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80/20 principle.. How it can be applied in real business situations?

By December 21, 2017 No Comments
Rajesh Srinivasan

While the entire world focuses on the methods & tactics, let’s focus on principles. For methods change, principles never. Here’s the first principle (out of 12) ..

80/20 principle..

80/20 principle (Pareto principle) was created by Vilfredo Pareto, an Italian economist who noticed that 20 percent of the people owned 80 percent of the wealth. It’s true even now.

80/20 principle APPLIES TO EVERYTHING..

It says.. few CAUSES create huge EFFECTS

Few real life examples

– 58% of the India’s wealth is owned by just 1% of the people (Source : Hindu, Jan’17). The study said there are 84 billionaires in India, with a collective wealth of USD 248 billion, led by Mukesh Ambani (USD 19.3 billion), Dilip Shanghvi (USD 16.7 billion) and Azim Premji (USD 15 billion). The total Indian wealth in the country stood at USD 3.1 trillion.

FEW criminals in the city are responsible for LARGE number of problems.
– FEW areas in the city causes HIGH traffic in the roads.
– FEW companies in the stock market has LARGE market capitalization.

80/20 says .. the world is unequal (whether we agree it or not). A key insight is.. we can have ‘LEVERAGE’ if we focus on few things..

For example… A city police commissioner can take the data and find those FEW criminals who is creating HUGE trouble in the city and just by taking action on those FEW he can bring down the criminal cases drastically. (in quick time)

Try to approach every business/life situation with 80/20 thinking, it can save you lot of time, energy and gives huge results with relatively less efforts.

Rajesh Srinivasan