This article explores what project practioners can learn from thermodynamic cycles and their four phases. These four phases are: expansion, stagflation, crisis, and depression. The article suggests that project stakeholders should consider where their ecosystem stands regarding these cycles. Then they should adapt their approach to the ongoing phase. They should anticipate as well the next phase of the cycle. 

Thermodynamics Deals With Heat and Other Forms of Energy

François Roddier, a French scientist and astronomer, is exploring how thermodynamics applies to economies and human societies. Thermodynamics is the branch of physical science that deals with the relations between heat and other forms of energy. These forms can be mechanical, electrical, or chemical energy for example. François Roddier proposed very exciting parallels between the thermodynamic cycles and the economical and sociological cycles[1]. Why would these teachings interest the project management community? Because, synchronizing projects with each of the four phases of these thermodynamic cycles is a sure way to limit disappointing (if not catastrophic) results.

High-Impact PMOThe French Nicolas Léonard Sadi Carnot introduced the new science of thermodynamics. He worked on the first two laws of this science. The first law states that energy is conserved. Heat is a form of energy. The second law states that energy dissipates. You cannot convert heat into mechanical energy without a temperature difference. And the total entropy can never decrease over time for an isolated system in which neither energy nor matter can enter nor leave.

We will see in a later article that there is a third law of thermodynamics. This third law states that energy dissipates as fast as possible, given a set of constraints. For now, only the first two laws need our attention.

Sadi Carnot stated that one can sustainably produce mechanical work only through a cycle of transformations extracting energy from a heat source and giving part of it back to a cold source.

A Steam Engine Produces Four Cycles of Transformations

A steam engine produces cycles of transformations. If steam or hot air can push a piston, one must apply a force to bring the piston back to its initial state. For this force to be weaker, one must condense the steam or cool the air content inside the cylinder. After each cycle, it returns to its initial state. During a cycle, it extracts heat from the boiler where the water is vaporized. And then part of the heat is given back to the condenser where water condenses. Only the heat difference is converted into mechanical energy. This thermodynamic cycle has four phases: isothermal expansion (the temperature of the gas does not change during the process), adiabatic expansion (they neither gain nor lose heat), isothermal compression, and adiabatic compression.

Learn From Thermodynamic Cycles

Figure 1 – The thermodynamic cycle.

The Same Cycle of Transformations Applies to Business Organizations

The laws Carnot developed could be applied to any dissipative structure. Such dissipative structures include human societies, economies, or business organizations.

They all show cycles made of four phases where the temperature, pressure, and volume of a fluid are replaced by supply, production, and demand. Peter Turchin and Sergey A. Nefedov describe these four phases in Secular cycles[2]: expansion, stagflation, collapse, and depression. This is what figure 2 shows.

Let us follow the cycle with Turchin and Nefedov. The grey abrupt zone is called the Seneca cliff[3] in relation to Seneca’s quote in his letter to Lucilius:

“It would be some consolation for the feebleness of ourselves and our works if all things should perish as slowly as they come into being; but as it is, increases are of sluggish growth, but the way to ruin is rapid.”

If you start from the foot of the Seneca cliff, the production is minimal. Demand grows. It is the depression or “inter-cycle” phase.

While production grows, wealth inequalities are rare, and employment is high. Supply and demand even out. This is the expansion phase.

Once satisfied, demand tends to decrease. However, supply continues, sustained by the investments realized. This is a zone where luxury markets grow. Rich people are more and more numerous (and richer).

Production ends up stagnating and unemployment increases. This is the stagflation phase.

At the end, production collapses, firms go bankrupt, populations rebel, and governments fall. This is the crisis phase.

Learn From Thermodynamic Cycles

Figure 2 – The thermodynamic cycles apply to human societies.

When a System Is Too Complex, It Collapses

Around the critical point C, firms reorganize themselves to adapt to the environmental changes they produced. Such a change is a society divided in two poorly interconnected groups.  one of (very) rich people and one of (numerous) poor people.

The farther from the critical point C, the bigger the avalanches or the crisis. It corresponds to the fluid condensation zone. But the avalanches are also less frequent. These avalanches help the natural process to self-organize. They appear when the ecosystem becomes too interconnected and too complex. It then collapses[4].

The period of these cycles varies. Small firms have a “Kitchin cycle”[5] of 3 to 5 years. Medium-size firms’ “Juglar” cycles[6] vary from 7 to 11 years. Large organizations have 15 to 25-year “Kuznets[7]” cycles.

What Project Managers and PMOs Can Learn From the Thermodynamic Cycles

During a stagflation phase, leaders should regionalize the organization or the economy. This is the reverse of globalization. They may do this even at the cost of a business or an economic decline. For example, they have to tackle indebtedness. They also diminish the size of the cycle. Positioning initiatives as close as possible to the critical point is like being inside the cyclone eye.

It is not possible to avoid a crisis. Avalanches are inherent in complex ecosystems. However one can reduce its impact by getting closer to the critical point.

During a depression, the opposite move is favorable. Leaders must internationalize the exchanges and increase the size of the economic cycle.

Why not apply these hypotheses to project management?

Project practitioners and PMOs, especially those closest to the strategic level, would benefit from synchronizing their projects with their environment and their firm’s position on the four-phase Carnot cycle. They will thus avoid the launch or the execution of projects running counter to current economic, social, and technological circumstances.

Adjusting the approach to the phase of the cycle is especially vital during the two phases “depression” and “expansion.” Anticipating the Seneca cliff and its height is very important too.

To your continued success

Philippe Husser, author of the book The High-Impact PMO, How Agile Project Management Offices Deliver Value in a Complex World

Notes

[1] François Roddier, Blog 104 – Les oscillations du cerveau (généralisation) http://www.francois-roddier.fr/

[2] P. Turchin, S. Nefedov, Secular cycles, Princeton, 2009.

[3] Ugo Bardi, The Seneca effect: why decline is faster than growth, http://cassandralegacy.blogspot.fr/2011/08/seneca-effect-origins-of-collapse.html

[4] Joseph A. Tainter, The collapse of complex societies, New York & Cambridge, UK: Cambridge University Press, 2003. Later Robert Ulanowicz defined a law explaining the phenomenon.

[5] Kitchin cycle is a short business cycle of about 40 months. Kitchin discovered it in the 1920s. This cycle is believed to be accounted for by time lags in information movements affecting the decision making of commercial firms (Wikipedia).

[6] The Juglar cycle is a fixed investment cycle of 7 to 11 years. Clément Juglar identified it in 1862. Within the Juglar cycle one can observe oscillations of investments into fixed capital and not just changes in the level of employment of the fixed capital (and respective changes in inventories), as is observed with respect to Kitchin cycles. (Wikipedia).

[7] The Kuznets swing is a claimed medium-range economic wave with a period of 15–25 years. It has been identified in 1930 by Simon Kuznets. Kuznets connected these waves with demographic processes.  (Wikipedia).