To become effective and successful as business leaders nowadays, we need to move beyond embracing change; we need to enjoy it. Bubbling economies, disrupted markets, complicated regulations, are all too common occurrences in our daily lives. We’re on our own and we better like adventure, or we need to find a different line of work. But on top of an adventurous spirit, we also need more than ever to have our very own personalized toolbox, which we can carry with us as we move from one challenge to the next. And one of the most important tools in our toolbox is the learned ability to pick the small number of resources and initiatives that give us the best results.
We begin creating this tool when we adopt what is called 80/20 mindset, as we are forced to make choices, in order to be more productive or to avoid being sucked into a vortex of unimportant issues. The thinking makes us a lot more selective and gives us the appetite to look for the few things that will tip the scales in our favor. Once we couple analysis with thinking, then we are better prepared to decide which are the vital few customers, the vital few metrics and the vital few people, for example. And finding out which are the vital few and relevant efforts in business, as in life, allows us to unburden ourselves from the tyranny of averageness and become free to create value for us and for others. As companies think of new ways to apply human capital, disrupting conventional employment rules, there is major and disproportional opportunity for leaders who behave as free agents. Contrary to traditional company lovers or company loyalists, the free agent sees his or her role in a company as a transformational one, with a mission to be accomplished, rather than a job to hold on to. They are people who can engage quickly and effectively in transformation work and serve as a consultative leader to the organization at the same time. Their missions typically last a couple of years, sometimes more, but certainly not a lifetime. They are more selective in picking their fights! Free agent leaders combine their individual work system with independence and 80/20 thinking, developing deep self-awareness. They know what they believe in and what makes them different from other executives. But in order to have freedom from averageness, you need to acquire the proper tools. Today, we get distracted by a profusion of things that were considered scarce just a couple of decades ago, such as access to information and to industrialized food products (at least in the developed world), to mention a few. Obesity, for example, has become a public health issue in most industrialized nations and is quickly becoming an issue in developing countries as well. It’s almost impossible not to draw a parallel between food that makes us obese and information that makes us unfocused. If you are not selective, you run the risk of getting obese with food and overwhelmed with insignificant information. A case in point is the obsessive use of social media. It’s easy to see why so much time and attention is spent on e-mail and social networks nowadays. People can lose their ability to distinguish between what is important and what is not, and become addicted to information and communication technologies that pump gigabytes of junk per minute into their brains! In the process, we can spend hours multitasking or focusing on useless and plainly false knowledge that comes along with the few nuggets that really matter. It does not seem like good management of the most precious resource we have in life—time. Instead of setting aside twenty percent of the workday for productive and uninterrupted focused thinking, as prescribed by Peter Drucker in The Effective Executive[i], more and more managers are averaging their attention span throughout the workday and giving the same or more quality attention to the trivial many as to the vital few. More managers have become so accustomed to relying on commoditized information sources that they almost completely disregard the importance of their own analytical capabilities and critical thinking skills to determine what is best for the business. Commoditization of information sources is another trend impacting all knowledge workers and managers these days. As industry expertise and skills become easily available through the Internet and other means, knowledge loses differentiation and value across the board, becoming a commodity. Knowledge has a shelf life and it continues to shrink. Relying on shelved knowledge to run the business can no longer guarantee a comparative advantage. To innovate and grow today, business leaders need to be capable of creating unique or differentiated knowledge, using all the common information methods available, augmented by firsthand knowledge and by 80/20 thinking. Leaders who are capable of discriminating their focus and attention to create distinguished knowledge will be able to capitalize the most from this new era. These people navigate through the information overload maze and take time every workday to perform focused thinking, even if only for ninety minutes. They embrace networking and analytics in the era of big data and mine nuggets of precious information, using their own mining methodologies and applying critical thinking. Peter Drucker called this exercise in 80/20 thinking, “ninety minutes of thinking time.” [ii] It is the smallest effective time slot required for meaningful knowledge work. It’s a period of time during the day of approximately ninety-six minutes when you are your most productive self. If you can fully concentrate on your most important work while avoiding distractions such as phone calls, e-mails, and other multitasking activities, you will generate the most impactful and productive work of the day. After you are done with the focused time, which is 20 percent of your workday, you can be sure you will have accomplished 80 percent of your day’s objectives. Capitalizing on imbalances in business is not always natural—it doesn’t come instinctively. Most of the time, it needs to be exercised and primed with data and hard work. People who are 80/20 thinkers have developed the ability to formulate estimates about possible imbalances between inputs and outputs. They visualize a ratio between effort and result, and then apply critical thinking to determine what matters most. And in life as in business, eighty percent of the time trivial issues will bombard you. Here are some well know examples and ideas about using 80/20 thinking:
“The philosophy of “10x” is woven into Google’s DNA. Instead of improving something by 10 percent, the company strives to work on projects that are 10 times better than anything else out there. “A big part of my job is to get people focused on things that are not just incremental,” CEO Larry Page told Wired in 2013. Getting to chase big ideas instead of simply one-upping competitors is one of the best parts about working for the company, employees have said. That mind-set has launched some of Google’s most amazingly ambitious projects, like self-driving cars, Internet-bearing balloons, and magnetic nanoparticles that can search the human body for disease.”
