Question:

Dear Mentor,

We're a global manufacturer with divisions across multiple industries. Our business has been flat in 2024. Some segments are doing well (electronics), while others are declining (machinery). How can we weather the current economy and be ready for growth when it comes?

-Up and Down

Answer:

Dear Up and Down,

Navigating a fluctuating economy while preparing for growth hinges on effectively committing to and applying 80/20. It's a powerful approach that creates flexibility - something crucial in uncertain times.

Many leaders invest a lot of time and money trying to predict the future. They often prepare for the wrong scenario. 80/20 prevents this trap. By minimizing complexity, costs are kept low, and resources are always available. This means that if the economy trends up, the company is nimble, and ready to assemble those resources at the best points of attack very quickly. On the other hand, should the economy turn sour, the business is already optimized to weather the storm.

The 80/20 company can seize those moments when, inevitably, the competitors take their eyes off the "growth" ball.

80/20 companies are always poised to outperform their competition, regardless of economic conditions. In economic instability, the competition resorts to drastic measures, while the 80/20 companies focus on growth opportunities. Those critical, few, lucrative growth always exist, even in tough times. The 80/20 company can seize those moments when, inevitably, the competitors take their eyes off the "growth" ball. The 80/20 company can pivot quickly to fill the void and take advantage of areas waiting to be exposed and maximized.In this case, prepare well both the electronics business and the machinery business through 80/20. If the economy booms, both businesses are ready. If the economy sinks, both businesses are ready.

For your company:

• Electronics Division: Since it's performing well, applying 80/20 will streamline operations further, and uncover new routes to explosive growth.
• Machinery Division: Here, the focus should be on refining efficiency to boost profitability. This division can then invest these gains to capture market share from struggling competitors.

Even those that predict well must be positioned to optimize the results of their "spot on" prediction.

Ironically, paradoxically, businesses that commit to 80/20 outperform both the businesses that try to predict the economy and predict poorly, and those that predict perfectly. Obviously, those who predict poorly are easy marks. But even those that predict well must be positioned to optimize the results of their "spot on" prediction. Mired in complexity, to their chagrin, they are not. They not only fail to optimize, but they move slowly. Conversely, 80/20 businesses are a coiled spring, ready to be unleashed the moment reality reveals itself.

Employing 80/20 is like going to the horse races with tomorrow's newspaper in hand. You're ahead of the game, knowing the results before they even happen. It might reduce the suspense, but it significantly increases your chances of success.

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