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The Butterfly Effect

In 1963, meteorologist Edward Lorenz coined what is known as the butterfly effect. His basic question sounds pretty profound:  “Could the flap of a butterfly’s wings in Singapore affect a hurricane in North Carolina?” Apparently, Mr. Lorenz spent a significant effort looking into this question and answered it with “yes!” Lorenz discovered this effect when he ran data through his weather models and changed the initial conditions slightly. Input data was rounded in a seemingly inconsequential manner but the results were dramatically different. A miniscule initial change had created a totally and dramatically different outcome. This is also known as chaos theory, which studies the behavior of systems that are highly sensitive to initial conditions.

The butterfly effect and chaos theory are part of studies reflecting the “unpredictability of everything.”  This brings us to the topic of sales forecasting. This is another example of a rather imprecise science. During the first quarter of 2015, our sales dipped in comparison to what we expected. Not surprisingly, my boss was wondering if this was a trend and something to be worried about. He didn’t seem to agree with me when I blamed it on the large quantity of butterflies I had seen this summer. I am happy to report this trend has been reversed and the rest of 2015 looks pretty strong. That’s my forecast and I’m sticking to it!

Each year we do a sales forecast during strategy planning meetings. This year it is interesting to note some of our largest customers are far below the level of sales we had predicted. Despite significant declines in some of these major accounts, overall sales are quite close to our original plan. We do have a prediction advantage with a highly diversified base of business and no single customer exceeds 8% of total revenue. Since we have so many customers across a wide variety of markets, with some up and some down, on the average we tend to achieve at least a directional level of accuracy. In mathematics this is known as the “Law of Large Numbers.” According to the law, the average of the results obtained from a large number of trials should be close to the expected value. This seems to be another way of saying our mistakes cancel out our mistakes!

A message related to the butterfly effect is that we need to properly appreciate the enormous effects of tiny causes. It is pretty difficult to relate the wings of a butterfly to a weather pattern but there are other things that can be related as cause and effect. In the sales arena, I think an easy message we can give customers is to make sure they know we are working on their project. If they send in a request for quotation, quickly letting them know we are working on it is a simple way to be customer sensitive. When a customer receives a reply indicating someone has responsibility for their project, they become comfortable and move onto their next problem. Little things like this can make the difference in capturing a new program. And sometimes programs can run for years and the same customer can have additional programs. A little cause and a big effect. All because someone provided a simple and easy follow-up gesture.

If a random initial disturbance from the wings of a butterfly can have a dramatic effect, just think what can be accomplished with intentional acts aimed at making sure our customers are receiving proactive attention! 

Dave Becker is vice president of sales and marketing at All Flex Flexible Circuits LLC.