“The Physics of Success”

The more energy is required to maintain a system, the less energy is available to produce results.

You can predict the success of your organization by applying the classic laws of physics. In fact, it’s easy to do and it doesn’t require a degree in physics to be really useful. These laws can be used to predict the success of any size organization – including your family, your company and your country. They’ll even predict if your favorite football team will make it to the playoffs this year.

In 1824, in his Reflections on the Motive Power of Fire, the French physicist Sadi Carnot coined the term “thermodynamics.” Thermodynamics is essentially the study of how energy behaves within a system. Two famous formulas describe it: the aptly named First and Second Law of Thermodynamics. Today, these two laws form the very backbone of modern physics. We use them to design and manufacture everything from spacecrafts to toasters, from buildings to microchips.

1. The First Law of Thermodynamics states that the amount of energy within a system is fixed. Energy, which is the ability to bring about change or to do work, can be changed from one form to another, but it cannot be created or destroyed.

2. The Second Law of Thermodynamics states that things fall apart over time. Entropy is a measure of things falling apart. If no energy enters or leaves the system, the potential energy of the system will always be less than that of the initial system due to entropy.

To summarize, remember these two things and you’ll have a basic understanding of the first two laws of thermodynamics: the amount of energy in a system is fixed and things fall apart over time. Simple.

What do the First and Second Law of Thermodynamics have to do with predicting the success of your organization? Everything.

Every organization is a system. In fact, everything in life is a system. By definition, a system consists of a group of interacting, interrelated, or interdependent elements forming a complex whole. Does that sound like your organization? It sure does.

Every thing and every function in your organization is really energy. Energy exists in many forms, such as heat, light, chemical energy, and electrical energy. But at its core, energy is the ability to bring about change or to do work. Your organization’s success is ultimately determined by how it utilizes the energy available to it.

By understanding the First and Second Law of Thermodynamics, and applying them to your organization, you can know two absolute facts: the amount of energy available within your organization is fixed and, if you just do nothing, the organization will fall apart over time.

So how do you use this knowledge to predict the success of your organization? There’s a nifty little formula we can use, called the “Success Formula” created by my mentor Dr. Ichak Adizes of the Adizes Institute. This formula will predict the success of any system:

The formula is simple and it’s easy to miss its significance at first. Let’s define each element of the Success Formula and then demonstrate how to apply it to your organization.

What is Success?
One classic definition of success is “a progressive realization of a worthy ideal.” For our purposes, success can be defined using this classic definition or however you want to define it. From “earn a billion dollars” to “make a positive difference on the planet” to “sell out” to “achieve 50% market share” to “win the super bowl.” It doesn’t matter how you define success since the formula will predict the likelihood of attaining any goal. It’s only important that you define it in a way that can be measured.

What is External “Marketing?”
In our context, “marketing” has nothing to do with the type of marketing found on Madison Avenue. Every organization engages in two types of “marketing” activities, external and internal. External “Marketing” (EM) refers to the actions an organization takes in order to align its internal capabilities with external market opportunities. For example, Google’s great success is partly due to a growing market opportunity to help Internet users quickly find the information they’re searching for. Google has capabilities in hardware, software, capital, people, research and marketing. Its EM efforts continually align those capabilities and develop new ones to match with emerging market opportunities. The same holds true for a young man seeking a mate. Let’s suppose an eager bachelor – we’ll call him “Bill” – has developed capabilities in terms of attractiveness, intelligence, empathy, earning power, a sense of humor, stability, creativity and so on. Bill is on the lookout for external opportunities, in this case a woman who desires his perceived capabilities. This is the essence of all marketing, actually: aligning internal capabilities with opportunities in the marketplace.

What is Internal “Marketing”?
As you’ll soon see, the level of Internal “Marketing” (IM) is the most important determinant for any organization’s success. IM encompasses all of the energy and effort expended within the organization in order to perform EM. A low level of IM occurs when the system is healthy. In a healthy organization, it’s easy to make good decisions and implement them quickly. The components of the system all work well together. The people and departments all share a common sense of purpose, vision and values. They treat one another with mutual trust and respect. The power centers of the system all operate in alignment towards a clear definition of success. A high level of IM, which occurs in unhealthy systems, is just the opposite. In an organization with high IM, it’s hard to implement decisions, even good ones. Rather than operating with a shared purpose, vision and values, it’s every man for himself. The organization’s components are misaligned and lack cohesion, resulting in a culture rife with infighting, politicking and finger-pointing. Fear is in the air. Friction and internal entropy take over. When IM supersedes EM, the organization is unable to fulfill its purpose.

