In 1897, Italian economist Vilfredo Pareto discovered a pattern of imbalance between causes and results, inputs and outputs, and efforts and rewards.  It was discovered that 80 percent of what we achieve comes from 20 percent of the time or effort we spend. This is contrary to the belief of most people who believe that a linear relationship exists in which 50 percent of what we achieve comes from 50 percent of the time or effort we spent.

 What the 80/20 Principle means is that the majority of time, money, and effort spent on a project may have little impact and that the minority of the time, money, effort spent may have great impact.   All causes do NOT have the same significance, all products or services do NOT have equal value, and all employees do NOT have equal value.  In most cause and effect relationships, a pattern of imbalance exists and it is up to the viewer to see it.  Simply stated, we just have to open our eyes!  

 An illustration of the 80/20 Principle is seen when a business owner discovers that 80 percent of sales in the business involved 20 percent of the total goods sold by the business.  Another way to state the result is that, 20 percent of the goods sold account for 80 percent of the total sales. 

 The 80/20 Principle, also known as Pareto’s Principle, the Principle of Least Effort, is a useful tool for analyzing or thinking about cause and effect relationships.  We believe the 80/20 Principle is a useful tool for inventors trying to research and develop their inventions, to determine the value of their inventions in the market place, and to sort out which inventions are commercially viable.

 Using 80/20 Principle as an Analytical Tool: 

Use the 80/20 Principle is a systematic, quantitative method for comparing causes and effects.  It allows one to identify the causes of any important things in our lives and to make sharp improvements in our positions by redeploying resources accordingly. 

(1) Assume as a hypothesis that an 80/20 imbalance exists between the cause and effect.

 

(2) Next, gather facts that support this hypothesis. If the facts support the hypothesis, then focus your efforts on the 20 percent that produces the 80 percent effect you want. 

 An example where the 80/20 Principle is useful is when a company uses the Principle to learn which products it sells generate the greatest profits.  Once the products are identified, the company must then decide how to use this information – does it drop the less successful products from its inventory and only sell the successful products or continue to sell both types of products but focus its advertising or marketing activities mainly on the successful products.  This approach is called ‘maximizing the winners’. The countervailing approach is called ‘maximize the losers’ where the business refocuses its advertising and marketing efforts on the less successful products. 

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Using 80/20 Principle Thinking:

Inventors may find this style of thinking useful: 

(1) Assume as a hypothesis that a 80/20 imbalance exists between the cause    and effect.

 

(2) Next, estimate the facts that support this hypothesis.  Ask yourself ‘what is the 20 percent that is leading to 80 percent.

 

An example where 80/20 Principle Thinking was useful is the following:

An inventor learns that truck drivers have a difficult time keeping tire chains on their tires.  A major cause of the problem is that straps currently used break during use.

Using the 80/20 Principle Thinking process, the inventor tries to find a solution to the problem in the following manner: 

(1) The inventor assumes that 80 percent of the straps used on tire chains break because the hooks used to connect the straps to the tire fail;

 

(2) The inventor then examines the hooks to determine if the above hypothesis is supported.  If it is not supported, the inventor develops another hypothesis, (i.e. 80 percent of the straps break because the material used to manufacture the strap breaks and finds facts to support this new hypothesis.  The inventor continues until he or she finds a hypothesis that is supported).