How business model innovation can be goosed: increase the likelihood of serendipity

I’m following up on the theme of innovation arising from periodically or systematically rearranging the workplace seating layout (see Embrace randomness). Here’s a snippet from Rachel Feintzeig in a NY Times piece that touched on workplace intermingling at a New York ad agency:

Rachel Feintzeig, The New Science of Who Sits Where at Work

MODCo Media, a New York advertising agency, has tested three different seating arrangements over the past few years. For about six months, the company intermingled its accountants and media buyers, hoping they would begin to absorb each others’ skills through “osmosis” and “overhearing phone calls.”

The experiment ended up saving MODCo “a couple hundred thousand dollars a year,” says CEO Erik Dochtermann, but it turned out badly for the accountants. The media buyers began to understand the financial side of the business so well that MODCo no longer needed a full accounting department. Now, the media buyers “do the accountancy on the fly” and the company’s chief financial officer checks their work, says Mr. Dochtermann.

From my perspective this is a great example of spontaneous desiloing of the business instigated by the chance interactions of the MODCo buyers when placed in proximity to the accountants. The transition of the necessary foundational knowledge about accounting took place without a plan, simply because the buyers were observing experts, and then began to copy them.

But Feintzeig and the MODCo CEO are using the wrong metric to measure the true impact of this business model innovation, which shouldn’t be money, but time. There is no doubt that the new approach — where the buyers record the accounting of their activities — means that the financials are getting closer to real-time. In the older model there was a lag capturing and communicating the financial data, then the effort expended by the accountants and various delays there, and of course some checking by senior finance people.

The likelihood is that the CEO would have been willing to spend serious bank to shorten that cycle, to buy new software to optimize it, etc. But, instead, the business model innovation came serendipitously, by changing the mix of people’s desks. And specifically people that were formerly housed in separate buildings or floors whose work was actually closely linked.

I’ve written recently about the premise of organizing the company’s operations around hiring and retaining the high performers, which Reid Hoffman at Netflix calls increasing the talent density (see What top performers do, and how to do it). This is a parallel idea, which is cross pollinating ideas and knowledge by rotating or randomizing seating, which increases coincidensity: increasing the likelihood of serendipidy.

And the apparent downside — the reduction in accounting staff — is only a downside to the accountants, not to anyone else. The shifting social contract in today’s accelerating economy means that lifetime employment is an antique premise, at best an empty promise. And note as well that the accountants may be just as likely to be picking up the skills of the buyers as the buyers did theirs.