This post reviews the Pareto Principle – definition, examples, strategic implications, and application to project management. Then it probes how the principle may be at play in the immediate moves by Elon Musk after his takeover of Twitter.
Review of Pareto Principle Definition
The Pareto Principle, or 80:20 rule, is a rather simple but profound concept. It says, generically, that roughly 80% of the outputs will result from 20% of the inputs.
Or…that 80% of your results will come from roughly 20% of your efforts.
Going a little deeper, of the 20% of inputs that yield 80% of the outputs, the Pareto principle also applies! And of that top 20%, 20% of them will generate roughly 80% of the those outputs.
That means that 4% (20% * 20%) of the inputs yields roughly 64% (80% * 80%) of the outputs!
This is an astounding revelation for prioritizing. The reality is that all inputs do not yield equal outputs. As a rule – by observation – inputs and outputs are very disproportionate!
One application of 80:20 thinking is project portfolio management (PPM). PPM is all about prioritization. Hence, PPM’s want to prioritize those roughly 20% of the projects, or project spend, that yield 80% of the results.
Pareto Principle Examples and Twitter
Since Twitter is so prominent in the business news right now, I thought I would focus on that.
From a project management perspective, Twitter is not being well-managed. It would seem that:
- Laying off half the work force is crazy and will hurt the company.
- Asking the remaining employees to make an extreme commitment or leave is not humane treatment.
- Completely changing or reversing policies on participation in a short timeframe is crazy.
- Evaluation based on the project management canvas (see below) yields a thumbs down on almost every measure.
So what are the drivers behind all of these major moves within such a short period of time? Is the Pareto Principle somehow at work here?
My guess is that the Pareto Principle is core to this storm of decisions by Elon Musk.
For example, if you can believe that 20% of the workers produce 80% of the results, then maybe these moves make sense.
However, if you believe that 80% of the human resources output results from 20% of the policies toward people (ie. how people are treated), things will likely not end well. But, playing devil’s advocate, consider these things:
- The acquisition and changes have been brewing for quite a while, even though the actions occurred swiftly once the deal finally happened.
- I’m not sure what, if anything, the laid off employees received, but those who would not ‘commit’ and elected to leave received 3 months pay. That’s not bad, especially when you consider that most of these folks are pretty marketable! And maybe they will all go on to have happy and profitable (maybe happier and more profitable!) careers elsewhere!
- Could it also be that a strategy evolves that will be better for all stakeholders – employees, user community, even society? It may not feel like it in the short term, but may actually work out that way.
Strategy and More Pareto Principle Examples
The strategy at Twitter has been, in a word, disruptive. It is a major pivot.
We will see what happens in the coming period. We’ll find out if these moves were, in fact, effective. But there is even controversy over how to measure the success!
I recommend these strategy resources (paid link):
Some think that the moves were made without clear objectives. Many think that these were rash moves made emotionally, without clear forethought.
Others give Musk credit, based on past performance, for having a vision. Does he actually have a clear picture of how he wants Twitter to be, and all of these moves are like a ‘big bang’ to rapidly reshape it to that picture?
This is not disruptive innovation. The technology drivers all seem to be essentially the same. The industry and market drivers also seem to be relatively stable and in place. This all seems to be the implementation of a strategy. It is disruptive to employees, customers, and the public, but is not ‘disruptive innovation’.
Instead, it is more like the tough medicine of a turnaround strategy. Or it may be business model innovation.
I mentioned above that I wonder if one of the main strategic drivers is 80:20 – that Musk wants to keep only the 20% of employees who are hyper dedicated, extremely capable, and 100% committed to his program.
There may be other 80:20 moves afoot, as well. This could include eliminating 80% of other costs which are evaluated to produce only 20% of the results. Maybe 80% of the rules for engagement will be eliminated, but the 20% most effective will be strengthened.
Project Management, the Pareto Principle, and Twitter
The project canvas above shows the 14 key and comprehensive considerations for a project. How does the current post-acquisition implementation at Twitter stack up against the project canvas?
Click on the canvas to view Antonio Nieto-Rodriguez’s LinkedIn post, “Is Musk’s Acquisition of Twitter a Project Doomed to Fail?” He frames the issue nicely – and you can view the reactions among numerous project management practitioners.
Once comment, by Kavita Sharma, especially caught my attention. She said,
“That’s why PMs can never be visionary. If a canvas is followed, then you are not looking beyond certain horizon. See all leaders w by beyond that – take an example for Steve Jobs.”
- Could it be that the actions taken by Musk, whether you agree or not, or whether they even make sense or not, are somehow out of the realm of rational project management?
- Does ‘rational project management’ require more controlled situations, more controlled strategies, or more controlled environments to work effectively?
The answers to these questions will come out over time, as the Twitter situation evolves. Let’s see what happens!
I recommend these PM templates (paid link):
This post has been a lot about Twitter – but all about the Pareto Principle. It has reviewed what the Pareto Principle is, provided some examples and ideas, and reviewed the strategic and project management implications.
While time will tell, what do you think about the 80:20 principle and Elon Musk’s acquisition of Twitter?
The following is an interesting video on the Pareto Principle, with some out-of the box’ examples: