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- Herausgeber: John Wiley & Sons
- Kategorie: Fachliteratur
- Sprache: Englisch
Structured corporate strategy to launch ambitious and consistent growth in just 100 days
Armed with the hands-on guidance in From Panic to Profit: Uncover Value, Boost Revenue, and Grow Your Business with the 80/20 Principle, companies of any size and in any industry can pivot from panic to profit in a 100-day turnaround using just four steps: set the goal, develop the strategy, build the structure, and launch the action plan. To set the stage for the four steps, this book first empowers leaders to replace their fear, uncertainty, and doubt with confidence from segment-by-segment insights into their business, its customers, its products, and its markets.
Written by Bill Canady, seasoned CEO with more than 30 years of experience as a global business executive, this book explores key concepts including:
- Unlocking the power of the 80/20 principle to boost company revenue, reduce costs, and accelerate profits
- Creating a business plan designed for continuous monitoring and improvement over a three- to five-year growth program
- Growing both organically and through strategic acquisition, developing the talent, expertise, and innovation needed to win in today's increasingly dynamic markets
From Panic to Profit: Increase Revenue, Uncover Value, Boost Revenue, and Grow Your Business with the 80/20 Principle lays out an essential blueprint for all entrepreneurs, executives, managers, and business leaders seeking the confidence and tools they need to help their organizations reach great heights.
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Seitenzahl: 332
Veröffentlichungsjahr: 2025
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Table of Contents
Cover
Table of Contents
Praise for
From Panic to Profit
Title Page
Copyright
Dedication
Author's Disclaimer
Introduction: The Keys to theGrowth Kingdom
The Visionary
The Prophet
The Operator
Show Us Your Receipts
Where There Is No Vision, the People Perish
Step 0:
Chapter 1: Panic
What to Do First
Core Meeting and Open Letter
Executive Leadership Team Meeting
Town Hall
Give Them a System
Chapter 2: Replace Uncertainty with Insight
The Dangerous Call to Action
Why It Is Better to Create Truth Rather Than Find It
The Blessing of Uneven Distribution
So … What?
Measure Only to Improve
Segment
Is a Verb
X Marks the Spot
Quads
Obey Natural Law
Chapter 3: Transform Business Insights into Business Segments
Serving Simplification
Simplification Made Simple
Can You Ever Be Too Simple?
The Dirty Dozen
The 80/20 Miracle—Thinking Is Still Required
And Think Some More
Chapter 4: Perform the Zero‐Up Thought Experiment
What If?
Refocus Resources
Methods and Processes
Quad Zero‐Up
Product/Customer Inflection Point Zero‐Up
Red, Yellow, Green
What Now?
Step 1:
Chapter 5: Go Get a Goal
Follow Columbus
Gap Analysis
Don't Sweat the Numbers
Get to the Dentist Before You Hit an Iceberg
Strategy Is Profitability and Profitability Is Strategy
Presenting the Goal
Every Process Begins with a Goal
Step 2:
Chapter 6: Frame the Strategy
Go for the Marrow
Win from Your Core
What Step 2 Looks Like
Work the Framework
Draft a Segmented Profit and Loss Statement (P&L)
Frame the Cross‐Functional Execution
Don't Be Afraid to Think Short Term
The Step 2 Work Product
Step 3
:
Chapter 7: Build the Structure
Strategic Alignment and Cross‐Functional Execution: The How
Apply Divergent Thinking Followed by Convergent Thinking
The Three Questions to Answer Now
Sector and Product Line
Deliverables
But Remember, It's Still About Progress, Not Perfection
Step 4:
Chapter 8: Launch the Action Plan
X‐Matrix
Scope of the Step 4 Action Plan
Sequencing Action Items
Do‐Check‐Act
Try, Try Again
After the First Hundred Days
Chapter 9: Exercise Your Right to Grow
Managing Real Time
The Strategic Management Process in Q1 and Q2
The Strategic Management Process in Q3 and Q4
Cycle and Flywheel
Celebrate the Wins, Cultivate the Fear
Chapter 10: Tune the Critical Focus
Your Most Powerful Tool
Shave Close
Simplifying Through Year 1
Choose Your Tool
Your Quad Manual
Segmenting the Entire Enterprise
Chapter 11: Develop Your Talent with 70/20/10
For Whom the Bell Curve Tolls
Applying 80/20 to the Talent You Have
The 80/20 Recruiter
The Role of 70/20/10
Year 1 and After
Chapter 12: Thinking Is Required
Shampoo, Rinse, Repeat
The Thinking That's Required
From Cycle to Flywheel
Stop Talking Change; Start Doing Projects
Why Grow?
