The 80/20 Principle: Re-engineering, Redirecting Nature and Lives

Value for Money operates on established and veritable pillars. Providing it with strong backing, the pillars help to reverse the tide of poor outcomes or performance, low productivity, corruption, and fraud, among others, and make the way for economic renewal for a floundering corporate entity or nation-state. Coming to focus first here of the pillars is the 80/20 Principle.

First expounded in 1897 by an Italian Economist, Vilfredo Pareto, when he studied the pattern of wealth in Britain, the pattern underlying the 80/20 principle posits that minority of inputs generates the majority of result, implying for instance that 80 percent of achievements results from 20 percent of efforts. This, by all practical purposes, represents only four-fifth of the effort, leaving the impression that a dominant part of it is virtually irrelevant. Though this is contrary to the expectation that the input and output relationship is relatively literal and equal, it nevertheless has a profound effect on value for money and productivity.

In business, many examples of the 80/20 Principle have been validated, taking 20 percent of products as usually accounting for about 80 percent of the value of sales, the same way as 20 percent of customers. In communities, 20 percent of criminals account for 80 percent of the value of crimes, just as 20 percent of motorists are responsible for 80 percent of their accidents, and so forth. And in homes, 20 percent of the carpets are likely to be used 80 percent of the time and 20 percent of clothes are worn 80 percent of the time. There is a limitless number of examples we can apply to the 80/20 rule in our personal and working lives.

 

The 80/20 Principle brings tremendous hope to the pursuit of value for money. You may ask how?

Foremost on that is that it brings home the truth that there is a tragic amount of waste everywhere – in the way nature operates in our lives, in business, and in society. If the principal pattern of what we do in our lives is for 80 percent of the results to come from 20 percent of the inputs, it is then clear that 80 percent of what we do or input, usually in the majority, makes a very minimal impact; about 20 percent only and aggregates in a tremendous waste of input.

The paradox is that the knowledge of such waste is wonderful news. Using the 80/20 Principle creatively makes it possible to identify and avoid the use of low impact input or to do something positive about it, and get enormous scope for improvement by re-engineering and redirecting both nature and our lives.

At the heart of this, is a process of substitution. Resources that have powerful effects are used as much as possible, every resource is ideally used where it has the greatest value, and resources that have weak effects in any particular use are not used or are used sparingly, wherever possible, weak resources are developed to mimic the behavior of stronger resources. The implication of the 80/20 Principle is that output (outcome) cannot only be increased but can also be multiplied geometrically if we are able to make the low productivity inputs nearly as productive as the high productivity inputs.

This quantum leap in value can be achieved in two ways with creativity and determination. First, by reallocating resources from unproductive to productive uses, finding a round hole for a round peg; a square hole for a square peg and a perfect fit for any other shape in between, experience, having suggested that every resource has its ideal place, where it can be tens or hundreds of times more effective than any other. Secondly, by finding ways to make the unproductive resources more effective even in their existing applications by making them behave as though they were the productive cousins of the productive resources and making them mimic, if necessary, by intricate procedures, the highly productive resources.

On a general note, the application of the 80/20 rule will assist everyone that understands how it can be prudently applied, to “Do More with Less by Doing Things Right and Doing the Right Things”



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