Saturday, April 28, 2012

On Pareto Principle

It has been many years since as a part of the Online IT team at a media company, I was part of the team effort in self-training in agile including prioritization techniques. During our mock up scoping exercise, a concept came up that 80% of value come out of 20% of requirements. We discussed where 80-20 concept applies in software development some further and came up with quite a long list of how this principle applies: 20% percent of project deliver 80% of value , or 20% of the team members deliver 80% of work. The latter has to be validated though – I hope this is Pareto exception J

Then, a few month later, I took an advanced project management class and learned about the Pareto chart and distribution types and where and how it applies.

Vilfredo Federico Damaso Pareto ( ) (15 July 1848 – 19 August 1923), born Wilfried Fritz Pareto, was an Italian engineer, sociologist, economist, and philosopher. He made several important contributions to economics, particularly in the study of income distribution and in the analysis of individuals' choices. He was the first to discover that income follows a Pareto distribution, which is a power law probability distribution. The pareto principle was named after him and built on observations of his such as that 80% of the land in Italy was owned by 20% of the population.

The Pareto principle, also known as 80-20 rule, helps define efficiencies for multiple systems – in software development and far beyond. Not that is universally applies – but thinking about this rule helps re-evaluate approach to project scope, resource allocation, and personal productivity. How? Just one example. In agile prioritization while prioritizing features and placing those on sprint backlog, we can try to identify those 20% that will actually bring 80% of value and acknowledge that while product backlog is never exhausted by deifnition, we are constantly delivering the need 80% to the business.

Hmmm. How universally is the distribution actually applicable? We are not talking income in Italia – can we apply this curve to software development? One of my colleagues actually tried to apply bell curve distribution to performance appraisals at an HR seminar on the topic. I personally advise against applying Pareto principle to bonus distribution though J

The 80-20 rule is applicable to multiple other situations and environment. Please provide your suggestions – and the one who provides the best input will receive a Pareto award. The winner will be selected by a poll – so total transparency and fairness is guaranteed.

And in conclusion, what is obvious to me is that 20% of the readers of this blog post will provide 80% of the valuable comments and Pareto samples. Are you in?

P.S. This  posting is my first attempt of taking a different look at familiar concepts. I’ll see whether it is of an interest to you. If it is, I am ready to continue with a new look at Deming and Plan-Do-Check-Act cycle. Or maybe you have your own views or suggestions for good candidates for the “Known Unknowns” category. Or does “Unfamiliar Familiars” sound better?


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  2. Thank you for your encouragement, Kiruthika! This is something I also take very seriously. Sometimes when I see teams demotivated because of a short-term failure (a rolled back deployment or not getting recognized for their contribution - this happens, but otherwise we won't be challenged, right?), all it takes to show them that what they do matters and there is value in what they produce, and this small sign of appreciation makes a big difference. Thank you!

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