I’ve always felt that the “80-20” principle is overrated. Working 70-hour weeks on intense strategy consulting gigs I wondered why I am getting smashed despite religiously focusing on the proverbial top-20% of causes that drive 80% of effects. My natural laziness helped me realise that the principle needs a little tweak, which makes it 20x more powerful!
Instead of abstract “causes” and “effects” for simplicity I prefer to think about it as effort (input) vs value (output). If a certain complex problem takes 100 hours to fully solve, by focusing efforts on the highest priority issues, in just 20 hours you should be able to solve 80% of the overall problem.
But here is the trick, “80-20” applies to that 20 hours as well! In fact, by spending only 4 hours (20% of 20 hours), you could tackle 64% (80% of the 80%) of the problem. It doesn’t stop there, with the right focus, in under 1 hour (20% of 4 hours) you could smash over half (~51% = 80% of 64%) of the problem!
That’s 50-1 magic, 1 hour of prioritised effort yields more than half of the value that working for 100 hours would produce. You could go even further to 1/5 of an hour (0.2% of total effort = 20% of 1%) delivering 41% of the result, but it’s hard to argue that solving less than half of the problem is good enough.
This 50-1 principle is a twin brother of the Price law, which states that the square root of the number of people in a domain produce 50% of the output. In crude business terms it means that in an organisation with 10,000 staff, the top 100 employees generate half of the value.
It may seem shockingly unfair, but 50-1 is the power law of nature. In many domains, more than half of output (in value terms) comes from 1% of contributors. 1% of Wikipedia editors generate 77% of the content. 1% of artists earn over 75% of music industry income. In classical music, only 4 (!) composers (Bach, Beethoven, Mozart and Tchaikovsky) made most of the music performed by the orchestras. Not surprisingly, this law also applies to how wealth is distributed: 1% of people hold 50% of the global net wealth.
Fighting this law may seem noble, but it is akin to fighting gravity. Why fight if we can use it to our benefit?
The principle can be particularly helpful in delivering change and innovation. Here is a practical interpretation of it: 50% of project success is determined by the 1% of effort (usually early stage including strategy, scoping and design). For example, on a major IT project that involves 1,000 pages of documentation and thousands lines of code, the most important 10 pages of scope, key design decisions and requirements determine 50% of its success.
Here are my top-5 rules on how to apply the 50:1 principle in business:
1. Invest disproportionally to get that 1% right. The hardest part is actually to figure out what that critical 1% is. That is why it is essential to invest the best talent from across the business (and attract externals if required) to ask the right questions and get the best possible answers leveraging available data and expertise. 1% of effort does not have to be equal to 1% of cost.
2. 20% of 1% ain’t good enough. The common pitfall is to drop a “great idea” or high-level strategy (call it “0.2%”) on the delivery teams and hope they will sort out the rest. How many projects and transformations have gone south due to that “0.8%” strategy-to-execution gap? Whether the company uses in-house capability or external advisors to take the project past the critical 1% mark, it must ensure they deliver up to the point where business has enough confidence and can put the pedal to the metal.
3. If you don’t get the critical 1% right, no matter how well you deliver the remaining 99% – the outcome is likely to be suboptimal. Many of us have seen well executed projects that led nowhere, either because the idea was not sufficiently thought through or there was enough slack in design to lead the project off-track.
4. 1% is not about strategy packs – it’s about the critical path. Sometimes the most important issues and decisions hide in the weeds, that 30,000-ft view of senior leaders will not catch. I recall a project where descoping of a matching algorithm (~100 lines of code) was close to derailing a $20m project and blowing up enterprise operations. A seemingly trivial decision impacting the critical path wasn’t adequately considered and led to a costly last-minute remediation.
5. Like all rules, it’s not without exceptions. Who would want airline engineers to take shortcuts in making aircraft maintenance decisions or doctors focusing on the top-1% of symptoms in determining treatment? Sometimes it has to be 100-100.
Some may say, what if I’m working on the 99% most of the time? Does this deem my work useless? Not at all – there is another 1% within 99% and another one within the next 98%.
Regardless of what you do, you need to find your own 1% and nail it every time, because 50% of your personal success hinges on it! But that’s for another story.