MBA2359 Must Read: 80/20 Rule by Richard Koch

0:09Heyo! Welcome to the$100 MBA show. No fluff, just the good stuff with our practical business lessons. I'm your host, your coach, your teacher, Omar Zinhome. I'm also the co-founder of Webinar Ninja, an independent software company I started back in 2014. And today's episode is a must-read episode. On our must-read episodes, I share with you a book that has influenced me, has impacted me. I share with you its takeaways, its insights, and why you should read it too. Today's must-read is The 80-20 Rule by Richard Koch. You might have heard of the 80-20 Rule, also known as the Pareto Principle. The 80-20 rule illustrates how focusing on a few vital inputs can generate the majority of your results.

0:49It can have a profound impact on your efficiency, your effectiveness, and overall success in business and in life. Essentially, the idea of the 80-20 rule is that 20 % of your inputs, your efforts, actually give you 80 % of your results. Meaning that most of the other things you do probably don't make much of an impact. And only 20 % of your efforts is actually making most of the impact. In today's episode, I'm going to share with you how Richard Koch goes and dissects this topic. In this book, The 80-20 Rule, why is this phenomenon so true and so fascinating, but also how to practically use this in your business and in your life so you're really using your resources properly.

1:31You're focusing on your strengths. You're making strategic decisions and not just things off the cuff or from a gut feeling. And a whole lot more. Can't wait to get into it. Let's get into it. Let's get down to business. The 80-20 rule is something that I've heard about over and over and over in the last 20 years of my journey as an entrepreneur. And it's kind of one of those things that you know it's true and it's in the back of your mind, but it's not ever in the front of your mind when you need it. And this book is all about that. How to make sure that you fully understand this concept so you can apply it practically and not just know it as a theory.

2:08In the book, Richard Koch explores the transformational potential of this principle, the Pareto principle, 80-20 rule, that again suggests that 80 % of the results that we have in our business, in our life, come from just 20 % of our efforts. In the book, he dives into the historical roots of this concept and how it's more true today than ever with all the distractions that we have, with all the options that we have, with all the tools and all the pings and all the emails and all the notifications that we have and all the things that we could possibly do to help our business and our life, this creates a paradox.

2:43There's so many choices, right? There's so many things you can do and therefore you try to do them all. But unfortunately, not all of them have the same efficacy, right? You want to only focus on things that actually move the needle, actually get you results. And one of the things that I thought about when I read this book is, have you ever gone on holiday and seen your business grow? This is one of the funniest feelings in the world. It's like, man, I should go on holiday all the time. But what happens is when you go on holiday, you are just doing the most important things to keep your business going, right?

3:17You are doing that 20 % that this book is talking about. You just drop all the stuff that you don't normally do, or you tell somebody else to do it, or you just flat out don't focus on it. You just focus on the most important things. And yet your business does just fine when you're on holiday. In fact, sometimes it even grows. That goes to show you that all the busy work that you're doing when you're not on holiday probably doesn't pay off, doesn't actually contribute to your bottom line. So the first concept that I want to drill home in today's lesson, in today's episode, is something that he talks about over and over in the book, which is vital few versus trivial many.

3:53This is recognizing that a small percentage of your inputs, the vital few, drive the majority of outcomes, allowing you to prioritize efforts and resources effectively. The key here is knowing what the vital few are. What are the things that actually move the needle? And just to focus on those things. And this takes time and it takes some experimentation, but it also takes an experiment. Remember when I talked about the holiday? Well, why don't you step away from the business for a bit? Take a holiday from the business. See if you can run the business with only 20 % of your time instead of 100 % of your time.

4:28What would you focus on? If you had to do that, let's say, for example, you had an emergency. You had to take care of a loved one and you just don't have the time anymore. What would you spend your time on? do that as an experiment for a month, for two, and you'll find out quickly what are the vital few. Another great takeaway is resource allocation. You have resources at your disposal in your business. So how are you going to allocate these resources? Whether it's people working for you, talent, labor, whether it's capital, you have revenue, you have money coming in and you can outsource things, whether it's time, whether it's expertise or people that you can lean on in your network.

5:05How can you use these resources to leverage your business so you're just doing those vital few things to get you 80 % of the results? He talks about focusing on strengths, concentrate on the areas that you're strong at and get a high return on in your business. For me, it's teaching. Whenever I teach, I get a high return, whether it's on a webinar, whether it's in a live situation in an event or on stage, whether it's with coaching or teaching or even with a recorded video or online courses. For me, that's my strength, and that's when I get the highest return for my efforts. Now, there's things that I don't get much of a return on, a low return, like administrative tasks that I don't like, right?

