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1 – 8020 Focus and No distraction

Doing a successful and result-oriented job is not as easy as it seems. In 1999, I was stunned by the productivity level and focus of my work colleague at a bank in the South of Germany. Mrs. Muller, a trusted and long-time employee in that bank, was scanning and double checking all high-income transfer receipts. I noticed two aspects at the same time, there were many zeros on each receipt and there were only a few receipts scanned compared to the amount of numerous boxes of thousands of documents. I was confronted the first time with the 8020 concept. All of the high and important transfers were taken into account whereas the majority of transfers weren't included by Mrs. Muller. She only focused on the most important transfers. But as a matter of fact the real lessons learned from her was her focus on time and to deliver her tasks each day in 8 hours because she had a 40 hours week. Every day she performed and there was zero distraction to do what she had to do on her 8 hour-workday. She was delivering concentrated value by simply doing what she was supposed to do.

Sounds like a normal working performance. But, there is one common mistake I see day by day in the numerous offices I visit.

Employees are very often “just not” doing what they are supposed to do.

And even worse, their boss, the CEO, is very often neither doing what he/she is supposed to be doing.

They are trapped in the daily business and the incoming operative problems, mails, social media and non-strategic tasks. They are busier with efficiency than with effectiveness. Doing the right things versus doing things right.

CEO challenge

The key challenge for a CEO is to manage that he/she and importantly his/her team are focusing and executing on the right things each day. And that doing the right things impact financially on profitable growth. CEOs have to define where the company will be in 2 years and not take part in each single decision which his or her managers are responsible for.

CEOs have to define the long-term vision and the fundamental business model elements (for instance closing constant deals with their key account, developing and hiring an outstanding sales team, defining a required service level or establishing a best in class business practice or process) that provide the company a competitive advantage and generate financial value.

CEOs are responsible for the strategy.

Strategy is a synonym for renunciation. To focus, CEOs have to trade off.

How much time do you spent each day on operational issues?

How much of your time are you in the 8020 zone?

In 1906, Vilfredo Pareto noted that 20% of the population in Italy owned 80% of the property. He proposed that this ratio could be found continuously in the physical world and theorized it might indicate a natural law. For business, we know that in most cases the 8020 rule comes true:

o 80% of work is completed by 20% of your team.

o 20% of your best clients (or customer segment) makes 80% of your sales.

o 20% of your products makes 80% of your sales.

o 20% of your best sales reps makes 80% of your sales.

o 80% of your complaints come from 20% of your customers.

o 80% of value is achieved with the first 20% of effort.

o 80% of project politics come from 20% of your stakeholders.

o 80% of problems originate with 20% of projects.

o 80% of software problems are caused by 20% of bugs.

o 80% of customers only use 20% of software features.

16x Pareto Principle

80÷20=4

20÷80=0.25

4÷0.25=16 → 16x

The right focus with the Pareto principle to define and execute on key projects, clients, priorities, people, tasks, … brings you 16x more results = impact = success

I always include the 8020 principle in all strategy courses I give, as a key part to plan a successful year in order to deliver more customer + employee value and to receive more profitable growth for the company.

Through the years, I have seen that many CEOs, especially of SMEs, lack to see the BIG PICTURE; whereas the most successful CEOs have become 8020 masters because they lead their companies to achieve ambitious goals while focusing energetically on the most important actions to reach the higher goals, for instance:

- They visit and develop the relationship of their key clients and prospects to understand market needs and requirements.

- They talk frequently to and retain their key employees, especially key sales people.

- They are aware of disruptive trends and key challenges. Hereby, they are better prepared for an unpredictable crisis.

- They set clear goals and communicate the importance of strategy execution.

- They empower employees and show them the importance of the 8020 rule.

You need to focus perfectly on the 20% that will deliver you the 80% of the desired result. Every decision and action has to be made consciously if our time is used effectively.

These are 8 logic steps to become a successful "profitable growth company":

1. Set and remind the sales and EBITDA goals with the majority of your employees and quarterly reward those who achieved them.

2. Focus on high-gross margin projects, products, services and customers.

3. @CEO: Be the number 1 sales guy in the company that inspires customers to buy your products or services.

4. Hire and retain the best sales people in the industry.

5. Develop benchmark and 8020 sales & marketing channels. Very importantly embrace and dominate digital marketing because nowadays every client is digital.

6. Have strong partners and allies that help you to sell.

7. Cross-selling is key. Your adjacencies strategy has to be well defined and executed.

8. Measure and communicate your sales, profit and productivity indicators.

Now, let's have a look at one of the most admired companies in Germany. DAIMLER recently defined the following strategy focus*:

“Four future-oriented fields are set to radically change the nature of mobility: greater vehicle connectivity, advances in automated and autonomous driving, the development of digital mobility and transport services, and electric mobility.

