The Butterfly Effect

In 1961 Edward Lorenz, an MIT meteorologist, was developing a weather-prediction model. Lorenz theorized that a miniscule occurrence, such as a tiny butterfly flapping its wings in the Amazon, could hypothetically set in motion a chain of events that could cause tornadoes in Texas a few days later.

That model, illustrations of which visually resembled a butterfly, eventually came to be known as The Butterfly Effect. As a metaphor, The Butterfly Effect has come to signify a series of seemingly trivial and unrelated events that collectively have a massive impact later, whether in causing storms or influencing the stock market.

While there’s some?disagreement?on the Lorenz model’s ability to accurately predict anything as intrinsically complex as the weather, the concept has clearly been well accepted by the public.

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The Butterfly Effect has been demonstrated in many movies, some in a very dramatic manner. When I was a kid, I remember having nightmares after watching The China Syndrome film with Jane Fonda, Jack Lemmon and Michael Douglas, where a severe meltdown of the core components of a nuclear reactor in California could cause devastating disaster in China on the other side of the globe.

Robert Redford’s character in Havana said: “A butterfly can flutter its wings over a flower in China and cause a hurricane in the Caribbean. They can even calculate the odds.” And Ashton Kutcher’s character sought to change his traumatic childhood in?The Butterfly Effect.

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In business, there are some occasions where a small occurrence that may look minor at first can have a serious impact on another aspect of the business if not initially treated with the right attention. ?

I myself have witnessed two examples of when The Butterfly Effect impacted the normal way of a business, one for the good and one for the bad.

I used to work with a distributor from Vietnam where customers are considered kings. Service is at the highest level and every small complaint is taken very seriously and escalated back to the manufacturer for immediate attention and resolution. ?

Though Vietnam was considered a small territory in the company’s strategic plan, marketing its products in this part of the world taught us a lesson. ?

On one occasion, we received a couple of complaints about one of our products. These complaints looked minor at first, but later, after deep investigation, it was discovered that the complaints were justified and caused by a manufacturing defect identified as a quality issue. This product was also sold for high usage in the company’s main territory. ?

Discovering this quality issue on time allowed the manufacturer to react quickly and come up with a recovery plan which saved the company a considerable amount of money and had the potential of impacting customer satisfaction in its main market.?

On another occasion, the same Vietnamese distributor sent a design change request to reduce the size of a consumable kit box. They just wanted to fit more kits in their standard shipping box to save costs. ?

The kit box design was indeed changed and reduced in size which resulted in a 30% saving in the container shipping volume. ?

This change that occurred before the pandemic turned out to be a big cost saving for this high-selling product, saving the company hundreds of thousands of dollars in shipping costs to its main market. This is due to the freight costs that more than tripled in the post-COVID era. ??

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So, some things that we tend to neglect may look minor at the beginning. But we never know what impact they may have on us in the future. ?

Now, I’m not saying that we should give up on our priorities, that’s not the point. Building the right infrastructure that enables us to deal with the small and big issues with the same effectiveness may do the trick. ?

After all, if we could just give the right attention when things are still small, it may pay dividends, at some point in the future, big time!???

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This was episode#21 of MarketHero Stories. We are going out for a summer break. See you back soon.