Pareto Principle

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What is Pareto Principle?

The Pareto principle, also known as the 80/20 rule, is a principle that states that roughly 80% of the effects come from 20% of the causes. It is named after economist Vilfredo Pareto, who observed that roughly 80% of the land in Italy was owned by 20% of the population. This principle has since been applied in a variety of contexts, including business, economics, and quality management.

The Pareto principle can be used to identify the most important factors or problems in a given situation. For example, in business, it might be used to identify the 20% of customers that generate 80% of the revenue, or the 20% of defects that cause 80% of the problems. By focusing on the most important factors or problems, organizations can often achieve a significant impact with relatively little effort.

The Pareto principle is not a hard and fast rule, and the actual percentages may vary from one situation to another. However, it can be a useful tool for identifying priorities and making decisions about how to allocate resources.

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