In summary, the principles of the Success Formula are:

• Success is however you define it.
• EM is the alignment of your organization’s internal capabilities with external market opportunities and needs.
• IM is all the energy your organization expends on the inside in order to engage in EM.

Now that we’ve established the components of the success formula, here’s how to apply it to predict the success of your organization:

Your organization is a system and we know from the First Law of Thermodynamics that the amount of energy within a system is fixed. You might argue that your system is not a closed one (no system is really closed) and that it can borrow energy from outside of the system. In actuality, at any given point in time, the energy within your organization is fixed. In order to create more, you’ll need to do one of two things: engage in more EM activities like getting more capital, clients and resources, or decrease IM by using less energy within the system, so that more energy is freed up for EM.

The key point of the Success Formula is this: THE ENERGY AVAILABLE TO YOUR ORGANIZATION GOES FIRST TO ADDRESS IM NEEDS. The energy in your organization does not get distributed evenly. Energy first ”flows” to IM because of the Second Law of Thermodynamics – the law of entropy or things falling apart. If it didn’t first flow there, your organization would not be functional and would quickly perish. Only after your organization’s necessary IM needs are met will the remaining energy, if any, become available for EM.

Most organizations wrongly dedicate the vast majority of their time, effort and resources to EM activities like increasing sales and market share by attempting to bypass their IM needs. This can work in the short run but it’s guaranteed to backfire in the long run. It’s a lot like a cardiac patient taking a cholesterol drug. The drug masks the symptoms but the underlying cause is still present. If the patient does not make the necessary lifestyle changes, short-term improvement can give way to catastrophic results.

The surest way to guarantee your organization’s success is to keep the energy required for IM as low as possible. Here’s an example of the power of lowering your organization’s IM.
Imagine that your organization has 100 arbitrary points of energy. It is currently suffering from a high degree of IM and thus needs 75 points of energy to engage in IM activities. This leaves 25 points available for EM. Is your organization going to be successful? No. Your organization is in serious trouble. It has a very high degree of IM and the prediction for success is grim:

Now imagine that you were able to decrease your organization’s IM requirements from 75 points to 25 points. This leaves 75 points available for external marketing and, all other things being equal, that’s a 900% improvement in your organization’s performance! If you can keep that ratio relatively constant as you grow, your organization’s likelihood of success is that much greater. It has a low degree of IM, freeing up tremendous energy to engage in EM:

Practically speaking, you can predict an organization’s probability of success by simply looking for signs of unhealthy internal friction. Unhealthy internal friction occurs when there’s a breakdown in mutual trust and a loss of mutual respect among the organization’s constituents.

Mutual trust is the belief that if I give you what you want today, you’ll give me what I want in the future. Trust is built up over time through reciprocal giving and receiving. It takes a long time to build trust and only an instant to lose it. That’s why the adage “do what you say and say what you mean” in all areas of your relationships is essential to establishing and nurturing trust.

Mutual respect is the belief that you and I can disagree without being disagreeable with each other. The philosopher Emmanuel Kant defined mutual respect as “I give you the sovereign right to hold your own opinion and I expect the same in return.” Emerson said, “Every man I meet is my master in some point, and in that I learn of him.” Both of these astute thinkers point out the wisdom of associating with people who command and grant respect.

Unhealthy signs of IM within organizations are easy to spot. In a family, you might see these when a husband and wife no longer trust each other. In an organization, they might emerge in interdepartmental feuding and gossip. In a football team, the head coach loses his players’ loyalty by promising one thing and doing another. In government, warring politicians fighting for sound bytes lose their voters’ trust and respect. All these symptoms lead to failure over time.

Successful organizations, however, are not entirely void of friction. Every organization needs a certain degree of friction in the form of constructive conflict. Constructive conflict occurs when people or groups can disagree without being disagreeable with each other. This voicing of multiple perspectives leads to better, sounder, full-picture decisions. And where there is mutual trust – where one gives a little today and the other gives a little tomorrow – there is rapid implementation. Finally, when an organization makes sound decisions and implements them quickly, it makes the most of its capabilities and opportunities. This organization will be successful over time.