The 80/20 CEO

are you leading a business that's struggling to reach its full potential? 

in this chapter, we'll look at the strategic thinking that propelled this author's career in business. you'll discover how to apply the powerful 80/20 principle to revitalize your business, focus on what truly matters, and drive rapid growth.

whether you're a seasoned executive or an aspiring leader, these practical tools will help you unlock your organization's hidden potential.

get ready to level up your approach to leadership and strategy – and achieve breakthrough results.

author bill canady’s journey – from a small farm in rural north carolina to becoming a successful ceo – is a testament to the power of two things: determination and strategic thinking. growing up in a double-wide trailer at the end of a dirt road, canady’s options seemed limited. but his decision to join the u.s. navy set him on a path of continuous learning and growth that would shape his future career.

his career was marked by a series of strategic moves, each building upon the last. he started as a product manager in a global tech company, focusing on industrial automation. this role provided him with invaluable insights into the inner workings of large corporations. his next big step was running a components factory, where he gained hands-on experience in managing operations. these experiences prepared him for his subsequent role at a generating equipment company, where he played a key part in the company's growth and eventual sale for a substantial profit.

throughout his career, canady embraced the 80/20 principle. this concept, also known as the pareto principle, suggests that roughly 80% of effects come from 20% of causes. in business, this suggests focusing resources on the most productive 20% of customers and products, which typically generate 80% of the revenue.

drawing from the 80/20 principle, as well as his broader experience, canady developed the profitable growth operating system (pgos) – a system designed to create rapid improvements in struggling businesses by unlocking hidden potential and value. this approach, which we'll see in action, is all about having a clear plan, well-defined procedures, and efficient processes.

when canady stepped into the role of ceo at phoenix industrial technologies, he faced a company in turmoil. the once-thriving business had become a hodgepodge of acquisitions, struggling under the weight of outdated systems and unclear direction. to right the ship, he needed to quickly gain a comprehensive understanding of the business and its challenges.

how did he do it? he began with a series of straightforward questions about the company's past, present, and future. to do this, he used checklists to ensure no stone was left unturned. this methodical approach, reminiscent of the one advocated by surgeon atul gawande in the checklist manifesto helped canady uncover issues that weren't immediately apparent.

central to canady's philosophy is the stockdale paradox, named after admiral jim stockdale, a vietnam war prisoner of war. this principle emphasizes the importance of maintaining unwavering faith in ultimate success while simultaneously confronting the brutal facts of the current reality. it's a delicate balance that avoids the pitfalls of blind optimism while providing a framework for perseverance in the face of adversity.

to gain deeper insights, canady embarked on what he calls a “three l tour”: listening, learning, and leveraging information from employees at all levels. this included a series of structured one-on-one meetings with key managers, guided by carefully crafted questionnaires. this approach allowed him to gather comprehensive insights while building relationships with his team.

as he processed this information, canady relied heavily on the eisenhower matrix to prioritize tasks. this tool, named after president dwight d. eisenhower, categorizes tasks based on their urgency and importance. for instance, addressing a major client's complaint would fall into the “urgent and important” quadrant, requiring immediate attention. developing a five-year growth strategy, while crucial, would be “important but not urgent,” allowing for more deliberate planning. tasks like responding to routine emails might be “urgent but not important,” potentially delegated to others. finally, activities like mindless web browsing would be neither urgent nor important, best eliminated altogether. this matrix helps canady focus on critical issues while avoiding time-wasters, ensuring every action contributes meaningfully to his goals.

throughout this process, canady maintained a flexible approach, recognizing that sometimes the first step is simply to avoid surrender and buy time for more comprehensive solutions. by balancing immediate action with strategic thinking, he set the stage for phoenix's turnaround, demonstrating that even in the most challenging business situations, a methodical, informed approach can create success.

after surveying the landscape of his new company, canady knew he needed a strategy – and fast.

the heart of canady's approach was the 80/20 principle. within 30 days of setting the company's overarching goal, he convened a strategy meeting. the team dove into product and customer data, searching for the vital 20% that was generating 80% of the company's revenue. this wasn't just number-crunching; it was a hunt for the company's true strengths.

canady's team used this data to segment customers and products into quadrants. the top right quadrant – dubbed "the fort" – represented the a-list customers buying a-list products. this was the company’s goldmine, demanding the lion's share of resources. other quadrants, like the "necessary evil" of a-customers buying b-products, or the "transactional business" of b-customers buying a-products, each required a tailored approach.

as the strategy took shape, canady posed five critical questions to his team. "what do we need for breakthrough growth?" he asked. one executive suggested streamlining their supply chain, while another proposed doubling down on their most innovative product line. "what will differentiate us?" canady pressed. the room buzzed with ideas: unparalleled customer service, cutting-edge technology, rapid prototyping capabilities.

the discussion moved to strategic opportunities. should they expand geographically? develop new product lines? make strategic acquisitions? each option was weighed against its potential value and feasibility. finally, canady challenged the team to distill their insights into a handful of critical initiatives.

