Who started it really doesn't matter as much as who's imparted it on you in a way that reached and benefitted you!
Many will claim they started it. I first heard the concept from the likes of thought leaders and coaches: Michael E. Gerber,
Brian Buffini, Jack Canfield, Zig Ziglar and Jim Rohn.

👉Working on your business is CEO work, the 10,000 foot view above your business: being the rainmaker, making it rain prospects, leads and opportunities.

👉Working in your business is being in the trenches as the COO and CFO, being the deal maker and the money maker that are in the daily minutia of the activities that make the CEO's efforts a money making reality.

Thomas J. Nelson, REALTOR ® e-Pro CRS RCS-D Vets has the blueprint here. 

I find myself at times doing both at the same time, making executive decisions while in the trenches.  

My view would be that to work on your business you have taken ownership of what you are doing Peter Mohylsky, Beach Expert . Working in your business is what a minion does.

Working on your business is planning and scheduling the tools you work with

Working in your day-to-day listings and selling process.

Many marketing mastermind groups spout this saying because the day you meet with your tribe is the day you are learning and generating different ideas and tools to improve your business skill set and differentiate yourself from the crowd .😎

Whether you're in it or on it, successful business standards matter!

Last Q first as TJ seems to have laid it out nicely . . .

you prioritize according to need, while making sure all is attended to on a continual basis. 

As a broker, distractions are the norm, whether they are inconvenient or not! There's paperwork to be organized, marketing, communicating on a daily basis - but when there's a fire to put out or an opportunity to carpe, LOL . . . you pivot!

I am reminded of: MIND your own business and MINE your own business. These hold-up today and beyond. Run your business or it will run you is no myth. Also, it is wise to remember business & personal are two different things and learning how to wield them could take a lifetime. Well worth it 

Marketing, networking and similar activities are "working on your business". They keep you busy but may or may not be productive as far as generating income so it's important to review your efforts frequently and adjust as needed. "Working in your business" is more active, showing property, doing listing presentations and listing, negotiating contracts to keep a sale together, etc., all of which are productive and produce income. 

I knew there were others before me answering so, I thought I'd check...Sure enough, Thomas J. Nelson, REALTOR ® e-Pro CRS RCS-D Vets has your answer, 100%! 

Some who are clueless are successful doing what they do. Some who follow the thought are lost in getting ready. Do what works for you and constantly be looking at how to tweak your actions to get even better.

Planning, building systems, and coaching others to success all qualify as working on your business.

Doing the work that others could be doing is generally working in your business.

It all comes down to which side of the cashflow quadrant you want to land on.

Peter Mohylsky, Beach Expert,

For me, working in my business is working on my business🙂

There are times it is both, but it is the success that comes from these times that matter.

When you have your own real estate business like I have, it's so easy to get buried under paperwork and other time-consuming stuff that eats up your creative energy to grow my business.  

I view it as similar to branches of govt.

The legislative branch, Congress, makes the rules, equivalent to a business Board of Directors.

The executive branch of govt follows the rules set by Congress.

The Board sets and adjusts the plan, direction, scope, strategy, and priorities to be followed. It creates the high-level macro view.

The executives and staff follow the Resolutions set by the Board. They deal with daily micro tasks to achieve the business macro goals.

The Board should be open to feedback from the market, economy, legislation, staff and customer reviews to adjust the plan for the best interest of the business and the customers.

The judicial branch is the court which makes decisions over disputes.

In business, big disputes are reviewed by the Board.

Smaller disputes are delegated to executives as part of their management duties.

So, there are 3 branches of business.

Business must serve We The People, the Customers, to be sustainable.

Working your business is for Good Will working in your business if for profit.

Working in your business is when you get caught up on the day to day small things that can be leveraged out. You often see this when agents who do lots of busy work and never have any business.

Working on your business is when you're doing activities and building your business.

I don't know who started it. When you find you're getting bogged down in all the little things vs. growing your business you have to make a change.