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• #80 20 PRINCIPLE LEAN FREE#

Who represents the Pareto Principle in your customer base? How can you reach more of them? Pareto Distribution of Defects What does this mean about the demographics of golf viewers? We're older and may have either of these two health problems.Īnalyze your customers and the Pareto distribution in their buying patterns. What are the most prominent types of commercials for golf matches? Erectile dysfunction and prostate problems. The goal, of course, is to figure out the mental and geographical demographics of the top four customers, and find a way to snag more of them.įor example, I watch golf on TV. On the revenue side of a business, this means that if you have 100 customers: In America, for example, 4% of Americans hold over half the wealth. If you apply the 80-20 rule to itself, you'll find that as little as 4% of the business produces over 50% (64% to be exact) of the delay, defects and lost profit. It follows an exponential (i.e., 2-4-16-64) progression. While many business activities have a linear (i.e., 1-2-3) progression the 80-20 Rule is a power law. Joseph Juran found that most businesses waste 25-40% of their budget finding and fixing problems. The goal of any business is to focus on increasing the 20% of customers and business activities that drive revenue and focus on reducing the 20% of the business that cause unnecessary costs. Similarly, 20% of a business causes 80% of the delay, defects and lost profits. The 80/20 rule implies that 80% of the benefit comes from 20% of the causes. The Pareto principle also suggests that even if the wealth was redistributed equally to everyone in society, in a very short time it would revert back to the 80-20 distribution. Pareto observed that 20% of the people held 80% of the wealth. And it laid the groundwork for TQM and Six Sigma. In the late 1800s, when Vilfredo Pareto, an Italian mathematician, created what we've come to know as the 80-20 rule, it changed how we think about life and business. Loading=lazy Pareto's Law and Principle of Distribution

#80 20 PRINCIPLE LEAN FREE#

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