Many operations experts have long promoted that 80% of sales are with 20% of your products. Yet, suppliers continue to proliferate styles, colors, sizes, models and features to presumably serve more customers and provide more features. There is even a book that promotes the concept of The Long Tail, which explains a theory that the internet provides a great opportunity to offer consumers almost unlimited variety and flexibility.
The flexibility rule is a myth. We are nearly drowning in a sea of choice, and it’s killing us and the economy.
The 80-20 rule rocks in business, marketing and our personal lives. A Harvard Business Review article analyzed numerous business examples and found that virtually all products seldom increased profits by increasing offerings with little real impact. We waste time, money, inventory dollars and frequently add confusion by adding complexity. Nowhere is this more evident than the opportunity to custom build a computer. You have to make 10-15 decisions with 2-6 options and usually have no clue what you are answering.
It’s not just computers. This tough economy offers a great opportunity to reduce proliferation of products that just aren’t producing. The selection of brands, products and colors in cosmetics is simply nuts and confuses the customer more than it helps. It took crises for GM to realize Pontiac sales have been declining for over 20 years and should be eliminated. However, the auto industry has still not figured out that it doesn’t need all the models, companies or dealers because it is easier to ask for government money than face the reality of making the tough decisions. Have we really lost anything in the last few months without the endless proliferation of credit card offerings that no one needed? No one wants to admit that much of the success of Wal-Mart is eliminating thousands of inefficient retailers.
The rule even applies to government. Is more or less regulation really the issue? In contrast, it may be increasing the effectiveness and integration of the regulations we have. We added Sarbanes-Oxley in accounting, which costs billions of dollars in fees and clearly did nothing to prevent the recent financial fiascos. Imagine the savings of consolidating some of the local, county, township and state government activities rather than spending more money and more taxes.
Keep reading to learn how we can simplify the process.
