Startups are heavily resource constrained and so prioritization of what to work on becomes paramount. In today’s Tech Tuesday I want to share an important heuristic that many companies can benefit from.

The point of departure for this the well known 80:20 rule, which for our purposes loosely states that 20% of the work will get you 80% to the goal. After that you have rapidly diminishing returns. For instance, you get a huge amount of benefit from just putting your code under version control even if you don’t do any fancy branching and merging. Another way of expressing this idea is that you tend to face diminishing marginal benefit of effort as shown in the graph below (adapted from here):

Now that in an of itself is not an earth shattering insight. But now let’s turn to the second part. Every startup has a bunch of different components it must work on. For instance, at the highest level these are likely product, marketing, sales, hiring and finance. If you dig into product for say an ecommerce site, the components might be a catalog, a shopping cart, checkout functionality, email reminders, etc. You can think of these components shown in an illustrative diagram as follows:

Along each component I have indicate how much progress has been made so far. You can now think of the area of the shape as being a measure of your overall progress.

So as you are thinking about prioritization your objective function should be to maximize the area of the shape. Now combining these two insights compare and contrast two possible effort allocations as shown below:

Working on component A you are already well into the diminishing returns portion of the curve and so a fair bit of effort will only result in a little bit of progress. On component D on the other hand you have not gotten very far yet and so a bit of effort will go a long way. Clearly working on D adds a lot more area – overall progress – than working on A.

The point here is not for you to try and actually draw diagrams like this. They are meant to illustrate a key point: don’t keep pushing forward on stuff you already have, work more on areas that are really languishing. Let’s make this really concrete: if you have an awesome product but nobody knows about it then you have to more or less stop working on the product and spend some time on marketing. This mode of analysis can be repeated at every level of an organization. For instance, if your website rocks in a full on browser but you have no mobile styling at all, you should stop adding more stuff to the site and get a rudimentary mobile version out. Or in marketing: if you have great PR but cannot be found via search, then you should spend some time on SEO.

The combination of the 80:20 rule and identification of “principal components” of effort is very powerful. Give it a whirl for your own organization or even your own life.