Definition: Pareto Principle
Pareto principle is a prediction that 80% of effects come from 20%
of causes.
The pareto principle has become a popular business maxim. It has
been used to describe everything from economics to projects.
Common business examples of the pareto principle include:
Projects
- 80% of value is achieved with the first 20% of
effort
Project teams commonly report that a task is almost completed after
a short time. A long time may pass after that before they report
any further progress.
- 80% of project politics come from 20% of your
stakeholders
Political struggles often originate with a few of your
stakeholders.
Program Management
- 80% of problems originate with 20% of
projects
Some projects are far more problematic than others.
Management
- 80% of work is completed by 20% of your
team
The observation that there is often a wide performance gap between
your top performers and the rest of your team.
Technology
- 80% of software problems are caused by 20% of
bugs
The observation that most problems are caused by a handful of
serious bugs.
- 80% of customers only use 20% of software
features
Most users don't use power features. In many cases, they find power
features to be annoying (e.g. complex interfaces).
Sales & Marketing
- 80% of sales come from 20% of your
clients
Many businesses are dependent on their largest accounts.
- 80% of sales come from 20% of your
products
Product diversification may have limited impact on your
business.
- 80% of sales come from 20% of your
salespeople
Killer salespeople aren't easy to find.
- 80% of your complaints come from 20% of your
customers
This is a commonly cited customer service rule of thumb.
Wealth Management
- 80% of wealth is owned by 20% of people
Pareto's 1906 observation that 80% of Italy's wealth (land) was
controlled by 20% of people has held up extremely well. Today, 20%
of the world's population controls 82.7% of wealth.
General
-
80 percent of success is showing up
~ Woody Allen
The idea that much of success is jumping through the hoops. It has
a grain of truth to it. If you consider that "showing up" is 20% of
effort — it's an example of the pareto principle.
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