Axioms: The Pareto Principle #2 – How to…..

27 Jul

In any complex system a small number of variables, usually fewer the seven, control most of the variance in the system. If you can identify these variables, you can exert great influence on the performance of the system.

The Pareto Principle is the basis for a Pareto Analysis, a simple and powerful way to identify these variables.  Imagine any data set, quantitative or qualitative, numbers or words.  If you assign these data into n boxes/categories and count and rank order the frequencies you can then produce a Pareto Chart.  The categories would be on the horizontal or x-axis and the frequencies on the vertical or y-axis.  The Pareto chart shown last week and in this blog are typical but these have fewer categories than usual.

With narrative data it is first necessary to inductively content analyze the narrative and then label and rank order the resulting categories by frequency.

This is a terrific tool for both tactical and strategic analysis and makes a SWOT look weak and useless (unless you don’t have a handle on the those characteristics).

For more on how, go to: http://en.wikipedia.org/wiki/Pareto_analysis and use the Pareto chart link.

Beyond Luck is now an e-book on Amazon.  At $6.95 it’s a great deal.


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