Anyone who took Chemistry 101 knows about phase transitions. They occur when a solid turns into a liquid or a liquid turns into a gas (vapor). They happen all around us. Take an ice cube out of the freezer, put it in a glass, and it will return to its natural state—water. Heat that same ice cube to boiling, and it will turn into vapor. The molecule hasn’t changed—it’s still H20. Only its state has changed through a phase transition.

So, what does this have to do with the business world?


Innovation owes its entire existence to phase transitions. One idea becomes another and then morphs into something else. Rarely is an idea so original that it causes a seismic shift in the time-space continuum. Nearly anything we can think of came from something else, from airplanes and televisions to our favorite shampoo.

Creativity serves as the catalyst in this process, continually fueling innovation by combining elements – knowledge, experience, observations and so forth – into something new. This creative spark can ignite the next phase transition, providing opportunities for new improvements and, at times, radical change.

The business world is filled with examples of phase transitions. Consider Walt Disney. He didn’t invent the theme park, but he turned his parks into a billion-dollar entertainment giant. Steve Jobs didn’t invent the phone, but he did take Edison’s device and add it to a pocket-sized computer. The world is full of examples of how phase transitions can reshape industries and create new opportunities.

Phase transitions in science and the marketplace don’t have to be revolutionary. Think back to the ice in the glass. A single degree turns hot water into its boiling state, which turns it into a gas—steam. The water hasn’t changed, only its state. Cool the vapor, and it turns back into a liquid.

Consider your own business for a moment. It may have already achieved a stable state that is comfortable and profitable. But what if you changed just one thing? It could be how you advertise, your price points, a new product or service line, or even a new model or trendy color. None of these changes are high risk; all are incremental. But any one of these changes can lead your company in a new direction, opening up new avenues for growth and success.

Sure, it can send you in a direction you didn’t necessarily want to go. Sales could drop, or you could be stuck with inventory that is dead on arrival.

You could write it all off as a dismal failure and go back to your old ways. Or you can alter the experiment. As Thomas Edison once mused, “I have not failed 10,000 times—I’ve successfully found 10,000 ways that will not work.”

What you did may not have been wrong at all. Instead, it could be one or more of the decisions you made leading up to your attempt at a phase transition. Just as a single degree can turn hot water into a gas, so can the degrees of a decision. Change the formula, and you will change the results.

What do you gain by such experimentation? You gain an edge over your competition. You become more relevant in the marketplace and popular with your customers. Your business culture becomes one of continual exploration rather than complacency. And just like that ice in the glass, you transform your company a degree at a time until it is red hot.

As a small business, you have the upper hand. The structure of a large organization is, by its nature, risk-averse. Redundancy, quality control and low error rates are the expectation, not the exception. Innovation is intentionally slow to protect the status quo. If you’re building airplanes, you’re not about to continually experiment. The cost of making a mistake is astronomical. But changing the way you merchandise an aisle or introduce a new product? The risks and costs are negligible.

Perhaps just as important, this experimentation helps you regain the entrepreneurial mindset that spurred you to start your business in the first place. Phase transitions change your decision-making process from the bottom up. Change is welcomed, not demonized or dismissed.

How do you create a culture where phase transitions are embraced and successes are celebrated? The secret is in the way you and your employees approach your business. We’ve all worked in environments where a new idea was about as welcome as a hole in the head. Ideas, even good ones, could put your career at risk, especially when they challenge a core belief of the organization or its owner.

But that’s the point of phase transitions. They are meant to challenge preconceived notions and change the paradigm. If you incentivize the culture of idea generation and challenge the status quo, your employees will become your best asset.

Test it for yourself. Add a new suggestion program. If employees are wary, allow the suggestions to be anonymous. Otherwise, offer a bonus for an adopted suggestion and present the reward (a day off, cash, gift card, etc.) to the individual who submitted it in a staff meeting.

Why does this work? Humans are conditioned to respond to incentives, whether it’s a low sale price or an airline loyalty program. Employees understand the incentive model and readily buy into it. Use this to your advantage, and you will experience phase transitions in the most unexpected ways.

Best of all, you don’t have to take Chemistry again. Phase transitions are all around you. All you need to do is create an environment where they occur in your own business. Change the conditions, encourage experiments and incentivize your workers. Customers and clients will beat a path to your door.