Ah! The Pareto principle – a must-have concept locked into your memory of productivity hacks.
The Pareto principle, or 80/20 principle, is a well known observation that can transform the way you think about leadership and time management. Thinking 80/20 can significantly cut down the areas that you’re spending too much time in and can make yourself lean by focusing on high performance areas.
Have you ever had a day where have you ever noticed that perhaps there were only several key dec. . have you ever gone shoppWell, both of those observations are in keeping with the Pareto principle.
Whether you’re starting up or scaling up in business, having an awareness of your key areas of performance can help you move forward efficiently.
Ive outlined a summary of 80/20 below, a load of examples to put it into context, and how you can use it to reassess where you should focus your attention and free up time by cutting out the 80% that yields low.
If you find that you’re wanting a deeper dive in this area, Id strongly recommend having a read of the best seller ’80/20 – the secret to achieving more with less’ by Richard Koch.
Let’s get lean with 80/20 thinking…
An overview of the 80/20 principle
History: Described by Vilfredo Pareto whilst studying at the University of Lausanne (Switzerland) in 1896
Definition: Put simply, the principle is the common observation that 80% of an outcome comes from 20% of the input. Or to swap it around, 20% of effort often yields 80% of the result. Think about that for a moment… 80% of the time you spend on a task could be in areas that only account for 20% of the final piece.
Context: Vilfredo Pareto found that about 80% of land in Italy was in the possession of 20% of the population This finding was later found to hold true time and time again over other regions. Strangley enough, we see this observation time and time again over many domains of life.
80% of a teachers time is taken up by <20% of their students
80% of world income comes from <20% of the population
80% of wear will be in <20% of your home’s carpets
80% of total views on Youtube comes from <20% of all YouTuber’s videos
An important clarification:
The absolute numbers of 80 vs. 20 isn’t set in stone. The observation describes anything where a disproportionate relationship exists. Therefore, if formally measured, the outcome may be more in keeping with a 70 vs. 30 relationship, or 60 vs. 40, 95 vs. 5, 99 vs. 1! – pretty much anything over 50:50.
Why does the Pareto principle exist?
What this effectively means is that input and output are not directly correlated, the relationship is unbalanced. The Pareto principle is merely an observation and a general rule. It is not a law of nature.
The actual reason for this imbalance will be context specific. For example, an observation in keeping with the Pareto principle is that 20% of the carpets in your house get 80% of the wear. The reason: We’re all creatures of habit. The brain likes to filter out information and develop habits to keep us on autopilot, pushing this work back into the subconscious mind to free ourselves up to interpret new stimuli. The result? We walk the same paths around our house and we wear the same parts of the carpet.
The key takeaway with the Pareto principle is that we can be much more productive by focusing on the 20% of our workload that counts for 80% of the outcome. Find the most important tasks and make them a priority.
Some more 80/20 examples
The Pareto principle can be seen everywhere:
- In music – >80% of Glastonbury festival’s performance fees goes to <20% of the performing artists
- In time consumption – >80% of the time you spend on your phone will be in <20% of apps
- In medicine – Out of the countless causes of illness, the vast majority of daily primary care appointments fall under a relatively small number of causes – i.e. back pain, depression, anxiety and colds & flus
- In venture capitalism: Venture capitalists make their money from investing in what they perceive to be up and coming businesses. Having investments in a handful of companies will help increase the chance of finding those may give a healthy return on investment in the future. However, it’s highly likely that only 1 or 2 will account for the majority of the value of their whole portfolio. The others may make losses, small gains, or fold entirely.
The Pareto principle in business culture:
So how does this impact entrepreneurship? Here are some common examples to consider.
- MVP creation – 80% of customer satisfaction comes from 20% of the design features. Focus on providing value in those areas.
- Product development – 80% of the problems come from 20% of the causes. Develop systems to troubleshoot those key areas.
- Marketing – 80% of your leads will come from 20% of your marketing channels – focus on optimising the channels that work best, whether this be Facebook ads, instagram, tiktok videos or SEO (search engine optimisation) from google searches.
- Leadership – >80% of the work is completed by <20% of the team.
- Raising investment – 20% of your pitch deck provides 80% of initial excitement to investors. Identify those areas and cut down the content.
- Profits – 80% of the profits come from 20% of the customers – these should be your target customers. Make them very happy.
- Sales – 80% of sales come from 20% of your products or services – focus on the most popular products and services.
How you can make the most of the Pareto principle:
The key here is to increase productivity, to save time and to reduce wastage when working towards a specific goal. The following steps and examples can help you think 80/20.
- Define the task.
- Example A: Improve workflow to complete a specific task
- Example B: Focus on creating a valuable product
- Example C: Improve marketing streams
- Define the components:
- Example A: What are the key steps of the workflow?
- Example B: What are the current features that are being created in product development?
- Example C: What social media platforms are you currently on?
- Measure the value added for each component:
- Example A: How long does each step take? To what extent does it drive forward production?
- Example B: What features do your customers care the most about – find out through feedback, testimonials and focus groups of raving fans.
- Example C: Which channel get the most engagement? what sort of posts are most commonly liked and commented on?
- Discover the vital few areas that account for the majority of the desired outcome and focus on them.
- Example A: Prioritise the most important tasks that willl get you close to your next milestone in a timely manner.
- Example B: Focus on building the most desirable features to a high standard
- Example C: Focus on growing a following in your most active areas.
- What are the majority of the areas that are unimportant? Alternatively, what are the 20% of tasks that give you 80% of the pain – can you cut these down, delegate to someone else or remove them entirely?
- Example A: Ignore the tasks that are not essential and can be modified at a later stage.
- Example B: Suspend the development of features that are non-essential and do not account for customer satisfaction. Use this time to focus on those highlighted in the previous point.
- Example C: Don’t concentrate on the social media channels that aren’t doing well for now. Focus on growing a following in your strongest markets.
- Test and refine. As you put the 80/20 in action, you’ll focus time on activities that should enhance your productivity. Thinking in this way should help free up time for you to invest elsewhere. Be sure to find a way to measure whether the changes you are instigating are making an impact.
- The Pareto principle or 80/20 principle is a powerful life hack to cut down time wasted on the activities that do not provide significant value towards a specific goal
- The principle is an observation seen over many domains of life such as economics, biology, entrepreneurship and media.
- When you’re finding yourself struggling to move forwards, thinking 80/20 can help you progress efficiently, freeing up time to invest elsewhere.