What Is Entropy in Business?

If you studied entropy in school, you discovered the topic in physics class. Entropy is a scientific concept that explains what happens to energy as it powers your flashlight and the universe. When applied in a business context, entropy can show you where additional resources would make your business more efficient and that there are other inefficiencies that you can do nothing about.

Entropy as a scientific principle concerns the loss of energy from a system or how an ordered system moves toward disorder. The point to understanding entropy is that it cannot be stopped, and to maintain a desired level of order or energy, more of the same must be added into the system. A simple example is when you heat your home on a cold day. When you stop heating, entropy is the process that describes the loss of warmth that can only be countered by again turning on the heat source.

With a business, a system to manufacture a product or conduct operations will not function smoothly without management or oversight. If you set up a business process and just let it run, entropy will cause the process to slow, get off track or completely break down. As a business owner, your awareness that entropy exists makes you aware that your business will not run itself. As an example, you cannot train sales workers once and expect them to stay effective. You need to have a program of sales skills and product knowledge training to keep the sales force sharp. Even if you hire good managers, entropy can also affect the quality of management, and you, as the owner, may be the only one able to realize that the business has veered off the tracks.

The fact that entropy exists and is a factor that cannot be stopped means the small-business owner must be monitoring all aspects of her business. You may be most interested in product development or working with clients, but if you do not watch the other parts of the business, such as accounts payable or accounting, entropy will eventually produce problems. Management regarding entropy aims at small corrections to keep projects or departments on track rather than letting these areas run on their own until there is a much larger breakdown or problem.

Another effect of entropy is that you cannot be 100 percent effective with your business operations. If all of your planning shows that a project will cost a certain amount of money in a specific amount of time, entropy requires you to put some cushion into those estimates. Entropy describes how nature -- including business operations -- is the movement from order to chaos. Even with active and efficient management practices, a little piece of chaos will get into and affect your operations. You as a business owner need to realize that entropy will prevent you from reaching perfection and that efforts to do so will waste resources that could be more effectively employed elsewhere.