Silo-based organizational models are for a much simpler world. They become a hindrance in the complex world we live in.
“There’s no coordination with government,” I heard the homeless campaigner say. He explained how, for example, the Department of Social Welfare was keeping some homeless people in hotels. This was an expensive option, but the Department of the Environment was responsible for building homes for low income families. The high hotel expenses affected the budget of the Department of Social Welfare, not the Department of the Environment. And there were other entities involved, some with overlapping and conflicting objectives. And it was all a mess.
I recently dealt with a large organization that wants to give its customers a better experience when buying stuff. They have an old model view of customer behavior. The model involves the organization advertising at the customer to get their attention. Then the customer goes and reads the marketing material. Then they might talk to a sales person. Then they decide to buy and they go to the website with the specific intention to buy.
That, of course, is not at all how things work today. But it’s how this organization is organized. Marketing is a silo. Sales is a silo. The commerce / buy system is a silo. And the customer is hopping back and forth between these disconnected silos, getting confused and annoyed. Because, for example, marketing has a product list, and the buy section has a product list, but these lists are organized differently. The potential customer is over in support too reading up on installation and maintenance documentation, and browsing through the communities. And marketing certainly doesn’t talk to support. It’s not a great experience.
Cross-silo collaboration leads to greater value and higher profit, according to Heidi K. Gardner in an excellent piece of research on professional services firms entitled "When Senior Managers Won’t Collaborate." When the specialists within these firms collaborated with each other, “their firms earn higher margins, inspire greater client loyalty, and gain a competitive edge,” Gardner states. “But for the professionals involved, the financial benefits of collaboration accrue slowly, and other advantages are hard to quantify.”
Why? Because they are measured and motivated based on old model metrics. “For a firm, the financial benefits of multidisciplinary collaboration are unambiguous. Simply put, the more disciplines that are involved in a client engagement, the greater the annual average revenue the client generates,” Gardner states. And yet most organizations still stick with the silo model because the silo is a known entity and is easier to manage.
The new model is the multidisciplinary network. Old model organization and reward structures are destroying value. Digital transformation must be much more about cultural and organizational transformation than technology transformation. The old silo-based culture is killing the future.