Acknowledgments
About the Author
Index
End User License Agreement
List of Illustrations
f06
Figure I‐1 International Tool Works Versus S&P 500
Figure I‐2 IDEX Versus S&P 500
Figure I‐3 Modine Versus S&P 500
Chapter 2
Figure 2‐1 Sample 80/20 Quad Chart
Chapter 3
Figure 3‐1 Leonardo da Vinci's “Vitruvian Man,” an illustration of the Golde...
Chapter 4
Figure 4‐1 Pareto Principle (Without Overhead)
Figure 4‐2 Pareto Principle (with Overhead)
Figure 4‐3 The Right to Grow Ratio
Chapter 5
Figure 5‐1 The Gap Analysis
Chapter 7
Figure 7‐1 The Four Requirements for a Desirable M&A Target
Figure 7‐2 Divergent/Convergent Thinking Cycle
Chapter 8
Figure 8‐1 X‐Matrix Template
Chapter 9
Figure 9‐1 First Hundred Days Timeline
Figure 9‐2 Zero‐Up in a Nutshell
Figure 9‐3 The Four‐Phase 80/20 Cycle: Basis for a Flywheel
Chapter 11
Figure 11‐1 The Normal Distribution Bell Curve
Figure 11‐2 The Power Law Curve's Long Tail
Chapter 12
Figure 12‐1 The Annual Strategy Management Process
Guide
Cover
Table of Contents
Praise for From Panic to Profit
Title Page
Copyright
Dedication
Author's Disclaimer
Introduction: The Keys to theGrowth Kingdom
Begin Reading
Acknowledgments
About the Author
Index
End User License Agreement
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Praise for From Panic to Profit
“I wholeheartedly endorse From Panic to Profit as a real‐world road map for structuring and growing a business. By applying the tools outlined in its pages, I've seen firsthand how this framework transforms not just management but also profitability. This philosophy isn't just a theory; it's a practical and effective approach that has streamlined our operations and focused us on what truly drives success. A must‐read for any entrepreneur looking to elevate their business!”
—Adam Gibbs CEO, OTC Industrial Technologies
“In From Panic to Profit, Bill Canady delivers a masterful road map for leadership teams in private equity–owned, middle‐market companies navigating complex turnaround scenarios. Drawing from my experience leading engineering and product development initiatives in high‐stakes environments, I find his application of the 80/20 principle both refreshing and practical. This book provides a strategic framework for uncovering value, streamlining operations, and achieving sustainable revenue growth—on demand and without surprises. Bill's insights, supported by real‐world case studies and actionable strategies, resonate with anyone driving transformative change in dynamic industries. This isn't just a guide—it's an operational playbook for executives who want to thrive in challenging circumstances. A must‐read for leaders committed to building resilient, growth‐focused organizations.”
—Mark Parker president and CEO, Royal Coatings, Inc.
“Bill Canady's new book, From Panic to Profit, lays out a powerful blueprint for struggling companies to not just remain viable but to thrive in a short period of time. Having worked with the 80/20 process, I've seen firsthand how quickly this approach can double or triple earnings in twelve months or less. With clarity and actionable insights, Canady puts his extensive experience into a road map that focuses leaders on what truly matters: maximizing profits while minimizing wasted time and effort. If you're ready to build sustainable growth quickly, this book is an essential read.”
