Training individuals and organizations to realize that, for all practical purposes, four-fifths of effort is wasted will bring big rewards. The solution is not to do more, but do less! In 1897, Italian economist Vilfredo Pareto while measuring patterns of wealth and income in England found that most wealth went to a small percentage of people.

The world wasn’t just unfair, but predictably unfair. Pareto found the same pattern everywhere. Twenty percent of workers did 80 percent of the work. Twenty percent of customers produced 80 percent of sales. Twenty percent of sales produced 80 percent of profits. This is true in your organization and the world today!

In 1951, Joseph Moses Juran identified quality losses as stemming from only a small number of causes. The U.S. was not interested in being re-trained but Japan embraced Juran and became the giant that decimated the American automobile industry, applying the 80/20 Rule.

In 1963, IBM realized that 80 percent of a computer’s time is spent executing 20 percent of the operating code. IBM made the most-used 20 percent more accessible so their computers would be more efficient and faster than competitors. Recently, Apple and Microsoft training has applied the 80/20 Principle.

The fact is twenty percent of your clothes will be worn 80 percent of the time. Twenty percent of your carpets get 80 percent of the wear. Twenty percent of your company’s products or its customers usually account for 80 percent of your sales and profits.

Corning, in the early 1990’s began turning away customers. It seemed to make no sense. Business was down, so they turned away business? That strategy restored Corning to profitability, while others failed. How did that happen? Corning learned where its real profitability lay and trained its people to accept only profitable business.

Traditional methods were of little use and were insensitive to hidden costs. One product, we’ll call the X-17, was easy to manufacture and quite profitable. Another product, the X-25, was odd-shaped and required highly trained engineers to oversee the process. Factoring in the hidden costs, the X-25’s unit cost was an unbelievable 500,000 times more than X-17’s.

Looking further, Corning found half of their 450 products contributed 96.3 percent of their sales. The other half grossed less that 4 percent and actually lost money. They had 1,000 suppliers, but only 200 provided 95 percent of the company’s materials.

Corning launched a significant training program that eliminated more that half its product line and it cut its suppliers to a few dozen. Corning’s transformation provides lessons useful for all organizations. Most of your profits come from a small percentage of your customers, or a few products or services. Eliminate activities that sap resources and put more effort into that small percentage of products or services that make the most profits!

One product does not deserve the same investment as another. One customer is not as valuable as the next. All problems are not equally worth solving. Only by training your people so they develop a true understanding of the 80/20 Principle, can your organization enjoy similar benefits.

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