Pareto Principle

Pareto Principle

The Pareto Principle, also known as the 80/20 rule, states that for many phenomena, approximately 80% of consequences come from 20% of the causes. This principle suggests that a small number of inputs or actions often lead to the majority of results or outputs.

Examples:

• Business: In a sales context, 80% of a company’s Revenue may come from 20% of its customers.
• Software Development: 80% of software errors might originate from 20% of the code.
• Time Management: 80% of results can come from 20% of tasks when prioritizing work.

Cases:

In retail, a store may find that 20% of its products account for 80% of sales, prompting it to focus on these key items for Inventory and Marketing. Similarly, in healthcare, 20% of patients may account for 80% of healthcare costs, influencing policy and resource allocation.