by Angela Guess
David Logan recently suggested an innovative way that the Pareto Principle can be used to drive better business intelligence. Logan states, “The Pareto principle is named after Italian economist, Vilfredo Pareto, who observed in 1906 that 80% of the land in Italy was owned by 20% of the population. Hence, it is more commonly known as the 80/20 rule, where for many events, 80% of the effects are a result of 20% of the causes. Using this principle in designing and building business intelligence (BI) systems can result in significantly improved performance, relevance, and correspondingly, business value of the product delivered. Two obvious areas that spring to mind are the extraction, transformation and loading (ETL) and presentation (reporting) components of BI. Analysing the underlying information for 80/20 patterns (such as 80% of a company’s transaction volumes come from 20% of its customers) during the BI design phase can create rapid return on time invested.”
He continues, “Given the trends of dramatically increasing data volumes that have to be processed, an example of using the Pareto principle would be to note that, typically, most of the transactional data processed daily are recent transactions, whereas a smaller volume of data can often be older data, which has only been processed recently. The interesting thing here is that the smaller volume of older data often creates a disproportionate processing load on the ETL process, as it involves recalculations of amounts for days – which have already been assumed to be ‘complete’.”
