Finding what matters most.
WHAT IT IS
Ranking items by contribution, and seeing how much comes from how few.
WHAT TO RANK
Customers by margin Products by gross profit Sources by customers produced Costs by size
WHAT YOU USUALLY FIND
A small proportion accounts for most of the total.
WHY THAT MATTERS
Attention spread evenly across everything is attention wasted.
WHAT TO DO WITH THE TOP
Protect it deliberately.
Know who those customers are and what they need.
WHAT TO DO WITH THE BOTTOM
Establish whether it costs more to serve than it returns.
Then reprice, simplify, or discontinue.
WHAT TO BE CAREFUL WITH
Discontinuing things that support the top Assuming small customers never grow
WHAT TO CHECK
Concentration risk: whether losing one item or customer would be serious.
WHAT TO PLOT
Cumulative contribution against rank.
That shows the concentration immediately.
WHAT TO REVIEW
Annually.
