How To Leverage A Centuries Old Principle To Gain A Competitive Advantage
In opinion / By Guise Bule / 13 February 2017
Back in the late 1800's, somewhere in the beautiful green gardens of Laussanne in Switzerland, an Italian gentleman by the name of Vilfredo Pareto was pottering around in his vegetable patch, when it occurred to him that 20% of the pea pods in his garden were producing 80% of the peas and it got him thinking about the pea pod productivity distribution and efficiency.
Whilst Vilfredo Pareto may seem like a pea obsessed gardener, he was actually the Chair of Political Economics at Lausanne University and his thinking around the peas in his garden formed the basis of the now very well distribution principle. I say well known because even if you have never heard of the Vilfredo Pareto, you will probably have heard of the 80/20 rule before, known to most economists as the Pareto Principal.
The 80/20 Rule
While Vilfredo was pottering around his vegetable patch thinking, he also worked out that 80% of the income in his native country of Italy, was earned by 20% of the Italian population. He pondered on the correlation between the distribution of peas in pea pods and the distribution of income in Italy before developing his now famous principle, the assumption that most of the results in any given situation are determined by a small number of causes.
Suddenly it wasn't just Vilfredo seeing the 80/20 rule in his pea garden, it was people who owned or managed businesses who started seeing the 80/20 rule everywhere as well. People started saying that 80% of problems could be attributed to 20% of causes using the principle; or you could see that 80% of a company's profits come from 20% of its customers; or that 80% of a company's complaints come from 20% of its customers; or that 80% of a company's profits come from 20% of the time its staff spent; or that 80% of a company's revenue comes from 20% of its products - and even that 80% of the coffee in the break room is drank by just 20% of the workers using the break room.
Generally speaking, all of these observations were true at the time they were observed, the Pareto Principle is one of those insidious economic principles which can be found everywhere if you really look hard enough and the good thing is that you will never be accused of having a delusional disorder, because the 80/20 rule is a real and proven economic principle.
The 80/20 Rule In IT
I can go on and on with examples of the 80/20 rule applying to business, but being that I work with technology, I am going to tell you how to leverage your technology to gain a strategic advantage over your business competitors using the centuries old Pareto Principal.
Take a good long and hard look at your IT infrastructure, the IT that powers your business, 80% of your IT looks almost identical to your competitor's IT infrastructure and there is probably only about 20% differentiation in the technologies that you use to enable business processes. Here is another way to look at your IT from the perception of the Pareto Principle, 20% of your IT infrastructure makes 80% of the difference in your business, the rest just keeps the lights on and the business running, typically the bit that looks exactly the same as your competitors.
My point here is that focusing on the 20% of your IT infrastructure that really helps you differentiate from your competitors is what will make all the difference strategically and competitively. As a CTO or IT Director, you have to realise that it is your focus on the 20% that makes a difference, instead of focusing on the 80% of your IT that doesn’t do much to advance your overall business goals and that if you really want to make a difference, you have to innovate around the 20% of your IT that counts to find the competitive and strategic advantages.
Leveraging The Pareto Principal In The Real World
The first step to leveraging the 80/20 rule in your businesses IT is by getting rid of the bulk of the IT infrastructure that does nothing to further your business goals and everything to keep your lights on. Outsource those boring elements of your IT to a managed IT services provider to keep the lights on for you, all that 80% chunk of your IT does is distract your IT team from their real jobs and even worse (in economics terms) there is diminishing marginal benefit. In organisations that focus on the 80%, you can almost see the law of diminishing returns at play as each additional hour of effort spent keeping the lights on means that each extra technician is adding less and less to your overall business goals and if this is left unchecked and allowed to continue, your IT stops supporting your business goals and instead starts to hinder them.
So thats the first step - stop fiddling with desktops, servers, AV, printers and all of the boring mundane aspects of IT that do absolutely nothing to advance your business goals and get rid of it. Outsource it to a managed IT services provide (lowering your CAPEX and fixing your OPEX in the process.) It's a no brainer and if you haven't already, you should do immediately before your competitors eat you. You have to move away from thinking about your IT as something that supports your business and start thinking about your technology as a business enabler.
OK, I Outsourced 80% of My IT, Now What?
First of all, congratulations! You have finally freed yourself from IT slavery and you can now focus on those technological strategic and competitive innovations that will really help you get a competitive advantage over your competitors. Now your IT team are free to investigate and learn new ways of helping your business get ahead of the pack and this in itself gives you a huge advantage over those of your competitors who are still trapped in 'keeping the lights on' mode.
But now what shall I do you ask me? Well I have absolutely no idea, you know your business a lot better than I do and you will know where those nooks and crannies in your business, the ones that contain the competitive and strategic advantages are to be found. All I can really do is give you a few examples of what others have done when they stopped thinking about keeping the lights on and started thinking about how to use their technology as a strategic and competitive weapon to use against their competitors.
