There are many management methodologies and philosophies that cover business improvements as a basis for long-term business development. Some of the most popular in the last years was Japanese improvement philosophy Kaizen that will be covered in some of the next posts. Here I want to explore the butterfly effect practice that shows how small changes and improvements can impact on the overall business and increases their business potential energy.
What is the Butterfly Effect?
Butterfly effect comes from the Chaos Theory and in the simplest words, it means that small things can have big effects on the output.
For example, if something is happening today, or something that you do today that is not recognized as something significant can bring big changes tomorrow.
This term for the first time was used from Edward Lorenz, who did a simulation about weather forecasting. When he takes the real number and shortcut on a number in decimal he received entirely different results. This difference in decimals he named as the Butterfly Effect. With this phrase, he wants to describe that if butterflies flapping their wings in one place, they will change the weather conditions on another place.
2 Different Ways Butterfly Effect Can Affect a Small Business
Butterfly Effect can have great impact on small businesses and entrepreneurs. In everyday activities of the small businesses, there are great changes. Each of these activities has some type of influence on general business operations. Small changes in one process can have great effect on the whole business.
But, butterfly effect can be seen in two different ways for a small business owner:
- Bring positive effects of small changes.
- Bring negative effects of small changes.
Positive Butterfly Effect on a Business
The first way, where butterfly effect means positive effects for the small business is something that is desirable for every small business. The positive effects are improvements of the businesses and these improvements will increase overall business potential energy.
Negative Butterfly Effect on a Business
With negative butterfly effect, your business gets the worst thing from a work caused these effects. In such a case you must escape or eliminate such a change. This effect will decrease your business potential energy. Your task here is to eliminate all negative butterfly effects and stimulate the positive one.
Butterfly Effect Example
Let’s look at some example.
If you have the profit of $100 daily from your everyday business operations, after one month you will have $3,000.00 in profit. After one year your profit will be $36,000.00. But, something that is really important with butterfly effect is that improvements bring everyday increasing of the profit. In such a case it will be $100 first day, $110 second day, $120 third day and so on.
This is a butterfly effect factor that increases or decreases the effect of the activities. When you have a profit of $100 on every day, then the factor will be 1.00. If we have increase of the profit on everyday basis as $100, $110, $121 and so on the factor will be 1.1.
The table below gives one example of a butterfly effect factor of positive and negative factors. Positive factors are larger than 1, while negative factors are below 1.
You can note that with negative butterfly effect, the profit on annual level will decrease from $36.000,00 to $13.970,00. That is decreasing by more than 60%. But, with positive effect the annual profit will increase from $36.000,00 to $47.000,00 that is increasing by more than 30%.
How to Stimulate Positive Butterfly Effect?
To stimulate the positive effect in your business, you must stimulate improvements on all business levels. That means that you will need to stimulate each employee to generate improvement ideas that will bring continuous changes of your business processes.
These changes will bring positive effect in your business in general. In such a way you will need to develop many butterflies through your business that will make small but effective changes.
Improvement is the process that must be everyday tasks of all businesses. Without improvement there will not be development of the businesses.