Pareto’s Principle & Systems Thinking

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During his studies, Italian economist Vilfredo Pareto noticed that 80% of the nation’s wealth was controlled by 20% of the population. Had he known about systems thinking, he may have uncovered why.

Since then, this concept has been dissected and applied to many scenarios. Perhaps the most recent was Tim Ferris’s book The Four Hour Work Week.

This post is not focused on how the principle works – or why –  but how we can apply it to our daily lives.

Pareto’s Role in Systems Thinking

Often, we become so consumed by our daily activities that we overlook – and in some cases, actively avoid – the tasks that lead to growth.

We confuse the small, mundane to-dos that  just “have to get done” for those that will lead to impact. Done day after day, tasks become routines and soon we’re left wondering why we can’t get ahead.

It happens in our personal lives through relationships with old friends or family members. And it happens in our businesses, whether we are solopreneurs, CEOs of Fortune 100 companies, or employees whose boss requires we complete low-level, time-intensive tasks.

Making Impact Daily

How aware are you of how you spend your time?

Was reading this blog a planned event or has it somehow crept into your day? (Either way, I promise it will be worth it in the long-run. So don’t leave quite yet.)

In order to be effective and accomplish as much in as little time as possible, we must understand what pieces of our day have the biggest impact. And in order to do that, we must take fourth simple steps:

  1. First, become aware of what tasks are even taking place. The good news is that you’re reading this blog post, which immediately makes you more cognizant of your actions than 95% of the population.
  2. Next, record your daily activities. For a while, I thought this to be a nuisance. But after doing it for a few weeks, it becomes habit and highly eye-opening. I use Toggl, a simple timer app that can run on your desktop or mobile device. I turn it on in the morning and use it to document how I spend my day.
  3. Third, determine what percent of your time is spent working on your goals and what percent is spent on non-systems related tasks.
  4. Lastly, work toward spending at least 20% of your time on systems-related tasks. This will increase over time, but 20% is a good place to start.

Keep in mind, this isn’t a time management blog, it is a systems blog. But without actively tracking what we do and the impact our actions have on our goals, we may as well be hamsters in spinning wheels doing the same things each day, making little to no progress.

 Remember “The Why”

An important function of almost every system is to ensure its own perpetuation.

Donella H. MeadowsThinking in Systems

Can you step away from your business without it stopping or collapsing? If you stop working, do you stop making money? Are there any portions of your business that are partially or entirely dependent on you – or a single individual within your organization?

As I’ll explore further, one of the primary goals of creating a system is to ensure the work gets done – with less manual effort and more accuracy – so that we can free our time to focus on other areas that will further enable growth.

What are the tasks that result in 80% of your company’s revenues?

Share them in the comments section, and we’ll find ways to systematize them in future posts.

This blog is created and maintained by:

Matthew Russo

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  • http://www.WomanlyWoman.com/ Liz Barnett

    I just came across this post on Twitter. I have known about the Pareto principle for a long time but I must say you have explained it very well. I have bookmarked this post so the next time I am trying to explain it to someone, I can just email them this. 🙂 Also, I love your website/blog design. It is a great example. Do you mind if I blog about it at LizB.co?

    • http://about.me/matthewrusso Matthew Russo

      Thanks Liz, I’m glad the post resonated. I’m hoping to break down more big concepts like this into smaller, actionable chunks that people “get” and take action on.

      Thanks also for the design praise. It took me some time to decide exactly what I wanted (and even more time to build it out), but I’m very happy with the final result.

      Look forward to seeing you around these parts. 🙂

      • http://www.WomanlyWoman.com/ Liz Barnett

        Do you mind if I blog about your design?

        • http://about.me/matthewrusso Matthew Russo

          Of course not, but thank you for asking. Blog away!

  • Carolyn Kent

    This could not have come at a better time for me. Struggling with this very issue given the amount of work that needs to be done vs. perpetual lack of support (headcount AND financial). Love the Toggl tip, too! Thanks Matt 🙂

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