The 70-20-10 Ratio

The 70-20-10 Ratio 

The 70-20-10 ratio has several applications that I am aware of: Time allocation in meetings; Resource allocation for driving innovation, Job training – just to name a few. You may be aware of other applications too. The order in which the ratio gets applied tends to vary, 20-70-10, 70-20-10, 10-20-70, etc. Here is my take on how to apply these ratios in your business:

20-70-10 Ratio for time management in meetings

20% = Past

I have a saying, “Successful Business Execution is 20% getting clear about what needs to be done, and 80% following up to make sure it actually gets done”

20% of the meeting time allocation is for following up to ensure that promises are being kept. I call it “weeding the garden”. This is a crucial step for creating a high performance, high accountability culture: Metrics / KPIs at the required standard? Projects on schedule? Tasks got done? e.g for a 1-hour meeting, spend 15 minutes, at the beginning of the meeting checking on progress and following up to ensure things are getting done.

70% = Present

70% of the meeting time allocation should be focused on the primary purpose of the meeting. e.g. for a 1-hour meeting, spend 40 minutes discussing the present-day issue: the project that is being implemented, the problem to be solved, the opportunity to be considered, the decision to be made, etc.

10% = Future

The final 10% of the meeting time allocation is spent assigning action steps to move things forward. e.g for a 1-hour meeting, spend the last 5 minutes assigning Tasks and getting due date commitments you can count on.

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70-20-10 Ratio for innovation & resource allocation

I learned about this from the book Mapping Innovation by Greg Satell. He points to a book called The Alchemy of Growth as its origin. Others say that it dates back as far as the 1950s. Whatever the case, many organizations, Google among them, find it a useful “rule of thumb” to guide investment and resource allocation. Here’s my interpretation:

70% = Sustaining Innovations

Sustaining innovations are continuous improvements to your existing products and services. These are also known as “incremental innovations”. Whilst they are not the (so-called) “disruptive innovations” we read about in the business media, incremental improvements are where you can obtain the most value right now. Sustaining innovations positively impact the Critical Success Factors (key Metrics) that drive your current operating model.

Even when you look at innovative companies like Google and Apple, most of their time, energy, and resources are focused on incremental updates to their existing products and services. In summary, 70% of your time, energy and resources are allocated to sustaining innovations.

20% = Explore Adjacencies

Every operating model, product line, or service offering has a finite lifespan. You don’t want to get caught out like Kodak, Blockbuster Video, Borders Bookstores. These companies kept on optimizing their existing business models and failed to change their models in a timely fashion to address strategic “inflection points” that occurred in their industries.

Every business model, no matter how successful, eventually declines. So, it is suggested that you devote 20% of your time and resources to develop and leverage your core capabilities and conduct test projects to see whether you can apply your capabilities to other industry categories and/or other customers.

Realize that many of these strategic bets will fail to deliver the hoped-for results, so you need to allow a tolerance for failure, and stick to predetermined go/no-go criteria at agreed milestones when evaluating each project to determine whether you fan the flames, or pull the plug.

10% = Identify New Paradigms

This is about stretching your comfort zone. Funding research and development. Tinkering and experimenting with new technologies. Attending conferences outside your industry. Exposing yourself to new information outside of industry dogma. This is about exposing yourself to highly speculative stuff that may not have any immediate payoff, but it opens you up to serendipitous discoveries and new ideas that may eventually turn into the products, services, and business models of tomorrow.

Note: As Greg Satell recommends, The 70-20-10 investment principle is a rule of thumb, not a physical law. You don’t audit your staff’s time or financial expenditures to adhere to the exact proportions. However, it is a useful guide to investing wisely.

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10-20-70 Ratio for job training and skill development

I keep this ratio in mind when designing the training and onboarding of a new hire during their first 1 to 3 months in a new role. Here’s a quick summary:

10% = Formal learning

Formal training and courses. Understanding the theory. Learning the processes. Certifications and compliance.

20% = Coaching and mentoring

Role-play scenarios. Shadowing others. Performance feedback and coaching from the manager in recurring 1 on 1 meetings. Peer learning and discussion.

70% = On the job experience

Learn by doing. Workplace integration of what has been learned. Apply coaching feedback from the manager. Progressively increased levels of autonomy. Accountability for Metrics and Projects. New assignments.

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Do you know of other applications for the 70-20-10 ratio?

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Until next time…
Stephen