this process wasn't about achieving perfection in 100 days. it was about charting a course, setting sails, and getting the ship moving in the right direction. the strategy would evolve, but its core – focusing resources on what truly mattered – would remain constant, guiding phoenix toward more profitable territory.

as canady stood before the whiteboard at , covered in a mess of diagrams and sticky notes, he felt a mix of excitement and trepidation. this chaotic display represented the culmination of weeks of strategic planning at phoenix industrial technologies. now it was time to transform these ideas into a concrete structure.

once again, canady's approach was rooted in the 80/20 principle, organizing the business into segments that would focus on the most strategic customers and products. but he knew that to breathe life into this strategy, he needed to balance two seemingly contradictory thinking styles: divergent and convergent.

the divergent phase was a whirlwind of creativity. canady encouraged his team to explore every possibility, from entering adjacent markets to potential acquisitions. no idea was too outlandish. "what if we pivoted to sustainable materials?" one executive mused. "or expanded into emerging markets in southeast asia?" another chimed in.

as the ideas flowed, canady eventually began to steer the conversation towards convergence. it was time to filter these grand visions through the lens of practicality. which opportunities offered the highest value? which aligned best with phoenix's core competencies? gradually, the sprawling list of possibilities was whittled down to a critical few initiatives.

with these key initiatives identified, canady and his team began crafting the business plan. they envisioned phoenix's future position in the marketplace, defined their strategic customers, and outlined how they would uniquely satisfy them. the plan included a brutally honest situation analysis, highlighting not just where phoenix was winning, but where it was falling short.

throughout this process, canady continually reminded his team that perfection wasn't the goal – progress was. this mindset allowed them to move quickly, knowing they could adjust their strategy as new realities emerged.

as the 100-day mark approached, canady looked at the final business plan with a sense of cautious optimism. it wasn't perfect, but it was a solid foundation. it prioritized the right customers, products, and initiatives. most importantly, it gave phoenix a clear direction – a north star to guide them through the challenges ahead.

imagine telling 80% of your customers, 'thanks, but no thanks.' it sounds crazy, but that's exactly the kind of radical thinking the 80/20 “zero-”up method encourages.

the 80/20 zero-up concept is a thought experiment that challenges business leaders to envision their company serving only its most profitable customers and products. it's an exercise in strategic imagination, asking: what if we could start from scratch, focusing solely on the 20% of our business that generates 80% of our revenue? this mental leap forces executives to confront the often-overlooked inefficiencies lurking in their operations.

at its core, zero-up is about balance and focus. many businesses unknowingly squander resources on unprofitable customers and products, diluting their ability to serve their best performers optimally. the zero-up process aims to rectify this imbalance by reallocating resources to where they'll have the most impact. this isn’t just about cutting costs; it's about strategically reinvesting in the company's strengths.

there are several methods to approach zero-up, each offering a unique perspective. the quad zero-up method dissects the company into four segments based on customer and product profitability. leaders then imagine building a company from the ground up to serve each quad, revealing the stark differences in resource requirements between high and low-performing segments.

the product/customer inflection point method takes a more granular approach. it involves a thought experiment of adding customers one by one to a hypothetical new company, tracking the cumulative profitability. this process unveils a critical inflection point where adding more customers or products begins to erode overall profitability.

both methods often lead to an 80-20 revelation – that is, more than 80% of profits typically come from the top 20% of customers or products. this insight can be both enlightening and unsettling, as it challenges conventional wisdom about customer retention and product diversity.

zero-up is not a mandate for immediate, drastic action. it's a tool for visualization and strategy development. the insights gained should inform decision-making, not dictate knee-jerk reactions. the goal is to create a roadmap for gradual, strategic reallocation of resources, not to eliminate customers or products indiscriminately.

implementing zero-up insights requires careful consideration and often involves strategies beyond simple elimination. it might mean restructuring pricing, streamlining operations, or finding innovative ways to serve less profitable segments more efficiently. the key is to use the zero-up perspective to drive continuous improvement and strategic focus.

in essence, 80/20 zero-up is about seeing the forest for the trees. it's a powerful lens through which business leaders can view their operations, challenging assumptions and revealing hidden opportunities. by imagining a business built from the ground up around its most profitable core, leaders can chart a course towards greater efficiency, profitability, and sustainable growth. 

the main takeaway of this chapter to the 80/20 ceo by bill canady is that strategic focus and the 80/20 principle can transform even the most struggling businesses. 

canady's approach emphasizes thorough analysis, clear goal-setting, and prioritizing resources on the most valuable customers and products. 

use checklists, the eisenhower matrix, and structured feedback to gain insights. apply the 80/20 rule to identify your core strengths and reallocate resources accordingly. 

remember, progress trumps perfection. by learning how to hone in on what truly matters, you can unlock your business’ hidden potential and drive rapid, sustainable growth.

okay, that’s it for this chapter. we hope you enjoyed it. if you can, please take the time to leave us a rating – we always appreciate your feedback. see you in the next chapter.