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Pareto Principle

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The Pareto principle (also known as the 80-20 rule, the law of the vital few and the principle of factor sparsity) states that, for many events, 80% of the effects comes from 20% of the causes. Business management thinker Joseph Juran suggested the principle and named it after Italian economist Vilfredo Pareto, who observed that 80% of income in Italy went to 20% of the population. Later, Pareto discovered that the principle was valid in other parts of his life, such as gardening: 80% of his garden peas were produced by 20% of the peapods.

Some example 80/20 Rule Applications

  1. 80% of process defects arise from 20% of the process issues.
  2. 20% of your sales force produces 80% of your company revenues.
  3. 80% of delays in schedule arise from 20% of the possible causes of the delays.
  4. 80% of customer complaints arise from 20% of your products or services.

See also

References

Pareto on Wikipedia