THE 80-20 THEORY
Have you ever noticed that there are 6 individuals in your class of 30, who always complete all assignments, submit their practical files (in time) and get top grades? Well, they are called ‘Nerds’, but that’s not the focus of this article. Analyze this; if you have friends who drink beer, you can notice that a small group of the lot drinks the major percentage.
Here’s another one, read the last thirty editions of the DELHI TIMES, and you’ll see the same faces making news recurrently. Is this just a coincidence? Are some guys born to be called ‘nerds’ and some ‘beer drinking fishes’? Why do some celebrities make the majority of gossip? This is an observation which has been molded into a theory, and is titled THE PARETO PRINCIPLE.
According to it, eighty percent of people make up for twenty percent of ‘work’, and twenty percent of people make up for eighty percent of the ‘work’, in any ecosystem. You can now recall countless examples to prove this theory; in your classroom, your workplace, or anywhere; it never fails. Now let’s contemplate its importance in the business world. It’s easily discernable that 20% of the world population earns and spends 80% of money. You can join that 20% if you learn the art of manipulating your ‘work force’ and your clientele, which is also bound by this theory. Consider this; you have hundred people in your clientele and you are serving each of them with equal effort, it’ll be deemed as a prodigal move after learning this theory.
Maximization of profits and minimization of stress depends on how you invest your time and effort on your workforce and your clientele. You must be extremely careful while monitoring the outputs, and then must shoot yourself in action while devising and revising the work plan. Interestingly, this theory thrashes the age old saying: “Everybody is equally important”.
80% of your profits come from 20% of your customers
80% of your complaints come from 20% of your customers
80% of your profits come from 20% of the time you spend
80% of your
sales come from 20% of your products
80% of your s
ales are made by 20% of your sales staff
Microsoft noted that by fixing the top 20% of the most reported bugs, 80% of the errors and crashes would be eliminated
In health care in the United States, 20% of patients have been found to use 80% of health care resources.
Several criminology studies have found 80% of crimes are committed by 20% of criminals.
In the financial services industry, this concept is known as profit risk, where 20% or fewer of a company’s customers are generating positive income, while 80% or more are costing the company money.
I advise you to read more about this principle as it gets tastier every line.
