In late 1800’s an Italian economist named Vilfredo Pareto observed that 80% of Italy’s land was owned by about 20% of its population – the elite of the day. This concentration characterized by 80/20 distribution has now become the famous Pareto Principle (aka the 80/20 thumb rule). This 80/20 rule manifests itself in many areas of our day to day life. Some examples – for many non-fiction books, 80% of the main content is captured within the 20% of the pages, the rest is repetitive. For many companies, 80% of their sales income comes from 20% of their clients. In industrial environments, 20% of the hazards lead to 80% of the injuries.
Interestingly, this 80/20 rule can be used effectively to drive the strategy, execution & decision making when managing technology products & teams.
Product Market Fit: Most startups (& even established companies with emerging products) struggle for a while before they find their “market-fit” – i.e. they try pitching their product/service/technology in a variety of industries, verticals, use cases, price points, geographies etc. The lucky ones find the market-fit before the funding dries up and the no-so-lucky ones go belly up without ever discovering the market-fit.
It’s important to have a Go-To-Market strategy & target segmentation based on the attributes of your product/service. At the same time, during the discovery phase, it’s important to experiment & pitch your product for a variety of use cases – some of which should be outside your original target segment. If you are lucky, for every 10 attempts you make, you may find some semblance of market-fit in 1 or 2 cases (i.e. the 20% rule). VMware is well known for its virtualization technology. However, in the early days of VMware, they had to struggle for a long time to find the market-fit until their product landed in the hands of system administrators who were responsible for managing servers – the rest is history. To hear more about VMware’s early struggles, hear this interesting podcast interview with Diane Green (co-founder & former CEO of VMware)…
Product Usage: A typical technology product (software or hardware) contains many bells & whistles. My experience is (some anecdotal and some data-driven), most users (80%?) use a very small set (20%?) of the available features/capabilities on a daily basis. This provides a fantastic opportunity for product teams to derive amplified gains with minimal effort – identify the most used 20% feature-set and polish them to perfection leading to remarkable results! If your 20% feature set offers the best user experience possible, your users will love your product and think thrice before considering alternatives!
KPI’s: Product teams typically use metrics/OKRs/KPIs to measure & drive outcomes. These KPIs can take various forms like users, usage, transactions, customer satisfaction, NPS, repeat usage, DAU, MAU, geographical distribution, platform distribution, customer distribution, industry distribution etc. Depending on who you speak to within the company, the metrics list can be endless and it’s not practical to monitor and review all the metrics. A more practical approach to success would be to identify the top few metrics (the 20%) and drive those with a maniacal focus! Having fewer KPIs to monitor makes it easier for product teams to focus on those KPIs and drive the catalysts that grow those KPIs.
Key People in a Team: A typical product team (or a sub-team) consists of 6-8 people. If you are lucky, there is 1 person (i.e. 20%) who is a head-and-shoulder above the others on the team. If you are super-fantabulously lucky, you land a 10x person on your team. These are the people who can solve the prickliest of the problems or come up with ingenious ideas that take your product from mediocrity to superiority. Identify such key people and make sure that they are taken care of in every respect (i.e. compensation, assigning them non-mundane projects, protection from politics, etc.).
Innovation: Venture Capital companies are in the business of investing in innovative startups with the hope that they go IPO or get acquired. The reality is, for every 10 companies the VC’s invest in, about 2 of them find some success while the rest flop. Google is known as one of the most innovative companies with a string of “successful” products such as Search, Maps, Gmail, Chrome, Android, YouTube, Android etc. The reality is, 84% of Google’s revenue comes from its advertising initiative – the 80/20 rule at play again! Even successful companies like Google have to chase a variety of innovations before they can find a “hit”. What this means for corporates is, to drive innovation, you must have the willingness to stomach 8 or 9 losses before they can hit 1 or 2 successful products. Without this willingness to invest in losses, innovation cannot happen!
Use the 80/20 to find yourself 100% success!