Presentation on theme: "An Introduction to 80/20 February 27, 2014 As presented by Joe Hahn."— Presentation transcript:
1 An Introduction to 80/20February 27, 2014As presented by Joe Hahn
2 What is 8020? Also called “Pareto Analysis” Discovered by Vilfredo Pareto in 189780% of the output comes from 20% of the inputConsider it a rule of naturePut simply … a few things are critically important, while the vast majority of things are worthless
3 The Premise of the 80/20 Principle Transaction activity, product variation, customer multiplicity, and complexity are the root cause of all overhead cost20% of the items in any uniform group will drive 80% of itSuccess comes from eliminating the complexity and focusing on the core products and marketsTreat them differently
4 Use 80/20 to study every aspect of your business ProductsCustomersSuppliersInventoryProduct CostSales ForceGeographic DistributionAnything you want to study
5 So…80/20 is the art of doing a few things spectacularly well…at the chosen expense of the rest!!!
6 You are better off than 98% of all Americans IF… You finish high schoolYou have a job, any jobYou get married and stay marriedYou have no credit card debt
7 Want your children to be in the top 10% of all students? Make sure they get enough sleepMake sure they eat properlyMake sure they show up for schoolMake sure they pay attentionMake sure they do their homework
8 Rule of 72 72/interest rate = number of years for your money to double $1,000 invested today at 2% is $2,000 in 2044$1,000 invested today at 12% is $64,000 in 2044
9 Quartile Report Quartile Analysis Customers % of Business % of Effort 1 - 2589%25%7%3%1%Approximately half of our effort supports 96% of ourBusiness. The other half supports 4%.
10 Absolute Rules vs Classic Arguments Not every customer is a good customer!We make much more money on our biggest customers than we think we do…and lose much more on our smallest ones than we think we do.Classic Arguments:“The small customers of today are the big customers of tomorrow.”“If we get rid of the little customers, we have nothing to fall back on if we lose a big one.”“Some big customers buy small products and vice versa.”
11 QUAD REVIEW Q1 “THE FORT” Q2 “NECESSARY … But not desirable” Q3 A PRODUCTSB PRODUCTSQ1“THE FORT”Q2“NECESSARY …But not desirable”Q3“Transactional”Q4“Eliminate”A CUSTOMERSB CUSTOMERSProblems with quartile – oftentimes brought up in objections sectionQuad is strategicGo through each quad, giving florist example
12 Four Steps to 80/20 Weed the Garden Separate Tomatoes from Pumpkins Simplify products, customers and processesSeparate Tomatoes from PumpkinsSeparate unlike businessesGive the Plants Only the Water They NeedApply the minimum number of resources needed to support the critical few (the 80’s)4. Harvest EfficientlySimplify and streamline methods and transactions for the 80’s
13 The Classic Prescriptions YES, BUTMINIMUMSVISARESPONSE TIME DIFFERENTATIONYOUR IMAGINATION
14 YOUR BEST CUSTOMERS OUGHT TO BE “RAVING FANS!!!”
15 Mirror, mirror on the wall … which is the greatest tool of all Mirror, mirror on the wall … which is the greatest tool of all? Product Line Simplification, by far, and its close friend, CUSTOMER SIMPLIFICATION
16 REPORT CARD Is your service line “boxed?” Are policies implemented to drive boxed services?Has a specials policy been defined and implemented?Are the customers “boxed?”Are policies implemented to drive the sales of “boxed” customers?Have key account and raving fans programs been established?Have our processes been set up to maximize the efficiency on key core services?Is the business fully segmented?Are business processes simplified?Are key leaders / “winning” people in place?Do we understand the 80/20 market drivers?Do we clearly know our three year objective?
17 BENEFITS OF 80/20 Your best customers are much happier Your quality is betterYour delivery performance is betterYour costs are lowerYou have fewer, better, happier employeesYou have better growthYou make more moneyYou don’t work as hard