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Trading How to use 80/20 rules in our trading/investing business

Discussion in 'Shares' started by wdongli, 1st Aug, 2011.

  1. wdongli

    wdongli Well-Known Member

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    Selective and least efforts

    1. celebrate exceptional productivity, rather than raise average efforts for our business
    2. look for the short cut for wining, rather than run the full course and losing
    3. exercise control over our lives with the least possible effort.
    4. be selective, not exhaustive

    That is about to get the vital few. You are special not because you don't eat but you could know which is vital and put the effort in

    1. strive for excellence in few things, rather than good performance in many
    2. delegate or outsource as much as possible in our daily lives and be encouraged rather than penalized by tax systems to do the trivial many
    3. choose for what we will do with extraordinary care, and if possible employ others rather than being employed ourselves
    4. only do the thing we are best at doing, passionately want to do, and enjoy most

    Do with least efforts with focus

    We have to have jobs. We could sit idle here or there. Life is valuable since we could do what we enjoy.

    1. look beneath the normal texture of life to uncover ironies and oddities
    2. in every important sphere such buying a share, work out where 20 per cent of effort can lead to 80 per cent of returns
    3. calm down, work less and target a limited number of very valuable things or ideas, where the 80/20 Principle will work for us, rather than pursuing every available opportunity.
    4. don't google for data which 80% of market wants, which could not change the fact this 80% lose the money in the market!
    5. Strike to get the skills and knowledge to get the most of those few ‘lucky streaks’ in our market life where we are at our creative peak and the stars line up to guarantee success.
    5. Get the position where 80% market player will never like to take at the right time.

    Do the job properly to pick up the winners. That means you have to be right at buying time first! To be selective and to be wise for vital few. Then if you are not extremely unlucky you would be rewarded greatly since you could be one of the 20% of market players, who make the 80% of money in the market!

    Don't know how to be selective? Go to the life logic for basic first!

    Behaviors need right rules, principles, and guideline. Something could make us better but we have to do for being alive.

    1. Something you have not to do to risk your life.
    2. Something is to wear you out, which you have to avoid.
    3. Something is valuable but too expensive you could not afford.
    4. Something is valuable but sold on fire, which is what you should hold in hand.
    5. Something has little probability at most of time to reward you and you don't need to put yourselves in to fight for your luck.
    6. Something has value and at the time with unlikely low price in normal time, which is the risk you should carefully take with great protection.
    7. Something has great probability at most of time to reward you but now is not popular just because the fads, which needs you to sense the fads and get in when the fads is rebating or better at stop!

    If you could response to the above somethings with the affordable capital, you may find you get the reward which is unthinkable for 80% of market players. The market reward the guys who don't take anything others gives to them but select what they want and be sure no risk to lose in probability!

    In most of time we know too much but we don't know deep enough for what we should. So we miss the vital few and have to worry all of trivial many every day!

    Could we ask ourselves what is the vital few things we have to do today, tomorrow, and so on? We need answer for this question to guide ourselves to do the most important and profitable things.

    In long term, my first thing is to ingrain the rule, principles, and guideline for my market business, I have known would help me to get the excellent vital few things into my portfolio and extend them to every corners of my business.

    In short term, I have to get my cash reserve to the safe level for next 6 months; I have to finish all of jobs around my first draft of my business plan as a road map in the market.

    Today sold all of my CIG with about 35% profit to collect the cash back, which would reduce the cash flow pressure greatly since the size of initial capital and avoid the selling in fear and panic.

    Selectivity and Quality Control

    80/20 rule means if we want to achieve any excel, we have to be selective for what we do and we want. The selectivity need the quality and quality only could be got from quality control. Stock market is a war place so that any business in the market must has the high standard to control the quality we want at least cost!

    Low quality and high cost would expose you in risk
    High quality and high cost would expose you in risk
    Low quality and extremely low cost would give you the odds to profit
    High quality and low cost would would give you the odds to profit

    Ideally we need high quality and extremely low cost.

    All of the quality and cost depend on how you could find quality and value and just pay the price which will bring down the cost to the possible minimum!

    How to insert the quality control for our selection process for the low cost and high quality shares. How could we just pick up 10 baggers rather than falling knifes? Do you know you need to focus on the quality of your business!

