3 Key Laws or Principles

I have found it useful to keep 3 Laws or Principles in mind when planning and executing projects or general activities within small businesses.  This might be something quite small, perhaps running an email marketing campaign or a major project, like launching a new product or service. 

All business owners will be aware of them but don’t always give them sufficient consideration in their day to day activities.  Let’s start by defining them. 

The Law of Cause and Effect.  This states that for every cause there is an effect. 

The Pareto Principle.  This states that roughly 80% of the effects are produced by 20% of the causes. 

Murphy’s Law.  This states that whatever can go wrong, will go wrong and at the worst possible time. 

If you look into the Law of Cause and Effect , it is impersonal.  It applies to everyone in the same way and applies equally to causes that produce positive effects and those that produce negative effects.  Everything that happens in your business is caused by something. 

Every decision and every action you take in your business will have an effect.  You should identify what this effect will be before making the decision or taking the action.  By doing so, you will stop yourself from causing something that plunges your business into a crisis. 

You can use this Law in the opposite direction just as effectively.  If you determine what effect or result you want to create, you will be able to brainstorm a list of all possible causes that will trigger this effect and then pick the right one for your circumstances. 

Here are a couple of examples to illustrate what I mean.  If you decide to introduce a minimum order value that was set too high, the effect would be to drive away those clients that placed small orders with you.  The effect would be a rapid loss of clients, a drop in revenues and (maybe) insufficient orders to keep your back office staff busy.

An example of using the Law in reverse might be when you decide to eliminate all production faults to reduce wastage, re-work costs and returns from customers.  You would identify all the actions you could take that will cause the desired effects and implement one or more of the most significant causes. 

Applied to your business, the Pareto Principle indicates that 80% of your profits will come from 20% of your customers.  It also indicates that 80% of your sales will come from 20% of your sales staff.  More generally, 80% of any task will take 20% of the time. 

Where in your business can you move from 100% (perfection) to 80% (good enough)?  The effect would be to release significant amounts of time that could be devoted to doing other tasks to good enough completion levels.  Productivity will rocket upwards. 

Murphy’s Law is relevant when you are resourcing and scheduling work.  It is prudent to undertake a risk assessment to identify what can go wrong and build in contingencies, slack time and spare resources to compensate for the inevitable setbacks.  For example, your supplier may miss delivery dates, a key member of your team falls sick or vital machinery breaks down. 

Keep these 3 Laws in mind as you go about your daily activities and you will soon begin to see a positive change in your business. 

ACTION IDEAS

  1. Identify how you could improve your business with analysis of the Pareto Principle.  It has a wide application in all businesses.
  2. Build into your plans some sort of buffer to accommodate setbacks, especially when the late completion of a task has significant consequences.
  3. Take time to think through the effects of any actions you plan to take before you take them to avoid any “unintended consequences”.
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