Holistic Thinking and Systems Thinking
In business and organizations, holistic thinking is often used synonymously with systems thinking. Systems thinking is your ability to see things as a whole [or holistically] including the many different types of relationships between the many elements in a complex system.
Yet, 'holistic thinking' is a wider concept that involves perceiving a system through sensing its large-scale patterns.
Systems thinking is often focused on problem solving through understanding elements of the system and their interconnections. >>>
This is, definitely, a valuable perspective to assist organisations improve performance. However, adopting other conceptions of holism, such as The Tree of a successful business [see example], 6Ws of corporate growth [see example], 5 Basic Elements of a winning organisation [see example], or working both smart and hard, may open up new perspectives which may also be very valuable.
Example
5 Basic Elements of Innompic Games
For instance, when applied in social situations, holistic thinking involves sensitivity, intuition and tact. Before modifications of the parts can be made for the overall benefit of the system, a thorough knowledge of how each part functions and the interrelationships among the parts must be present.
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Adapted from The 80/20 Principle and 80/20 Revolution, Richard Koch
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Warning! Don't apply 80/20 analysis and strategies in a linear way. "Like any simple and effective tool, 80/20 Analysis can be misunderstood, misapplied and, instead of being the means to an unusual insight, serve as the justification for conventional thuggery. 80/20 Analysis, applied inappropriately and in linear way, can also lead to the innocent astray – you need constantly to be vigilant against false logic". |
| 80/20 Analysis examines the relationships between two sets of comparable data and can be used to change the relationships it describes. One its use is to discover the key causes of the relationship, the 20% of inputs that lead to 80% of outputs, and put your resources behind the best-performing efforts. The second main use of 80/20 Analysis is to improve the effectiveness of the underperfroming 80% of inputs that contribute only 20% of the output. 80/20 Analysis should be applied carefully, in a systemic way, as opposite to linear thinking that may lead to misunderstanding of the 80/20 Principle and its potential abuses. "Don't be seduced into thinking that the variable that everyone else is looking at... is what really matters. This is linear thinking. The most valuable insight from 80/20 Analysis will always come from examining non-linear relationships that others are neglecting." |
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Analytic Thinking vs. Holistic ThinkingPage 3
The 80/20 Principle involves a static breakdown of causes at any one time, as opposite to change over time. "The art of using the 80/20 Principle is to identify which way the grain of reality is currently running and exploit that as much as possible".
The 80/20 numbers are only a metaphor and a useful benchmark. The real relationship may be more or less unbalanced than 80/20. The 80/20 Principle asserts, however, that in most cases the relationship is very likely to be unbalanced and close to 80/20.
The 80/20 Principle is extremely versatile. "It can be → profitably applied to any industry and any organization, any function within an organization and any individual job". It helps you identify all the forces beneath the surface, so that you can give maximum power to the most productive forces and stop the negative influences.
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What is 80/20 Principle?
The 80/20 Principle asserts that there is an inbuilt imbalance between inputs and outputs, causes and consequences, and effort and result. It states that a minority of causes, inputs or effort usually lead to a majority of the result, outputs or rewards. A few things are important; most are not... More
80/20 Thinking
80/20 Thinking, applied to your daily life, can help you change behavior and to concentrate on the most important 20%.
Action resulting from 80/20 Thinking should lead you to achieve much more with much less. To engage in 80/20 Thinking, you must constantly ask yourself: what is the 20% that is leading to 80%? Never assume that you automatically know what the answer is, but take some time to → think creatively about it. "For every ounce of insight generated quantitatively, there must be many pounds of insight arrived at intuitively and impressionistically."
→ Amazing Thinker 360
Achieving Progress by Applying 80/20 Principle
80/20 Principle is inherently optimistic because it reveals a state of affairs that is seriously below what it should be and shows the direction towards a better state. To achieve progress and multiply your output, you must give power to the 20% of resources that really matter in terms of achievement, and get the remaining 80% up to a reasonable level. "Progress takes you to a new and much higher level. But, even at this level, there will still typically be an 80/20 distribution of outputs/inputs. So you can progress again to a much higher level."
