Using the Pareto Principle In Your Digital Acceleration Strategy

The path towards digital acceleration is ridden with obstacles. Going back to basics like the Pareto principle can help you navigate the process.
February 28, 2022
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2020 changed the landscape of the Economy worldwide. It wasn’t just the pandemic, we also had to contend with the disruption of supply chains, the global chip shortage, political instability and unrest, and an overall shift in the economic paradigm. 

To say that 2020 was a year that put our ability to adapt to the test is an understatement. No business emerged unscathed, for better or worse. It was turmoil, and like an old friend of mine used to say, the difference between turmoil and opportunity is our attitude towards change.

Not Every Change is Digital Acceleration

Adapting to new technologies is nothing new, in fact, sometimes it can be so subtle that we don’t realize that it’s happening. I can still remember back when everyone was carrying a USB stick around when companies handed them out like candy, and then, in a couple of years, they became a thing of the past.

The fact that we’re constantly adopting new technology doesn’t necessarily mean that we’re actively seeking change. Sometimes companies choose to embrace technological advancement to follow trends and to not be left behind. 

The problem is that by the time these companies make the jump, they no longer have a competitive edge. Trend chasers don’t define the market, they adapt reluctantly to the pressures of their competitors and the environment. 

John Chambers, the former Executive Chairman of Cisco, grabbed the headlines back in 2015 when he said that at least 40% of companies would die in the next couple of decades if they didn’t find a way to accommodate new technologies. 

Chambers could be accused of being grim and fatalistic, but he was not wrong. According to Yelp, just in the U.S, 60% of businesses that shut down due to the pandemic closed down for good. 

Care to guess what was one of the key reasons? You got it, the inability to adapt quickly enough to a decentralized business structure. Companies that already had work-from-home protocols and online resources fared better than their competitors. 

But COVID isn’t to blame here, at least not completely, it just accelerated the inevitable. By the time we were asked to work from home, millennials and Gen-Z employees were already embracing the idea. We were already having meetings over Zoom, and XaaS was beating other solutions for computing, storage, and delivery.

Digital Acceleration is defined as the cultural, organizational, and operational change of an organization, industry, or ecosystem through smart integration of digital technologies with a focus on speed and adaptability.

To embrace Digital Acceleration we need to have an “edge-of-our-seats” attitude, never stopping and always searching for new and emerging technologies that can disrupt our industry. All within the framework of a solid strategy for implementation.

In other words, it’s not change for change’s sake, it’s a rational decision, one made with the purpose of staying ahead of the competition and adapting to an ever-changing world.

The Obstacles Towards Acceleration

Digital Acceleration isn’t easy. According to PTC, over 52% of billion-dollar companies have fully embraced it. That means that only half of the wealthiest businesses have managed Digital Transformation, while others are lagging behind, stuck with traditional processes. But why?

One of the keys to success in the world of Digital Transformation is setting clear goals for your processes and assessing if you are meeting or falling short of those goals. If objectives aren’t met, then we have to find the reasons. 

According to Riverbed’s report, Digital Transformation is harmstringed by 5 fundamental reasons: 

  1. Budget Constraints
  2. Overly complex or rigid legacy IT infrastructure 
  3. Lack of full visibility across the digital or end-user experience
  4. Lack of available or appropriately-skilled personnel 
  5. Lack of buy-in from leadership on prioritizing digital initiatives 

On top of this, 80% of respondents also mentioned experiencing multiple issues with their digital tools, which negatively affected user experience and productivity. 

Each on its own is bad enough, but most respondents experienced several of these issues in their own process towards Digital Transformation. This is where a Digital Acceleration Strategy is needed.

Prioritizing lies at the core of any strategy. Regardless of the nature of your challenge, assessing your current resources, and distributing them most efficiently is fundamental for success. 

Remembering the Pareto Principle

The Pareto principle is nothing new, but I find it appalling just how often people tend to forget it. The concept was originally coined by Joseph Juran, who named it after Vilfredo Pareto, an Italian economist and professor from the 19th Century.

The Pareto principle is rather simple, “80% of most outcomes can be attributed to 20% of the causes”. For example, in mobile apps, 80% of income is localized in 20% of the user base, that is, the paying customers.

Of course, the 80/20 relation isn’t a golden rule, what’s important is the underlying assumption that outcomes are often linked to a few key causes, or how Juran puts it, “the vital few”. 

Businesses are complicated structures, so, naturally, their outcomes are often the result of several causes, but not every cause has the same value or weight as the rest. Instead of diluting our resources by dividing them to attend to different causes, we should focus on the ones that matter.

In the world of software development, Microsoft is well known for using the Pareto principle. By prioritizing 20% of the bugs (the most reported) engineers solve 80% of the issues the system is having.  

Keep in mind though that not every “vital few” is as clear as bug reports. In a lot of cases, the underlying cause of most of our headaches can be hidden from view, it’s like that line of code that’s cascading into a myriad of problems, none of which points directly to the line.

A solid Digital Acceleration Strategy has to be able to detect and prioritize the vital few. While there is no hard and fast rule to pinpoint the vital few, in my experience the following strategies have helped us in the past:

  • Use a model, like Ishikawa’s fishbone, to help you define the causes for not meeting the goals of your digital transformation strategy.
  • Follow the breadcrumbs, when you fail to meet your goals, find the area that proved most difficult, interview key participants, and follow wherever the evidence leads you. Like a detective trying to solve a case.
  • Hire consultants, digital transformation specialists can provide insights based on their experience.
  • Whenever possible, make small changes to your strategy and keep track, if you start seeing better outcomes right away you might have found one of the vital few.
  • And as usual, trust your gut, intuition is also information.

After the Dust has Settled

Slowly but surely the world will adapt to the pandemic, but the way the industry has changed is here to stay. Digital Acceleration is a way to stay ahead of the curve and to be ready for what the future holds. Having the right strategy is fundamental for that transformation to lead you to success.

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