The 80/20 rule, also known as the Pareto Principle, is attributed to the Italian economist, Vilfredo Pareto. In one of his papers, Pareto noted that about 80% of the land in Italy belonged to approximately 20% of the country’s total population. In essence, the Pareto Principle infers that there’s an 80-to-20 relationship between effects and their causes.
The Pareto Principle transcends disciplines. In sports, for example, you’ll find that at least 20% of athletes win 80% of the time, or that roughly 20% of training and exercise impact 80% of an athlete’s performance. Similarly, when it comes to healthcare, about 20% of patients depend on as much as 80% of the nation’s healthcare resources.
Applying it to the business world, the 80/20 rule suggests that 80% of your company sales come from 20% of your customers. Alternatively, you could say that 20% of what you do represents 80% of that particular activity’s outcome.
To this day, the 80/20 rule is present on all walks of life:
In languages, the most frequently used 20% of the words account for 80% of the word occurrences
The richest 20% people in the world have 80% of worlds income
In 2002, Microsoft reported that 80% of the errors and crashes in windows and office are caused by 20% of the bugs involved
20% of the customers are responsible for the 80% of the profit earned and 20% of the complaints received come from 80% of the customers
The 80/20 rule can be simplified to:
80% of the output or results will come from 20% of the input or action.
20% of my tasks were bringing me 80% of the results in a specific business goal, which led to making those tasks top priority
If you are a business owner, identify your top revenue sources. You will clearly see that most of your revenue is generated by a handful of products, services or customers.
By the numbers it means that 80 percent of your outcomes come from 20 percent of your inputs.
Competence In Your Key Areas
Competence means that you begin to become very, very good in the key result areas of your chosen field. You apply the 80/20 rule to everything you do and you focus on becoming outstanding in the 20 percent of tasks that contribute to 80 percent of your results. You dedicate yourself to continuous learning. You never stop growing. You realize that excellence is a moving target. And you commit yourself to doing something every day that enables you to become better and better at doing the most important things in your field.
The 80/20 Rule of Time Management: Stop Wasting Your Time
Small-business owners waste their time on what I call $10 an hour work, like running to get office supplies. Meanwhile, they forgo the activities that earn $1,000 an hour, such as sending the right email to the right person, or negotiating a lucrative contract, or convincing a client to do more business with you.
Don’t expand a list of contacts just to have a large network. Figure out from whom you’ll benefit the most, and focus your time and energy on developing and maintaining those relationships.