficult to see an easy connection or link between our choices and actions and results at work.  Some of us use our education or theoretical orientation to identify the high leverage tasks. For example, here’s how it might look if you are a project manager:

  • Some focus on dependencies and the critical path as the route to identify the 20%
  • Other project managers focus on constraints as the key,
  • Other project managers focus on burn down lists or estimated versus actual time indicators.

They all represent different perspectives on what gets focused on when applying the 80/20 rule.  By-the-way, did you notice all the examples above were “inward facing”? 

Let me underscore the ambiguity factor even more.  Often when people are identifying the 80/20 split they are actually looking in entirely different directions.  You see the 80/20 can be inward facing which often looks like “doing things right”, being effective at your job and the roles it embodies.  But it can also be outward facing, which tends to look like “doing the right things” so as to grow the business, meet customer needs, etc. 

The inward facing versus outward facing dynamic is critical to understand, so I’ll go there in the next blog, but hopefully I have just pointed out how muddy the water can get.  That 80/20 principle started out sounding so clean and compelling, and now we’re talking about inward versus outward facing 80/20s, and then we have those project managers with very different, but strongly held, opinions about what the 20% factor in the projects they run. 

Bottom Line:  It can be difficult to clearly identify the 20% that generates the 80% return when it comes to cause and effect.  It’s even more of a challenge to identify the 4% that generates 2/3rds of your results, and the 4% is what you need to focus on to get really powerful results

There are some lagging indicators that you can use to identify the 20% (example, focus on your top 20% of customers and craft your solutions and services around their needs), but as you move toward leading indicators you easily run into conflicting if not fuzzy definitions of what the 20% is upon which you should be prioritizing your focus and efforts.  Given the ambiguity surrounding the identification of what creates the most leverage, it’s best to embrace the ambiguity by doing the following:

  • Actively test your assumptions and strategies against results on the identified 4% and 20% in order to validate you’re focusing on the right stuff, and
  • Manage the 4% and 20% much closer (more collaboration, visibility, accountability, investigating the critical thinking being applied to why, what and how) than you do other tasks.

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