Pareto's 80/20 rule: Changing your story with the 80/20 principle
You might not have heard of Vilfredo Pareto or the 80/20 rule. However, I doubt if there is anyone that is not familiar with its concept. The question is, have you been using it for your good; to maximize your potentials?
Let me tell you a short story. A few years ago, working as a freelance writer, I was always running on a busy schedule. I received writing jobs from different clients, and it was almost hard to keep up.
At a point, I realized about 80% of my income was coming from a few of the clients (about 20%). This set of people paid more for my services, they were also my consistent clients.
I told myself, it was high time I focused on those clients that mean more to my writing business. I didn't necessarily discard the others, but it meant I gave priority to that 20%.
This is because an hour spent on their project is more productive than even 3 hours spent on the project of the rest. It also eliminated unnecessary stress of trying to beat the deadline for all 100% clients at a time.
I could also tell another story of when I was trying to do different things at a time. I had a lot going on in my life but didn't seem to be making any progress.
Pareto's 80/20 rule simply states that 20 per cent of the efforts you put in are important and will yield 80 per cent important results.
I mean, I wanted to make my life better, empower myself, make something out of my life. I found myself in a position where I was enrolled in different online health classes.
At the same time, I was into language learning; I was also reading up on how to improve my writing skills. I just had too many things on my plate. But, I noticed it was just like I was busy doing nothing.
That was when I realized I might as well have been wasting my time all the while. "Why not set your priorities right and opt for one that makes you better?"
Sometimes, you just have to sit back and think of what brings out the best in you, the best skills you have, your best clients, your best employees then, focus on them. Focus on developing them. Focus on maximizing your best skills and potentials.
What is Pareto's 80/20 principle
Pareto's 80/20 rule states that 80 per cent of the results you get come from only 20 per cent of the efforts you put. This principle is saying that:
- If you are in the customer service department, 80 per cent of the complaints, you get come from 20 per cent of your clients.
- 80 per cent of the crimes committed in the society are committed by 20 per cent of the populace
- 80 per cent of the organic traffic driven by a website would come from about 20 per cent of web contents and efforts of the web content creators
- 80 per cent of your business profits come from 20 per cent of your customers
- When it comes it comes to IT and programming, 80 per cent of the program's functionality are from 20 per cent efforts made by the developer
- 20 per cent of the sales representatives in a business generate 80 per cent of the total sales
There are so many instances of Pareto's 80/20 rule, and it can be applied in almost every sector and sphere of life. You would be much more familiar with the power of this principle if you are in the economics or business field.
The man behind the 80/20 rule
Vilfredo Federico Pareto, an economist and philosopher credited for the 80/20 rule
Vilfredo Federico Damaso Pareto, who is one of the most famous economists and philosopher, was born in Italy in the year 1848. The story had it that he realized one day that only about 20 per cent of the pea plants he cultivated in his yielded 80 per cent of the healthy, plump pea pods.
The revelation led him to delve further into wealth creation studies. He further discovered that about 80% of the lands in the country (Italy) was owned by just 20% of the overall population.
It doesn't end there; investigations launched into the industrial sector showed that 80 of production or yields were from only about 20% of the firms.
Pareto's discoveries resulted in the generalization that 80 per cent of results would come from only 20 per cent of the action taken.
How does the 80/20 rule play out in our everyday lives?
Simply put, the "universal truth" of input-output imbalance is what we have come to know as the Pareto's Principle (the 80/20 rule).
In reality, it does not always play out in the exact ratio of 80:20. However, there is no denying the fact that this imbalance does exist in almost every business or action taken.
I have noticed I have up to ten T-shirts, but I find myself wearing more of two out of the ten. About 80% of the times I want to go out I grab either one of the two (which comprises 20% of the T-shirts I own).
Your town probably has so many roads and routes but 80 per cent of the times you go out either to buy foodstuffs, work, school etc. you make use of only 20 per cent (or even less) of the roads.
I have about 40 apps on my phone but about 80 per cent of the times I am using my phone, you will be surprised to know that I use only about 8 out of the 40 apps.
I could go on and on and point out different instances where the Pareto's rule play out in our daily lives, but I am sure you must have gotten the point now. The question then is "Is the knowledge of the Pareto's principle beneficial? Moreso, how can it be put into good use?"
How can you use Pareto's principle to make things easier and better for you?
Applying Pareto's rule in some things in your life will not only increase yield or productivity for you, but it will also save you some time. It will help you evade the mistake of chasing shadows and wasting time on unnecessary things.
For Company Executives:
If you are an executive in a firm, no doubt at one point or the other, you have been faced with the challenge of limited resources. You will need to maximize your team and very importantly, time as well.
Some executives make the mistake of trying to do the impossible, thus, causing themselves constant stress.
You should learn to prioritize. Work with the goals of the organization and identify the most important goals. With that insight, you can then pick out the most important projects.
In businesses, it is wiser to focus on the 20 per cent investors, clients, that bring in more revenue and added value to the business
Focus on those specific tasks that are most important then align yourself and your team to carrying them out. Also, channel the focus of your firm towards building a stronger relationship with those clients who bring more value to the company
It might also help to maximize the potentials of the best members of your team. It doesn't mean you don't carry everyone along, but you focus on 'bringing out the best in the best'.
There is the saying that "entrepreneurship is all about risk-taking". There is really not wrong with the statement. You can always try out new things with your business, especially when it is in line with the goals of the business. However, adopting the 80/20 rule can help your business a lot more.
Is yours a startup? This is an excellent time to make strategic plans and focus on the plans rather than wasting time chasing endless new opportunities. Focus on that line of your business that brings 80% of the profit and boost it before you go hunting new things.
For freelancers, employers are not usually fixed; they come and go. However, some working relationships are long-term, especially when you are delivering to the clients quality works and services that they are satisfied with.
There is always that urge to keep all the clients but have you stopped to check how the 80/20 rule applies to you?
Remember, no one is saying you should discard your clients and put all your eggs into one basket. But, spreading your wings too much can lead to quick burn out.
It is vital that you identify your best clients (the clients that pay best, especially without causing you much stress). Focus on those that generate more money for you and strengthen your relationship with them.
Also, when it comes to niche diversification, you would be tempted to delve into various niches or skills (call it versatility).
It is awesome to be versatile as you might not know where your knowledge of a field or niche would be required, however, it would be better if you focus on one or two and have them developed.
Build for yourself an area of speciality and get people to seek you out for them. You'd be surprised to find out that 80% of the money you make would come from just about 20% of the skills you developed.
It doesn't matter what you do; remember, that there are only 60 minutes in an hour, 24 hours in a day and everyone gets the same minutes and hours in a day.
What differentiates you from another is how much you make those number of minutes or hours count. People will barely ask you what you do with them; people are more interested in the result (output)!
Thus, you should look towards adopting Pareto's 80/20 principle, so you don't end up being a slave to an endless to-do list.