Bill Canady explains how the 80/20 principle works in business: 80% of revenue comes from just 20% of customers and 20% of products. Companies should cut the low-value 80% and pour resources into serving that vital few instead.
I thought we'd talk a little bit about serving simplification. 80/20 can tell you a lot about your business, but it is more than a diagnostic instrument. It is a tool in service of simplification, which is a process for strategically focusing on business for what products produces profitable growth rather than waste your investment. 80/20 guides you to simplifying your business. It is about identifying the products and customers who matter most to your business so that you can focus on over-resourcing them. 80/20 reveals that roughly 80% of your revenue comes from the intersection of 20% of your customers and 20% of your products. Put another way, only 20% of your effort is critical to your success. It would be to your advantage to reallocate resources that— from misspent 80% to overserving that critical 20% of your customers and products.
