Improvement Insights Blog

Juran borrowed the work of Vilfredo Pareto to describe the uneven distribution of defects. Vilfredo focused on wealth. Juran expanded it to defects. And I narrowed and expanded it to include almost anything. Here’s what it means to you:

“Hi, I’m Jay Arthur, author of “Lean Six Sigma For Hospitals” and the QI Macros [software].

“I was rereading Juran, and he was talking about how he misnamed the Pareto Principle but then it stuck. When he was in his mid-20s, as a young engineer he observed that quality defects are unequal in frequency. They seemed to just be in specific places, and so on. Employee absenteeism, causes of accidents, right? Mistakes and errors, vital few, trivial many… and so he borrowed from Pareto, who was talking about distribution of wealth. Juran was the first one to apply it to defects and mistakes and errors and waste and rework and so on.

“That unequal distribution to wealth also applies to Quality losses. It wasn’t a universal [principle] when he started but then it became one. He said, “If I’d have been a different person, I would have called it the Juran principle.”

“Since then, I have found that as little as four percent of what you do produces over half the mistakes, errors, waste, rework and lost profit, and I named that the 4-50 Rule. I also find that the 4-50 Rule applies to a lot of other things in the world, like you only need four percent of the knowledge to get fifty percent of the bang for the buck on things, right? You don’t need to know everything about Lean and Six Sigma to start doing Six Sigma projects, right? A handful of tools (I call them The Magnificent Seven) will solve most of the problems you’re going to face. Then at some point you’re going to need to add some more tools, but you don’t need to know them all to get started. That’s just silly.

“It doesn’t take a math genius (or you don’t have to be Warren Buffett) to get wealthy. The secret sauce is you take 10 percent of your income you invest it. If you’re not Warren Buffett, Warren Buffett says invest it in a U.S. stock index fund and it’ll just start growing, right? Stock index funds outperform 90 percent of the actively managed funds. Guess what? That’s all you need to know. Ten percent of your income, invest it you can get wealthy. No matter how much money you make, you will get there.

“So that’s my Improvement Insight for this week. There’s the 80/20 (you know, the Pareto Rule), there’s a 4-50 Arthur Rule, and you can apply that to anything: defects, mistakes and errors. You can apply that to knowledge about investing. Six Sigma anything else you want to learn. You can get dramatic things going with just a little bit of knowledge and so you don’t need to know everything to do anything.

“Let’s go out and improve something this week.”