Structuring
Pareto principle (80/20)
A small share of causes often drives a large share of results.
Facts checked against sources onWhat does Pareto principle (80/20) mean?
It is a rule of thumb, not a law, and the split is rarely exactly 80/20. Use it to decide where to look first, then check the real numbers.
Example
The Pareto principle is the observation that a small share of causes often accounts for a large share of the effect, for example a few customers bringing most of the profit.
Where does it come up in case interview prep?
- Procurement and sourcing: where the money goesLesson in Sourcing, trade and supply risk
- Who the customer is: segments by need and by valueLesson in Customers and growth: the economics of marketing
- Structured brainstorming, and ranking the ideasLesson in Brainstorming and creativity
- Cost reduction and cost cuttingLesson
- The economics of a consulting firm: hours, rates, realization and pricingLesson in Professional services: consulting, audit, law and IT services
Related terms
- HypothesisYour best early guess at the answer, which you then test.
- MECEBuckets that do not overlap and together cover everything.
- Issue treeA branching diagram that breaks a problem into smaller parts.
- Driver treeAn issue tree built from the numbers that drive an outcome.
- Sensitivity analysisChanging one assumption at a time to see which matters most.
Learn it in context
See Pareto principle (80/20) at work in a lesson from Sourcing, trade and supply risk, with checks as you go.
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