2. How can investors protect efficiency and long-term returns in a changing operating environment?

How can investors protect efficiency and long-term returns in a changing operating environment?

For investors, the key question is no longer only where to invest — but how value is preserved and multiplied after the investment is made.

In today’s environment, many investments fail not because of poor products or weak markets, but because the organizations behind them gradually lose efficiency as complexity increases.

This loss rarely happens suddenly.
It happens quietly — through accumulating friction.

A changing environment demands higher organizational precision

The operating environment for companies has changed fundamentally:

• new strategic actors shape global markets and competitive dynamics
• geopolitical instability affects supply chains, pricing, and capital allocation
• customer behavior has become less predictable and more volatile
• decisions must be made faster, often with incomplete information
• competition is increasingly based on execution speed, not ideas

In such conditions, organizational imprecision becomes expensive.

Strategies that once tolerated ambiguity in roles, decision rights, and accountability no longer do. Growth now amplifies inefficiencies instead of compensating for them.

Efficiency is not lost at once — it dissipates

From a systems perspective, efficiency does not disappear at a single point.
It dissipates across the organization.

This dissipation becomes visible in:

• unclear strategic priorities
• decision bottlenecks and escalation overload
• overlapping or drifting roles
• repeated re-decisions and coordination loops
• leadership teams compensating for structural gaps with personal effort

For investors, this translates into:

• rising operational risk
• slower execution despite increased spending
• erosion of margins
• leadership fatigue and key-person dependency

A brief note on efficiency-based thinking

From thermodynamics, we know that no system operates without friction — some energy is always lost to entropy. The relevant question is not whether friction exists, but how much of it is structural and avoidable.

Applied to organizations, this means:

• how much effort turns into value
• how much is absorbed by coordination, clarification, and correction
• how much leadership energy is spent steering the system instead of growing it

In investment terms, this is not a “soft” issue.
It is a capital efficiency and risk management question.

Why strategic clarity alone is no longer enough

Many organizations react to environmental change by refining strategy — while leaving the rest of the organization largely untouched.

But strategy cannot operate in isolation.

As the environment becomes more complex, the strategic frame must become more precise — and the organizational operating frame must evolve accordingly.

This includes:

• decision logic and decision rights
• role design and accountability
• execution pathways and escalation rules
• leadership practices that match the current level of complexity

If the strategic frame sharpens but the organizational frame remains vague, friction increases and efficiency declines — regardless of talent or motivation.

What investors should pay attention to

Beyond financial metrics and market positioning, investors increasingly benefit from asking:

• Is decision-making clarity keeping pace with organizational growth?
• Are roles and accountability explicit enough for the current level of complexity?
• Where does leadership compensate for missing structure with personal effort?
• How much energy is spent maintaining the system rather than creating value?

These questions point to what I describe as structural ambiguity — a condition where unclear decision logic, roles, and accountability silently reduce execution capacity and investment returns.

Protecting investment value requires structural attention

In today’s environment, safeguarding and growing investment value requires more than capital and strategy. It requires organizational architectures that preserve efficiency as complexity increases.

Reducing avoidable friction is not about adding bureaucracy — it is about enabling organizations to convert effort into value reliably and sustainably.

For investors focused on long-term returns, this is not optional.
It is a prerequisite for durability.

Curious question to investors and board members:
Where do you most clearly see effort increasing in your portfolio companies without a proportional increase in value — and what structural factors might be driving that?

Margus Alviste is a leadership consultant and organizational architect with 30+ years of experience working with growth-stage organizations and investors.