—Joe Ayette VP Operations, Western Power Sports
“Bill Canady's From Panic to Profit is a compelling guide for executives seeking to cultivate a culture of continuous improvement and unlock their organization's full potential. By focusing on the critical few rather than getting bogged down by the trivial many, Canady helps leaders prioritize high‐impact customers, products, and improvements. It's an essential read for anyone committed to operational excellence and long‐termsuccess.”
—Mark Graban author, The Mistakes That Make Us
“Great book in From Panic to Profit. It came to me as specific and actionable, very clear. The beginning grabbed me and put me right in the seat of taking over an acquired mid‐cap company in a private equity portfolio, needing a quick turnaround. You concisely and clearly lay out a plan to transform a business, providing details for each step along the way. Your literary references and historical anecdotes make the concepts memorable and vivid. Your books have the clearest and most data‐driven approach to making any business better quickly. The results speak for themselves. The heart of this is using the 80/20 principle. You cut to the core of the issue and keep it simple. From Panic to Profit provides a clear process and approach to get results for any business fast. These insights and playbook will help any leader drive excellence.”
—Bret Snyder chairman, CEO, and president, WR Gore Industries
“Bill gave me the opportunity to read an advance copy of his book From Panic to Profit, and I was hooked from the beginning. Bill has lived exactly what the book covers from start to finish, and so have I in many ways. He references the work of other well‐known authors in business strategy and acumen, which I have followed in the past. But From Panic to Profit captures what many companies face today, with dynamics like the rise of private equity firms, the focus on short‐term profitability, and the need for immediate results. I plan to use this book with my key managers to instill the sense of urgency necessary for delivering above and beyondresults.”
—Randy Breaux GPC Group President North America – Napa and Motion Industries
“In From Panic to Profit, the follow‐up to the highly‐successful The 80/20 CEO, Bill takes us on the recovery journey of a private equity–sponsored business called Rolling Thunder that was sinking quickly. This real‐life, step‐by‐step guide lays out the tools and processes of 80/20 required to earn the right to grow and reach the desired state of a profitable growth operating system (PGOS). Throughout, he deftly weaves historical and nonbusiness anecdotes into his hardcore business how‐to, resulting in an easily digestible, must‐read for any executive facing a business crisis. Good luck with the launch!”
—Mitch Aiello CEO Boyd Corporation
“In this book, Bill combines invaluable lessons with great storytelling, which is rare for a 'how‐to' business book. By finding creative examples or analogies from historical events, literature, movies, fables, or even religion, he makes each practical observation easy to read and enjoyable. The end result is tangible advice, learned from experience, that sticks with you.”
—Roland Mosimann president, AlignAlytics, and 80/20 expert
“A handful of leading companies have highly efficient operating mechanisms, strategy deployment methodologies, and talent management approaches fine‐tuned over many years, often decades. If your organization lacks such maturity, 80/20 provides a powerful, scalable, and replicable model that will permanently reshape how your business is run in less than eighteen months. Trust the process, and you will discover the true potential of your business. In From Panic to Growth, Bill shares the recipe with compelling and practical examples of successful 80/20 implementations. A must‐read.”
