Is your company getting distracted?
Don’t build lemonade stands in front of the gold mine.
You can find the previous articles about focus here, here, and here. This post is also available in Portuguese.
Companies often get distracted and fail to focus on what's critical. They end up doing things that move them away from what they really want to achieve.
Netflix has a colorful expression to describe those pesky distractions that get in the way of achieving what truly matters: the lemonade stand in front of the gold mine.
As Netflix co-CEO Greg Peters explains:
We have this thing we call the lemonade stand in front of the gold mine, which is don’t get distracted building lemonade stands in front of the gold mine — you want to find the gold mines and that’s what you really want to work on.
PayPal also had to deal with its share of distractions, as former executive Matt Lerner points out:
At PayPal, all of the early growth came from referrals & eBay. Next wave was developers, shopping cart referrals, and direct sales to a few verticals. That was it—all of PayPal’s growth came from 5 things.
We did tons of other stuff. Tons! Most of it was a huge, expensive distraction.
Netflix’s analogy also applies to teams, as they can get distracted building lemonade stands in front of their own small pockets of gold.
One of the reasons executives and teams get so distracted is that the word priority lost all meaning.
Everything became a priority
I've noticed a common pattern: people agree they are working on too many things at once, but get stuck deciding where to focus.
To them, everything they are working on is a “priority.”
Over time, I realized the word priority had lost all meaning.
Priority lists became the junk drawers of the business world. It's where people lump together what's critical with what may be useful someday, in a jumbled mess of dozens of items.
Everything became a priority, so nothing is.
Without a shared language to separate what's critical from what's merely useful, people get distracted.
Some try to number priorities (P0, P1, P2…) but that's like saying LeBron James and I both "play basketball." While technically correct, it hides the massive difference in our impact on the game.
So, what's the alternative? How can you find the gold mines and avoid getting distracted?
You might be thinking, “Isn’t finding gold mines and avoiding distractions the job of strategy?” And you’d be right.
But strategy is hard. Many companies struggle with it or lack a real strategy.
And even when companies have a “strategy,” there’s another problem: people often fail to see gold mines right under their noses. Or worse, they find the gold mines but struggle to clearly communicate them to the teams.
There is a simple but powerful principle that can help you identify what truly matters and stay focused. You may have heard of this concept, but I'd bet you're not fully applying it.
The 80/20 rule
The Netflix and PayPal stories are great examples of a crucial concept that can help answer these questions: the Pareto principle, also known as the 80/20 rule.
The principle, named after Vilfredo Pareto, suggests that in many situations, 80% of the effects come from 20% of the causes.
In plain English, it means that often 80% of your outcomes come from 20% of your efforts.
In the early 2000s, Microsoft CEO Steve Ballmer wrote an email to customers highlighting a clear case of the Pareto principle in action:
About 20% of the bugs cause 80% of all errors, and—this is stunning to me—1% of bugs caused half of all errors.
To be clear, the 80/20 rule is just a simplified way to express the Pareto principle. The exact ratio doesn't have to be 80/20.
For example, the language learning app Duolingo gets 80% of its $530 million in annual revenue from 9% of its users.
Some may argue that everybody knows about the Pareto principle, or even that it’s “obvious.”
But if your company was actually applying the 80/20 rule, you wouldn't be dealing with dozens of priorities, would you?
We'll continue this discussion after a short break.
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Separating what's critical from what's merely useful
The 80/20 rule can help you avoid the trap of burying your gold mines under a pile of so-called “priorities.”
But the truth is that the Pareto principle can sound dull or abstract, especially for those who don't think of themselves as "metrics people."
To make the 80/20 rule stick, we have to make it more memorable by pairing it with the lemonade stand analogy and adding other colorful terms.
That way, we can give people a simple model to separate what's critical from what's merely useful, by thinking about two categories1:
“Gold mines” or critical success factors are the handful of elements which will drive most of the outcome and create real impact.
These are the main characters of your strategy and need to be treated as such.
They are also called “levers” or “drivers,” but these words are so overused that they are rarely useful.
“Lemonade stands” or supporting cast are the large number of remaining elements that account for a small part of the outcome.
These include all the good ideas that play secondary roles in your strategy. They may be useful but aren’t critical.
"What is the 80/20?"
When people are struggling to decide where to focus, I’ve found it’s useful to explain this model and then ask, “What is the 80/20?”
This question can prompt great conversations, helping create focus and alignment.
Different words resonate with different people, so this model allows you to use different versions of the question: “What are the critical success factors here?” or “What is the gold mine?”
With engineers, simply mentioning Pareto can be enough.
In the next article, we'll discuss how to use this question and put the 80/20 rule into practice by taking three critical steps:
Find the gold mines: Identify the critical success factors that will likely drive most of the outcome. Some of them may be hiding in plain sight, right in front of you.
Help teams avoid distractions: Help them focus by making the gold mines crystal clear instead of lumping them together with other “priorities.”
Relinquish the lemonade stands: Learn to let go of all the good ideas that aren't critical and say no to lemonade stands.
We'll dive deeper into how you can follow these steps to become more focused. We'll also discuss the reasons why people often fail to do so.
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The original names for the two categories are “the vital few” and “the useful many," which aren't exactly memorable.
Every manager and stakeholder claims that their idea or wish is a gold mine. Few are willing to let their proposals being tested. Especially when people low in the hierarchy do it.