Did you know that the 80/20 rule comes from Vilfredo Pareto, an Italian engineer, sociologist, economist, political scientist, and philosopher, who was born in the mid-1800s? The 80/20 rule, also known as the Pareto principle, was built on observations that 80% of the land in Italy was owned by about 20% of the population. So what? How does this apply to commercial processes?
There is a very cool tool called a Pareto chart, named after our new Italian friend. It is both a bar chart and a line chart; the bars are represented in descending order, and the line represents the cumulative total. It looks like this.
What does this tell us? In this example, we can quickly see the sources of our lead volume. As the tallest bar, our web site is the clear winner at driving the most leads. Per the line chart, web site traffic is driving about 60% of all leads. The line chart also indicates that the web site and inside sales together are driving almost 80% of all leads. If you overlay this information with the marketing and sales spend for each lead source, you can quickly get a sense for your ROI. Good data contributes to great decision-making!
I submit that if you want to understand any process well – even commercial processes – you need to collect data about those processes. If you do, you might just see that your data follows a similar model. A pareto chart makes it easy to discover the 80/20 rule for your business, which will help you quickly identify the few areas that drive the most impact. Knowing the factors that have the biggest positive influence is important – you may want to invest more. Likewise, understanding which factors drive the biggest pain points allows you to address potentially only one or two items and make a huge positive difference for your team or your customers.
TopLine Results can help you examine your processes and garner insights to assist you in addressing issues that are preventing your growth as well as help you identify those areas that may deserve additional attention or investment. If you’d like to learn more about business process improvement, give me a call to schedule a free 30-minute consultation or register your interest here.
About the Author
Melanie R. Varin specializes in business process consulting for organizations across many industries. With more than 30 years of business expertise, Melanie focuses on providing clients with winning strategies for improving their sales, marketing and overall business processes from assessment to implementation.
Melanie’s certifications include: Six Sigma Master Black Belt, Silver Certified Microsoft partner and Registered Salesforce partner.