    The quality is value and margin of safety!

    No value in market no quality! No margin of safety no low cost! Quality control is how to get the value with the margin of safety!

    Trading or investing or speculation with the quality control would fail! Put the trading on the top of investing and speculation is wrong since no quality of your action and your business or your services, you could turn the swans such as BHP and RIO as your falling knifes!

    How many genius investors have lost their shirts in RIO? How many fools have gained millions dollar from FMG, which was 10c around in 2004/2005? Do you strike to find the future trend and the future swans? Do you strike out to desert the future craps in your portfolio? Selectivity is two way path!

    To be sure you know to obtain consistently higher quality at lower cost, you need the quality control, which is the job and if you could have a quality system in your business it will contribute the profit for your business. You will behave consciously rather than the guys who just talk about emotion control. You could do your job for high quality but you could not stop yourself in depression if you lose your shirts again and again!

    What could be used in your quality control? You have to use statistical and
    behavioral techniques to be sure you get the value at the bargain price. It is to obtain a zero rate of product defects, any kind of falling knife in the market!

    Why did you lose?


    It is helpful to see the words from Joseph Juran, the pioneer of quality control, "Rather, the losses are always maldistributed in such a way that a small percentage of the quality characteristics always contributes a high percentage of the quality loss."

    He gave the footnote for the above words:

    *The economist Pareto found that wealth was non-uniformly distributed in the same way. Many other instances can be found— the distribution of crime amongst criminals, the distribution of accidents among hazardous processes, etc. Pareto’s principle of unequal distribution applied to
    distribution of wealth and to distribution of quality losses.

    What the Paretp's principle? The 80/20 rule! One high quality buying at extremely low cost could compensate high percentage of low quality losses. If you hold high percentage of quality, you would never be in loss!

    Why did you lose? Who has never win something in the market? However we don't have any quality in the market and we just follow this words and that words to stop the losses!

    You losses should be the result since your error in your efforts to get high quality at low cost. You losses should be much lower than the profit and then you never lose! You sell some dead shares is not to stop the losses but to tighten your quality control for the high quality at low cost!

    Why do we so emotional to stop losses?


    Why do you so emotional? You don't do the job as a qualified quality controller and then you have to go out every second to check what wrong in the sky! You waste your time in the sky and then your house could be on fire!

    Have you ever tried to find the top 20% problems which cause your 80% losses and fix them? Have you tried to get the solution turn this 20% problems as the benchmarks for the high quality solution? Why not? If you do so you would at least reduce your 80% losses!

    It is not a bad new your business just has one employee, yourself! You could work to find the way for high quality and low cost! You can fix your own problems if you really want! If you want to have the quality as your base of life you can start to do now without extra cost!

    What are you doing? Struggle for the definition of the trading, investing, or speculating? It is useless and could not make us qualified and then we could not buy quality at low cost!

    Do you really want the money over there? Give your quality to the warriors and then your job done and your labor value and business value would be realized. We don't want to do the job so we could not be not emotional! Control? You lose the control for your quality and then you could not control anything!
     
    Last edited by a moderator: 1st Aug, 2011
  2. wdongli

    wdongli Well-Known Member

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    Just in time to find the quality problems!

    Most of us don't understand business and its operation. It is the organization which has the goal and process for the goal. Each process actually is a control system. The process operation itself must be high quality. We never worry about our own goals and process for goal since it is not our goal and job! Have you seen any great business men become crazy in their office? I didn't even I have seen a lot of small ones who count each cents carefully to reduce the costs!

    We are traders so that we don't need the quality but the patterns. What if you keep to interpret the patterns in the way wrongly? What you do is not important but what for? All of warriors work hard for fighting but what for the fighting? How many warriors have their war game and plan?

    As business people you have to ask yourself for every step in your business process for the quality and cost for our product and services. Could you adds value or provides essential support for adding the value? If it does neither, it’s waste. Cut it. This is the 80/20 rule, revisited: You can eliminate 80 percent of the waste by spending only 20 percent of what it would cost you to get rid of 100 percent Of the waste. Go for the quick gain now.

    However we never ask the right questions. We tend to show our strength but it could not solve any problems if we hold the craps, the crap process, the crap goal, the totally no control of the quality! Have you heard the words "just in time program?"

