I'm sure that many of you are familiar with the 80/20 Rule, simply stated, "...in anything a few (20 percent) are vital and many (80 percent) are trivial." In 1906, Italian economist Vilfredo Pareto created a mathematical formula to describe the unequal distribution of wealth in his country.  Pareto showed that 20 percent of the people owned 80 percent of the wealth.

We can be thankful to Dr. Joseph M. Juran for making the work by Pareto more widely known, and a cornerstone of Statistical Process Control.  In Juran's work in the 1940s he identified 20 percent of the defects causing 80 percent of the problems.  When he published his findings he described the result as the "vital few and trivial many".  You can apply the 80/20 Rule to almost anything: products, customers, customer service, or work flows.

The Pareto Chart can be thought of as a special case of a Histogram.  The items to evaluated are sorted in descending order and the frequency of their occurrence are plotted as columns, with their value in percent shown on the left Y axis.  The cumulative percentage of the items is calculated and plotted as a line with their values shown on the right Y axis, the maximum being 100%.  The items to the left of the red vertical line are the 'vital few' vs, the 'trivial many' to the right.

In this example for a client, 81% of their revenues were being generated by 23% of their customers.  Not all observations are this close to the 80/20 Rule, but what is important is being able to distinguish those 'vital' few'.  Armed with that knowledge, we created a focused strategy for our client to - "Win 'em, keep 'em, and grow 'em."