In many ways, strategy and project management are very simple. It really comes down to just a few basic principles. One of them is focus – what is sometimes thought of as the 80:20 rule, or doing the 20% of things that bring 80% of the results.
The 80:20 rule works, whether in our personal lives, crafting a business strategy, or managing a project.
The Power of 80:20 Thinking
The 80:20 rule, or Pareto Principle, essentially says that 80% of the results will come from 20% of the efforts. The bottom line is that all things do not matter equally.
Whether we are working on our to do list on a daily basis, scheduling activities for a team, or determining direction for an organization, this 80:20 thinking is highly useful.
But how do you find the 20% that delivers the 80% of results? One basic approach is…to use your best judgment…and keep it simple.
One approach is, when faced with two personal tasks, simply ask, “Which is most important?” You will probably be right most of the time if you use your seasoned judgment. It is also likely that you will be wrong sometimes – but don’t fret about it! Accept the 80:20 rule – and the inevitability that using your best judgment, some variation of the 80:20 rule will apply there as well. You may be right 80% of the time and wrong 20%, so just accept the lack of perfection and keep moving.
80:20 thinking frees you to get your thoughts and actions more closely synchronized for effectiveness and success. It makes prioritization easier, and diminishes the fear of failure.
Shopify and Amazon – A Story of Focus
For some “focus” thinking in practice, let’s take a brief look at a “strategy” story – that of Shopify and Amazon.
A few years back, Shopify decided to focus on the unique needs of small businesses. It surely did not do this at a single moment of time…but rather as part of a process of 80:20 decisions and actions that over time revealed this path of focus.
The story goes that Amazon was finding that it made greater margins on sales by selling directly on Amazon, rather than through myriads of small businesses that it hosted as part of its services. Their small business customers were even finding that Amazon itself was competing with them, and that it seemed a real conflict to be hosting their e-commerce businesses on Amazon.
Amazon, recognizing the conflict, and desiring what it perceived to be the much higher margins in selling goods straight through Amazon, sold its merchant website hosting business to Shopify and moved forward to focus on its own global marketplace business.
Shopify, without the conflict of a broad group of businesses such as Amazon has, focused its efforts on the specific needs of the small businesses. A key area of focus was for small businesses to feel comfortable that their service provider would prioritize them – and not prioritize some other part of the business over them. That’s exactly what Shopify was able to provide.
With that as a focus, Shopify built other auxiliary services, all focused on helping their target small business customers. Such services included payment and promotional services. The business, especially with the auxiliary services, has proved to be quite profitable for Shopify. They have tinkered with the idea of fulfillment services…but recognize that Amazon has such a huge fulfillment network, that this may be a bridge too far – and an area of focus to avoid.
While there remains a threat to Shopify that Amazon could re-enter that business again, they have built a strong and loyal following of customers by focusing single mindedly on their needs – something which Amazon was finding difficult to do. For Amazon’s part, they may have misjudged the profit potential of the business of serving small business merchants, as Shopify is prospering in this area. But maybe this is the ideal industry balance…
If you want to explore this story in more detail, see “How Shopify Outfoxed Amazon to Become the Everywhere Store” by Brad Stone in Bloomberg Business Week magazine.
Focus and Strategy
Strategy is all about making choices. It’s as much about choosing what not to do as what to do.
In the story of Shopify and Amazon with small businesses, Shopify made the decision to focus on small businesses, and Amazon made the decision to forego that in favor of its own global marketplace business.
Rarely can a business have it all. This story indicates that this idea can even apply to Amazon. Sooner or later, everyone – and every organization – bumps up against its limits.
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An interesting thing about this story is that Amazon and Shopify were grappling, in large part, with value chain choices. In the large, complex value universe of internet services, the question was what unique value chain pieces would each of these competitors choose as a focus.
There are many factors at play. In fact, Amazon, and even to a lesser extent Shopify, enjoy network effect advantages as well. That is where the complexity of strategy lies – in analyzing the broad and deep complexities in the marketplace, and making choices for how the business needs to configure itself to best serve its chosen customers.
Focus and Project Management: What Matters Most?
Michael Porter examined the relationship between strategy and project management, emphasizing the idea of making clear choices. There are several takeaways related to focus and project management:
- Project management vs operations – The Project Economy continues to evolve. Operations, where the strength of a company is in its infrastructure that supports day to day operations, are gradually being replaced by a project management capability. Since the world is changing so fast, embedded operations are less the choice in favor of a project management capability that enables rapid change.
- Need for two-way dialog – The function of strategy, often the realm of high level consultants and senior, C-level management is often clearly separated from the project implementation function. This separation seems to make no sense – and seems to be a major problem! Michael Porter strongly emphasizes the need for a two-way dialog between the strategy and project management functions.
- Operational effectiveness vs strategic projects – Many projects are simply operational ip0rovements. That does not mean they are simple! They can be extremely large and challenging. However, they usually lead only to keeping the company in line with best practices in the industry, and thus do not provide a competitive advantage. By contract, Michael Porter distinguishes strategic projects as those that target competitive advantages that distinguish the company from other competitors.
All of these ideas can help project managers discern which thinking matter most – the priorities that result from making sound 80:20 choices in execution by thinking strategically.
Focus: A Never Ending Quest
Finding focus is not a “one and done” activity! It is a frequent occurrence and accumulation of scores of focus decisions made on a daily basis. Using the 80:20 rule in considering all decisions can help improve the success percentages in your favor.