Ever been in a large corporate organisation and wonder why there are silos between different departments and business units? Silos are barriers that restrict collaboration, the flow of information and worst of all they can destroy the company if left unchecked for too long. How many times have you heard of examples where one part of the company has absolutely no idea about what another part of the company is doing or someone complaining that a new product or service failed because department X didn’t get their act together?
Why does this happen? Most large companies are full of very clever people who have the right motivation and want to do right by the company. Most large companies grew out of smaller companies and when they were smaller the status quo couldn’t have existed so what changed?
There are lots of reasons for silos, some of them being:
- Organisational culture and internal politics
- Overloaded people just focusing on the smaller picture to get their immediate jobs done
- Weak leadership
- Inwardly looking departments and business units
- The sheer size of the company – the bigger it is the more effort it requires to prevent silos
- Different geographical locations and time-zones
- Nature of the work doesn’t require lots of inter-departmental interaction
However, I’m going to pick on one cause of silos for this article, which isn’t in the list above and is not immediately obvious. It’s the one cause that I think is not spoken about that often but is actually one of the most important reasons for silos existing. So what is it……?
As a company grows from its scrappy roots it seeks to find a stable business model that is repeatable and profitable. The processes in the company are crafted to underpin the business model and when that happens the changes reduce in frequency until you reach a point of equilibrium. Sure tweaks happen here and there every once in a while, but the core of the business model and processes gets defined in the early phases of the company and they tend to stick. People then get very good at their jobs, understanding what needs to be done and the whole machinery starts to move to autopilot. It’s like driving a car, when you first start driving, remembering to do the right sequence of moves to get the car going seem very difficult and awkward. As you practise it all becomes second nature and soon enough you stop consciously thinking about how to drive a car, it just happens. Companies are no different, they learn a way to do things and that’s how it then happens henceforth with people rarely going back to take a wholesale view of the business model or processes that underpin it. The business model and processes embed themselves into the social fabric and DNA of the company. Is that a bad thing? It can be, in fact it can be a very bad thing.
When companies operate the same business model for a long enough time, people think that’s how you do business for everything. The company starts to view the world through the lens of their current business model and this is dangerous for companies in two cases. The first is that fundamental changes can occur in the industry that are extremely disruptive to your business model and the value chain. The world has changed but the company keeps approaching the problem the way its done before. This is probably one of the root causes of why many companies don’t last more than 40 to 50 years.
The second challenge for the company is when it tries to enter a new market or try a new business venture that requires a very different business model and processes, but guess what…..the company will apply the same rules it uses in its current business model to the new challenge or new market opportunity. That’s ok if the existing business model and processes can be applied to the new thing, but its a recipe for disaster if they can’t. Our dear friend Clayton Christensen has documented this in the three books he’s written on innovation so if you’ve not read then, I’d really suggest you do.
In the case that some people in the company do recognise the need to change the business model and processes, the silos make it extremely difficult to do so. There limited collaboration outside the BAU way of working and that’s when the silos are the companies worst enemy. When its time for a change, it requires multiple departments to club together and co-ordinate the changes.
Silos also prevent inter-department innovation. Any company has to serve and satisfy its customers and there are multiple departments that need work together. If silos exist those companies will find it harder to innovate across the entire customer life cycle.
So if one of the reasons for silos is because the business model has stabilised and the rules don’t change often then how do you get over this? Actually thinking about business models and processes as being static and not evolving is a very out-dated way of looking at things and harks back to a bygone pre-internet and communications era when things moved more slowly. In this world of instant communication things constantly evolve and change often very quickly. Changes that may have taken decades in the old world can happen in months and weeks today and only those adaptable and agile enough survive in today’s world. Companies have to take fundamentally different view to the way they manage and review their business models and associated processes. They have to view them as constantly evolving entities that if cultivated properly will provide the competitive edge over competitors and protect against threats. But whenever changes to the business model are required many people walk away from it because it requires large scale change across multiple departments and IT systems – the social and technical architecture make it a daunting task.
Avoiding silos across the organisation is achieved by fostering cross business working on a regular basis and not just for special projects that happen once in a blue moon. It should be ingrained in the companies culture that projects require people from all disciplines to be involved. This doesn’t happen naturally so there needs to be a concerted and concious effort to make it happen. People should be moved around between departments as a matter of course to extend their loyalties beyond their old departments. Regular communication channels across functions should be set up and this is where social media tools can help greatly so that people can see what’s going on in other parts of the company. I’m not a fan of the artificial corporate events where people from across the company meet – they do have limited impact and are fun but there needs to be common purpose and binding activity that allows people to work together across departments to deliver a common set of objectives.
Another important thing in my mind is that with today’s speed of evolution someone in the company needs to have responsibilities for monitoring and adapting the business model and processes. It can’t be left to individual departments. I personally see it as being the role of senior members of the organisation to break down the silos and ensure a free flow of people, knowledge and communication across the interfaces. These senior members are either board members or their direct reports. Junior people can’t make this happen.
Who in your company looks after the business models and processes? Who’s there making sure the company’s relevant in 20, 40 or 100 years time?