    Just-in-time programs have been applied using the 80/20 rule (80 percent of the value is spread over 20 percent of the volume) and top-dollar usages are analyzed constantly. Labor and overhead performance were replaced by Manufacturing Cycle Time analysis by product line, reducing product cycle time by 95 percent.

    What's our service cycle in the market for warriors? We could only get gains in about 20% of one market cycle roughly. What is your market cycle in your favor circles? Have you analyze the top-dollar usages in your market business? What're your cost and overlay? How could you increase the profit without increases of the cost and overlay? Why do you perform good this time and poor next time? Could you do the correction of your mistakes just in time? Who tell you so? Are you trust them?

    We all start in the market with low quality! We all tend to fail in what we should focus on! Why do you favor trading, investing, of speculating? We have to agree we choose them not because we know them well enough but we just feel we could get some quick bucks!

    You can trade, invest, and speculate if you could make 80/20 rules in your quality control and this control needs a process, the equipment, the operators, feedback, analysis, and judgment. You must be a strategist or boss for your business. You want to cut all of craps in your business away! You use all of your effort and time for the goals not too many dared to think about, don't you?

    We need to be just in time for chances and our own problems!
     
    Last edited by a moderator: 2nd Aug, 2011
  3. wdongli

    wdongli Well-Known Member

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    Don't do in a place to hurt you!

    Don't do in a place to hurt you! Never forget don't do in a place to hurt you!

    1. don't know or not sure whether or not you have big enough chances to make money
    2. could not get enough capital to start your business and be survival;
    3. just could make the similar money as your salary from your boss in long term without the passion to work for your business;
    4. don't have the gut to take the risk and are wise enough only take the affordable risk
    5. are driven by your dreams but don't know how to look after the budget or cash flow, and don't know how to be sure your base assets are safe, you should not do.
    6. could not behave in guard-optimism
    7. don't buy the share as though your kids' future in your hand
    8. could not find what could make you win out with your limited mind.
    9. could not ask the right question and find the rational answer for your intention

    If you don't accept the prudence above don't do! It is a war place and if you are not guarded, you would be consumed or traded in!

    1. don't ignore your feeling;
    2. don't ignore the market sentiment;
    3. don't allow you excited when you have shares in hands;
    4. don't read to twist the words as though you are genius;
    5. don't allow you to buy when the market is in the the road to crash down;
    6. don't be panic and if you are panic, have a break, cool you down, start to check everything in your business to rescue the capital and paper profit.
    7. Don't forget when you are anxious, something has been wrong for long enough, which is rooted in your over-optimism.
    8. You have been beaten down by your enemy, yourselves. How to stop the bleeding, keep to be survival, get a corner for safety, and then check yourself for solution!
    9. Don't google to let you feel better if you feel any pain. Pain is great chances for lessons. Don't let it gone too easily
    10. Don't buy if you feel so exciting.
    11. Don't buy if you have not enough cash seserve
    12. Hold when you are not sure the chances and risks. You are uncertain plus future uncertain would reinforce the random events to hurt you!

    Don't be too smart to forget whom you are!

    Don't be disappointed if you find the above is strange! Just sit down to think what the market is to you! Have you got what you want? Why? You could google to sharpen your mind and just to sharpen your mind now! Just to find the rationality for your craziness and ignorance or arrogance or excuses for you? It will help you to kill you! Stop googling! It is the most important rule you have to follow in discipline! You fail to follow and then you will work hard to fail you!

    I did make a series of mistakes, which has caused pains. How should I do I could not lose the chances from the pains? I am passionately working on it for lessons. I did pay my tuition fee for my full-time market study. I should not pay for the tuition feel without the best lessons I could get from my study! Otherwise I am not responsible for myself, my kid, my family, and my personal legend.

    It is not about cleverness but the market philosophy, market view, life attitude, personal trait to the ever changed environment, and behavior made by your personal trait. You could get your life in your capability in the market but you have to find what can be done and what cannot be done by you.
     
