Business Entropy – bringing order to the chaos

In his recent post, Jim Harris drew an analogy between the interactions of atomic particles, sub-atomic forces and the working of successful collaborative teams, and coined the term ego-repulsive force.

Jim’s post put me in mind of another aspect of physics that I think has parallels with our business world – the Second Law of Thermodynamics, and the concept of entropy.

In thermodynamics, “entropy” describes a measure of the number of ways a closed system can be arranged; such systems spontaneously evolve towards a state of equilibrium, which are at maximum entropy (and therefore, maximum disorder).

I observe that this mechanism also holds true for the workings of organisations – and there is a law of Business Entropy at work.

It’s my contention that, just like in any closed system that a physicist could describe, business organisations will tend to decay towards a chaotic state over time. Left to their own devices, people will do their own thing, suit themselves, and interact only intermittently and randomly to a level sufficient to meet their own needs. Business entropy continues to act until a state of disordered equilibrium is reached, at which points random events may occur but effectively have no impact on the overall business (almost the business equivalent of Brownian Motion.)

The role of management, then, is to introduce additional energy into the closed system of the Brownian organisation, whether through raw enthusiasm, new ideas, encouragement, or changes of processes. And management only serves a purpose when it is acting to add energy to the system – when that stops, then the law of Business Entropy will kick in and the organisation will begin to decay over time.

This management energy applies forces that disrupt the chaotic state and create dynamic new motion (innovation), gain momentum (business change) or maintain the bonds between particles (organisational structure and process). If the right forces are applied at the right time and in the right way, then the business can be moved to a new desired state.

(As an example, when Lou Gerstner joined IBM in the early 1990s, he turned around the fortunes of a rapidly failing business by introducing an approach of continuous renewal, innovation and re-invention which is still prevalent today.)

Of course if too much energy is added, then the system may become unstable and can either collapse or explode. Too little, and the natural inertia within the organisation cannot be overcome. (e.g. Ron Johnson’s failed leadership and change of direction for J.C. Penney, while time will tell whether Kodak can survive its endemic complacency and too-cautious response to digital imaging).

What is the state of Business Entropy in your organisation? Are you moving with momentum, with management applying the right forces and energy to achieve the desired state? Or are you in a Brownian Business?

And more to the point, what are you going to do about it?!

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