Pareto is wrong

If you want to thrive in business you have to forget about applying Pareto’s principle to your problem solving. I know at first it seems to make sense: “solve 20% of the problems that cause 80% of customer dissatisfaction” (or whatever you are trying to solve). The problem with that way of thinking is that:

1. Nobody wants to be satisfied only 80% (or given an 80% working product)
2. As soon as you solve that 20%, another Pareto raises its head – it never ends.

If we apply the idea that solving 80% of an issue is ok to provide for everyday situations, we would quickly realize that working like that is unacceptable (and leads to failure). For example, would you accept 80% of your laundry done? What about an 80% warm cup of coffee? Would you take an 80% cooked meal?

Let’s face it. In today’s business environment solving something 80% is not good enough. Servers have to have an uptime of 99.9995%, customers expect (and demand) 100% satisfaction, project budgets have to be accurate at least 95% of the time, six sigma expects 99.9997% efficiency in processes and products. You can see that 80% of something is way below expectations.

Why then, whenever there is a problem and a meeting is held somebody always brings Pareto into the discussion? Because there is no company that has infinite resources (well, maybe Microsoft), you always have to prioritize – it is just a matter of necessity. How then, can we escape the Pareto trap?

First, get rid of Pareto thinking! Then, follow these steps:

1. Clearly define your problem(s)
2. Identify all relevant measures or indicators to the problem – for example, percentage of customer satisfaction, number of defects per million opportunities (DPMO), or number of dropped calls. The fewer the better.
3. Measure the initial state (use the indicators selected)
4. Define your goal as the conditions necessary to consider the problem(s) solved and, if appropriate, your tolerance (nobody gets it right all the time) – be sure to use the measures or indicators selected in the second step.
5. Identify all steps necessary to get there – make a plan (and hire a Project Manager)
6. Take all of the steps, solve all of the problems until you get to your goal - don’t forget to measure progress along the way or you may not know you’ve arrived.

What happens if the steps necessary are not doable, the problem is unsolvable or your company can’t afford to make it happen? That means it is time to reconsider your strategy: either lower expectations, reposition the product or service, or exit the market.