Pareto's law

From An Agile IT

Pareto's Law (aka 80/20 Rule)

In the late 19th Century, Pareto established that 80% of the land in Italy was owned by 20% of the population. He later found this was the case in most countries.

The Pareto Principle or the 80:20 Rule has proven its validity in a number of other areas.

Some examples:

• Meetings: 80% of decisions come from 20% of meeting time.
• Time management: 80% of your results and progress will come from just 20% of the items on your daily To-Do list.
• Distractions: 80% of distractions come from the same 20% of people.
• Defects: Roughly 20% of the code typically causes 80% of defects.
• Sales: Roughly 20% of your customers produce 80% of your sales.
• Customer Complaints: Roughly 80% of customer complaints are about the same 20% of your projects, products or services.
• Marketing: Roughly 20% of your marketing will produce 80% of your results.

The 80/20 rule should make us all think more about separating the essential from the non-essential. Once established as the norm this approach becomes a standard reaction to solving problems.

Frequently when confronted with solving a major problem, people seem overwhelmed with the complexity of the issue, the number of variables involved in the problem. Often they are unable to take any meaningful action. Without using "Pareto Thinking" the task of making improvement in any process or solving any significant problem is extremely difficult and at the very least usually appears to require much more time and work than one can afford.

One caution is that beyond a certain threshold, the cost of improving further becomes very high.