The 80/20 Rule - Pareto Principle for Innovation - Ted Talks

 So, you are less efficient, less productive, and not sure if you are giving your 100 percent? That's where the 80/20 rule comes in. 
What the rule does is that it signifies that out of the 100 percent work you do every day, only 20 percent of that work brings 80 percent of the benefit to you. This is a universal rule and it applies to everything we do in our life and in our practical life.

Let's understand what we mean by this rule and how it can improve your business, efficiency, and lead to better innovation.

You have a small business of selling paper. Check how many clients you have and then check how many clients actually are high paying clients. You will see that only 20 percent of your clients are high paying clients and the rest only have a small budget. You will see a pattern that these high paying clients are hard to achieve yet they 4X your revenue.

So, if you are investing double the effort in getting a high value client for your business, the return you get is 4X of your total value, then still this client is worth the value. 

In maths:

Your effort is E and your result is R. To get one client 1R, you have to invest one 1E effort. But to get a client that falls in the 20 percent ratio or 4R, you have to invest 2E. 

2E effort = 4R result 

So, now you can focus on clients that bring the most revenue for your business by carefully analyzing your patterns. Businesses can innovate for the better by using this simple principle and then optimizing their strategies for the same.

Pareto principle is a rule to enhance insights, analysis capability, and help people focus on areas that they were missing before.


Writing on Self Reflection by Hasan Shahid

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