    Last edited by a moderator: 2nd Aug, 2011
  4. wdongli

    wdongli Well-Known Member

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    Competitive circles of your trading/investing business

    We could not know everything without matter how clever and genius we are. Have you found a genius in art who is genius in business and engineering? Bell Gate is a genius but he is not a genius Engineer. He is a genius business strategist with the desire to do anything necessary with internal and external resources! So we need our circles where we could be very competitive in this war place, market. So some understanding the competitive environment in the circles generally would give us some guideline for where we work on!

    A competitive circle is a competitive segment of the market, where you face some special competitor or different competitive dynamics. Actually in your circle there some sub-segment too. So it is important to know what differences of these sub-segments and be alerted to them you know a little. Take any part of your business that comes to mind: a product, a customer, a product line sold to a customer type, or any other split that may be important to you.

    It is very confused to talk about the product, customer, a product line, and customer type if we don't have business senses or we act as market warriors. When you buy a share, which become your raw material for your services to the market warriors or market public. You have to buy not just one shares so you would have different products or product lines. These products and product lines are contracted out when you hold them, so that what quality of the contractors and how they do their business would be reflected when you want to sell your holdings to service the market public.

    These business of your shares are your business partners. You have to be carefully to choose your partners for your business, right? Wrong partners will doom your business without matter how clever or genius you are. You could not do your business without understanding your customers, their favorite or tastes, and you could not ignore when they desperately for your services. You could not play your business in a strategic view and focus the operations to be sure you could get your strategic goals.

    How could you know your sub-segment enough?


    A sub segment is a part of your business where you face a different competitor or different competitive dynamics.

    Take any part of your business that comes to mind: a product, a customer or customers, a product line sold to a customer type, or any other split that may be
    important to you in your market circle. To identify these sub-segments are very important so that you could find your strength or weakness and the way to make the strength stronger first and use the strength for your business benefits. You could find your strength just takes about 20% of your resource you could use and other 80% are wasted on your weakness.

    We need two questions now!

    Do you face a different main competitor in this part of your business compared to the rest of it?

    If the answer is yes, then that part of the business is a separate competitive segment (or simply segment for short).

    If you are up against a specialist competitor, your profitability win depend on the interaction of your product and service against theirs. Which do consumers prefer? And what is your total cost to deliver the product or service relative to your competitor’s? Your profitability will be as much determined by your competitor as by anything else.

    It is therefore sensible to think of this area of your business separately, to determine a strategy for it that will beat (or collude with) your competitor. It is certainly sensible to look at its profitability separately too: you may have a surprise. But even if the part of your business you are looking at has the same competitor as another part of your business (for example, your main competitor in Product A is the same as in Product B), then you need to ask another question.

    Do you and your competitor have the same ratio Of sales or market share in the two areas, or are they relatively stronger in one area and you relatively stronger in another?

    There will be real reasons for this. Consumers may prefer your brand in one product but your competitor’s in another. Possibly the competitor doesn’t care much about what happens in the first one. Perhaps you are efficient and price competitive in the first one whereas the reverse is true in second.

    At this stage you don’t need to know the reasons. All you need to do is observe that, although you face the same competitor, the balance of advantage is different in the two areas. They are therefore separate segments and will probably exhibit different profitability.

    The above is when we have the competitors to our business. However it is best that you could make your businesses unique and have not competitors for your product and services. It is very difficult but not impossible. To me I believe lowest price for best value in worst time could make us unique. Uniqueness is few since the least effort to get profit and huge effort is needed to organize the uniqueness and let the uniqueness becomes true.

    It will not one day's job to be unique. So it could be start point to check all we have and find the 20% effort to make the 80% profit, so that we could turn this wasted 80% efforts into the 80% profit place for 100%, 200%, 300% profit first. We then could make us unique and no competitor for a sure profit. Once the uniqueness is formed we could think about how to extend our efforts to copy and past for our business dream!

    Don't worry if you feel getting lost!

    Most of us are not trained to be strategic players in the market. Why are you a trader and prefer the patterns? What we have known mostly are some of special skills to do some special things so that we just sell our skills for living. However to do business is not just about to use the available skills to us, but some strategic thinking for chances while put the risks into the box. How many of us would concern where the salary should come from in the offices and workshops?

