The point is that 20% of features doesn't satisfy even 20% of users. It's going to be only a tiny fraction of that because something like 99% of potential users are going to need at least one feature outside the 20%. And if a competitor has all the features they need, but you don't, then you lose the sale.

As long as the 20% is enough to sustain your company, sure. You might have to charge more, however. Luxury brands do this, for instance (fewer consumers is actually a strategic choice to make the product more exclusive). “Pro” products also do this (though often “pro” means more features, not fewer).