Business entropy
Chapter 1 - Worldview
Previous page: Societal entropy - Business entropy - Next page: Chaos
Back to Book or directly to Main Page
.
Welcome to the Business entropy page
This is the fourth item of the second building block.
.
Business entropy is a specific form of social entropy. Again, entropy is driven by context, and we try to minimise its effort cost.
.
Key take-aways
- Entropy is inevitable, even in business. We can only be aware of it and try to find ways to minimise or reuse the "lost energy"
- Companies strive for maximum efficiency (operational excellence) but, as an entropy result, end up in a situation with minimal effectiveness (in contrast to product leadership)
.
Core idea
Let's start with a physics example. When you place a glass of water in the refrigerator, the water is more ordered when it fouls. But feel the back of the fridge, and you will notice it radiates heat. The total movement of air due to radiated heat is always more significant than the reduction due to the freezing of the water.
.
Business entropy
Think of the administrative burden as an example. The administration aims to reduce variation (from an Excel list to an ERP package). Yet, time and again, people complain that the workload is increasing. This increase is business entropy. You can think of other examples from the operational side of your business.
Businesses that grow and sustain themselves typically invest in interventions that stimulate creativity, alignment, brand awareness, training, and innovation and receive focus from these activities. They try to create stability by recreating business culture, systems, and processes, which is critical for growth and sustainability. But, simultaneously, they encounter entropy in an ongoing fashion as collateral damage to their efforts.
.
There is a saying: "In business, the most efficient system dies first".
.
.
ESG
ESG is a good example of how a business system falls apart over the years.
.
.
.