Sink or swim – Starting a New Business If you’re Starting a New Business you should, like any successful entrepreneur, start with a vision. Aspiring to Starting a New Business you must imagine the type and caliber of customers they wish to serve. They must invest in the resources that will attract and retain this roster. And then …
80 20 rule
The Pareto principle states 80% of consequences come from 20% of the causes. Other names for this principle are the 80 20 rule, the law of the vital few
Mathematically, the 80 20 rule is roughly described by a power-law distribution (also known as a Pareto distribution) for a particular set of parameters, and many natural phenomena have been shown to exhibit such a distribution. It is an axiom of business management that “80% of sales come from 20% of clients”
In economics Pareto’s 80 20 rule observation was in connection with population and wealth. Pareto noticed that approximately 80% of a country’s land was owned by 20% of the population.
In computer science, the Pareto 80 20 rule principle can be applied to optimization efforts. For example, Microsoft noted that by fixing the top 20% of the most-reported bugs, 80% of the related errors and crashes in a given system would be eliminated. Lowell Arthur expressed that “20 percent of the code has 80 percent of the errors. Find them, fix them!” It was also discovered that in general the 80% of a certain piece of software can be written in 20% of the total allocated time. Conversely, the hardest 20% of the code takes 80% of the time. This factor is usually a part of COCOMO estimating for software coding.
Other applications The Pareto 80 20 rule principle has many applications in quality control where it was first created. It is the basis for the Pareto chart, one of the key tools used in total quality control and Six Sigma techniques. The Pareto principle serves as a baseline for ABC-analysis and XYZ-analysis, widely used in logistics and procurement to optimize stock of goods, as well as costs of keeping and replenishing that stock. In engineering control theory, such as for electromechanical energy converters, the 80 20 rule principle applies to optimization efforts