Bye Bye Pareto: The new “20/60/20 rule”

Date: Jul 25, 2008 | Author: Santiago B. | Categories: Entrepreneurship

Most of you who studied Economics or other social sciences are likely familiar with the “Pareto Rule” or “80/20 Rule”.

The rule was invented when an Italian economist of the 19th Century called Vilfredo Pareto noted, while analyzing the distribution of Income in Italy, that 80% belonged to the richest 20% of the population. The rule was then extended as the “Pareto Rule” to any situation where 80% of the effect can be traced to 20% of the causes and is used in many different fields

All this introduction serves as background to a breakfast I attended a week ago, organized by the Ashoka Support Network. There we attended a presentation by an amazing social entrepreneur called Alberto Croce from Fundación SES.

I could talk a lot about Alberto, but in this post I want to focus on one single aspect of his speech. He mentioned that when someone is trying to promote a social change in a group of people. 20% are very open to it and embrace it easily. Another 20% is completely resistant, no matter how much effort we put. But the secret is in the 60% in between, that does not jump in easily, but can be attracted with the right approach and effort.

What is the catch? That tempted by the Easy 20%, we tend to concentrate our efforts there, not where we can really make a difference.

Of course, this can also be applied to other orders of life, including business. As an example, at Officenet we constantly train our account managers to avoid focusing to much on the 20% of their customers that buy a lot, but do so without us having to do much. Instead, we want them to focus on the 60% that, if we don’t call, would likely not buy or buy somewhere else.

That 20% is in this case our “Comfort Zone”. Seems obvious and somehow with our human weakness we live our lives focusing a good deal of our time daily to that 20%.

That is why the “Croce Rule” - Sorry, Alberto! - is a useful tool in our attempts to take risks. In every situation we can ask ourselves: