The Pareto principle is one of the simplest ways to improve your business results and your thinking. It simply states that 80% of your results, comes from 20% of your effort. Our 80% of your outcomes come from 20% of the inputs.
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In other words, 80% of your sales, will come from 20% of your customers. Or 80% of your overall costs will come from 20% of what you buy. 80% of your time online will come from just 20% of the actions you take online. 80% of new customers will come from 20% of your advertising effort.
‘For many events, roughly 80% of the effects come from 20% of the causes’ – Vilfredo Pareto
Who invented the Pareto Principle
Developed originally by Vilfredo Pareto, he identified in Italy in the early 1900’s that 80% of the wealth (land) was controlled by 20% of the population. And today, 82% of all wealth is still owned by 20% of the population.
But what about website traffic? Well, 80% of users to your website will come from a web search.
Some more examples:
When investing, its been shown that 80% of the returns come from 20% of the investments made. And, unfortunately, on the other side, 80% of the losses come from 20% of investments as well.
The DMAIC structure is a logical flow to solving both small problems to major cross-functional business problems. As you move through Define, Measure, Analyse, Improve and Control, there are a range of tools that can be used.
- At the end of each stage, a clear decision point must be followed before moving on to the next
- The tool while appearing to be quite rigid, is iterative with flow across the first four phases
- It follows the PDCA flow
- Engage a team – you will get much better results