The Serendipity Economy: How Spontaneity Plus Social Networking Drives Innovation

For one national hamburger chain, internal Yammer talk and listening to Twitter altered a new product. The Serendipity Economy can demonstrate value well beyond improved cycle times or reduced costs. Here's how.

Unlike industrial age activities that can easily be measured in short periods of time with exacting accuracy, The Serendipity Economy’s time-deferred, non-fixed value of outcomes and constantly shifting networks operate in a rather amorphous environment. In The Serendipity Economy any kind of return-on-investment for horizontal investments is a waste of time, given that even the best forecasters cannot anticipate the network effects of tools like collaboration and enterprise social media. No one can know what people will discuss or the ultimate business impact of anything arising from those discussions. That does not mean that value cannot be determined, but it does mean that traditional means of measuring value will not capture meaningful data. And with network effects, once something is determined to be of value, that value will likely be discounted or enhanced by changes in the composition of the network, or the context in which it exists.

The Serendipity Economy offers a new lens through which to view horizontal investments. The Serendipity Economy requires awareness, patience, and perseverance as ideas arise and as innovations gestate, mature, and evolve. Rather than looking always for better, faster, and cheaper, organizations can capture and quantify value that arises from the random encounters of individuals with each other, or with ideas, that lead to innovations that no enterprise architect or ROI calculation could anticipate.

The Serendipity Economy is not an abstract concept. Business leaders can easily see how the following six attributes wreak havoc with traditional ROI calculations, but also how they create a more open, holistic view of value. Rather than measuring everything in short sequential bursts, The Serendipity Economy can demonstrate value well beyond improved cycle times or reduced costs.

The following six areas outline the key principals of The Serendipity Economy.

  1. The process of creation is distinct from value realization.
  2. Value realization is displaced in time from the act that initiated the value.
  3. The measure of value requires external validation.
  4. Value is not fixed and cannot be forecasted.
  5. Looking at a network in the present cannot anticipate either its potential for value or any actual value it may produce.
  6. Serendipity may enter at any point in the value web, and it may change the configuration of the value web at any time.

Case in Point: Red Robin Finds Serendipity in Some Pink.

At the nationally franchised hamburger chain Red Robin, those principals manifest themselves as serendipity arises from their use of Microsoft’s Yammer, an enterprise social networking system.

Recently Red Robin introduced a value-priced offer called the Tavern Double (served with bottomless fries), a $6.99 burger in a $10.99-a-burger restaurant in order to attract customers put off by Red Robin’s pricier fare. Customers can "style up" the Tavern Double into one of three variations: pig-out, cantina, or buzzalo, for a small additional fee. Their social media team created Facebook and Twitter channels to capture consumer feedback. Those channels ended up being pretty quiet. But customers weren’t quiet. They were talking to managers.

And managers were talking to each other, and to the kitchens through Yammer. Though the chain can’t share the feedback, the internal social experience generated an unprecedented response: a kitchen-tested tweak to the menu just four weeks after product launch. Even minor improvements usually take 12 to 18 months before customers see them. This example demonstrates how serendipity creates value. The primary feedback channel failed, the one they invested in specifically to garner customer feedback. Yammer was not part of the equation, but it became the unintended channel for customer insight.

Chris Laping, Red Robin’s Senior Vice President of Business Transformation and Chief Information Officer, says that the company often rolls out ideas using the burger term "some pink" meaning that they aren’t completely done. Their Kaizen-inspired approach to continuous improvement creates a context for anyone in the company to contribute an idea, but the company cannot, as The Serendipity Economy ideas suggests, anticipate where those ideas will come from, or how quickly they will manifest themselves. If Laping and his team weren’t looking holistically at the contributions of their IT portfolio, their Tavern Double story would be yet another anecdote rather than a solid instance of serendipity value attributed to their social networking investment.

In another example, a manager suggested the use of reusable kids cups as a cost-saving measure, which also met other published improvement criteria: It didn’t negatively impact guests or employees, and it was sustainable, not just a onetime improvement. In what Laping calls the "take it, tweak it, share it" culture, Red Robin examines ideas not in days, but in hours. Using Yammer, immediate responses confirm an idea’s viability or point out its flaws within three to four hours. From a pure production point of view, the entry of the idea simply produces a catalyst.

The external feedback loop and socialization of the idea imbues it with value and transforms it from rapidly captured bits into something with sustainable value. And even though the three- to four-hour turnaround looks like a performance metric, it can’t be accurately forecasted, as different ideas produce different results, and most important for The Serendipity Economy model, each idea attracts a unique set of contributors, who also cannot be determined before the idea hits the enterprise networking stream.

