The 80/20 Principle
26 Nov
Over 100 years ago the economist / sociologist Vilfredo Pareto published his seminal works, cours d’economie politique which included a little explored law of income distribution that would later come to be known as Pareto’s Law. This mathematical formula was used to demonstrate the uneven distribution of wealth in society and stated that 80% of the wealth and income was generated and possessed by only 20% of the poppulation. This law later became known as the 80/20 principle.
So what has this economic formula got to do with anything other than the distribution of worldwide wealth? Well a lot actually!
In fact the 80/20 law can be applied to almost anything, for example…
• 80% of peas produced come from 20% of pea pods
• 80% of the consequences come from 20% of the causes
• 80% of the results come from 20% of the time and effort
• 80% of a companies profits come from 20% of the products and customers.
You can see there this is going. By rewriting the 80/20 principle it can applied to anything, specifically business productivity.
80% of the outputs result from 20% of the inputs
The list of ways to use the principle is probably infinite and the ratio is often skewed even more severely, 90/10, 95/5 are not uncommon but the minimum ratio to seek is 80/20.
So for the moment, ask yourself the following two questions…
1. Which 20% of sources generate 80% of my problems?
2. Which 20% of sources generate 80% of my outcomes and resulting happiness?
In the second part to this article I will explain how you can apply the 80/20 to reduce your work load and double your profits. In the mean time you can follow me on twitter @oligibson or if you have any questions about anything I’ve discussed just leave a comment.
No comments yet