Applying the 80/20 Principle

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Thu, Mar 27 - 9:38 am EST | 10 years ago by
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    The 80/20 Principle is also known as the “Pareto Principle” or “the law of the vital few”. Generally, this means that 80% of the outcomes come from 20% of the causes. Here’s example of how this relates to business:

    • 80% of your work is done in 20% of your working time
    • 80% of your income comes from 20% of your sales
    • Originally, the ratio was used to illustrate that 80% of wealth was distributed to 20% of the population.

    80/20 is not meant to be a fixed ratio. Other ratios such as 7o/30, 90/10, and 95/5 also exist. However, the general “grouping” idea is the same.

    So what? How do I use this 80/20 Principle?

    If you’re in charge of marketing, see which marketing efforts produce 80% of the leads (or the general bulk, since the rule isn’t intended to be exact) and focus your resources and energy on those.

    If you want to boost your productivity, try to measure if 80% of your required daily work can be accomplished in 20% of your required daily work hours.

    If you take care of product development, see which products bring in the bulk of the sales, and focus on selling, manufacturing, and improving those.

    Are you a team leader? Figure out which of your members produce the bulk of the results, and find a way to improve the output of the others or assign them to other tasks.

    Other articles on the 80/20 principle:

    The 80/20 Principle: 11 Ways to Boost Your Life from Life Optimizer

    A more academic approach to the 80/20 principle can be found here

    Do you use the 80/20 rule in the office?

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