Red Robin also finds serendipity a powerful ally in its training program. With 87% of the staff consisting of Millennials, Red Robin abandoned 200-page manuals in favor of 1,000 iPads filled with simulations, games, and videos. The company empowers line employees to challenge the training they receive. If the training doesn’t align with the best of current practice, team members pick up an iPad and shoot a video of a better practice and share it over the Yammer implementation they call Yummerversity, named after the chain’s "yum" slogan. Instant feedback is baked into the system, eliminating disconnects between training and practice—no one knows where these new ideas will originate, or what form they may take.

Collaboration Reveals Value in the Serendipity Economy.

These Red Robin stories may be primarily product or process related, but those are the places where serendipity has delivered value to them. Other Yammer customers have seen serendipity manifested in different ways. In 2011, 7-Eleven stores watched enterprise social networking light up during their birthday celebration as store managers started sharing merchandizing practices after months of low engagement. The managers haven’t stopped talking to each other.

Direct store-to-store communications was rare before Yammer. The new communication paradigm has lead the company to reexamine its field management configuration. The company implemented Yammer with no fixed outcome in mind. Not only have managers started sharing merchandizing insights, but they also share maintenance tips; the corporate offices now regularly tap store manager knowledge to help interpret business intelligence results. These delayed, unanticipated benefits, valued not by the efficiency of the channel but by the outcome, show the power of systematically tracking serendipitous events and assigning them to IT infrastructure investments.

At Deloitte in Australia, a young staffer found a way to navigate the ranks of senior partners to affect a positive customer change that would otherwise have been ignored without enterprise social networking, very similar to Red Robin’s server-based suggestion for reusable kid’s cups. In both cases, without enterprise social networking, those goods ideas would probably be lost, resulting in frustrated young employees jilted too soon by corporate bureaucracy.

The Serendipity Economy and Enterprise IT

Enterprise social media is just one horizontal technology that clearly illustrates the ideas of the Serendipity Economy. All collaboration technology, innovation processes, improvement programs, and most marketing efforts result in serendipitous activity. The outcomes from open, cross-organizational networking can’t be predicted, nor can the time to value or magnitude of ideas generated by such networks be anticipated. Business leaders who actively monitor, document, encourage—and protect—serendipitous activity will be able to attribute much higher returns to their IT investments than those who focus only on reductions in cost and time.

For a deeper exploration of The Serendipity Economy see Welcome to The Serendipity Economy at danielwrasmus.com.

[Image: Flickr user Guian Bolisay]

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6 Comments

  • Ara ohanian

    Daniel, serendipity, or finding good things by chance, plays a crucial part in what you describe, but is only one part. The other crucial piece?  Frictionless communication. The serendipitous discoveries you describe have always taken place. The skill of transforming them into success is a combination of social media tools to share the discoveries; a sharing, non-abusive company culture; and a workforce given the freedom to exploit these discoveries. In my experience as a leader of a successful global learning technology company, organizations with the right culture, communication and employee enablement are adopting these tools for a range of internal and customer facing benefits.

  • danielwrasmus

    I agree. The Serendipity Economy has existed in all the random, emergent activity that takes place, but we too often ignore its results, or attempt to increase their frequency, because we are so focused on saving time and money. Many organizations wonder why they fail at innovation. The answer is simple, they let the industrial age mentality engineer creativity out of the organization. The Serendipity Economy needs space, and industrial age thinking always, always tries to reduce space, decrease degrees of freedom and increase constraints so that repeatable, low cost products and processes can be created and sustained. Real innovation takes place with discontinuity, and people overly constrained by technology or systems (or systems of management) rarely, if ever, experience enough freedom to introduce a discontinuity.

  • Ara ohanian

    Daniel, you’re right about engineering creatively out of the organization. Organizations that succeed in the future will provide the space for innovation as well as the tools and culture to enable our innovation for rapid diffusion across the organization.

  • Anthony Reardon

    Quite interesting Daniel.

    Your use of "serendipity" was a bit strong IMHO, but I get it. I get the need to communicate a complex idea in a simple and easy to remember manner too.

    I guess you could say the same thing for economies of scale. Organizations come up with structured systems for the sake of productivity, and these can transcend everything in a company from product to culture to customer experience. Certainly, there are corresponding models for feedback loops and these can be deficient in themselves.