Rather than developing new technology up front and going after venture capital moneys to launch his company, Nick Woodman thought of unconventional ways to apply and package existing camera and data storage technologies, focusing on “high-adrenaline sports” market segments, such as skydiving, base jumping and white-water rafting. This approach was much more cost effective and kept the company from going after private equity money early on, which would have been a distraction. By limiting the scope at the beginning of the project, it helped bootstrap the company to have early successes that Nick was able to build upon.
“After CEO Reed Hastings made up his mind about where he would focus the company in the long run, he dropped everything else to build the new business. Including his legacy business of mailing DVDs to people’s homes. In classic 80/20 thinking, he selected his “eighty" strategy and started to “milk” his “twenty” business” to fund the “eighty” one. He shifted resources and focus to the “eighty” strategy.” “In 2011, he split Netflix into 2 businesses—DVD and streaming—and allowed them to price independently and compete with each other for customer business. He was trounced as the “dunce” of tech CEOs. His actions led to a price increase of sixty percent for anyone who decided to buy both Netflix products, and many customers chose to drop one. Analysts predicted this to be the end of Netflix. But in retrospect we can see the brilliance of this decision. CEO Hastings actually did what textbooks tell us to do—he began milking the installed, but outdated, DVD business. He did not kill it, but he began pulling profits and cash out of it to pay for building the faster growing, but lower margin, streaming business. This allowed Netflix to actually grow revenue, and grow profits, while making the market transition from one platform (DVD) to another (streaming).” “When you need to move into a new market, set up a new division to attack it. And give them permission to do whatever it takes, even if their actions aggravate existing customers and industry participants. Push them to learn fast, and grow fast—and even to attack old sacred cows (like bundled pricing).”[iii]
The people that can think 80/20 and leverage imbalances need more than a conventional job or career path. Choose them wisely! They need to be in positions that are impactful, such as running business units, and be made accountable for results. They thrive on challenges. If you do a great job selecting “eighty people”, then you are better off adopting a supportive leadership style and virtually working for them and concentrating yourself on what you do best. Let them do the work for you and focus on making them happy. They are the actual “vital few”, and they will have a positive multiplying influence on your bottom line.
“Fun is one of the most important and underrated components of any successful venture. If you’re not enjoying yourself, it’s probably time to call it quits and try something else. If your employees are engaged and having fun, and they genuinely care about your customers, they will enjoy their work more and do a better job. Hire people who look for the best in others, who lavish more praise than they dole out criticism, and who genuinely love what they do.”[v] In summary, if you have to decide which vital few tools to carry in your toolbox, I hope you decide for the ones that allow you to pursue the few relevant things in life, over the many insignificant ones that pop up continuously. Selectivity is a learned skill that needs to be exercised, with analysis and 80/20 thinking. Don’t be fooled by relying on intuitive thinking alone, especially in an era when we are being bombarded with menial knowledge. Work hard to deaverage the knowledge and find imbalances that can work for you. Once you’ve acquired a discernment method that works for you, you will become a lot more productive on what you set yourself to accomplish. You will become a free agent, in the sense that you can create value to yourself and to others, by doing only what you know best and enjoy most. [i] The Effective Executive: The Definitive Guide to Getting the Right Things Done (HarperBusiness Essentials) – Peter F. Drucker – HarperBusiness; Revised edition (1/3/2006). [ii] Peter Drucker, The Effective Executive, HarperBusiness; Revised edition (January 3, 2006). [iii] Netflix: The Turnaround Story of 2012 - www.forbes.com - Retrieved in January 2013. [iv] Sir Richard Charles Nicholas Branson, Kt (born 18 July 1950) is an English businessman and investor. He is best known as the founder of Virgin Group, which comprises more than 400 companies. [v] Richard Branson's Top 10 Tips for Succeeding at Business - www.entrepreneur.com - Retrieved in September 2015.
2 Comments
Marc suri
6/12/2016 11:32:38 pm
Pedro,
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Pedro Ferro
6/13/2016 05:34:12 am
Thanks for your comments Marc. I agree, 80/20 is not as intuitive as it looks. All the best.
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