From The Desk Of Wil Buchanan: The Way to Create Something Great…

The Way to Create Something Great…

The author Richard Koch coined the phrase “The way to create something great is to create something simple”. He is referring to our human condition of complicating everything that we touch, and of the amazing productivity gains to be had by simplifying. Brian O’Connell from Service-Leadership Inc. has a saying that makes me laugh every time. He says, “there’s nothing simple that we can’t complicate!”

“The way to create something great is to create something simple”

So, what’s the cost of this complexity in our companies, and what do we have to gain by simplifying? Assuming that business follows the natural law of 80/20 (20% of our efforts account for 80% of our rewards), the opportunity cost of not removing complexity from our organizations, is the inability achieve greatness.

I’m studying this concept from several books including The Goal, by Eli Goldratt, Essentialism by Greg McKeown , The 80/20 Principle by Richard Koch, and the 4 Disciplines of Execution by Chris McChesney and Sean Covey. Koch says it best in Chapter 5 of his book. He boils it down into this simple (yes, pun intended) list:

1.     Simplify (Identify and eliminate unprofitable activity)

2.     Focus (On a select few things that were identified in step 1)

3.     Compare (What changed after you made the removed the unprofitable activities and did more of the profitable activities).

Does the 80/20 rule, or Pareto’s Principle apply in every business?

Hard to say, but I’d bet that it does. To test this theory, I wanted to find out if 80% of our revenue actually comes from only 20% of our customer base. Yep. Almost exactly (78% of our revenue comes from 22% of customers). On the flip side of this, 79% of the effort (service hours) that we put out each month only generates about 35% of our monthly revenue. It’s not exactly the 80/20 rule, but it is nonlinear and it is staggering.

I have the feeling that if a company could master these principles, that they would become great. Let me know if you’ve experienced this principle in your life and/or business.

Wil Buchanan