    It is normal and not too bad, if we just work in our offices or workshops and we don't care about how to use our internal resources to solve the problems to make our living in a ever-changed environment. It is acceptable we could not change our behavior to be organized, disciplined, analytical, and self-reliant in everything for a while when we put some of our saving into the market. However we have to change if we want to turn the market as our offices and workshops!

    Don't worry if we get lost in the market if we really want to get what we want in the market. We just need to re-educate ourselves and don't allow us to lose the shirts again and again! Business is not the application of the rocket science but the application of the wisdom and intelligence. It does need to change our behaviors by using the business strategy and operation with viable business plan as road map! All are to know self and environment for chances and affordable risks!

    We need to think as business people first. We need to run our trading/investing as business secondly. We need to know what we could do and couldn't do now and extend our knowledge about our own business.

    Not easy! So don't worry but learn how to run a business from the pain first!
     
    Last edited by a moderator: 2nd Aug, 2011
  5. wdongli

    wdongli Well-Known Member

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    Questions for decision making

    Please note: in business we don't want to fight for anything else but the best services or products for best profit. We want the best services or products not because it could make us feel better but it could make people enjoy or relieve the pains in the market and help out contractors to get the best services and products for the society.

    Feeling better is the consequences with our best services and products which should not affect our professional performance to run our business. Otherwise we are not doing business but are some naughty boys or girls play for quick gratification!

    To do business in the professional way, we have to ask some basic questions after we have figure out which segments in our business could use less resources for better profit. The questions are
    besides profitability, that are key to strategy:

    Is the segment an attractive market to be in?
    How well is your business positioned in each segment?

    We don't want to publish some paper for glossy names. We want the market share. We want to be at the best position in the most profitable market circles. We could to do more research to know how these segments are so attractive and how could we take so great position as lessons which could be used for all of our segment with profit and the best profit!

    ***
    Do you know we need the high profit and high growth businesses as our partners in the market? Don't know? You are not businesslike investor or market players! Do you want to be businesslike? No? My posts are poison pills to you. Don't read them any more! You don't want but read will upset you! If you want 80/20 rule could be used as one way to find or confirm the growth and value.

    Why do I say one way not only way? Value and growth could be found by wise reading of the financial statements and clever usage of probability distribution too. I prefer use these three ways together on each share and all of my portfolio and all of my segment analysis if I could. It is because future is uncertain but I want my business could get certain profit and big profit! That is why I need work hard to read and update my mind!

    Somethings really need to know:

    1. All of the best profit segments should be also attractive markets we are growing with some uniqueness which we know or we don't really know. We need to know.
    2. The uniqueness has high barriers to entry for new competitors, had more demand than capacity, faced no threat from competing technologies and had high bargaining power to get both customers and component suppliers.
    3. As a result, nearly all the competitors in these markets made good money. Win-win is great for business.
    4. Your contractors or partners should be also well positioned in the segment, meaning that it
    has a high market share and is the top suppliers. You need to know the competitive advantages of them so that you could get the experience to pick up future partner!
    5. The most profitable segments are less than low and no profitable sectors and follow the 80/20 profit comparison.

    We need to analyze why these 20% efforts could make 80% profit economically. We need rebalance our resources and effort toward to these 20% efforts for our business uniqueness. Please note we could target a very potential market but we fail to get the market at the low cost and then we could fail to get any profit. It is very important to hold the time you get into any market.

    The rule is there. The rule could get into the ear of deaf people or could be used in bias! We have to mull for the context and conditions and put a process to be sure we use this rule in the way properly!
     
  6. wdongli

    wdongli Well-Known Member

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    Rule, principle, and guideline are just starting points!

    80/20 analysis of profits does not give us all the right answers. The analysis is bound to be a snapshot at a point in time and cannot (to start with) provide a picture of the trend or of forces that could change profitability. Profitability analysis of the 80/20 type is a necessary but not a sufficient condition of good strategy.

    On the other hand, it is undoubtedly true that the best way to start making money is to stop losing money. Any rule has the exceptions. Even the simple 80/20 profit analysis would have given more or less the right result, but it does not mean that strategic analysis should stop with 80/20 Analysis, but that it should start with it. For the full answer about your business, you must look at segment market attractiveness, at the potential of value realization, at the probability that the price would regress to the means or value, and at how well the business is positioned in each sub segment.

