Koch (The Star Principle: How It Can Make You Rich, 2010, etc.) discusses how to successfully apply his “80/20 principle” to business management and leadership.
The author believes that “if you divide the world into causes and results,” then relatively few causes bring about most of the results. He names the phenomenon the “80/20 principle,” modeled on a similar concept formulated by Italian economist Vilfredo Pareto more than 100 years ago. Koch applies the rule to current business practices. He does not believe that running businesses using accounting methods alone stands much chance of success, and he insists that one of “the most harmful, ridiculous, idiotic, yet enduring assumptions of the business world is that all sales are good, all revenue is valuable, and all sources of revenue are of roughly equal importance.” At Filofax, a company he rescued, Koch found that just 4 percent of stock-keeping units generated 93 percent of revenue and 20 percent of profits, while one-fifth of the customers accounted for 91 percent of sales. The author distills lessons from this and other cases into a 10-point system designed to help managers recognize where they can obtain the greatest results from the application of the 80/20 principle. These include developing investigative skills, building networks and connectivity, mentoring and using leverage. Koch enriches his arguments with references to his own experiences at the Boston Consulting Group and Bain & Company. The author advocates “time rich” methods (effective use of time), arguing that there is a negative relation between work time and productivity. He takes pains to separate this view from time management and seeks to cultivate the management skill of “calculated inactivity.”
A lively presentation that effectively combines ways to improve leadership with business problems and solutions.