The 80/20 Rule: A Cognitive Framework for Improving Wine Quality
At élevage Consulting, we always seek ideas, mental models, and cognitive frameworks that clarify the opportunities to make better wines or improve winery operations.
The 80/20 Rule addresses the non-linear, asymmetric relationship between inputs and outputs. It is also known as the Pareto Principal after economist Vilfredo Pareto, who noted that approximately 80% of the land in Italy was owned by only 20% of the population. A closer examination of many phenomena reveals that it applies to much more than land ownership in Italy.
In The 80/20 Principle: The Secret to Achieving More with Less, Richard Koch explains how to apply this idea to our business and lives. In its simplest form, the idea is that a small portion of our actions result in an outsized volume of consequences.
For example, Koch suggests that a careful examination of customers' sales shows that disproportionately large sales are attributable to a relatively small number of customers.
The book outlines, in detail, two critical practices. The first portion describes an "80/20 analysis," a quantitative examination of the distribution of inputs and outcomes. The book's second part, "80/20 Thinking," is more relevant to winemaking.
“Look at all of your activities and assess 1). Is this activity part of the “vital few” that yield outsized results? 2) Are there times when this activity is more or less important?”
Most winemakers, for better or worse, find themselves with constraints. Rare is an operation with an unlimited financial budget and an oversupply of labor. Even well-resourced operations can find themselves constrained by harvest conditions. An essential skill of the winemaker is to do great work in the face of constraints. The 80/20 rule is a valuable tool in developing that skill.
Before we go further, it should be made explicit that the relationship is not always 80/20. The point here is that there is an asymmetry in inputs and outcomes. It could be 99/1 or 60/40. Regardless of the distribution, these asymmetries, once known, can be exploited to provide considerable leverage.
Here are some ways to apply the 80/20 rule to winemaking or elsewhere in your operations:
The Doctrine of the Vital Few: A few things matter much more than most things.
I can't count how many hours I've spent over the last two decades wiping down the insides of a red fermenter after each punchdown or pumpover. I know I'm not alone. Most winemakers I know do this or have their team do it. It can take an hour or more each day. I love the way the tank looks after being wiped down. I've heard the rationale that it is more sanitary or that it results in fewer fruit flies.
However, I've never heard of a ferment sticking or becoming volatile or reductive for it not being done. More importantly, I've never heard anyone attribute this practice to making a notably better wine.
Are there things that consume about the same amount of time that would result in a notably better wine?
Are there other activities that matter more?
·Are there times in the winemaking process when this activity is less important than others?
Look at all of your activities and assess 1). Is this activity part of the "vital few" that yield outsized results? 2) Are there times when this activity is more or less important?
A few people add most of the Value.
Not everyone on your team is equal ( in capability and output).
Are you assigning responsibilities and tasks equally? Should you be?
Are the high-value tasks being assigned to the most capable people?
Also, think about the team you've assembled. You've personally vetted each member. They are all capable and will all do great work, right? Wrong; the 80/20 principle says that a few will outperform, and most will underperform. Don't deny this is happening. Accept it and make the decisions necessary to get the most output from each member.
Identify the 20% of your time that gives you 80% of your results.
Winemaking demands an unreasonable amount of time. Even the most resourced teams sometimes put in big days. Not every hour has the same potential to deliver significant results.
Is this activity time-critical?
Does doing this task now keep me from doing another that makes a more significant contribution?
Does this task need to be done at all?
How much time is being lost to task switching?
Would this task be better done tomorrow while the team is fresh?
The 80/20 Principal can also be applied in other parts of winery operations.
You have a few customers that represent a large portion of your revenue.
You have wine club members who buy more than most others; do you know who they are? What are you doing differently for them?
You have distributors or wholesale accounts that dramatically outperform the others. Who are they? Are they getting more support?
80% of your marketing accounts for 20% of your sales.
Do you know which 20% of your marketing projects account for 80% of revenue? Find out. Then, spend 80% of your resources (time, budget) repeating that 20%.
Big wins start small.
Because of the Pareto distribution something big always starts as something small. Pay attention to the small things: products, processes, markets, and customers, and look for outsized performance. You AND your competitors are looking for big opportunities. You will often find yourself alone, looking for the small opportunity with the potential to deliver outsized returns.
Correlation is not causation.
It is a trap to make too close of an association between seemingly related activities. For instance, having a super clean winery probably correlates highly with wine prices. However, the prices aren't caused by clean wineries. More importantly, suddenly having an immaculate, spotless winery won't increase prices.
Pursuing correlated activities diverts resources from variables that could be causative.
80/20 thinking can benefit every aspect of your business. It requires you to question the conventional. It can help wineries, both big and small, to thrive with constraints and identify opportunities. Look for the investments, expenses, people, and activities that deliver asymmetric outcomes, good and bad, and do more or less of them.