Also known as: 80/20 rule, law of the vital few
Pareto Principle
FoundationalFrameworksStrategies
Definition
Pareto Principle: The Pareto Principle observes that roughly 80% of effects come from 20% of causes. In business: 80% of revenue from 20% of customers, 80% of bugs from 20% of code, 80% of results from 20% of effort. It guides focus toward high-impact activities and customers.
Example Usage
“Analysis showed 22% of customers generated 83% of revenue. We restructured customer success to focus intensely on that cohort.”
Common Misconceptions
It's always exactly 80/20. The ratio varies; the point is that outcomes are unevenly distributed.
Ignore the 80%. The 'long tail' 80% may still be valuable; understand the distribution before cutting.
Apply Pareto to everything. Some situations require comprehensive coverage, not just focus on top performers.
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