The Pareto Principle (PP) seems to get mentioned everywhere. It is hard to pick up a productivity, business or self-help book from the last 10-15 years and not see PP referenced in some form. This isn’t a bad thing and I don’t get tired of it to tell you the truth. Since it appears to be somewhat of a “law” of how the world works, it is good to get reminded of it often so that I can put it to use. However, knowing that I should put to use and actually putting it to use are two different things.
For those who may not be as familiar with the PP, another term you may have seen would be the 80/20 rule. Pareto was an early 20th-century economist who noticed a general relationship between inputs and outputs. His specific example was that over a large geographic area, 80% of land at the time was owned by 20% of the people. The inputs in his observation were the 20% of the population and the output was the 80% of the land that they owned. The numbers don’t always have to be 80/20, but the basic idea is that there is some small percentage of input that accounts for a much larger percentage of the output.
Of course, the principle extends to many areas other than land ownership. Maybe at your company, a vast majority of work is actually accomplished by a small percentage of workers. If management is aware of this then the smart thing to do may be to focus on that 20% and funnel them as many resources possible to increase that output. Another example may be that a minority of clients are providing you with almost all of your revenue. If you analyze that minority and notice some common traits amongst that group then it would equip you going forward with the insight to focus on attracting more clients that possess those same traits.
Focus is the key ingredient here. Applying the PP gives you the power to know where to focus your efforts which is critical for any business. Last year when I was rebranding my business I was being influenced by what I was reading on this subject. My desire was to come up with a company name that would be a constant reminder to us that we must focus our efforts. Out of this thought-pattern emerged the term Power Slice which is a direct reference to the 80/20 rule. That 20 percent is the power slice of input that we want to focus on. For us, that focused input is on helping small to medium-sized service businesses see next level results through customized software. For you that focused input will likely be something completely different. But for all of us, if we take a small amount of time to determine what our focus should be, then when distractions come masquerading as “opportunities” we are equipped to see it as outside of our power slice. Take the time. It is worth it.