5:44And because I don't like it, I don't do it as well as I should, and therefore, I have to hire for that. And that's a good way to use your resources, use your money, use your capital, use your team. Now that you believe in the 80-20 rule, you've got to start making strategic decisions based on it. You are informed about whether things really matter in your business or actually move the needle. That means making the decision to say, hey, we're going to stop doing these things. These things don't help us or they do, but not that much. Not worth keep on doing. Let's just do the stuff that actually help us grow.

6:15This starts to change your belief system in your business. This starts to make you understand that, hey, not everything is created equal. Not every piece of work, hard work is equal. Some things will have more of an impact than the other. So it's just not work, work, work, work, hard, hustle, and don't worry about the outcome. No, let's only work on things that matter. Let's work smarter, not harder. One of the things I learned in business is really echoed in this book, which is simplify complexity. Business can get really complicated if you let it. There's a lot of different procedures. There's a lot of different operations you're doing in your business, whether it's payroll, whether it's just doing a task, whether it's implementing a new product or service or, for example, this podcast.

7:03Running this podcast is very complicated, but because we document all the steps, we have a standard operating procedure. Everybody knows what they're supposed to do. We have a game plan. We have a playbook. So everybody on the team just follows the playbook. We simplify complexity. We streamline the operations by identifying and addressing the most significant bottlenecks. What are the things that can get us in trouble where we're going to have confusion or delays? Let's solve for that. This allows us to streamline the process and improve our overall performance and the result of our work. You know, we're able to create a better show because we have a better system.

7:39Everybody is doing everything properly and on time because we worked on the system. That way, after I record this episode, everybody knows what to do. Whether it's Carl, our editor, editing, whether it's Romina helping us with scheduling and publishing the episode and making sure the show notes are all ready. whether it's Cindy who's doing all our wonderful marketing for the show, they're all part of the system singing from the same song sheet. And that is by design. That takes work. That takes you working on your business and not in your business. Now, he has a word of warning in his book that is important.

8:12He says, avoid over analysis. Resist the urge to excessively analyze every detail. Instead, focus on the critical elements that truly drive results. Meaning, once you find out, okay, this activity helps my business. If you know that, hey, every time I send an email out to my customers with an offer, I make money. Okay, email marketing is important. I need to focus on that. I got to do better with that. He's saying, don't go too much into the weeds and say, well, maybe I need to really analyze which subject line worked the best. And what about my opening sentence? And should I bold my print or should I just hyperlink it?

8:48Some people just go too much in the minutiae and not realize that actually what's working is just sending out the email. All the little details, yeah, you can experiment, you can A-B test, but don't spend too much time on the minutiae that is not going to really make a big difference. You might be spending 5, 10, 20 hours every time you write an email, when instead you could spend one hour and spend 19 other hours creating other emails to make other offers. Lastly, he talks about long-term impact. When you embrace the 80-20 principle long-term, you start to see the results compounding over time because you're consistent and you're focused and you start to see the result as time goes on.

9:28Initially, you might not see a huge difference, but six months, a year, two years, three years, and you look back and like, wow, my business really changed and is in a different place because of this. I highly recommend you check out The 80-20 Rule by Richard Koch. It's a simple book. It's a simple concept that really gets drilled home. And it's one of those books you may want to reread from time to time because we all need reminders, especially because we're making so many decisions about our business constantly every single day. Thanks so much for listening to The$100 MBA Show. If you haven't subscribed or followed to the podcast yet, do this right now.

10:05Whether you're listening on Spotify or Apple Podcasts or whatever podcast app, hit follow or subscribe so you get our next episode automatically. Also, by doing so, you get exclusive access to our back catalog over 2300 business lessons. So go ahead and do it immediately. Before I go, I want to leave you with this. This book, The 80-20 Principle, is a book that I had a hard time with. I had to really wrestle with the concepts because of my mindset prior to understanding the 80-20 Principle. Why? Because of my upbringing. My parents are immigrants. They moved to the U.S. from Egypt and they really, really worked hard to get everything they had.

10:48So hard work is in my DNA. You got to work hard a lot, put in as many hours, outwork the competition. All of this is in my mindset from a young age. And I never stopped to think, hey, maybe there's a smarter way to work instead of working so hard. Maybe hard work is for chumps. Maybe hard work doesn't pay off anymore. Now, I'm not saying that that's all true, but it's good to question it so that you can be smarter about your time because that's your biggest asset. And suggesting that only 20 % of the things I do, that means 80 % of the other stuff I do doesn't really impact my business. Wow. I had to really swallow a tough pill.

11:26But once you kind of embrace it, you start to realize, okay, I can make changes here, here, here. And it empowers you. It makes you start to think, hey, I can do it better. So I love picking up books that challenge me. I suggest you do the same because that's when the change happens and that's when you start to see some results in your business and in your life. Thanks so much for listening and I'll check you in Wednesday's episode. I'll see you then. Take care.

12:08Thank you.