—Peter Hakanson president, Bihr European Power Sports
“I recently read Bill Canady's book From Panic to Profit, and I found it incredibly insightful and informative. Building on his groundbreaking work in The 80/20 CEO, this book empowers CEOs to systematically analyze, diagnose, chart a course, and execute a successful and profitable turnaround in almost any business environment. Bill emphasizes the importance of ‘thinking required' throughout the book, and I couldn't agree more. It's the most crucial aspect of applying the principles of 80/20 to business. Earning the right to grow and deploying a profitable growth operating strategy (PGOS) requires thoughtful consideration. The starting point in this thinking process is to focus on the customer, understand their needs, and honestly assess why they choose your products or services over competitors. The new CEO doesn't have all the knowledge and intelligence needed to turn around a business. If they think, or say they do, don't hire them. A one‐person show does not produce sustainable results. I was particularly impressed with Bill's understanding that team members possess vast knowledge and experience that can be harnessed to improve performance. Unfortunately, in underperforming enterprises, this knowledge is often underutilized. In multiproduct, multi‐market companies, people often work at cross‐purposes, engaged in activities that have little chance of generating profitable growth. These individuals are usually dedicated to tasks that don't matter to the customer, at least not enough to justify the cost. In my experience, tapping into this knowledge base and focusing on the vital few products and markets that can make a positive impact will lead to profitable growth, even in challenging market conditions. The PGOS framework provides a straightforward methodology for leaders entrusted with the task of turning around underperforming businesses. As always, Bill's insights are presented in an entertaining way and incredibly valuable. I highly recommend this book.”
—Ray Hoglund member of the board of directors, Marcone Supply
Uncover Value, Boost Revenue, and Grow Your Business with The 80/20 Principle
FROM PANIC TO PROFIT
BILL CANADY
BEST SELLING AUTHOR OF THE 80/20 CEO
Copyright © 2025 by John Wiley & Sons, Inc. All rights reserved, including rights for text and data mining and training of artificial technologies or similar technologies.
Published by John Wiley & Sons, Inc., Hoboken, New Jersey.
Published simultaneously in Canada.
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Library of Congress Cataloging‐in‐Publication Data:
Names: Canady, Bill author
Title: From Panic to Profit : Uncover Value, Boost Revenue, and Grow Your Business with The 80/20 Principle / Bill Canady.
Description: Hoboken, New Jersey : Wiley, [2025] | Includes index.
Identifiers: LCCN 2024051382 (print) | LCCN 2024051383 (ebook) | ISBN 9781394331581 hardback | ISBN 9781394331604 adobe pdf | ISBN 9781394331598 epub
Subjects: LCSH: Corporations—Growth | Business planning
Classification: LCC HD2746 .C35 2025 (print) | LCC HD2746 (ebook) | DDC 658.4/06—dc23/eng/20250106
LC record available at https://lccn.loc.gov/2024051382
LC ebook record available at https://lccn.loc.gov/2024051383
Cover Design: Laura Duffy
Author Photo: Courtesy of the Author
For
My wife Debbie, my best friend, my confidant, my love.
My girls Sarah (plus my son‐in‐law, Nico!) and Hannah, who inspire me every day.
And my grandson, Collin, the light of my life.
Author's Disclaimer
Much that I have written here is based on my executive and leadership experience working with various companies and individuals. In the interest of privacy and, even more, the protection of proprietary information, I have either avoided naming those companies by simply referring to them generically or, for convenience, supplied fictitious names.
—Bill Canady
Introduction: The Keys to theGrowth Kingdom
Please don't skip this section. This book lays out a set of processes and practices that will grow your business. More precisely, it lays out a set of processes and practices that will earn you the right to grow and accelerate that growth.
So don't turn the page. Not yet.
Because if your business is failing, faltering, or successfully treading water, you need to earn the right to grow before you can grow. And even if your business is already growing, but you want to make it grow more and faster, you still need to earn the right to grow.
I promise that I am going to tell you how to earn this right. But converting that how to action requires that you and your entire organization commit to and align on the processes and practices of a Profitable Growth Operating System® (PGOS) driven by the 80/20 Pareto principle. If you are not familiar with 80/20, don't skip ahead. All you need to know at the moment is that 80/20 is a natural law of input and output that tells us roughly 80 percent of consequences come from just 20 percent of causes. Put another way, just 20 percent of your effort is critical in its effect while 80 percent is trivial.
For now, you need to know that commitment to the 80/20 PGOS is everything and that this is not an opinion. It is a fact founded on experience, and I have the receipts to prove it, which I'll soon show you. Just don't skip this section. Okay?
