Strategy

23rd July 2015

In Praise of Pareto

You may never have heard of Vilfredo Pareto the Italian engineer, sociologist, economist, and philosopher who died in 1923 but you will almost certainly be familiar with the law for which he is most well known. Often referred to as the 80;20 rule Pareto’s law states that 80% of our results comes from 20% of our effort. This can be extended to infer that 80% of our profit comes from 20% of our customers and that 20% of our customers generate 80% of our problems.

If I am completely honest I don’t know how much statistical validity this claim has but what I do know is that whenever I have tested the principle it seems to hold true to a remarkable degree. It is relatively easy to test for yourself.

One of the most fruitful applications of the 80:20 rule lies in helping us to manage our time. Pareto would say that 80% of our results come from the application of 20% of our time, which presents a significant opportunity for all of us. Probably the biggest single opportunity we will ever have to achieve extraordinary results in our lives.
You see time has some unique properties. For a start it is an absolute measure. Every one of us has the same amount of time. Every day is 24 hours; every hour is 60 minutes, every minute is 60 seconds. Time is finite. We, none of us, have unlimited time. Time is the most perishable thing imaginable. It has already disappeared and you can’t get it back, no matter how hard you try, no matter how wealthy you are. So the person who will achieve the most extraordinary results will be the person who is able to utilize the perishable, limited resource that we call time most effectively.

Our friend Vilfredo said that 80% of our results come from 20% of our time. You do the maths. It means that some things are 16 times more productive than other things. (if 100 minutes gives us 100 units of output, 20 minutes will give us 80 units of output or 4 units per minute. While 80 minutes will give us only 20 units of output or 0.25 units per minute which is 1/16th the effectiveness).

There is hardly a business person I know that is not under time pressure, and yet here we have the key to achieving 80% of what we achieve with only 20% of the time. This has to be the silver bullet we are all looking for. The key challenge for all of us lies in understanding what those things are that are a 16 times more effective use of our time and having the discipline to consistently focus and execute those things well.

But let’s not stop there. If you apply Pareto to the 100 things that you must do you will come up with a list of 20 things which are, on the face of it, 16 times more valuable than the other 80 which you have discarded. Why stop there? If you apply the same principle to the 20 you will eventually come to the one thing that is absolutely the most valuable thing for you to achieve.

What is it for you? What is the one thing that you must achieve today?

If you are a regular reader of this blog you will be familiar with the mantra that ‘Clarity is Power’. Is there a better or more important thing to be clear about than your one thing, for today, for this week, this month, this life?

Some clients have asked that I append some reading recommendations to my weekly blog. I hope you get value from the books I recommend. The books are mentioned at random and will have no relationship to the blog above.

The One Minute Manager by Ken Blanchard and Spencer Johnson

I call this a skinny book. It is only about 100 pages and it will take you about 90 minutes to read, but don’t let appearances fool you. I must have given away hundreds of copies of this book to people who want to learn to lead and manage themselves and others. It is much more profound than it appears and its wisdom is deep. If you are finding it a challenge to manage others then get hold of this book and begin your journey of mastering the skills you need to manage people easily and effortlessly.