    The things need to be sorted out:

    • Market potential: attractive or good but unattractive or losing the trend and potential
    • Market share: good, moderate, or sub0scale but improving, or poor position
    • Profitability: High, OK, or poor or loss

    The above things would define the attributions of your business segments, such as your buying, holding, selling, portfolio diversification, portfolio rebanlance and its time period to averaging the buying and selling, Cost of single share, Quality of single share, Margin of safety to a share or your portfolio, and so on. All of them would need to be analyzed and make the judgment for actions.

    When you think about these attributions of each sub-segment, you move yourself into operations from the strategic views of your business which get from 80/20 rule. It is the operation to furnish your strategy and get the guidelines of your business in each sub-segments. You would get the ideas to reinforce your efforts and resource in the sub-segments which is high attractive, good market shares to service the warriors of market, operational for high quality low cost results, and then profitable with the potential of growth.

    You definitely need a lot of time to get the skills and knowledge to find the great product or service or lines but you could find the vital segments in your business, which could not generate the profit or cause you into the losses. In the market if you don't buy, you don't have risks. If you could control the buying with trustful processes to buy or find excellent partners at low cost, you would hold your business with great potential or no losses.

    Bottom-top approaches target the root problems and then lay the one layer after another to build your business castle and moan. You are the worker to put the layers but you are also the designers of your castle. It is highly possible if you put the layers one after another you just forget you need to get the road map or blue plan good enough; if you make the plan you would have the time to put layers one after another.

    You have to know what could be compromise in your business and what could not be compromise for your future now. The challenge is to find the bottom line you could not lose for your business; balance among the future and present. We need a operational model or process to get the thing we have to do excellent so that

    The potential to get attractive profit is highly for our business
    The market share of our business would be broad
    The profitability of our business is high

    Since we could make our business excellent, we could protect us effortless in all of market conditions! The most powerful protection is you just make great profit every year! In this sense, no loss as rule is just the bottom line and we need great profit potential, quality,and income so that no loss is the inherent feature of our business!

    What have I got for my business so far? Nothing! What analysis have I done for my business objectively? Nothing! What have I done for my business? I regularly destroy my bottom line of my business! I want to get the basic for life logic but I don't accept the basic fact I am an warrior in the market!

    What could make me feel excited? Nothing! I don't know the market enough and my self enough. My exciting is the poor gratification due to my lucks only! No business sense at all! A typical gambler who win some money due to luck so that he assumes he get the holly grail to make profit in the market. Seriously saying I may know more in the life logic but I still could not work for your business since I don't know what business is! Business needs the road map and process to be sure the goals of the business could be achieved.

    Could I say I am a business man? Back to 4 weeks I just feel pains and don't know the above! My experience tell me I should be a full time student of the market for quite long time but I unintentionally use this idea as the excuses to do the things in the business way! When a good idea becomes excuses to do good work for the business, you could not do job rationally and you could not stop to be over-optimism since you could not see the roots have been in damage.

    I have to warn myself if I feel too good for what I get! I am far less good than I feel. Good is about good behavior to do the job. It is your duty and responsibility. If you do a good job you have got what you want but you could not sure you could do a good job tomorrow if you are not businesslike people!
     
    Last edited by a moderator: 4th Aug, 2011
  7. wdongli

    wdongli Well-Known Member

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    Not good enough but euphoric? Stupid!

    Most of market players never would like to admit their stupidity. We tend to compare ourselves with the people who do poorer than us? I never realize that! Is it stupid? Now I could not deny its stupidity!

    What did I feel really when I talked about the margin of safety? I felt really good, which I didn't want to admit for too long and have tried to avoid to face my real feeling. What margin of safety for? It is to protect our business not a cover cloth to hide who we are and let us to appear glossily!

    Do I know value? Could I read the financial statements to get the sense of the chances and risks? Do I know enough about the probability distribution and use it to make constant cash stream? I don't know or don't know enough myself and market sentiment. I prefer the good black swans but I also hold some falling knife in my back yard. How could I dare to be over-optimism or euphoric?

    If you are not good enough but euphoric why do you deny your stupidity? Market can tolerate you don't know but could not accept any stupidity! If we are stupid often than not, we only have one thing could do is stop losses and run away from the market after losing the shirts!

