Want to get real value for your information technology investments? Then forget about perfection and focus on the key and significant. If you can learn to focus on the right things to do, the returns on IT investment can be enormous. All that it takes is the application of Pareto's Law, also known as the 80/20 rule.
An enormous amount has been written over the last several years about information technology investments and their ROI. The observations made and guidance given in many of these articles is correct and solid. However, all too many technology initiatives focus on perfection (i.e., getting absolutely everything done perfectly). The scope of many of these technology initiatives is simply too broad. The small significant achievements get lost while efforts continue to standardize absolutely everything within the original project scope; or, worse yet, an even greater scope. It’s become so common that a phrase exists for the phenomenon: “scope creep.”
In most information technology projects, broader scope and greater levels of effort add little, if any, extra value; they frequently simply add extra cost. However, applying some 100 year-old basics formulated by Vilfredo Pareto can make a substantial difference.
Vilfredo Pareto
Vilfredo Pareto (1848-1923) was an Italian economist and political sociologist. As part of his life-long research, he formulated, “The law of the trivial many and the critical few.” This law has become commonly known as the “80/20 rule.” His law can be restated to apply to information technology initiatives: “In any system implementation, 80% of the potential value of that implementation can be achieved from just 20% of the total effort or cost.” One can spend the remaining 80% of effort (or cost) for relatively little return.
Table 1 below summarizes this.
| Cost |
Value |
| 100% |
100% |
| 20% |
80% |
Please note that once the initial 80% value has been achieved, to achieve the final 20% of value requires spending five times more than was spent for the initial increment.