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The Butterfly effect

Small changes get amplified up to have big effects, like a butterfly flapping its wings and thereby causing a tornado. The business world is replete with stories of such butterfly effects – Bill Gates’ chance encounter with IBM that led to the formation of one of the worlds biggest and richest software companies, stories that are paralleled by Google, Facebook and others.

The problem with the butterfly analogy is that there are an awful lot of butterflies flapping that don’t cause tornadoes, and predicting which one to back can be a tricky decision. I find that the metaphor of an avalanche easier to visualise – an inherently unstable situation is “waiting” to change, and it only takes a small disturbance to set the whole chain of events in motion. Although avalanches are normally seen as destructive, there are examples of ideas whose “time has come” that can flip a bad situation into a better state. As I write this the death of Nelson Mandela highlights how one man was able to trigger a set of events that led to the collapse of a well-entrenched apartheid system in South Africa.

The key to using the butterfly effect in business is to spot the fault lines – the tectonic plates where tension is building up because something is stuck. It is not difficult to spot these situations – systems stretched to breaking point, people suffering intolerable distress, excesses and shortages, resources concentrated in the wrong places.

Take for example the banking system, which few would doubt is broken. It delivers obscene levels of wealth to a few individuals, while destroying the hopes and dreams of millions. Here is a system overdue for an avalanche to occur. We don’t know what the landscape will look like when the avalanche comes to rest – perhaps we will have new types of bank, or no banks at all. We may even have a totally different way of managing transactions that doesn’t involve money, a system that distributes wealth more effectively.

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