Leverage Tool:
80/20 Analysis
Used for
- Analyze which 20% of inputs produce 80% of output or success
- Provides a more definitive conclusion as to the 20%
- The result of the analysis can often be trusted with high confidence
Strength
4
/ 5
Versatility
4
/ 5
Difficulty
3
/ 5
What?
Perform an analysis of the 20% of inputs that produce 80% of outcomes
Why?
This analysis provides a more definitive idea of the strong causes
How?
Gather data of inputs and outputs and perform the analysis
“The 80/20 Principle suggests that we should think in terms of the largest and smallest, the most and least, the worst and best, the excellent and unsatisfactory. We should focus on the extremes.”
Richard Koch
–
Bestselling author and billionaire investor
What it is?
The process involves collecting and analyzing data to find where the majority of results (80%) stem from a minority of inputs (20%). You start by gathering all relevant data on causes and effects, then sorting this data to see the distribution of impact.
Why use it?
Identifying the 20% that drives 80% of the results allows for strategic focus, resource optimization, and increased efficiency. By understanding which inputs are most significant, you can concentrate efforts where they will yield the best outcomes, thus improving productivity and effectiveness.
How to use it?
- Data Gathering: Compile data on all relevant activities, issues, or items. This could be sales figures, error logs, customer feedback, etc.
- Sort the Data: Arrange the data in descending order based on the effect or outcome (e.g., highest to lowest sales figures).
- Identify the 80/20 Split: Look for the point where about 80% of the effects are achieved. This might not be exactly 80% but should show a significant concentration of results from a smaller set of inputs.
- Highlight the 20%: Mark the top segment of causes or inputs that contribute to the majority of the effects. This is your critical 20%.
- Acknowledge the 80%: Recognize the remaining inputs that only contribute to the minor percentage of outcomes. These should be managed differently, perhaps reduced or handled more passively.