Product Management using the 80/20 rule

Product people were born to bring innovative thinking into our daily lives and make brand-new ideas happen. The metaphor "don't reinvent the wheel" appears incorrect because doing something that already exists can make you understand how it works and how it can be improved.

We aim to learn new skills and use them to discover fresh approaches.

There is a powerful principle that I often employ to understand which functional variables have the highest cumulative effects on the usage of the application, like the dealer management system. The beauty of this principle is that it doesn't require extensive knowledge or complex formulas to implement. It's a straightforward, rational approach that can be easily applied, making it a valuable tool in our product development „arsenal”.

I want to draw your attention to the Pareto principle, also known as the "80–20 rule." The Pareto principle says that, for many events, approximately 80% of the effects come from 20% of the causes. Mr. Vilfredo Pareto (1848–1923) was a genial Italian engineer and sociologist who observed that 80% of the land in Italy was owned by 20% of the population. Later, the same phenomena ("80–20 rule") were detected in different spheres of the everyday world and even in product management in IT business.

The "80–20 rule" is an observation; indeed, it is not a law of nature. Consider the above before starting to apply it either in analyzing optimization efforts (QA) or determining functional specifications. Personally speaking, I found the Pareto Chart powerful in requirements analysis. It helps to visualize what matters most.

Let's imagine we are designing a new automotive application such workshop scheduling to manage service appointments and utilize workshop resources effectively (core idea).

Such a sophisticated tool has very different requirements from different stakeholders, and therefore, the Pareto principle may help. To support the product's core idea, one should classify use cases as functional variables and measure them (frequency, quantity, cost, or time).

Here, I suggest grouping different service appointment types per period. However, someone may consider a different approach. Standard services to offer, resources, skill set available, or a source of appointments could also work with the Pareto Principle.

Procedure: Sample data are collected and recorded in each category in the table below:

Using the data above, we now build the Pareto Chart.

The figure presents how many service appointment types were received in each category with cumulative values. If all categories require a particular set of functionalities, starting with functional requirements and dealing with small and quick services would substantially impact usage.

The Pareto chart is a powerful tool for analyzing data about the frequency of events or causes in a process. It's beneficial when dealing with different requirements on the same application, as it helps us focus on the most significant ones. I've found it reliable for communicating with stakeholders and making informed product-related decisions.

Thank you for taking the time to read the article. If you require any additional information, please do not hesitate to contact me.

Dr. Juraj Hanus

SME DMS | juraj.hanus@incadea.com