Appendix B: Why Are 2,000 Percent Solutions Avaialble for Almost Any Activity?

Appendix B:

Why Are 2,000 Percent Solutions Available for Almost Any Activity?

Each problem has hidden in it an opportunity so powerful that it literally dwarfs the problem. The greatest success stories were created by people who recognized a problem

and turned it into an opportunity.

― Anonymous

When first creating a 2,000 percent solution, many people report discovering that their solution could have been implemented at any time during the prior 50 years. But no one had. Why is that?

Let us tell you a story that helps explain such delays. One of our students works in a business where 95 percent of the ingredients were once discarded at the end of the production process. That’s like taking a piece or two of a large wedding cake and then throwing the rest of the cake away. The organization first called the unused ingredients “waste” and dumped that material into the ocean. A new treaty in the 1970s prohibited this kind of dumping, and the “waste” went into landfills. Environmental laws were later enacted that made it more attractive to do something else with the “waste,” and the leftover ingredients were turned into “by-products” that didn’t have much value. The student redefined those used ingredients as “products” and discovered that with a little upgrading they became valuable forms of organic fertilizer that many were anxious to buy. Soon the student had developed a large fertilizer business and was successfully making similar upgrades of waste into valuable products for other manufacturers.

From this experience, the student learned that people only pay a lot of attention to “products,” seldom focus on “by-products,” and hardly ever examine their “waste.” Similarly, people pay a lot more attention to 2,000 percent solutions than to efforts to meet the annual budget increase of 10 percent more profit. Why? It’s more exciting and rewarding to develop 2,000 percent solutions. When you accomplish that first 2,000 percent solution, your self-esteem reaches a higher level than you ever thought possible. You’ve done it once and you know you can do it again.

A parallel observation to Pareto’s Law, Pareto’s Principle (referred to by many as the 80/20 principle) states that 80 percent of the results of any economic activity come from 20 percent or fewer of the people, occurrences, or efforts. This principle is based on the observations of many who study organizations, beginning with Dr. Joseph M. Juran who discovered that 20 percent of product defects cause 80 percent of product problems. Let’s look at an example of this principle to see why 2,000 percent solutions are naturally abundant.

Imagine that a business has 100 salespeople selling 100,000 units a year. Consistent with Pareto’s Principle, 20 of those salespeople produce total sales of 80,000 units per year while the remaining 80 salespeople produce total sales of only 20,000 units per year. The most productive 20 salespeople average selling 4,000 units per year while the 80 less productive average sales of 250 units per year. The 20 most productive salespeople create on average 16 times (4,000/250) the average of the 80 remaining sales people. Matching the performance of the remaining 80 sales people to what the most productive 20 salespeople accomplish is a 1,500 percent solution (1,600 percent minus 100.percent is a 1,500 percent increase).

Within the group of 20, some are more productive than the others. Let’s assume that the most productive salesperson produces annual sales of 7,000 units. That amount is 28 times what the 80 less productive salespeople average. If the less productive people can move up to the productivity of the most productive salesperson, that’s a 2,700 percent solution (2,800 percent minus 100 percent is a 2,700 percent increase).

Within the group of 80, some are less productive than others. Let’s assume that the least productive salesperson who won’t be fired sells merely 100 units per year. If that person could match the most productive salesperson, that matching would be a 6,900 percent solution (7,000 percent minus 100 percent is a 6,900 percent increase).

The nature of which customers are served may have something to do with why the high and low performing salespeople vary so much in productivity. But if the least productive salesperson can increase performance to even half the average of the most productive group, that’s still more than a 2,000 percent solution (half of 7,000 units is 3,500 -- 3,500 percent minus 100 percent is a 3,400 percent increase).

Let’s also assume that the company has a more effective competitor where the most productive salespeople sell on average 10,000 units per year. Within that group, let’s also assume that the most productive person sells 18,000 units per year. If some of this success is based on selling methods that the least productive salesperson in the first company can emulate but doesn’t use now, that relatively low performing salesperson would only have to capture one-eighth of the results of this most productive competitor‘s salesperson to achieve a 2,000 percent solution (18,000/8 is 2,250 – 2,250 percent minus 100 percent is a 2,150 percent increase).

In addition, there are probably better performing salespeople in other industries who could also show the lowest producing salesperson in the original company how to improve. By drawing on those examples, the least productive salespeople can expand their productivity further.

