Managing in a pareto world calls for new thinking

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Abstract

Research findings showing the ubiquity of Pareto and ‘power-law’ distributions in the social and organisational worlds underlie increasing calls for complexity-driven ideas to be applied more frequently to organisational and management research. Power laws indicate well-formed Pareto distributions. Given that the world of business is, then, quite likely Paretian rather than Gaussian, phenomena in the long tails are often more important than worrying about the average. Consequently, how to modify strategic attention and what to tell managers? Basic ideas highlighting key differences between Gaussian and Paretian approaches are first reviewed. Then, five specific cases highlighting the managerial tails of Pareto distributions are discussed. These illustrate how overall managerial effectiveness is improved by managing the Pareto tails rather than relying on conventional wisdom to manage ‘average’ behaviour. Insights and effective strategies better tuned to Pareto-distributed managerial practice follow.