What is 80-20 Rule

80-20 Rule is also known as the Pareto Principle after its founder Vilfredo Pareto, an Italian economist. It is one of the most important concepts of life which states that 20% of input generates 80% result. This means, when we are dedicated to the most important 20% input of any cause, the result would be an 80% productivity.

The 80-20 rule explains that, in every business, the clients or customers that produce 80% results are usually 20%. It is advisable then that the business manager focuses on this 20% of customers or clients and make them the business priority in order to retain the 80% results from these customers or clients. Therefore, in business and economics, the rule helps to identify the 20% asset that generates more value and how concentrating on this asset would increase the business level of productivity.

However, this principle is not restricted to business and economics alone. It cuts across all spheres of life and helps in personal development. For instance, a student can apply this rule to excel in his or her study. If the student identifies the 20% aspects of a textbook that would be the focus of his or her exams, he or she could concentrate on this aspect rather than reading the entire text.

The basis of the rule is to identify the most important aspect needed to increase value. Understanding the rule helps to prioritize the task that needed more concentration and dedication.

A Little Background Of The 80-20 Rule

80-20 rule was first used in macroeconomics to explicate how wealth in Italy was distributed in the 20th century. The rule was introduced in 1906 by an Italian economist, Vilfredo Pareto and known as Pareto efficiency. Pareto first observes the production of the peas in his farm. In his observation, he found out 20%of his pea pond produces 80% of his peas. Relating this to his country, Pareto found out that 80% of Italy's wealth was controlled by only 20% of the entire population.

In 1940, a prominent operation manager, Dr. Joseph Juran, applied this rule to observe his business level of productivity. He explains that 20% of the problems encountered in the aspect of production result in 80% of product defects. Hence by focusing on tackling the production problem, business productivity would increase.

How To Apply The Rule

Although the rule has been condemned by some scientific evidence, it has shown to be very effective when applied as expected.

To apply the rule, it is important to focus on setting your smart goal on the 20% input. Start with the most difficult but valuable task. The reward for completion would pay off at the end of the day.