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Business Leaders: Master the 80/20 Rule

The document discusses the potential downside of strictly applying the 80/20 rule to decisions. While the 80/20 rule can help focus on the most important areas that provide the greatest returns, it may not surface new or non-traditional paths that could be highly impactful. This is illustrated through the example of Audrey Hepburn in 1967 - a strict 80/20 analysis would have recommended continuing her successful career in romantic comedies. However, she wanted to pursue philanthropic work through UNICEF instead, which did not appear as the most effective option based on past data but allowed her to have a large positive impact in a new way.

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Einah Einah
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48 views2 pages

Business Leaders: Master the 80/20 Rule

The document discusses the potential downside of strictly applying the 80/20 rule to decisions. While the 80/20 rule can help focus on the most important areas that provide the greatest returns, it may not surface new or non-traditional paths that could be highly impactful. This is illustrated through the example of Audrey Hepburn in 1967 - a strict 80/20 analysis would have recommended continuing her successful career in romantic comedies. However, she wanted to pursue philanthropic work through UNICEF instead, which did not appear as the most effective option based on past data but allowed her to have a large positive impact in a new way.

Uploaded by

Einah Einah
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
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The Upside of the 80/20 Rule

When applied to your life and work, the 80/20 Rule can help you separate “the vital few from the
trivial many.”
For example, business owners may discover the majority of revenue comes from a handful of
important clients. The 80/20 Rule would recommend that the most effective course of action
would be to focus exclusively on serving these clients (and on finding others like them) and
either stop serving others or let the majority of customers gradually fade away because they
account for a small portion of the bottom line.
This same strategy can be useful if you practice inversion and look at the sources of your
problems. You may find that the majority of your complaints come from a handful of problem
clients. The 80/20 Rule would suggest that you can clear out your backlog of customer service
requests by firing these clients.
The 80/20 Rule is like a form of judo for life and work. By finding precisely the right area to
apply pressure, you can get more results with less effort. It’s a great strategy, and I have used it
many times.
But there is a downside to this approach, as well, and it is often overlooked. To understand this
pitfall, we return to Audrey Hepburn.
The Downside of the 80/20 Rule
Imagine it is 1967. Audrey Hepburn is in the prime of her career and trying to decide how to
spend her time.
If she uses the 80/20 Rule as part of her decision-making process, she will discover a clear
answer: do more romantic comedies.
Many of Hepburn’s best films were romantic comedies like Roman Holiday, Sabrina, Breakfast
at Tiffany’s, and Charade. She starred in these four films between 1953 and 1963; by 1967, she
was due for another one. They attracted large audiences, earned her awards, and were an obvious
path to greater fame and fortune. Romantic comedies were effective for Audrey Hepburn.
In fact, even if we take into account her desire to help children through UNICEF, an 80/20
analysis might have revealed that starring in more romantic comedies was still the best option
because she could have maximized her earning power and donated the additional earnings to
UNICEF.
Of course, that’s all well and good if she wanted to continue acting. But she didn’t want to be an
actress. She wanted to serve. And no reasonable analysis of the highest and best use of her time
in 1967 would have suggested that volunteering for UNICEF was the most effective use of her
time.
This is the downside of the 80/20 Rule: A new path will never look like the most effective option
in the beginning.

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