In decisions, I would say that it’s worth the extra time to simulate through all the exceptions especially when they could threaten your ability to thrive.

That said, wouldn’t you agree that the Pareto principle still holds?

Process Manager: Why are you spending all your time on eingeering for the exception case?
Process Engineer: Not all– only 80%. The exception cases may happen 20% of the time, but they cause 80% of our support costs.

If the manager figures to not worry about the 20% exceptions because they’re only 20% of the cost, he’s assuming uniform distribution, and not understanding the 80/20 rule at all.

Pareto holds.

Jon

Good catch on the sentence. Thanks. I did miss a word. I was a victim of my dersire to multi-task and lost a word. .

The 80/20 rule that I was reffering to is as follows:

Focus on the 80% that is the normal and worry about the excpetions later as they evolve (the remaing 20%). This principle has been succesful in dealing with case management, process flow and decisions in the past and worked well. .

My point is that the danger is in the 20%. It might be exceptional customer needs, exceptional logic and in the extreme case of low probability conditions that catch decision makers unprepared.

Around my office, you’re held in high regard. But this sentence has my head spinning; there is probably a word missing:

“I believe that new leadership models need to exercise that leverage new forms of decision making that leverage analytics and predictions using near real time events inline with process, value chain and market interactions.”

As per the 80/20 rule (Pareto Principle), I find it always helpful to provide an example for the given domain: e.g., 20% of the use cases are invoked by 80% of the users. And indeed, which 20% may be different for different customers!

When you mention “outlier conditions that nobody thought were possible” I think you’re getting at a separate point, akin to what Nassim Nicholas Taleb has been calling the black swan theory (highly improbable events with massive impact). I’ve only read a number of reviews on the book, but I believe that he’s faithful to Pareto, while disdainful of many contemporary economists. Remember also that risk analysts aren’t looking at the “20%” events, but those with with probability of 1 out of 10^n.

And back to your top point. When you refer to the “80/20 Rule”, are you referring to (a) the mathematical model of the Pareto principle, or (b) the popular application of it? (compare with: email still “works” in the sense that it still goes from sender to recipient, but doesn’t work very well when *applied to* managing business processes.)

Jon