In 1972, MIT professor Edward Lorenz gave a presentation that changed the way we look at dynamic systems. He called it “Predictability: Does the Flap of a Butterfly’s Wings in Brazil Set Off a Tornado in Texas?”
Lorenz was trying to solve a problem that many of us in business face — how do we predict outcomes with precision when working with complex systems? At the time, he was developing a digital algorithm to predict weather patterns. Early tests showed promise, but there was one problem: His forecasts didn’t always match reality.
For example, his algorithm predicted sunshine on a particular day in a certain location. When Lorenz checked the actual weather, it was raining — hard.
Lorenz, being the detail-oriented scientist that he was, dug into his work to find the cause. At first, he thought it might have been a mistake in his programming or a miscalculation in his data. But after reviewing everything, he noticed something subtle but critical. He had been rounding off the data to the thousandth decimal place to save computing power — something that seemed reasonable at the time but was ultimately too imprecise.
So, Lorenz pushed the algorithm further, recalculating the data to the ten-thousandth decimal place. Still wrong. But when he increased the precision to the hundred-thousandth decimal place, the forecast finally matched reality.
The 4-Step Startup Growth Cycle
- Segment
- Simplify
- Zero-Up
- Grow
What Does the Butterfly Effect Mean in Business?
In that moment, Lorenz uncovered the essence of what we now know as chaos theory. The smallest changes in input — tiny, almost imperceptible shifts — could trigger dramatic, unpredictable results. This phenomenon is what we refer to as the Butterfly Effect: A butterfly flapping its wings in Brazil could, in theory, set off a chain of events that leads to a tornado in Texas.
Now, what does all of this have to do with your business? A lot, actually.
When you’re starting a new business plan or trying to turn around a struggling company, it can feel like you’re working in the dark. You don’t have all the data you need at first, and the data you do have is often too rough to help you make precise decisions. Just like Lorenz’s early weather algorithm, the numbers you work with in your first phase are likely too “gross” to offer optimal guidance.
But that’s okay. Just as Lorenz realized that small adjustments could change the outcome of his weather predictions, you will see that your business decisions, when refined through repeated cycles of testing, learning, and adjusting, will become more and more accurate over time.
Four Steps for Growing Your Startup
Here’s how it works: In the first hundred days, you’re going to segment, simplify and zero in on what’s critical for your business. The first round of data is always rough, but it’s useful for getting your bearings. You’ll take that initial data, tweak it, test it and make adjustments. This isn’t about getting everything right at first; it's about refining the focus through continuous iteration.
The more you repeat the four-phase cycle — Segment, Simplify, Zero-Up and Grow — the more you’ll start to uncover the small, often overlooked variables that make the biggest difference in your business’s success. As you go through these phases, your focus will become sharper, the predictions more accurate, and the adjustments more effective in driving profitable growth.
Slack
Look at Slack. When they first launched, Slack wasn’t the massive, ubiquitous tool it is today. It started as an internal communication tool for a gaming company. But what Slack did right, and what they’ve continued to do, is use the principles of segmentation and simplification. Early on, they focused on tech companies, understanding that those companies had a unique need for a seamless communication platform.
As they refined their approach, they simplified the user experience, making the product easy to adopt. Then they honed in on the core features that mattered most. By sticking to this iterative approach, Slack grew rapidly and eventually became the communication tool of choice for businesses of all sizes.
Zoom
Zoom is another example. Zoom found its niche early on by focusing on business professionals and educational institutions that needed an easy-to-use, reliable video conferencing solution. In its early days, Zoom didn’t try to be everything to everyone. It focused on making the video experience as seamless as possible. As they gained traction, they simplified the user interface, stripped away the unnecessary features, and optimized the platform for growth.
The result? Zoom became an indispensable tool for remote work and virtual communication, especially during the pandemic, showing just how powerful it is to refine your offering through continuous iteration.
Shopify
Then there’s Shopify, which made it incredibly easy for entrepreneurs and small businesses to set up online stores. In its early years, Shopify segmented the market by focusing on entrepreneurs who didn’t have technical expertise but needed an e-commerce solution. They simplified the process, offering easy-to-use tools that anyone could use to create and manage an online store. Over time, Shopify continued to zero in on what made it work best: better integrations, more customizable options, and robust analytics. Today, Shopify is a leading e-commerce platform with millions of users globally.
Embrace the Chaos (Theory)
Here’s the bottom line: Will your startup plan ever be perfect? Probably not. But that’s okay. Perfection isn’t the goal. The goal is improvement through iteration. By continually refining your focus, you’ll get closer to the right formula each time. The Butterfly Effect shows us that even the smallest adjustments — whether it’s in your data, your strategy, or your execution — can lead to massive change.
So, embrace the chaos. Accept that you’ll never have a perfect plan from the start, and instead, focus on constant iteration and improvement. Your business will get sharper, your predictions will become more accurate, and over time, your growth will accelerate.
Adapted with permission from the publisher, Wiley, from From Panic to Profit by Bill Canady. Copyright © 2025 by Bill Canady. All rights reserved. This book is available wherever books and ebooks are sold.
