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When Connected Devices Make Decisions, the “80/20 Rule” Risks Losing Significance

When Connected Devices Make Decisions, the “80/20 Rule” Risks Losing Significance

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The Pareto Principle, more commonly known as the “80/20” rule, is commonly referenced in both business and economic applications. Essentially, the Pareto Principle states that 80% of the output is achieved by 20% of the input. Dating back to the twentieth century, this rule of thumb has been used to explain the economics behind everything from wealth distribution to employee efficiency, car accidents to criminal activity.

Although the Pareto Principle’s roots are chiefly economic in nature, its many applications rely on observing human nature and the output of associated activities. So, what happens when you take humans out of the equation? When the devices around us, connected in an intricate Internet of Things, communicate, does the Pareto Principle still apply?

Let’s examine a few common applications of the Pareto Principle and how, with the increased connectivity of the devices around us at home, in business, and in our cities, the 80/20 rule may no longer hold significance.

20% of the workers do 80% of the work.

Although only 10% of industrial operations are currently using the connected enterprise, it offers tremendous potential for greater efficiency and productivity among machinery and employees. Food and beverage company, King’s Hawaiian, found that by adding just 11 connected machines to a factory’s existing operations, they were able to double their production, speed time to market, improve asset utilization, lower total cost of ownership, boost workforce efficiency and better manage risk.

And that’s by the addition of only 11 machines. Imagine what entire fleets of connected machines could do for the manufacturing sector, an industry primed for IoT disruption and benefit in 2015. And, when these connected machines replace a portion of an error-prone human workforce, they will undoubtedly throw off the balance of the 80/20 rule in favor of device-to-device communication, decision-making, and efficiency.

20% of car drivers cause 80% of the accidents.

Google self-driving car

A Google self-driving Lexus at a Google event outside the Computer History Museum in Mountain View, Calif. (AP Photo/Eric Risberg)

Recent data released by Google and the State of California showcases the safety rate of self-driving cars. According to Google’s report, its self-driving cars have been in 11 minor traffic accidents since it began experimenting with the technology six years ago. And, all of these accidents were caused by the other vehicle, driven by a human, not a computer.

If we can apply this accident rate (and at-fault rate) to a larger data set over time as driverless cars become mainstream, it will undoubtedly have an impact on this particular application of the Pareto Principle. Self-driving cars currently report a zero percent fault rate for accidents, so the 80/20 principle may still apply in the short-term, as human-driven cars outnumber their self-driving counterparts on the road. However, as self-driving cars grow to occupy the majority of space on the road, the percentage of “drivers” responsible for accidents will likely decrease.

In business meetings, 80% of the decisions are made in 20% of the time.

Let’s apply this percentage breakdown to an hour-long meeting. If five decisions are made by the meetings end, then four of them were made in only 12 minutes. Now, if we add sensor-laden devices to the mix, that deliver real-time, actionable data, that ratio is bound to shift.

Cisco is working on technologies that allow for rapid IoT data collection and analysis to influence the speed of informed decision making. They’ve found that, without needing to move device data to a central repository for analysis, organizations can improve their their ability to make decisions more quickly. When you have the right data at your fingertips, aided by machine analysis that can make decisions where humans were once needed, your meeting will likely produce more than one decision in that remaining 48 minutes you’re on the conference line.

Of course, there are some instances where we cannot yet imagine how the IoT would have an impact on the 80/20 rule. Does a more connected infrastructure in our cities change the fact that 20% of criminals commit 80% of the crimes? Does a bar filled with sensors alter the assessment that 20% of patrons consume 80% of the alcohol? Elements of human nature will always be susceptible to the Pareto Principle. It’s when we allow the devices around us to take over for actions and decisions we once made that we’ll need to reassess the 80/20 rule’s statistical validity.

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