Definition:
The Pareto principle also known as the 80/20 rule, the law of the vital few. A theory maintaining that 80 percent of the output from a given situation or system is determined by 20 percent of the input.
Figure: Focus on 20% out of 100%
History:
In the very early 1900's, an Italian economist by the name of Vilfredo Pareto created a mathematical formula describing the unequal distribution of wealth he observed and measured in his country. Pareto observed that roughly twenty percent of the people controlled or owned eighty percent of the wealth.
Examples:
Here are a few examples of the Pareto principle in action:
1). 20 percent of employees produce 80 percent of a company's results.
2). 20 percent of a given employee's time yields 80 percent of their output.
3). 20 percent of software bugs cause 80 percent of the software's failures.
4). 20 percent of a company's investments produce 80 percent of its investment profits.
Figure: 80 20 Rule applicable on Mobile Phone
Figure: AC Remote satisfies 80/20 Rule