***
There is a rule so important that somebody a long time ago wrote it out in Latin: Omne trium perfectum—“Everything that comes in threes is perfect.” If you are Christian, the rule of three brings to mind the Holy Trinity. If you are a Wiccan, you know that whatever energy a person puts into the world comes back to them times three. Aviators use a rule of three to calculate the rate of descent in terms of altitude versus travel distance. C++ programmers have their own rule of three concerning class method definitions. Hematologists exercise a rule of three to check the accuracy of blood counts. Medical chemists observe a rule of three in dealing with lead‐like compounds. Statisticians employ a rule for three to calculate a confidence limit in the absence of observable events. Survivalists prioritize survival steps using their own rule of three. Storytellers have always loved the rule of three. It's the Three Little Pigs, Goldilocks and the Three Bears, and The Three Musketeers. Sloganeers of every stripe revel in the rule of three: life, liberty, and the pursuit of happiness; stop, look, and listen; stop, drop, and roll; turn on, tune in, drop out; Snap, Crackle, and Pop; government of the people, by the people, for the people.
I could go on. But I won't—except to point out that the United States national government is conspicuously founded on the rule of three, with power divided among the legislative, executive, and judicial branches, which work together yet are opposed.
Without doubt, there is a special mojo in the rule of three. So, here is the rule of three any business that needs or wants to earn the right to grow must not only apply but commit to across the entire organization. Fail to do this, and the processes and practices that you find in this book will produce results at best suboptimal and, at worst, useless.
***
Most of this book is about processes, practices, and the tools required to apply and deploy them. I must state the obvious: all the processes, practices, and tools described in the pages that follow need people to use them. All you really must know about people in general is that there is no business without them. But about one category of people—leaders—you need to know something more: to lead a business to profitable growth requires not a single standout leader but a triumvirate. They are a visionary, one prophet (sometimes more), and multiple operators.
The Visionary
The visionary is the first as well as the final decision‐maker within the organization, which almost always means the CEO. Within the triumvirate and the entire organization, the visionary is the highest authority in the business. They make decisions and issues directives to other executives and managers, who are held accountable for acting on them. The visionary sets the strategic goal for the team as part of a three‐ or five‐year business plan. The goal is almost always a target number. The visionary holds the team members accountable for making progress toward the goal and ultimately achieving it. The visionary ensures alignment of all team members by making commitment to and alignment on the goal and all aspects of the PGOS a condition of employment. To ensure alignment, commitment, and continuous improvement, the visionary conducts regular reviews, always holding team members accountable for the results.
The Four Commandments
The visionary holds team members accountable for obeying The Four Commandments:
Be on pace.
Produce no surprises.
Be data‐driven.
Believe that results matter.
Although the decisions of the visionary must be firm and unambiguous, they are, like everything else in any organization, dedicated to continuous improvement and subject to further decisions that might modify some or all the CEO's preceding decisions.
One entity limits the power of the CEO. In corporations that have a board of directors, the board might operate as a check on CEO authority. More significant for this book, however, the visionary—the CEO—like every other leader and manager in the organization, must be committed to the entire program of the PGOS, including all its practices and processes. This commitment is so critical to the success of the PGOS deployment that it must be clearly laid down as a condition of employment.
Why don't we just call the visionary by the corporate title, CEO? Because visionary embodies the essential idea of vision. In a company earning its right to grow, the visionary understands the present state of the enterprise and, with imagination and wisdom, leads the planning for a desired future state.
For starters, think Henry Ford or Steve Jobs, but get more specific. I see the visionary role not as that of some soothsaying fortune teller but as a person quite literally with vision. Set aside Henry Ford and Steve Jobs and think instead of air traffic controllers. They have an incredibly demanding job, coordinating takeoffs, approaches, and landings at busy airports, continuously monitoring highly dynamic situations with many moving parts, calmly and concisely communicating with pilots, telling them what actions to take and when to take them.
How do they manage this? How do they keep the planes from crashing into each other?
