In business, you're either growing or dying. This fundamental truth is deeply rooted in the immutable laws of physics that govern our universe. Just as individuals require sustenance to thrive, a company eventually needs revenue growth (there are a few situations where companies can grow substantial market value without any revenue, but that’s really, really rare) to achieve its Vision and leave a lasting legacy. Without growth, organizations face an inevitable decline and eventual demise.
This "grow or die" principle is not just a catchy phrase — it's grounded in these laws of thermodynamics:
- The First Law of Thermodynamics, also called the law of conservation of energy, states that energy cannot be created or destroyed. It can only be converted from one form to another.
- The Second Law of Thermodynamics states that entropy (disorder and decline) always increases over time in any closed system.
These laws are crucial in understanding how energy, in revenue growth, functions within an organization. They teach us that growth is essential for survival and prosperity, not only for businesses but for all entities, including individuals and families.
This blog post examines the critical connection between the first and second laws of thermodynamics and the growth imperative for businesses. By understanding these principles, you'll be better equipped to assess your company's trajectory and take the necessary steps to ensure its long-term success. If you're ready to master the physics of business growth and build an extraordinarily productive, humane, and resilient company, let's begin!
The First Law of Thermodynamics
There's no way around it: Just as living organisms need nourishment to survive and flourish, a business requires a specific level of revenue growth to sustain itself and prosper.
The law of conservation states that potential energy is always finite with any entity — whether an individual, family, or business. However, the first law also teaches us that energy can be transformed from one form to another. This means that resources can be strategically invested and leveraged to generate business growth.
For example, investing in research and development can lead to new products or services, generating new revenue streams. Similarly, investing in team member training and development can enhance productivity and innovation, increasing competitiveness and market share.
The key is recognizing that these resources are finite and must be managed wisely. Businesses that fail to allocate their resources effectively may struggle to generate the revenue growth necessary to survive and thrive.
The Second Law of Thermodynamics
The second law, entropy, unveils an even more challenging reality. Entropy is the propensity of all things, particularly complex systems, to deteriorate over time. It’s an unrelenting force, constantly working to break things down, and it manifests everywhere — in aging, decay, and the gradual slide into disorder that affects all living and nonliving things. This law is as inescapable in the business world as it is in the physical universe, and understanding its implications is crucial for any organization seeking long-term success.
In the business world, entropy manifests in various forms, each contributing to the gradual decline of an organization's vitality. Some common examples include:
- Customer churn and contraction
- Inefficient processes and operations
- Drifting KPIs and misaligned metrics
- Product degradation and loss of market share
- Unclear roles, accountabilities, and responsibilities (RARs)
- Declining team engagement and performance
Entropy is a hidden threat that can slowly erode an organization from within, eating away at its potential and vitality — ultimately demoralizing its culture and killing its market value. Many businesses may not realize the extent of entropy's impact until it's too late, making it all the more critical to combat its effects actively.
The only way to fight entropy is through business growth. An organization needs sufficient forward momentum and energy to address it (remember, it's everywhere: processes, KPIs, products, services, people, structure, and on and on), strengthen its core capabilities, remain competitive, gain market share, and expand. As ambitious founders, we must recognize that stagnation is not an option — if our organizations aren’t growing, they’re dying. Consistent and deliberate growth provides the necessary energy to push back against entropy and propel our organizations forward.
Assessing Your Growth Trajectory
So, how can you determine if your organization is growing enough to outpace entropy? Here are some key indicators to consider:
- Your revenues are growing at or above the industry pace.
- You're consistently adding Ideal Customers and rarely losing them to competitors.
- You're successfully attracting and retaining top talent.
- Your products and services are industry-leading.
- You're making clear progress toward your Vision.
- You're consistently hitting around 90% of your quarterly Rocks and at least 80% of 1- and 3-year Goals.
- You're progressing steadily toward 90% Strong across your 9 Core Competencies.
- Your equity’s value is growing at a rate appropriate for your business stage and risk profile.
- You're actively identifying sources of entropy, learning from them, and making necessary adjustments.
Even if you’re hitting these marks currently, constant assessment and optimization will help you stay on track. Complacency is the enemy of growth. Even the most successful organizations must continually push themselves to evolve and improve.
To determine whether your organization is headed in the right direction, closely examine your Org Chart and every Seat's RARs. For each RAR, ask yourself: Is the core purpose to maintain your existing state (Is it simply fighting entropy?), or is it to drive the organization forward? Have the people in those seats estimate the percentage of their time allocated to activities that maintain the status quo (which is, for all practical purposes, entropic) versus those that promote growth and progress each week.