    Any company that has e-mail exchange capability between employees can accomplish virtually the same thing, but organizationally they might not facilitate the opportunity for such outcomes to occur. I can see how the introduction of a specific technology for inter-business communication might make this more likely- perhaps merely for the fact it signifies to people that their input is valued and actionable.

    However, technology can also be processed into an organizational model and miss the point. For instance, setting up a Facebook page to promote a release and monitor feedback. Does that really impress consumers their input is valued and actionable? Doubtful. The real benefit would be to engage consumers directly as if they were a part of the team, and that is an approach I find grossly underutilized.

    However, the fact they have a system for open communication and participation internally can at least simulate the framework of a consumer community. After all, a market is simply a group of people concerned more or less with a given business. I found your examples quite telling to this.

    Peter Senge from The Fifth Discipline and Systems Thinking acclaim talks about "delays" in feedback loops. A good analogy is the delay between when you turn on a shower, how long it takes to get up to temperature, and the potential for over-correction. In a traditional management hierarchy, you've often got a decision maker that wants to get the information, set the course, and see it done. You see the shortcomings of that in process improvement implementations all the time- when management would do better to adopt an open, continuous, and long-term approach where everyone including them has to remain engaged on and responsive to the challenges. More likely, they will commit too strongly to a myopic perspective disconnected from key realities, encounter the consequences after the fact, and then over-correct trying the same approach.

    Anyways, I like your line of thinking. On your first three principles of The Serendipity Economy, though, I might challenge you.

    1.Why does the process of value creation have to be distinct from value realization? Understandably, there's that false assumption that creating a product to delight will delight. If, for instance, you can involve the customer at the point of ideation or design, then these can be one in the same.

    2. Why does there have to be a delay between value initiation and realization? Same point as above. If you are involving the customer real-time, then you bypass this condition for error in both concept and execution.

    3. Why must the measure of value require external validation? Again, same point.. What measure of value is distinct from the authority it is intended for? Obviously these are traditional systems and structures derived from supply-push thinking, but I think with social technologies etc, we are going to reach a point where this mode of thinking is outdated by demand-pull. You orient around the customer, and everything else falls into place. You start with the value the customer holds, and then you measure and validate yourself in relation to it.

    I like some of your thoughts on non-linearity and flexible ordered systems. Provocative article. Thanks!

    Best, Anthony 

  • danielwrasmus

    Anthony,
    Thank you for the thoughtful response. The Serendipity Idea is meant as a contrast to purse industrial age measures. I appreciate your answers, but would argue the following:

    1. If you involve a customer in ideation, the result of that process will provide future value when the customer's ideas are integrated with the whatever the product or process you are working with them on. The customer does not affect all future products, just the prototype, for instance, with which you are working,.

    2. It is likely that after talking with the customer, something else happens. That input is not directly put into the product or process without a change management process at minimum, and probably more. I agree, that if you are involving a customer in solving a real-time problem that results in real-time (I don't believe in real-time as everything that we can reflect on is actually historical -- by the time you can talk about it, it isn't realtime anymore ) I would put that into the category of a production process, like a call center activity. If, however, we look at ideation again, the result of customer input does not affect future versions of the product or process immediately. I have seen customer input highly modified by internal processes before it makes it to a product or process. The customer generated the serendipity (because you didn't know what their input would be) and it continues until it gets locked down into a repeatable product or process, at which point industrial measures apply again. In contrast, a production process produces direct value at the end of the process that is reflected in the output at the time of its completion. So although you may differ on the subtleties, what you describe is not a production process, regardless of subscribing to my framework or not.

    3. A co-creation event is not the primary driver of The Serendipity Economy model, but it does apply. To some degree, the customer is external validation, but I know of very few situations where the customers input is taken as-is. If I, as a product manager, sit with a customer and we co-create a solution to something, it will likely involve some review. That encounter, let's make it a chance encounter at a trade show to pump-up the serendipity, isn't going to end up in a product until an engineer and a number of other people recognize and validate the input from the customer.

    And yes, serendipity is much more about pull than push, and the primary impetus for its creation was to highlight to executives that not everything falls into a production model. Not all production processes result in immediate value, some things happen over longer periods of time and not all process are self-contained, some require external validation of their results.  If you read the longer paper, I have the space there to make much richer arguments than those outlined here or in my recent HBR piece.

  • Anthony Reardon

    Simply fantastic responses, Daniel. I am going to take some time to reflect on your points and counter-points as they are well constructed. Thank you for the deliberation.

    -Anthony