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80/20 Principle and Your Business
The key theme of the 80/20 Principle applied to → business is how to create the greatest stakeholder value and generate → most money with the least expenditure of assets and efforts. Any individual business can gain immensely through practical application of this Principle.
→ Business Success: Yin-Yang Strategies
The most important use of the 80/20 Principle is "to isolate where you are really making the profits and, just as important, where you are loosing money. Every business person thinks they know this already, and nearly all are wrong. If they had the right picture, their whole business would be transformed". >>>
The game is to spot the few places in your → business model where you are making great surpluses – be that a product, a market, a customer type, a technology, a distribution channel, a department, a country, a type of transaction, an employee, or a → team – and to maximize them; and to identify the places where you are loosing and get out. >>>
80/20 Principle of Higher Profits
80/20 Principle for Customer Success
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| Applications of the 80/20 Theory of the Firm |
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| 80/20 Analysis of Profits |
| To achieve sustainable growth through effective reallocation of resources, conduct continuously an 80/20 Analysis of profits by its different categories:
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80/20 Principle and Your Business
The key theme of the → 80/20 Principle applied to business is how to create the greatest stakeholder value and generate most money with the least expenditure of assets and efforts. Any individual business can gain immensely through practical application of this Principle. The most important use of the 80/20 Principle is "to isolate where you are really making the profits and, just as important, where you are loosing money. Every business person thinks they know this already, and nearly all are wrong. If they had the right picture, their whole business would be transformed."
The game is to spot the few places where you are making great surpluses – be that a product, a market, a customer type, a technology, a distribution channel, a department, a country, a type of transaction, an employee, or a team – and to maximize them; and to identify the places where you are loosing and get out.
Case in Point Warren Buffett
Warren Buffett – the richest man in the world and the most successful investor – said his companies ability to generate such large profits is the result of being able to focus on what is important, and not paying attention to things that would distract the company... More
Sustainable Competitive Advantage
Case in Point Ford Electronic Manufacturing Corporation
The 80/20 Principle is used in many corporate quality management programs. In Ford Electronic Manufacturing Corporation's quality program that won the Shingo prize, just-in-time programs have been applied using the 80/20 rule [80% of the value is spread over 20% of the volume] and top-dollar usages are analyzed constantly. "Labor and overhead performance were replaced by Manufacturing Cycle Time analysis by product line, reducing product cycle time by 95%."
8 Rules for Quality Management
Areas Targeted by TQM in Japan
Simple is Beautiful
"Because business is wasteful, and because complexity and waste feed on each other, a simple business will always be better than a complex business." To succeed in → managing change and transforming your organization or business by applying the 80/20 Theory of the Firm, you need to demonstrate that simple is beautiful and why. Unless you understand this, you will never be willing to give up underperforming 80% of your current business and overheads... More
Effective Selling and Competing
Selling Is Problem Solving
Synergistic Selling: 3 Arts
80/20 Principle helps you to direct your attention where the real threat of competition exists. 80% of your revenue comes from 20% of your customers. Know who your top revenue-producing customers are and make sure you meet their needs to win their loyalty. "Focusing on 20% of your customers is a great deal easier than focusing on 100% of them." Being customer centered on all your customers is impossible. "But cherishing the core 20% is both feasible and highly rewarding."
The four steps to lock in your core customers:
Improving Your Margins
"Margins ‒ between value and cost, between effort and reward ‒ are always highly variable". High-margin activities constitute 20% of total activities but 80% of total margins. You must interfere with this natural allocation of resources unless you wish to see these imbalances to grow even further. Acknowledge the reality that the majority of what your firm does is worth much less than the minority of high margin activities and reallocate resources to take your firm to a new higher level. Don't stop there – do that again.
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Business Model
The 80/20 Principle helps you to isolate customer segments where you are making higher profits and where you are less cost effective. Spot the few places in your business model where you are making great surpluses – be that a product, a market, a customer type, a distribution channel, a country, a type of transaction – and maximize them. Identify the places where you are loosing money and get out.