    I am really shocked by my ignorance, arrogance, and stupidity in the market. Who doesn't have a few days to be lucky in the market? If you could not lock the lucky money, are you stupid? When I said no loss, no harm, and fail-safe, I should know all of I should do first is to get the bottom line goal of my own, I need to lock the income for the living expenses. But I just didn't care about the income. Is it stupid?

    Never feel I am so stupid before. Should I make me a little bit wiser? If I don't I will keep to be stupid. Do I really want to be stupid until I am in the hell? I don't want but I do act or behave for what I don't want to get, I am stupid!

    So I have to find a way to stop me to be stupid too long before I could be a qualified business people in the market and never be too stupid! So easy to be stupid and I don't have any reasons to allow my head hot!

    Seriously saying, looking back I could not help to stop shaking my head ruefully and say to myself: "I can't believe I used to do things that way. I must have been crazy!"

    We need to be innovative in our market practice. We need to find our stupidities. We need to fix them bit by bit! We could use 80/20 rule to find the breakthrough points for our innovation for our business!
     
  8. wdongli

    wdongli Well-Known Member

    Joined:
    31st Mar, 2010
    Posts:
    1,292
    Location:
    Perth
    80/20, creative thinking, and processes of operations

    It has been long time to know the words: what, where, when, who, whom, how, and why; the strategic thinking need to ask the right questions for vital few, the tactics to implement the strategy, the process to operate to lower cost and add value for financial viability. Yes it seems that it has been known too long to use these words.

    Innovation in business is necessary. The operations and the process need creative thinking too. Creative use of 80/20 rule principle to know what operation or process would help to find what is adding value and what is lowering the cost.

    How to use 80/20 to get the way to creative thinking? Consider the following ideas:

    1. 80 per cent of the profits made by all industries, are made by 20 per cent of industries.

    Make a list of the most profitable industries that you are aware of. So you could to sort out their market attractions, shares, and profitability, which could be used as the first step to find your strategic partners. You should know what you want, what your partners advantage, and then you could get high quality partners so too for your business.

    2. 80 per cent of the profits made in any industry are made by 20 per cent of firms. If you aren’t choose them as your partner, how could you sure you could provide the best service to the warriors when they need.

    3. 80 per cent of value perceived by customers relates to 20 per cent of what an organization does.

    What is the 20% you do to let the warriors feel less pains and more euphoric in the market.

    What is stopping you doing more of it? No rules, principles, and guidelines for what you do? No road map to follow? No process to be sure you work for your goals so that you behave for the right time and right position to service the warriors?

    Could you find these 20% firms and then you could make them to be your partners. Do you know what time you could lower your cost to make your partners work hard for themselves and you.

    What is preventing you from ‘making’ an even more extreme version of that 20 per cent? In my case I don't have the processes and road map to get my job done so that I always follow my feeling and get into the traps when I turned to be overoptimism when I get some paper profit or the market is bullish.

    I act as a gamblers to bet when I feel happy and run away when I feel panic! So cost runs, cash reserves is gone, I get the pains, fears, depressed, and then patch this or that hole to stop the capital leakage.

    4. 80 per cent of what an industry does yields no more than 20 per cent of the benefit to its customers.

    What is that 80 per cent in your case? Why not abolish it? Where might less be better? Could the customer be engaged in providing some of the services? 80/20 views to your business, the circle of your business could open the door to see the future based on the past but you need to check the causes, the way to make your favorite 20%. You have to know 80/20 needs following processes to lower the cost and add value! It is the job or fantasy. If you follow the process, you should not have time and reasons to be euphoric!

    5. 80 per cent of the benefit from any product or service can be provided at 20 per cent of the cost.

    Many consumers would buy a stripped-down, very cheap product. Could you do so? Why could you do so? What the causes you could not do so? Why could you use half your capital for the profit you want? Why do you put all into the market for losing your shirts? Could you remove the services or products which are too expensive?

    6. 80 per cent of any industry’s profits come from 20 per cent of its customers.

    Do you have a disproportionate share of these? If not, what would you need to do to get it? What is the most valuable customers for your business. What's the consuming behaviors? What is the time they want your product and services desperately? Could you make different services or products to different customers so that you could get enough income and cash flow with great gain potential?