Pareto analysis is a  handy analysis to help clarify how to allocate resources. The basic idea to to identify a small proportion of items or results that are disproportionally responsible for the overall outcome. For example the 20% of customers that are responsible for 80% of your companies sales.  The pattern is also known as  the Pareto principle, Pareto’s  law, the 80/20 rule, the principle of least effort, and the principle of imbalance. The  80/20 principle  was discovered in 1897 by the  Italian economist Vilfredo Pareto.  Vilfedro was researching the distribution of wealth in England and found that 80%  wealth was controlled by 20% of the population. In the 1960’s,  IBM reportedly used the principle when they identified the  20% of the Operating System code of their mainframe computers that carried 80% of the workload. They then rewrote that 20% of the code so the  OS would run quicker. This gave them a performance edge and contributed to their early domination of the computer market.

This video post demonstrates how to quickly run a Pareto analysis in Excel.