Automate All The Manual Work
A good place to start leveraging technology as an advantage is to immediately look at all of the manual work that your employees are doing in the business and see if you an automate it. For example in the legal sector forward thinking law firms are leveraging technology like RAVN to automate the processing of millions of contracts using artificial intelligence. A great example of this was during the PPI scandal when they had to check millions of contracts for specific clauses related to PPI and realised that by automating the work they could reduce their time to completion by five years, completing the task in 18 months using AI, rather than six years using humans whilst maintaining the same error rate doing it. It is exactly this sort of forward thinking that helps a business beat its competitors in a fiercely competitive market place.
Make Your Applications Talk To Each Other
Another great place to rid your business of the scourge of manual work is to get your applications talking to each other. A great example is a book-keeping client of ours who realised that they were spending an extraordinary amount of time inputting raw data into excel spreadsheets, so they invested in custom software development that connected each of their applications and enabled automated data input and data flow between them, saving then enormous amounts of time that can now be spent on more productive tasks in the business.
We also work a lot with the recruitment industry and the professional services team in our recruitment division have mastered the art of creating custom software to help automate recruitment workflows. They have helped drive efficiencies in some of the largest recruitment consultancies in the country by creating custom software to automate the most common workflows and connect CRM systems to web portals, reporting tools, customers and candidates, freeing up recruitment consultants to do what they do best.
Recruitment consultancies we have come across are exceptionally good at automating tasks that integrate directly with social media platforms after realising that their consultants spent a lot of time promoting and managing jobs across social platforms, now all of that work is automated so as soon as a customer adds a new vacancy to the system, it is automatically promoted and managed on all of your social media channels using custom automation software, creating even more time for consultants to spend with their candidates and customers.
One of the big technological leaps in the legal industry over the last few years has been digitisation, where all of the countless pieces of paper that a law firm accumulates and stores for decades is digitised and uploaded to a cloud platform, made immediately available for lawyers, clerks and administrative assistants to easily find and access the document, saving the huge amounts of time that it would have previously took to retrieve the document from storage. If there are bits of paper still floating around your workplace and your business process depend on them, you would do well to follow the legal industries lead and find a way to digitise that paper, making it infinitely more flexible and convenient.
Protect Your IP
One of the most common complaints amongst recruitment firms is that when consultants leave, they very often leave with a copy of their current database on a USB stick and take it to their next employer and this is actually a complaint that you hear across many different industries that deal in sensitive, private of valuable data of any kind. If your business may suffer if your company proposals or supplier price lists gets into the wrong hands, then it will make sense to take a closer look at document rights management technologies and data leak software that helps you keep control over your databases and the documents that you do send outside of your company. Imagine if suddenly all of the documents that you sent to your customers and suppliers prevented themselves from being printed, copied or forwarded and that they deleted themselves after a certain amount of time. Protecting your IP in any way gives you a huge advantage over any competitors who may not be doing the same, especially in small 'incestous' industries and is definitely something to think about applying technology to.
Collaborate More Effectively
Our CEO Nigel Redwood said a wonderful thing the other day, he said that "Slack actually makes virtual teams a productive reality" and he was absolutely right. It pleases me because I brought Slack with me when I joined Nasstar and up until then we were not really using any team collaboration tools to deal with external contractors and freelancers, then suddenly we acquired a company called Modrus who also used Slack to collaborate and saw the light. By removing the need to spread conversations across multiple channels (IM, email, telephone, skype, etc) and removing the thread fragmentation between conversations between teams, you can dramatically boost your productivity and this doesn't just apply to remote or virtual teams, it applies to anyone who sends lots of emails, uses IM a lot, checks support ticket systems constantly or works in a huge open plan office and has to walk across it to talk to someone about something. If you fuse all of that into one single pane of glass like Slack, suddenly you have oiled the operational wheels of communication and made it really easy for everyone to have the conversations they need all in one place and it also makes your team conversations transparent and visible so nobody is out of the loop.
In short, stop focusing on the IT that keeps the lights on, all that will ever do is justify your current job and that is never going to help you move your business to a better place technologically. Outsource everything that you can do yourself, but shouldn't be, freeing your valuable time and resources up to focus on the parts of your IT that will really make a difference to your business.
Automate manual work where you can and leverage AI to do tasks faster than humans where possible, even if its just having X.ai look after your calendar scheduling for you. Figure out ways to protect your IP and what you know so that it remains a strategic advantage and stop your employees walking away with your data when they leave if this is an issue that has happened more than once. Finally, figure out ways to collaborate more effectively with your team, the chances are that you are all still stuck in the 9-5 office dynamic, all commuting to work to be together, but doing nothing but sit in 'communication silos' away from the rest of the company, the right hand no idea what the left hand is doing.
When Vilfredo walked around his vegetable garden pondering on peas that day, he stumbled across a principle which can dramatically change your fortunes when applied to your IT infrastructure and you need to start pondering peas like Vilfredo did if you really want to gain a strategic advantage over your competitors.