Posted on Sept. 26, 2016
Consultants live by the famous 80/20 Pareto principle: generate 80% of the expected impact with just 20% of effort or information. For example, in the world of ‘big data’, applying this rule would mean that to generate 80% of potential cost savings, the consultant need only to examine 20% of the data available. Of course, 80/20 is only a guideline. The real breakdown could be 70/30, 90/10, etc. The point is to define the problem and analysis so that the biggest impact can be felt by doing the smallest amount of data analysis. This approach worked well in the dawn and the peak of consulting.
However, in a world where new data is generated at an accelerated, exponential rate, and where the cost and time to process data are continually reduced, does it still make sense to apply the 80/20 rule? In fact, no.
At CKM Advisors we live and breath a new rule for a new era: the 100+/100 rule. This rule states that more than 100 percent of the expected impact can be generated by analyzing 100% of the data, a highly realistic task in today’s environment.
In the new world, the aggregate impact that can be achieved is greater than the old 80%. The reason is quite simple. By accessing all the data available, by analyzing it in many dimensions, by linking it to many other data sets, by working not only by deconstructing a problem in its known components but by also understanding the problem in its real context, we can expand the nature of potential impact. Further, by affecting one set of variables, we can impact several dimensions.
This concept is best illustrated by example.
Consider the management of a real estate portfolio in a large company. Typically, a survey will be sent to everyone who has been assigned to a desk to assess utilization and needs. Most often only employees will be contacted while contractors, an integral part of the workforce, will be ignored. Very few people will respond, and even those that do are flustered with survey overload. Most responses will remain subjective, not objective. What people think, or tell others they do, is almost always vastly different from what they actually do.
Based on the few answers received, hypotheses will be developed and a certain number of interviews will be conducted. The 80/20 approach will be used to achieve the biggest results with the smallest effort. The consultant may, for example, focus on employees who work from home, reasoning that this group of employees would not need desks. No desks, reduced real estate needs, big cost savings. By focusing on this group of employees, the consultant has put a boundary around the data and analysis needed, keeping the task well-defined and constrained to a particular group of employees. The consultant saves significant real estate dollars in eliminating desks for this group by analyzing specifically the data related to this small group of employees. This is the old approach.
Now consider the application of the 100+/100 approach. Instead of focusing on a select group of employees, we consider ALL of the data of ALL employees and ALL contractors. The data capture all sorts of behaviors: going to a client appointment, returning from a client appointment located close to another office, meeting every Friday in a different office close to home, making sure presence in the building is always correlated to the physical presence of a manager, leaving everyday exactly at the same time to catch a defined bus or train, etc. Now, by linking the employees’ actual presence, both physical and virtual, to other dimensions such as day of the week, electronic meetings, home zip code, we discover complex patterns that can be influenced and streamlined resulting in impacts far beyond the elimination of some desks.
Instead of focusing on a select group, we consider ALL the data
Under the 80/20 approach, some desks are eliminated. Under the 100+/100 approach, some desks are eliminated, AND the distribution of desks across buildings and campuses is optimized, AND the use of real estate space by function and by business is maximized, AND the services associated with the actual use of real estate such as energy, janitorial services, food services are rationalized, AND the use of new workspace arrangements is adequately understood. What started as a simple cost savings initiative leads to significant enhancements in employee productivity and worker satisfaction all by listening to the data. All will agree this is a significantly improved outcome.
Furthermore, the 100+/100 approach does not require more consulting and management effort, it requires a different kind of effort. The effort can be best described by the people required to perform the tasks; they are people who have a deep understanding of the business imperatives and are able to create meaning out of large sets of opaque data. At CKM, we combine individuals with different skill sets to bring success to our clients. To achieve the greatest impact for our clients, we align data scientists with business experts.
An important fringe benefit of the 100+/100 approach is its ease of implementation and monitoring. As it uses real-time transactional data, the changes are monitored on a continuous basis ensuring that expected impact and actual reality are aligned, real-time. This real-time monitoring allows organizations to notice quickly when expectations and reality are mismatched and to amend the course of action before it is too late.
So we can bid farewell to the 80/20 approach. It achieved its goals at a time when information was sparse and hard to come by. It is an old friend that used to have a reason to be. However, it is not our best friend anymore. Welcome, 100+/100, the new, CKM approach.