The Pareto Analysis?

The Pareto Analysis, also known as the Pareto principle or 80/20 rule, assumes that
the large majority of problems (80%) are determined by a few important causes
20%).

The founder of this analysis, Italian economist Vilfredo Pareto, discovered this
when he was carrying out a study at the end of the 18th century in which he
ascertained that 20% of the Italian population owned 80% of the property. This
80/20 rule or Pareto Analysis was further developed by total quality management
guru Joseph Juran (after 1940) and can be applied to various matters (for instance
decision-making and other complex issues).

The principle of the Pareto Analysis is based on the Zipf distribution (pattern in
linguistics and a discrete probability distribution with parameters λ and N. the
Pareto Analysis is a creative and practical way of looking at the causes of
problems. It stimulates ideas about thinking and organizing. This method of
analysis helps identify the main causes (20%) that lead to 80% of the problems
that need are to be solved. As soon as the main causes have been identified, the
diagnostic techniques such as the Ishikawa diagram or fishbone analysis can be
used to identify and address the deeper causes of the problems.

Step 1: Measuring – identify the problems and document them in a table

Based on observations, interviews and reports, data can be collected from which problems can be
deduced. Subsequently, these problems are documented in a table and grouped if possible. It is
important to apply the ‘cause-effect’ theory to each item so that the source of each documented
problem can be found. There are several techniques that can help in this such as for example
the Root Cause Analysis (RCA).

Step 2: Determine their order of importance

Organize the inventoried problems in ranking order from the most important down to the least
important in descending order. Make sure that the most important cause is documented first.

Step 3: Mark or score each recorded problem

Step 4: Group the identified problem and add the marks or scores

Step 5: Time to act

Pareto Analysis calculation example

An example is a computation of the percentages of problem costs, in other words, the number of
times a department is faced with this problem or the opportunities of how a department can

increase sales.

Pareto Chart
This example teaches you how to create a Pareto Chart in Excel. The Pareto principle states that, for many
events, roughly 80% of the effects come from 20% of the causes. In this example, we will see that roughly
80% of the complaints come from 20% of the complaint types.
Fishbone diagram
The Fishbone diagram is also known as the cause and effect diagram, the root cause analysis, and
the Ishikawa diagram, named after its originator Kaoru Ishikawa, the Japanese quality pioneer. It
is generally called the Fishbone diagram because the diagram resembles that of a fishbone. In
simple terms, Fishbone is brainstorming in a structured format. The technique uses graphical
means to relate the causes of a problem to the problem itself, in other words, to determine cause
and effect. The diagram focuses on the causes rather than the effect. Because there may be a
number of causes for a particular problem, this technique helps us to identify the root cause of
the problem in a structured and uncomplicated manner. It also helps us to work on each cause
prior to finding the root cause.
This technique is very much applicable to the software industry and to Notes and Domino. There
are problems in Notes-based applications and in Domino administration in which root cause
analysis is important. For example, replication problems can occur for a number of reasons,
including replication settings, database access levels, document security, or other factors. The
Fishbone diagram helps us to arrive at the root cause of a problem through brainstorming.