Ask an air traffic controller, and you will get a straightforward answer. They learn to “get the picture.” That's what they call it. In fact, they cultivate what the French call coup d'oeil, which can be translated as the “glance that takes in a comprehensive view.” The phrase is usually applied to military leaders. For instance, Napoleon had coup d'oeil, General Ulysses S. Grant had it, and General George S. Patton had it: an ability to take in, at a glance, a vast dynamic battlefield. It is a moving picture, and every successful air traffic controller has this get‐the‐picture coup d'oeil ability to comprehend the situation and act on it in real time. Aided by sophisticated radar, they create in their mind's eyes real‐time visions revealing each aircraft in relation to every other aircraft within a certain space. Every decision made and every instruction given to each pilot is formulated and communicated within the frame of the picture. The required visionary faculty of a PGOS‐driven CEO is vividly analogous to that of an air traffic controller.
Now, because all the parts of the business picture are, like the planes approaching and departing the airport, always in motion, the visionary must be super agile and ultra‐focused. Deploying a strategic business plan within the guardrails of the processes and practices we call PGOS transforms static strategy into dynamic deployment. The relentlessly running clock certainly creates pressure on the visionary, but it also means that the visionary's outlook cannot be of some imagined static state of perfection but must be a real‐life process of progress toward a goal, which, like everything else, is subject to revision in the face of reality.
The Prophet
The first company I was hired to run (by the private equity firm that had purchased it) was a conglomerate of decentralized businesses sprawled out over diverse markets—medical, technical, and industrial.
In theory, 80/20 guided the entire conglomerate. In practice, unit presidents generally went their own way. At first, I brought in outside consultant trainers to drill 80/20 and related processes and practices into our bundle of businesses. They were good consultants and competent trainers. But they were making painfully slow progress, during which the conglomerate limped along, the ongoing victim of suboptimization. That is when I realized that we needed to internalize 80/20 and our other aligned processes. The only way to do this efficiently and on pace was to bring it all, the whole program, totally in‐house.
What did we need? A prophet!
Like the CEO visionary, the prophet is a leader—often, but not necessarily, the chief operating officer (COO)—with the knowledge and know‐how needed to deploy the vision of the visionary. The prophet (or prophets, because there might be more than one) translates the vision into actions, typically through training, coaching, and mentoring others throughout the organization in the deployment of the company strategy.
More specifically, the prophet is expert in the deployment of PGOS processes, especially 80/20 analysis and execution. The prophet owns the PGOS training of the team, ensuring that everyone understands how 80/20 and other key processes work. Indeed, the prophet is responsible for training the trainers. The objective is to develop an internal cadre of PGOS experts capable of training all team members in the key processes. Often, outside consultants initially serve in the prophet role, inculcating PGOS and 80/20 into the team leaders; however, it is impractical to rent a prophet from a consulting or training company for the long term. Without a prophet who is organic to the organization, your executives, managers, and other key personnel will inevitably regress from aligning on the strategy to drifting from it. Without a prophet, they will implement what makes them comfortable or what they individually believe is right. The result? In place of the possibility of growth will be the disorder of suboptimization. If a prophet (or prophets) are organic to the organization, substantial progress toward the goal set for the business plan is seen within three to five months. If no organic prophet is available, significant performance improvement is likely to take eighteen months.
The ideal prophet is not only thoroughly versed in 80/20 and other aspects of PGOS but has led deployment of 80/20 multiple times. If the prophet role begins as an outside consultant—because no prophets are available in the company—the visionary needs to plan a transition from reliance on outside consultants to a fully functioning prophet leadership role (usually assigned to the COO) within two years. Starting from zero, you will need at minimum eighteen months to “grow” at least one prophet in the company.
In religion, a prophet is a propagator of the faith. The unifying structuring principle of a company committed to the practices and processes of the PGOS does resemble a religion in at least one aspect, namely, commitment to a gospel. Call it “the gospel according to Pareto.” Religions are generally based on the notion that there is only one right way. Similarly, PGOS holds that the only right way to embrace a strategy that focuses on the most profitable products and customers is by over‐resourcing the roughly 20 percent of customers and products that create roughly 80 percent of the company's revenue.
