Pareto principle

The Pareto Principle, commonly known as the 80/20 rule, is a principle that states that roughly 80% of effects come from 20% of causes. Originally observed by economist Vilfredo Pareto in the context of wealth distribution, the principle has been widely applied across various fields including business, economics, and quality management.

In business, for instance, it is often observed that 80% of a company’s sales may come from 20% of its customers, or 80% of customer complaints arise from 20% of a product’s defects. Similarly, in productivity management, it might be noted that 20% of the effort generates 80% of the results.

The Pareto Principle is used to illustrate the imbalance between inputs and outputs, causes and results, effort and reward. It’s a useful tool for analyzing efficiency and prioritizing resources, suggesting that focusing on the critical 20% of factors can produce a disproportionately high percentage of the desired outcomes. This principle helps businesses and individuals in decision-making by highlighting areas with the most significant impact, thereby optimizing their strategies for better results.