Attacking “Business Entropy”

Not long ago, I wrote a post on how clarity affects the bottom line. It emphasized the importance of a sharing a common vision among a company’s management team and laments how often it’s inadequate. “The lack of this understanding is so common among $10-50M companies that I’ve stopped being surprised when they can’t articulate a clear positioning statement.” The point has since arisen in several CEO discussions, and as I continued to ponder how it happens, a relevant term suggested itself from the fields of physics and cosmology.

Entropy. According to Merriam-Webster’s Online Dictionary, entropy is defined as “the degradation of the matter and energy in the universe to an ultimate state of inert uniformity” and as “a process of degradation or running down or a trend to disorder.” These words could also describe how the purpose, meaning, and direction underlying a successful business can lose strength over time.

When brand new ventures pursue funding, investors want to understand the business and seek answers to questions like:

  • What category of business is this?
  • What is its primary offering?
  • Who are its competitors?
  • What are the competitors’ weaknesses that can be exploited?
  • What makes the company’s offering unique in the market?
  • How will it gain advantage in the market and keep it?

and so forth.  In a well developed business plan, these questions are answered clearly and formulate the company’s strategic positioning.

As a business grows, it naturally changes, causing the strategic positioning to evolve. New competitors enter the market. The product strategy and product mix react to external economic forces. Customer requirements result in development of new products and services. Acquisitions occur. Partnerships are struck.

Such changes affect the strategic positioning of the company and also the shared management vision. If the company positioning is ignored as these changes occur, the business equivalent of entropy can begin and proliferate. The previous “uniformity” of vision gradually erodes. A “degradation” of the company’s messaging about itself, its products, and its services follows a “trend to disorder.” The lack of shared vision within the management team causes inertia and delays in execution.

Thankfully, the remedy to this “business entropy” doesn’t involve a comprehension of cosmology.  All it requires is foresight and a willingness to take action. Periodically, especially during and after significant game-changing events, the company’s strategic positioning must be reviewed and revised. Senior management and other key players should reach a consensus vision about the company, its market, its competitors, and its direction. And of course, outside assistance can facilitate the process.

About Bob Barker
Bob Barker is a trusted advisor to CEOs, helping them identify, define, and execute new growth-accelerating opportunities. He also shares ideas on LinkedIn (robertgbarker), in guest posts on related blogs, and in industry publications. Contact him via email at bob@2020outlook.com.

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  1. […] the strategic moves needed to fulfill them. As discussed often in this blog (e.g., see “Attacking Business Entropy“), clarity about positioning is crucial and fundamental to a successful […]

  2. […] to make quarterly goals can diffuse the shared view of a company’s purpose. A process called business entropy (e.g., repeatedly accepting non-core business) can eventually dilute the strength of a company’s […]

  3. […] quarterly goals can diffuse and erode the shared view of a company’s purpose. A process called business entropy (e.g., repeatedly accepting non-core business) can eventually dilute the strength of a company’s […]