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Second-Stage Sensei

by Dr. Dino Signore

Manager of Entrepreneurial Education

Enlightened entrepreneurs: The road to progress and prosperity

I’ve been reading Steven Pinker’s latest book, “Enlightenment Now,” which is about the emerging emphasis on science, reason and individualism in the late 17th and 18th centuries. A surprisingly uplifting read, Pinker provides a tremendous amount of data and examples to show how much progress we’ve made over the last 250 years.

Early in the book, he discusses three things that affect progress and prosperity:

  1. Entropy — which is the measure of thermal energy unavailable for work. The second law of thermodynamics states that in a closed system entropy never decreases (everything eventually decays) and the statistical version of entropy, which Pinker refers to, holds that disorder is more likely than order.
  2. Evolution — by adapting and reproducing, living things are able to resist entropy.
  3. Information — helps reduce entropy. Pinker calls it “the ingredient that distinguishes an orderly, structured system from the vast set of random, useless ones.”

This trio of concepts struck me as particularly relevant for second-stage business owners. There’s a “leader’s lament” I often hear: “As soon as I get my team where I want them, everything seems to fall apart.” Well, you can chalk it up to entropy.

Nothing stays the same, and something will always happen to disrupt your systems and internal order. Talented employees depart for other opportunities, motivation wanes, HR policies become obsolete, and so on. It reminds me of sand castles I built at the beach as a kid. Whenever I had one section just the way I wanted and turned to a different area, an unexpected wave would sweep in and destroy my creation, forcing me to rebuild.

Indeed, there are numerous external forces that you have no control over — changes in technology, laws and regulations, the economy and society, to name a few — and yet they drastically affect your company’s ability to compete. If you’re not paying attention and adapting to changes in the external environment, entropy can take a bite out of your business.

There are plenty of examples. Take Kodak. Founder George Eastman built the company on disruptive technology, but under later management the company became impervious to change. Although one of its engineers developed the first digital camera in 1975, Kodak kept it under wraps until 1991. Instead of serving the growing consumer demand for digital photos and online sharing, Kodak remained maniacally fixated on the film side of its business, which led to its demise in 2012.

Sealed, closed systems decay faster. Open systems — ones that are continually evolving and learning — flourish.

How easily does information from the external environment flow into your company? Are new ideas exchanged freely throughout departments? Or has a sort of organizational rigor mortis begun to set in? The exchange of knowledge within an organization sounds simple but can be difficult to practice on a daily basis. Here are a few suggestions to ensure you’re continually evolving:

  • Talk to your peers. CEO roundtables are designed to improve decision-making by the exchange of information among leaders.
  • Talk to your suppliers. They often have vital information about changes taking place within the industry.
  • Visit other businesses — even if they’re in other industries.
  • Recruit people with diverse skills, backgrounds and cultures into your organization. Diversity is positively correlated to innovation.
  • Build internal infrastructure for progress by dedicating a specific budget and resources to experimentation. Form a hypothesis that you can measure, assign deadlines and then analyze the feedback. What did you learn? Is this an anomaly or a genuine trend?
  • Get out of your pattern as a leader. Travel somewhere you haven’t been. Read a book you thought you’d never read. In other words, stretch yourself. If unquestioned for too long, our patterns can become prisons.

Entrepreneurs are often told to focus and “stay in their lane.” Granted, you can’t be all things to all customers. But in second stage, it’s important to keep evolving. What got you to this point isn’t going to be what propels you forward. Progress allows you to be profitable, and you can’t progress if you’re don’t commit to being an open system.

A couple of quick caveats: There’s a big difference between incremental change and radical change, and timing is important. In my opinion, it’s best to make a major change when things are good at your company. Trying to do so during a slump is far more difficult because you’ll probably have fewer resources to work with and your people may be in a panic mode.

The species existing on our planet today are here because of their ability to evolve. Either you’re a victim of change — or you’re a driver of change.

(Published May 29, 2019)