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The Little Book of Big Decision Models by Dr. Jim McGrath

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MODEL 10

THE PARETO PRINCIPLE AND THE IMPORTANCE OF THE VITAL FEW

Use this to identify where you should concentrate your efforts.

Vilfredo Pareto first used his famous principle to demonstrate that 80 per cent of the property in Italy was owned by 20 per cent of the population. His idea was picked up by Joseph Juran, the quality guru, who helped to make it known more widely.

Pareto’s theory of the ‘vital few and the trivial many’ has been applied to such diverse areas as:

  • Stock control where 80 per cent of the stock’s entire value is generally contained in 20 per cent of the items.
  • Sales where 20 per cent of an organisation’s customers purchase 80 per cent of all sales.
  • Staffing problems where 20 per cent of staff are responsible for 80 per ...

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