Tuesday, September 04, 2007

Paretto Principle

One of the best learning I got from the Ateneo was learning the Paretto Principle. Our Operation Management professor shared the Paretto Principle or the 80-20 rule very simple but with a lot of passion that after the class we were became believers.
What is this Paretto Principle?
The Pareto principle is also known as the 80-20 rule. Is the law of the vital few and the principle of factor sparsity which states that, for many events, 80% of the effects comes from 20% of the causes. Simple?.
Business management thinker Joseph M. Juran suggested the principle and named it after Italian economist Vilfredo Paretto, who observed that 80% of income in Italy went to 20% of the population.
It is a common rule of thumb in business that "80% of your sales comes from 20% of your clients.
How do experience this principle in our lives:
1. we wear our 20% most favoured clothes about 80% of the time.
2. we spend 80% of the time with 20% of our acquaintances.
3. 80% of a country's wealth was owned by 20% of the population.
4. Relationship: 20% of the people you know (friends, colleagues, family) provide
you with 80 percent of nurturing support and satisfaction.
5. Business: Twenty percent of customers will account for 80 percent of profit.
6. Productivity: Twenty percent of your activities will account for 80 percent
of your success.

How can we put the 80-20 principle to good use?
The Pareto principle is great to increase focus. Don't try to do more. Just do more of the right things. For example, out of our many maladaptive behaviors, twenty percent of it will contribute to 80 percent of all our hardship and misery. So working on just these 20 percent can greatly contribute to our personal growth. Time management is another area where the rule can be very effective. If you have a lot of work to do, break it down to specific activities and figure out what twenty percent of the tasks listed contributes to eighty percent of the results you seek. Second, give your maximum concentration to those 20 percent tasks.
Thanks to Joseph M. Juran, you created followers beyond your dreams!.


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