Most religions rely for validation on faith rather than on proof. The Pareto principle—which we explain and demonstrate throughout this book—offers ample proof and asks for no faith whatsoever. It has the receipts, and it shows them. Consider, for instance, the example of a company that has mastered the use of 80/20 thinking, Illinois Tool Works (NYSE: ITW). In the early 1980s, ITW faced rising costs and decreasing profitability. In response, company leadership decided to use the 80/20 principle to drive a complete overhaul of its policies, processes, and rules of operation. Over twenty‐five years, ITW not only perfected how it applied the 80/20 rule but also enjoyed annual shareholder returns of 19 percent without fail—many times by acquiring companies and applying the principles of 80/20 to them. That's one profitable gospel!
Don't have twenty‐five years to perfect your practices and processes?
One thing ITW discovered is that profitable growth accelerated pretty much in proportion to the degree that the visionary, the prophet, and (as we are about to see) the operators were all embedded in the company. The leaders of rapid growth were internal, organic to the organization. As mentioned, an external prophet or team of prophets is often initially hired as an outside consultant, but the sooner the lessons are learned and the role of prophet is brought in‐house, the better. For, the prophet in a PGOS‐driven enterprise must preach from a total understanding of the core strategy and coordinated engagement with the other true believers in the company. The prophet is not the author of the holy writ, however. That is the role of the visionary. No, the province of the prophet is the keeper, the interpreter, and the evangelist of the vision.
The Operator
The operator is the leader who runs the business on a day‐to‐day level. Typically, there are several of these operators who are operational leaders within the business, employees who hold the company or business unit title of president. In some cases, operators might be designated members of the CEO's staff. In the kind of conglomerated businesses I have run during my career, the operators have been the presidents of segments or of operating companies. The operators are charged with owning, developing, and setting the strategy within their companies, business units, or segments to deliver the strategic goal set by the visionary. Although operators might not be experts in PGOS and 80/20, they understand the principles and processes involved. They must adhere to what I call The Four Commandments, which are the keys to the successful execution of the strategy. Accordingly, they must continuously upgrade and improve their teams to ensure conformity with The Four Commandments.
The operators know their companies, but they are not the source of the overall strategy. That is the role of the visionary. Nor are they the keepers and masters of the practices and processes by which that strategy is implemented. This is the domain of the prophet. What they do have is intimate working knowledge of their companies or business units, and they are themselves thoroughly evangelized on the strategic vision and on the processes and practices necessary to ensure that their business is perfectly aligned with the strategy and meets or exceeds all its strategic goals.
Show Us Your Receipts
What can you expect from applying 80/20 in the PGOS? I believe that ITW was in fact the first business to use 80/20 analysis in a systematic and systemic whole‐of‐company program to earn the right to grow, to exercise that right, and to grow. The company called it the 80/20 Front‐to‐Back Process. ITW began operating under the first iteration of this process in 1985. At the time, the company's compound annual growth rate (CAGR) was essentially on par with the S&P 500. This performance improved slowly through the early 1990s. Beginning in 1994, a dramatic climb commenced. By 2022, ITW's operating margin was 23.8 percent, compared to 15.9 percent in 2012. Overall, since embracing an 80/20 growth system, the company's compound annual shareholder return stood at 15.2 percent and delivered ten‐times cumulative return versus 8.4 percent for the S&P 500 over that same period (see Figure I‐1).
Figure I‐1 International Tool Works Versus S&P 500
The examples of two more companies, IDEX Corporation and Modine, show similar performance, but for these firms we have an added data point, which provides a critical insight. Take a look at the performance of IDEX versus S&P 500 between the start of 2009 and the end of 2023 (Figure I‐2).