Our objective is clear. We intend to continue to be a leading vehicle manufacturer while developing into a leading provider of mobility services. Every strategic action revolves around one thing, the customer. So also for the future, we will only be as successful as our products and services are in the market.

By means of five closely related components we are pushing forward the biggest changes in our company history - our 5C-strategy. We will be:

• strengthening our global core business (CORE)

• leading in new future fields (CASE)

• adapting our corporate culture (CULTURE), and

• strengthening our divisional structure (COMPANY).

• The benchmark for each of these strategic components is

our fifth and most important C: our CUSTOMERS.”

So, defending and strengthening your core business should always be the starting point of your strategy plan, unless you have proven data that your "core business" is threatened to lose more than 40% of sales and/or market share during the next 2 years. In times of disruption this might be a possible scenario but it is rare especially for medium sized enterprises. The core business is where your company generated the most gross profit during the last 3 years and strengthening this part is essential for maintaining profitable growth for the future.

Your culture and customer strategy focus are two more common key 8020s for every business. Culture is the values that define how everyone acts in your company regarding to customers, suppliers and other stakeholders. One of the most important organizational values is frugality. Rarely found in the today's company values but so crucial for profitable growth. Frugality means the quality of being economical with money. Being prudent and wise when it comes to investment and spending is a must have 8020 value. This is what my dad taught me and how German fathers educate their coming generations. At the end of the day, performance is key and you have to focus without distraction. More importantly, hire focused people.

Business owners are responsible for hiring focused people who are better than him or her and they should not be there to execute 80% of the whole work that by the way only results in 20% of the important results.

Never distract yourself from the 8020 zone.

Distraction leads to Procrastination

Please be aware that procrastination means postponing something. It is more and more common in a social world where the new generations loose so much time in consuming social media. But this time spent on video / audio may be out of the 8020 zone. So, a key challenge for Top Management in the next 5 to 10 years will be keeping people focused.

Let’s have a deeper look on why people are distracted or procrastinate key responsibilities:

• Too many tasks

• Unclear goals

• Fear of change

• Committing too much

• Fear of failure

• Social media or

• Mainly lack of communication and attention.

Essentially, the communication of the 8020 zone, reasons, goals etc. is going to be more important than at any time in the business history.

Communicate the 8020 principle over and over again, especially internally since it becomes so crucial to focus the millennial and post-millennial employees. Get their attention with creative video and audio messages about the company’s 8020 goals and tasks.

Furthermore, a strong focus boosts your company’s competitiveness. Concentrate the limited resources where your company excels best in a profitable way. Knowing with which customers, with which products/ services, and in which geographical markets you have already succeeded, gives you a clear hint of where to focus. All the passion and time should be focused on your 8020s.

TMH Case Studies

1

- Failure: Lack of focus. There was a client who had 5000 SKUs and we showed him (analysis-wise) that only 600 products made 80% of sales.

We recommended the CEO to discontinue at least 500 very costly and unprofitable products.

We showed data over and over again. But at the end of day, the Owner did not want to “kill” one single product because these products were like his children and he did not want to “kill” them.

- Lesson learned: Products or services are not your children and you should not have an emotional over-attachment to unprofitable products and services.

Actually, thinking about the biggest failures in the business world, all failures have to do with not taking into account disruptions or that the value proposition became obsolete at some time.

When the big data shows you that certain products do not make sense financially please do consider at least to double check if and why you really should keep this product in your portfolio.

2

- Success: We showed a client data that in terms of geography 80% of his business was in the country’s capital since the big companies and budgets were centralized there.

His headquarters were 600 kilometers away from the capital.

So, we showed him with data the potential sales his company might have in the next 3 years penetrating the new target market. He decided to move to the capital and among sound B2B marketing strategies we got two new “big” clients, which by the way had the biggest budgets for his products in the whole market.

His 5-years CAGR (Compound Annual Growth Rate) was +200%.

The EBITDA growth was similar.

- Lesson learned: If you have a physical product or you have to sell your service 1 to 1 to real people you have to be close to your 8020 clients and prospects.

Being in the 8020 zone means your headquarters should be at the target market. 80% of the market value is often driven by only 20% of key players. You and your salesforce have to be close, very close, to your customer.

This was the success story for this particular client and indeed we have created many of these success stories to be near the target market.

Oftentimes, the sales representatives are not close enough with their target market clients and prospects. They are physically and emotionally absent.

*Source: Daimler Strategy statement published on the Daimler webpage.

More information: https://www.daimler.com/company/strategy/ (2020)