Chapter 23 The important few and the trivial many

In our work, we must master the important management principle of "important few and trivial majority". This principle was proposed by Vifredo Pareto, an Italian economist and sociologist at the end of the 19th century and the beginning of the 20th century.Its general idea is: In any particular group, important factors usually only account for a minority, while unimportant factors account for the majority, so as long as the minority factors that are important can be controlled, the overall situation can be controlled. After years of evolution, this principle has become the well-known "80/20 principle" in today's management circle - that is, 80% of the value comes from 20% of the factors, and the remaining 20% ​​of the value comes from 80% of the factors.

The following examples can clarify the connotation and importance of the "80/20 principle". Example 1: In terms of inventory management, there is an "ABC classification method", which divides inventory into three categories: A, B, and C. Category A represents the "important few", and this type of inventory has a small amount and high value.They should be valued to enjoy the best inventory management, including the most complete records, the most ample order waiting time, the most careful storage, etc. Class C inventory refers to the "trivial majority".This type of inventory has a large amount and low value, such as office stationery such as folders, staples, paper bags, envelopes, and stamps.For this category, there is simply no need for any inventory management, since the cost of doing so may exceed the value of the items themselves.Therefore, under normal circumstances, those responsible for stocking only try to replenish such items when they find that they are exhausted. Class B inventory refers to goods between Class C and Class A.Usually, the inventory management of such goods can be carried out in a mechanized manner, that is, when the inventory quantity drops to a certain amount, the enterprise should automatically replenish the inventory.

Example 2: An insurance company occasionally classifies the size of its customers' transaction volume, and finds that almost 90% of the total turnover comes from large customers who account for less than 10% of the total customers.This discovery prompted the company to implement a drastic change in its business policy of treating large and small clients alike — concentrating its time on serving a small number of large clients.As a result, the company's total turnover and profits are on the rise. Example 3: A company once asked executives at all levels to point out the factors that hinder the company's profit growth. There are 37 items in total.Since there were too many projects to be solved at the same time, the company leaders asked the executives at all levels to arrange the 37 factors in order of their importance, and finally found that the first five factors were the culprits that hindered profit growth.

Example 4: The president of a watch company found that among the many watch models produced by the company, the sales of about 1/3 models accounted for only 4% of the total sales, so he decided to stop the manufacture of these models. The company's profits gradually increased over the next six months. Example 5: The head of a certain department suffers from heart disease and follows the doctor's instructions to only work for three or four hours a day.He was surprised to find that the quality and quantity of what he did in these three or four hours was almost the same as what he used to spend eight or nine hours a day.The only explanation he could offer was that, since his hours had been cut short, he had to spend them on his most important work.This may be the main reason why he was able to maintain work effectiveness and improve work efficiency.

Example 6: In the structure of a traditional refrigerator, the freezer is located at the upper end, and the freezer is located at the lower end.When you use the freezer, you can maintain a standing position, but when using the freezer, you often have to squat.Because the use chance of the freezer is only 20%, while the use chance of the freezer is as high as 80%, many housewives often feel backaches due to squatting too many times when using the refrigerator.Based on this, an electrical appliance company placed the refrigerator at the upper end and the freezer at the lower end in the design of the refrigerator.This new type of refrigerator can reduce the number of squats when using it, and the result is very popular with consumers.

The "80/20 principle" is an important working method that we must master. An important revelation of the "80/20 principle" for work is: avoid spending time on trivial issues, because even if you spend 80% of your time, you can only achieve 20% of the results.You should spend your time on the important few problems, because you only need to spend 20% of the time to solve these important few problems, and you can get 80% of the results.