The 80/20 Principle: The Secret of Achieving More With Less (29 page)

Talent has probably always followed an 80/20 pattern. The effect of technology may be, roughly, to move talent to a curve approximating 90/10 or 95/5. Rewards used to follow, perhaps, a 70/30 curve, but for the most famous they must surely now be close to 95/5 or an even more unbalanced curve.

The distribution of wealth along 80/20 or even 99/1 lines seems to have become an inexorable and even frightening trend. Between 1990 and 2004, the top 1 percent of American earners saw their earnings fatten by 57 percent. For the top one-tenth of 1 percent, it soared by 85 percent. Billionaires have fared even better. Their combined wealth was a staggering $439 billion in 1995, but now it has multiplied eight times to $3.5
trillion.
In the last year (up to 2007), it went up by no less than 26 percent. Two-thirds of the 2007 billionaires were significantly richer than last year, and only 17 percent were poorer.

WHAT DOES ALL THIS MEAN FOR THE AMBITIOUS?

What are the rules for success in this 80/20 world? You may want to give up and refuse to compete in a world where the odds against megasuccess are so long. But I believe this is the wrong conclusion. Even if you do not aim to become a world-beating millionaire (but especially if you do), there are 10 golden rules for successful careers in an increasingly 80/20 world (see below).

Although these principles are more valuable the more ambitious you are, they apply to any level of career and ambition. As we elaborate, put on your 80/20 thinker cap to editionize the text to your own career. Recall the Von Manstein matrix: find the place where your name is already inscribed, where you can be intelligent, lazy, and highly rewarded.

10 golden rules for career success

1. Specialize in a very small niche; develop a core skill

2. Choose a niche that you enjoy, where you can excel and stand a chance of becoming an acknowledged leader

3. Realize that knowledge is power

4. Identify your market and your core customers and serve them best

5. Identify where 20 percent of effort gives 80 percent of returns

6. Learn from the best

7. Become self-employed early in your career

8. Employ as many net value creators as possible

9. Use outside contractors for everything but your core skill

10. Exploit capital leverage

Specialize in a very small niche

Specialization is one of the great, universal laws of life. This is how life itself evolved, with each species seeking out new ecological niches and developing unique characteristics. A small business that does not specialize will die. An individual who does not specialize will be doomed to life as a wage slave.

In the natural world the number of species is unknown, but it is almost certainly an astonishingly large number. The number of niches in the business world is very much larger than generally appreciated; hence many small businesses, apparently in competition in a broad market, can actually all be leaders in their own niches and avoid head-to-head competition.
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For the individual, too, it is better to know a few things well, or preferably one thing exceptionally well, than it is to know many things superficially.

Specialization is intrinsic to the 80/20 Principle. The reason that it operates—that 20 percent of inputs can result in 80 percent of outputs—is that the productive fifth is much more specialized and suited to the task at hand than are the unproductive four-fifths.

Whenever we observe the 80/20 Principle working, this is evidence both of a waste of resources (on the part of the unproductive four-fifths) and of the need for further specialization. If the unproductive 80 percent specialized in what they are good at, they could become the productive 20 percent in another sphere. This in turn would produce another 80/20 relationship, but at a higher level. What used to be the unproductive 80 percent, or some of it, will now be the productive 20 percent in another distribution.

This process, what the German nineteenth-century philosopher G. W. F. Hegel called a “dialectic,”
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can go on and on, constituting the engine of progress. Indeed, there is evidence that this is precisely what has happened over time, both in the natural world and in society. Higher living standards have been driven by greater and greater specialization.

The computer evolved from a new specialization within electronics; the personal computer from a further specialization; modern user-friendly software from further specializations; the CD-Rom from yet another stage of the same process. Biotechnology, which will revolutionize food production, has evolved in a similar way, with each new advance requiring and feeding on ever more progressive specialization.

Your career ought to evolve in a similar way. Knowledge is the key. One of the most marked tendencies in the world of work over the past generation has been the increasing power and status of technicians, formerly often blue-collar workers but now empowered by specialist knowledge in league with ever more specialized information technology.
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These experts are now often more powerful and well paid than the technologically more primitive managers who purported to add value by organizing the technicians.
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At the most basic level, specialization requires qualifications. More than 80 percent of qualifications in most societies are held by 20 percent of the workforce. Increasingly, the most important class distinction in advanced societies is not ownership of land or even of wealth, but ownership of information. Eighty percent of information is the property of 20 percent of people.

The American economist and statesman Robert Reich has divided the U.S. workforce into four groups. The top group he calls “symbolic analysts,” people who deal with numbers, ideas, problems, and words. They include financial analysts, consultants, architects, lawyers, doctors, and journalists, indeed all workers whose intelligence and knowledge are the source of power and influence. Interestingly, he calls this group the “fortunate fifth”—in our terms the top 20 percent—who he says hold 80 percent of information and 80 percent of wealth.

Anyone who has any recent experience of intellectual disciplines knows that knowledge is undergoing a profound and progressive fragmentation. In some ways this is worrying, since there is almost nobody in the intelligentsia or society as a whole who can integrate different advances in knowledge and tell us what it all means. But in other ways, the fragmentation is further evidence of the need for and value of specialization.