The 80/20‐based process was introduced at the start of 2009 by a team of outside consultants. Their engagement lasted into July 2012, during which shareholder return increased essentially on par with that of the S&P 500. During July 2012, the external consultants were replaced by a 100 percent internal team. IDEX had committed to the rule of three, aligning internal leaders—the visionary, the prophet, and the operators—on the 80/20‐driven processes and practices of the company's growth strategy. The result was dramatic, as can be seen by how sharply the performance of IDEX suddenly veers upward from that of the S&P 500. This growth occurred only after the company was fully aligned on the strategic execution of 80/20 through an internal team led by internal rule of three leaders. For nearly three years, under external consultants, IDEX shareholder value was up about 100 percent, only slightly more than the S&P 500. The outside consultants were doubtless necessary, but they were not sufficient, and they likely remained too long. After four years under internally led deployment, however, with the company fully aligned on the 80/20 growth strategy, it was up a cumulative 400 percent, while the S&P was about 200 percent.
Figure I‐2 IDEX Versus S&P 500
In the case of Modine, 80/20‐driven deployment of PGOS began with the CEO and board of directors, and the full rule of three leadership team fully committed and aligned. True, 80/20 experts were hired from the outside as initial consultants, but the strategy and implementation were organic, internal, and the product of total commitment. Figure I‐3 shows the result.
Figure I‐3 Modine Versus S&P 500
In just eighteen to twenty‐four months, between January 2021 and October 2022, the company began a sharp upward inflection, putting a lot of mileage between itself and a comparatively flat S&P 500. By October 2023, growth rate was up a cumulative 250 percent, while the S&P lolled along with gains hovering just above zero percent.
Examine the receipts, and you discover that your choices are stark:
EITHER
commit to earning the right to grow by creating a totally embedded, organic, internal leadership triumvirate in conformity with the rule of three: visionary, prophet(s), and operators. Align the three leaders on processes and practices to build and execute an 80/20‐driven strategy. Enable total alignment with these processes and practices,
make the alignment a condition of employment
, and put the company on a trajectory of rapid growth—just eighteen to twenty‐four months to your goal—as measured against its own past and present performance as well as the index of the S&P 500.
OR
change nothing about your internal leadership. Ignore the rule of three. Embed nobody. Just hire a team of consultants to tell you what to do. If those consultants are really good, you might improve performance, but anything resembling significant improvement will take at least a decade.
Where There Is No Vision, the People Perish
A proverb is an adage or traditional saying that expresses a truth based on experience and/or common sense. The Old Testament features a whole “Book of Proverbs,” including this one (Proverbs 29:18–19), which begins, “Where there is no vision, the people perish …”
In a business run on the 80/20‐driven PGOS, the visionary provides the vision, the prophet leads the execution or deployment of the vision, and the operators act on that vision and its deployment at the level of their individual business units. Although outside experts are typically consulted when introducing 80/20 to the organization, none of the commitment to 80/20‐driven PGOS is imported. Sooner or later, all must be made internal, integral, and organic to the business—and, based on the typical growth curves, sooner is far preferable to later.
PGOS will deliver extraordinary results only if the complete triumvirate—visionary, prophet(s), and operators—is present, active, aligned in the organization, and thoroughly committed. The prophet guides the execution of the vision throughout the organization, aligning the company on the strategy and applying 80/20. Without a visionary, however, there can be no vision. Without a vision, there can be no prophet or prophets. The operators take their direction from the visionary and apply it with the prophet's instruction, guidance, and mentoring. Without the committed and aligned operators, the work of the visionary and the prophet comes to nothing.
The homeliest and most practical illustration of the rule of three in leading an enterprise is the humble joint stool. It requires all three of its legs to stand. Without the visionary (often but not always the CEO), the team would not have a clear goal. Everyone would be firing unaimed arrows, which never miss yet hit who knows what. Without the prophet, the team lacks a clear map to the visionary's goal. Without the operators, neither the visionary nor the prophet will have anything to do.
