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Utilizing the Pareto Principle

Workbar at Staples Brighton 1660 Soldiers Field Road , Boston, MA (map)

The Pareto principle (also known as the 80/20 rule, the law of the vital few, or the principle of factor sparsity)[1] states that, for many events, roughly 80% of the effects come from 20% of the causes.[2] Management consultant Joseph M. Juran suggested the principle and named it after Italian economist Vilfredo Pareto, who noted the 80/20 connection while at the University of Lausanne in 1896, as published in his first paper, "Cours d'├ęconomie politique". Essentially, Pareto showed that approximately 80% of the land in Italy was owned by 20% of the population; Pareto developed the principle by observing that about 20% of the peapods in his garden contained 80% of the peas.[3]

It is a common rule of thumb in business; e.g., "80% of your sales come from 20% of your clients." Mathematically, the 80/20 rule is roughly followed by a power law distribution (also known as a Pareto distribution) for a particular set of parameters, and many natural phenomena have been shown empirically to exhibit such a distribution.[4]

The Pareto principle is only tangentially related to Pareto efficiency. Pareto developed both concepts in the context of the distribution of income and wealth among the population.

Agenda

-Share business models

-discuss how the Pareto principle applies to your customer segments in your business model.

-discuss key activities and actionable items to apply the principle to your organization

- set follow up dates to report back to members

More details to be announced.

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