How to Apply the 80/20 Principle in Business and Time Management

80/20 Principle also known as the Pareto Principle, is considered one of the effective solutions for not only individuals but also businesses in today's busy modern life. How to effectively apply the rule? Let's learn more about this rule through Viindoo's article below.

What is the 80/20 Principle?

The 80 and 20 Principle, also known as the Pareto Principle, states that there is an imbalance in almost everything in life, and 80% of outcomes should come from 20% of causes. There are also different statements of this principle:

  • 80% of the results are caused by 20% of the causes.
  • 80% of revenue is contributed by 20% of customers.
  • 80% of usage is generated by 20% of features.
  • 80% of incidents are caused by 20% of errors.

However, the distribution is not always exactly 80% to 20%. In fact, this is emphasizing that things are not evenly distributed but that some contribute more or less than the rest.

80/20 Principle

The 80 and 20 Principle states that everything is unevenly distributed

An example of the this principle is: Company X is selling tables with 100 product models. According to the 80/20 Rule in business, 80% of the revenue is generated by 20% of the company's products. Therefore, the company could cut some models and develop advertising strategies for the more important 20% products.

What are the benefits of the Pareto Principle?

Having learned about the what is Pareto Principle as well as examples of the Pareto Principle, we should also learn about its benefits. Why do many businesses choose to apply this principle?

The Pareto Principle helps individuals focus their best efforts on 20% of the important factors to create effective work performance, instead of focusing on 80% but the efficiency is not high.

Businesses when applying this principle in business can obtain good results at optimal cost by spending 80% of effort on the 20% likely to produce the best results.

Apply the 80/20 Principle in Business and Time Management

It helps businesses focus on what matters the most

However, when applying the 80/20 Rule at work, businesses should not only focus their efforts on the important 80% but neglect the remaining 20%. At the same time, individuals still need to allocate time and organize the job priority to complete all work.

How is the 80/20 Principle applied in practice?

This principle is not difficult to understand. Therefore, individuals or businesses can apply this principle in actual business activities or for time management.

The 80/20 Principle in business operations

The 80 and 20 Principle - achieve more with less is used by many individuals and businesses in business operations. Applying it in the work allows businesses to identify 20% of the main tasks contributing to 80% of business goal achievement.

An example of the 80/20 Rule at work is: when providing services or products to the market, the business should focus on investing 80% of its labor to create 20% of the company's core products or services. This will help businesses focus on a key product line with high value to attract customers instead of offering a series of similar products.

Businesses should understand that 80% of revenue will be contributed by 20% of customers. After that, when planning, business leaders should focus on that 20% to generate more revenue at the optimal cost.

80/20 Principle

Applying the Pareto Principle helps better business operations

Another example that clearly demonstrates the application of the 80/20 Rule in business is: Software vendors providing task management software need to focus on developing 20% of important features but accounting for 80% of the software value. These features should receive intensive resources to develop and are well promoted.

Individuals looking for capital can also apply 80/20. About 20% of investors will hold 80% of the business capital. Therefore, it is important to connect well with that 20%.

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The 80 - 20 Principle in Time Management

It makes people realize that they have wasted too much time on things that do not bring many results. Refer below to know how to effectively apply the Pareto Principle in time management and daily work.

Define priority tasks 

Make a list of all the to-dos for the day, then divide the list into two groups: Priority Tasks and Non-Priority Tasks. In the Priority Tasks list, sort the tasks in order of importance from high to low and work on them separately. For the list of non-priority tasks, you should delegate them to someone else. 

Determine your effective working time 

Regularly notice your productive periods and work on your top priorities during those times. For example, if you find yourself most focused for a maximum of sixty minutes, you should use these 60 minutes for important tasks and rest between intervals. You can use the Pomodoro method to help with the workflow. 

Regularly set and review objectives 

Clearly defined goals and detailed planning will make it easier for you to focus on implementing priority tasks. In addition, review your goals regularly to establish appropriate action plans. 

Set time for errands 

Set a regular time for errands. For example, spend ten minutes every morning checking email or thirty minutes a day surfing social networks, etc. 

Create rewards for each task completion 

Finally, create your own rewards for completing a priority task. The rewarded feeling after completing a job helps you stay motivated and energized before each new one.

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Notes when applying the Pareto Principle

Viindoo provides here some useful notes to help readers effectively apply it.

  • When should not apply this principle?

Under what circumstances does the 80/20 Rule not really work? That is when there are no big differences among people (customers, employees, etc.), objects (tools, products, etc.), or services.

Apply the 80/20 Principle in Business and Time Management

Not all cases can apply this principle

  • Is there an example of wrongly applying it in business?

For example, in a toy assembly factory that uses automatic lines, there are 100 workers that produce more than 100,000 products per month.

According to the 80/20 Rule, 80% of the total output should be generated by 20% of the workers. At this time, businesses choose to reduce the number of workers. However, this leads to a mistake. Because the work is mostly automated, the remaining 20% of workers are unable to be more productive than the other 80%.

80/20 Principle

Appropriately applying the 80/20 Rule

  • Is it necessary the number 80/20

The number 80/20 is not the default, instead, this is just a relative. In several cases, it can be flexibly changed to 70/30, 85/15, or 90/10 in accordance with the actual situation.

This article by Viindoo provides readers with knowledge about the 80/20 Principle concept and methods to effectively apply the 80/20 Rule. Overall, the 80/20 Rule is considered a meaningful method to help businesses achieve success. Hopefully, readers can apply this rule to improve work and life!

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How to Apply the 80/20 Principle in Business and Time Management
Viindoo Technology Joint Stock Company, Van Anh Nguyen June 10, 2022

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