And for the individual, observing the increasing trend of rewards going to the top dogs, this is an extremely hopeful process. You may have no hope of becoming Albert Einstein or even Bill Gates, but there are literally hundreds of thousands, if not millions, of niches where you can choose to specialize. You could even, like Gates, invent your own niche.

Find your niche. It may take you a long time, but it is the only way you will gain access to exceptional returns.

Choose a niche that you enjoy and in which you can excel

Specialization requires very careful thought. The narrower an area, the more important it is to choose it with extreme care.

Specialize in an area in which you are already interested and which you enjoy. You will not become an acknowledged leader in anything that cannot command your enthusiasm and passion.

This is not as demanding a requirement as you may think. Everyone is excited by something; if not, they are dead or dying. And almost every hobby, every enthusiasm, every vocation can these days be turned into a business activity.

You can also look at it from the other end. Almost anyone who has made it to the top has done so with great enthusiasm for what they are doing. Enthusiasm drives personal achievement and also infects others with enthusiasm, creating a multiplier effect. You cannot feign or manufacture enthusiasm.

If you are not enthusiastic about your current career, and are ambitious, you should stop doing it. But before you take this step, work out a better career. Write down all the things about which you are enthusiastic. Then work out which of these could be made into a career niche. Then choose the one about which you are most enthusiastic.

Realize that knowledge is power

The key to making a career out of an enthusiasm is knowledge. Know more about an area than anybody else does. Then work out a way to marketize it, to create a market and a set of loyal customers.

It is not enough to know a lot about a little. You have to know more than anybody else, at least about something. Do not stop improving your expertise until you are sure you know more, and are better in your niche, than anybody else. Then reinforce your lead by constant practice and inveterate curiosity. Do not expect to become a leader unless you really are more knowledgeable than anyone else.

Marketization is a creative process: you will need to work out for yourself how to do this. Perhaps you can follow the example of others who have marketized their knowledge in an adjacent area. But if this option is not available, follow the guidelines below.

Identify your market and your core customers and serve them best

Your market is those people who might pay for your knowledge. The core customers are those who would value your services most.

The market is the arena within which you will operate. This requires you to define how the knowledge you have can be sold. Are you going to work for an established firm or an individual as an employee, to work for a number of corporations or individuals as a freelancer, or to set up business marketing services (derived from the labor of yourself and others) to individuals or to firms?

Are you going to supply raw knowledge, to process it for specific situations, or to use the knowledge to create a product? Are you going to invent the product, to add value to someone else’s semifinished product, or to be a retailer of finished products?

Your core customer or customers are the specific individuals or corporations that may place the highest value on your activity and that may provide a stream of well-paid work.

Whether you are employed, self-employed, a small or large employer, or even the head of state, you have core customers on whom your continued success depends. This is true whatever the level of your past achievement.

It is surprising, incidentally, how often leaders forfeit their position by neglecting or even abusing their core customer group. Tennis star John McEnroe forgot that his customers were the spectators and even the professional tennis organizers. Mrs. Thatcher (as she then was) forgot that her most important customers were her own Conservative Members of Parliament. Richard Nixon forgot that his core customer group was Middle America, with its requirement for integrity.

Serving customers is key, but they must be the right customers for you, those whom with relatively little effort you can make extremely happy.

Identify where 20 percent of effort gives 80 percent of returns

There is no fun in work unless you can achieve a lot with a little. If you have to work 60 or 70 hours a week in order to cope, if you feel that you are always behind, if you are struggling to keep up with work’s requirements: then you are in the wrong job or doing it completely the wrong way! You are certainly not benefiting from the 80/20 Principle or from the Von Manstein matrix.

Keep reminding yourself of some of the golden 80/20 insights. In any sphere of activity, 80 percent of people are only achieving 20 percent of results; and 20 percent of people are achieving 80 percent of results. What are the majority doing wrong and the minority doing right? Come to that, who are the minority? Could you do what they do? Could you take what they do and do it in an even more extreme form? Could you invent an even more clever and efficient way to do it?

Is there a good fit between yourself and your “customers?” Are you in the right corporation? The right department? The right job? Where could you impress your “customers” with relatively little effort? Do you enjoy what you do and are you enthusiastic about it? If not, begin planning today to switch to a job where you can be.

If you like your job and your “customers” but are not coasting to glory, you are probably spending your time in the wrong way. What is the 20 percent of your time when you achieve 80 percent of your results? Do more of it! What is the 80 percent of your time when you achieve little? Do less of it! The answer can be as simple as that, although implementing the change will require you to break all your normal habits and conventions.

In every market, for every customer, in every firm, in all professions, there is a way to do things more efficiently and effectively: not just a bit better, but a step-function better. Look beneath the surface for 80/20 truths in your profession or industry.

In my own profession, that of management consulting, the answers are clear. Big clients, good. Big assignments, good. Large case teams with many cheap junior members, good. Close client relationships—between individuals—good. Relationships with the top person, the CEO, very good. Long client relationships, very good. Long and close client relationships with the top people in large corporations, with large budgets, and the use of many junior consultants—laughing all the way to the bank!