For businesses, the arrow of time can prove fatal

Not being a physicist, or anything near one, I was captivated by the concept of entropy in the recent book, This Idea Must Die. What intrigued me was the thought that in all things, the degree of disorder increases with time and is moving in one direction often called ‘the arrow of time’.

The classic example is that “you cannot unsplatter an egg”. This idea is the basis of the Second Law of Thermodynamics. All nature moves in one direction, from lower to higher disorganisation and not the reverse.

Ruminating on this I realised that the concept was visible in every type of human construct. Not even the greatest organisations (the Roman Empire, the East India Company, the Ottoman Empire, etc) have been able to escape its reality. Perhaps the Roman Catholic Church is the only structure which still exists in some form after almost two millennia, but even it has changed so much through the years.

In our field of retail, many of the great and famous have fallen and eventually disappeared. Murphy’s Law — which postulates that what can go wrong, will go wrong — is not just a humorous tale; it is very much based on the concept of entropy and the Second Law. Recall the history of Woolworth. It opened in 1879, was an outstanding retail pioneer that taught the world many marketing practices, but eventually pulled down shutters in 1987. Borders bookshops started in 1971 and were seen as the ultimate book retailers, but disappeared after 40 years of business.

Reports today suggest that iconic giants like Sears Roebuck, Quicksilver and American Apparel are in deep trouble and even Gap and Abercrombie and Fitch are closing stores to counter serious declines. The arrow of time is moving inexorably as it did for so many retailers in our region who once dominated the landscape — Orkay Electronics, Dadabhai Toys, Strand and Al Nasr Cinema, etc.

What does this say about entropy to the rest of the retail market? It is helpful to study the various causative factors for deterioration and decline:

Is the segment in which the business exists still growing? For example, desktop computers and compact discs are in decline. As a result, the music business is unrecognisable from a few years ago and the same thing is happening with computer and electronic stores.

Is the product category still in sync with preferences, or have people’s choices

moved on? For example, the growing attraction of electric, hybrid and self-driving cars will eventually propel car retail in that direction. It won’t be long before we feel the effects here and new brands such as Tesla will be the global heroes, while it remains to be seen which of the existing auto brands will make a successful transition.

Have buying habits changed? Will the attraction of large destination shopping centres and malls continue? Or are customers now more inclined towards smaller, more easily accessible shopping centres in their vicinity? Do they still want to see multiple cookie-cutter stores of the same products or are they tilting towards unique, localised, differentiated stores which reflect and cater to the character and needs of the area in which they are located? Or are they migrating to online shopping?

Chilling observation

In our field of retail, many of the great and famous have fallen and eventually disappeared. Murphy’s Law — which postulates that what can go wrong, will go wrong — is not just a humorous tale; it is very much based on the concept of entropy and the Second Law.

A recent report in ‘Global-Influences’ made a chilling observation: Buyers would not really care if 70 per cent of the brands disappeared! According to the report, from a rational perspective people expect experience and dialogue, and from an emotional perspective they want community and engagement. This movement towards authenticity and local relevance is being adopted by successful retailers.

Lululemon has long incorporated the idea into their brand experience’ food stores have turned themselves into gourmet destinations where besides purveying products they also teach customers how to use them and advise them on good living. And social media is creating the platform for building relationships that have become so vital.

In the physical world, a bridge or building will eventually collapse unless entropy is counteracted by the addition of new energy from outside — money, energy, power or labour.

Similarly, every organisation will eventually run its course and die unless there is an input of actions or forces, a redefinition of goals, a reactivation of people, new products, categories, markets or other energy is applied.

Just as water cannot flow uphill and always needs external energy to pump it in the vertical direction, organisations also need an inflow of new energy — strategies, plans and efforts — to fight their natural deterioration and disorganisation. The arrow of time cannot be stopped.