From the first company’s management perspective, notice that the challenge is different. Only if the salespeople in total improve their productivity by 20 times does the company establish a 2,000 percent solution. Even if the methods and personal qualities of the best salesperson can be duplicated in the rest of the sales force, such a 2,000 percent solution cannot be achieved. That’s because the company would still need 15 salespeople to equal the 100 current salespeople in performance (100,000/7,000 units per salesperson equals 14.3). Only by dropping the sales force to four people and keeping the same sales level could the company achieve a 2,000 percent solution (25,000 units/1,000 units per sales person equals 25 times more sales – 2,500 percent minus 100 percent is 2,400 percent). Reaching that level of performance would mean exceeding the productivity of the competitors’ best performer (100,000/18,000 units per sales person is 5.5). What’s the solution?

The odds for creating a 2,000 percent solution for the whole sales force are improved by another factor we haven’t discussed. Few of the top performing salespeople will be using identical methods. As a result, you can combine highly productive techniques to exceed the performance of even the most effective salesperson.

There’s also hope for improvement from other sources. Pareto’s Principle also applies to every other activity that a person does in a company: Twenty percent of the employees will produce 80 percent of the results. By learning from the best inside and outside the company and combining those lessons in new ways, the most productive employees can improve further.

Likewise, 20 percent of the customers will produce 80 percent of the earnings. So it’s as important whom you sell to as it is how efficiently you perform. Some organizations will find that their highest volume salespeople are mostly bringing in business from relatively unprofitable customers. As a result the most profitable best practice may be found among a so-called average performer who only produces sales that deliver high profit margins. Properly cross-fertilize the methods of the high volume salesperson with the high-margin one, and you should increase the profit-productivity of sales efforts by much more than 2,000 percent.

How can you accomplish these results? For a given organization, start by determining who are most productive and what they do differently to provide keys to breakthrough productivity. The few organizations that do such benchmarking within their company are quick to find ways to make enormous improvements. From there, combine best practice methods that differ from one top performer to another. Finally, check out the highest performing competition to pick up other practices that can be combined with the best of what you do.

At Mitchell and Company (the management consulting firm Carol Coles and I have managed that helps leading companies create the next generation of best practices), we measured a large number of companies which were performing the same activities to see how each company’s effectiveness compared to its competitors. Much like what Pareto’s Principle suggests, companies were highly effective (well above average) compared to other firms in only a few areas … usually fewer than 5 percent of their most important activities. Companies were about as effective as the average firm in about 30 percent of their important activities. And these same companies were well below average in the remaining important activities.

That measurement made us realize the enormous potential of outsourcing. If you have some activity where you are well below average throughout your company, you may have the potential for a 2,000 percent solution by simply outsourcing that same activity to a top-performing outside organization.

Here’s a lesson to keep in mind now that you understand that you can recognize 2,000 percent solutions virtually wherever you look: Pick the highest payoff opportunities first! We all know that each activity varies in its significance. For instance, developing new medicines at a pharmaceutical company is much more valuable than most other activities. If your company is below average in such an important activity, the company-wide benefits of either improving to become above average or outsourcing to an organization that is above average can result in a 2,000 percent solution for the entire company’s profits. As a result, those who are wise in selecting the activities to improve first can make much faster progress than those who focus in less significant activities.

You should consider an even more important lesson: Some companies are making tremendous strides by developing skills throughout their organizations in designing and implementing 2,000 percent solutions. Such organizations will have vast advantages over those who simply look at the internal best practice or the industry best practice, or outsource to a highly effective outside organization. Such 2,000 percent solution expert companies will be able, instead, to advance beyond the future best practice toward the theoretical (or ideal) best practice. Implementing beyond the future best practice usually creates at least a 5,000 percent solution. Coming close to a theoretical (or ideal) best practice often creates a 10,000 percent solution. If you create a 2,000 percent solution that also serves to greatly expand the market by adding new users of your offerings, the gains can be exponentially larger. If your solution becomes a common practice in many organizations, you may spawn a worldwide revolution in effectiveness as inventions like the wheel, the printing press, the telephone, and e-mail have previously done.

From that perspective, you can see that achieving a 2,000 percent solution is often a modest target … even though at first blush a 2,000 percent solution would seem to be the opposite, a stretch goal. Clients and students who worked on creating 2,000 percent solutions were often able to reach 20 times higher performance levels within six months of implementing this solution development process. Rarely does it take longer than two years to stimulate performance to these higher levels through implementing the new practices. Individuals who have developed 2,000 percent solutions usually report being able to create the plan for one solution after fewer than 60 hours of effort. Hardly anyone requires more than 120 hours of personal effort.

If you would like to learn more about the 2,000 percent solution development process, see The 2,000 Percent Solution and The 2,000 Percent Solution Workbook.

Copyright © 2007. 2012 by Donald Mitchell.