For example, a customer service representative may spend 80% of their time addressing customer complaints and resolving issues (maintaining the existing state) and only 20% gathering feedback and insights to improve the product or service (driving the organization forward). While both activities are essential, an imbalance toward maintenance can indicate that the organization is losing ground to entropy.
The organizations that will focus, align, and thrive in the New Age of Work will be the ones that use data from their Org Chart, RARs, KPIs, and time allocation assessments to optimize how they allocate their most precious resource: their people's time and effort. By shifting more energy and focus toward growth-oriented activities, leaders can tip the balance in their organization’s favor and create a virtuous cycle of progress and prosperity.
Our Journey at Ninety
At Ninety, we're undertaking the challenging work of deeply analyzing how we use our resources for individual roles and activities. This process leads to some uncomfortable but necessary conversations. We believe in radical transparency with all our Ideal Stakeholders, from our teams to the broader community.
Every company, regardless of its level of success, grapples with the growth versus entropy battle every day at every level. We're no different. However, we've learned to welcome that struggle because it strengthens us. For example, our Product department is going through a significant reorganization that will enable us to better enhance and support the development of each of our tools. During this reorganization, we’re also assessing how each tool interacts with all the other tools and our platform’s core infrastructures (such as data).
More importantly, openly discussing our challenges is far more productive than letting our egos get in the way of our progress. By confronting our Issues and sharing what we've learned, we hope to inspire others to do the same.
We're not perfect, but we're fully committed to the ongoing work of building a great, enduring company. We know it requires constant growth fueled by a clear Vision, clear structure, strong execution, and a willingness to confront our entropy daily. It's not rocket science, even if it is physics.
Embodying Growth: The Story of King Arthur Baking Company
King Arthur Baking Company faced the growth versus entropy challenge head-on. Founded in 1790, this employee-owned company has been committed to providing top-quality baking products while prioritizing social and environmental responsibility. In 2007, King Arthur Baking Company became a B Corp, formally committing to using its business as a force for good. This meant maintaining its high standards for products and customer service and actively working to reduce its environmental impact, support its team members and communities, and promote transparency and accountability.
This commitment was put to the test during the COVID-19 pandemic. With the sudden surge in home baking, King Arthur Baking Company saw an unprecedented demand for its products. The company could have simply focused on maximizing profits, but instead, it prioritized its Core Values and the other key elements of its Vision. It implemented strict safety protocols to protect its team members and increased wages and benefits. Additionally, it donated millions of dollars worth of products to food banks and frontline workers and accelerated its sustainability initiatives, such as transitioning to 100% renewable energy and reducing packaging waste.
King Arthur Baking Company actively combated entropy by prioritizing growth-oriented activities and staying true to its Core Values and purpose, passion, and/or just cause, even in the face of immense challenges. By maintaining its commitment to its team members, customers, and the environment, the company preserved its energy and momentum, ensuring long-term success and resilience. This approach exemplifies how organizations can fight entropy, maintain a growth mindset, and still emerge even stronger and more resilient than they were to start.
Confronting the Growth vs. Entropy Struggle
We're sharing these stories because we think it's helpful to know that every company struggles with growth regardless of its Stage of Development or how strong it is across its 9 Core Competencies. That said, we love the struggle. We deeply believe the struggle makes us stronger and that being open about it is far more helpful than our occasionally bruised ego.
So, let me ask you this: How's your organization doing in the battle between growth and entropy? Where are you thriving, and where do you need to step up your game? What lessons have you learned along the way that could help others?
An African proverb goes, "If you want to go fast, go alone. If you want to go far, go together." It's so true. We can progress by having honest conversations, sharing hard-won lessons, and pushing each other to improve. Learning from each other's wins and losses can speed up our growth and make a huge difference. Growth is not just a must-have — it's a chance to evolve, create value, and make a real, lasting impact on the world. And it's a chance we can only seize if we work together.
Grow or die. It's not just a catchy slogan. It's the law of the universe. So, what's it going to be? Will you let entropy slowly chip away at your potential, or will you take on the challenge of growth and use it to create something great? The choice is yours, but remember, you're not in this alone. By sharing our knowledge, struggles, and victories, we can all become better leaders and stewards of the resources we've been given.
So, let's commit to growth — not only for ourselves but for everyone we serve. Let's use our companies to do good and do it together. That's how we'll create a more prosperous, fair, sustainable, and fulfilling world for all.
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