I joined Cloud Perspective in July last year because I recognise that data is becoming increasingly critical to how businesses can benefit from the AI revolution. In my conversations across the industry, I’ve become more familiar with the concept of Value-Driven Modelling (VDM). While I’m not an expert, I’d like to share a few thoughts on VDM and its intersection with the more familiar Pareto Principle.
Not all business inputs are created equal.
Often, a small number of products, customers, or activities are responsible for the majority of results. That’s the insight behind the Pareto Principle, also known as the 80/20 rule, when combined with Value-Driven Modelling (VDM), it may become a powerful tool for growth and efficiency.
Reference: What is value-based management? ‘Levels of value drivers’ McKinsey Quarterly Exhibit 3.
What Is the 80/20 Rule?
In many scenarios, 80% of outcomes come from just 20% of inputs.
For example:
- 20% of products may drive 80% of revenue
- 20% of customers might account for 80% of profit
- 20% of campaigns could generate 80% of conversions
It’s not about being exact, but about revealing where disproportionate value lies.
VDM Complementing Pareto
Value-Driven Modelling is about linking actions to measurable outcomes through logic and data. When you apply the 80/20 rule inside a VDM framework, you’re doing two things:
- Identifying the high-value 20%
- Applying structured logic to scale to optimise those areas
This is how strategic focus meets operational clarity.
Example: Retail E-Commerce
Let’s say you run an online store. You’re looking to grow profit, reduce waste, and make smarter use of your budget. Here’s how you can apply the 80/20 rule within a VDM approach:
Step 1: Identify the Top 20%
Using your data, you discover:
- 20% of your SKUs generate 80% of sales
- 20% of customers generate 80% of total lifetime value
- 20% of ad campaigns deliver 80% of conversions
Now, instead of spreading resources evenly, you drill down on what’s working.
Step 2: Apply VDM to Drive More Value
What it looks like in action:
| Top 20% Area | VDM Strategy | Metric to Monitor | Value Outcome |
| Best-selling products | Introduce bundles, upsells, and price testing | Revenue per SKU, AOV | Higher revenue per transaction |
| High-value customers | Launch loyalty tiers and personalised offers | CLV, repeat rate | Increased retention and customer value |
| Best-performing campaigns | Allocate more budget, test creative variations | ROAS, CAC | Greater impact from existing spend |
| Most efficient channels | Optimise conversion flow and user experience | Conversion rate by source | More leads and sales at lower cost |
Instead of chasing every possible initiative, VDM helps you prioritise what drives the most value, then apply data and logic to scale it effectively.
Don’t Forget the Other Side: Reducing Drag
Just as the 80/20 rule highlights your top performers, it also shows you what’s draining resources with low return.
- Cut or phase out underperforming products
- Shift away from high-cost, low-conversion marketing channels
- Automate or streamline repetitive low-impact tasks
VDM gives you a framework to make these decisions confidently, using data, not instinct.
The One (or more!) Key Point(s)
This:
Don’t try to improve everything, improve what matters most!
Use Quality/Trusted/Mastered Data to measure your 80/20 high-value opportunities.
Use VDM to scale them with clarity, data, and logic.
Be Data Driven as you execute against your goals (Account Based Selling/Marketing, Whitespace Selling, Cost Efficiencies).
How to grow smartly?
Focus less on doing more, and more on doing what counts
