xxxxxxxv) Silos

Need to understand the impact of silos on organisations and their thinking.

"...silos are fundamentally a cultural phenomenon which arise because social groups and organisations have particular conventions about how to classify the world......commonly held ideas, beliefs and practices of any society of any kind..."

Gillian Tett, 2015

Silos are like a classification system that is fundamental to human culture

Even in today's world of increasingly interlinked systems, our lives and minds remain fragmented. Many large organisations divide and then subdivide into numerous different departments which often fail to communicate with each other, let alone collaborate.

"...people often live in separate mental and social "ghettos", talking and coexisting only with "people like us". In many countries, politics is polarised. Professions seem increasingly specialised, with a tiny pool of experts. Silos proliferate: or at least they do if you take the word to mean the presence of self-standing, independent entities that seem semi-detached from the wider system. It is not difficult to work out why these patterns exist; we live in such a complex world that we need to create structure to handle this complexity......the simplest way to create a sense of order to put ideas, people, and data into separate spatial, social and mental boxes. Silos help us to tidy up the world, classify and arrange our lives, economies and institutions. They encourage accountability..."

Gillian Tett, 2015

Some of the downsides of silos include

- self-interest of the silo dominates that of the organisation, eg much time and effort is wasted with each silo defending its own position against each other, rather than pushing what is best to the whole organisation
- creates incentives for managers to protect existing product ideas and past successes, rather than trying new things
- lack of communications between silos, eg fragmentation can cause information bottlenecks, stifle innovation, etc
- create tunnel vision/groupthink/mental blindness which can cause people to do stupid things
- not evaluate risks effectively

Most companies start as customer-driven and lose focus when they grow and turn into silo organisations. They have to relearn the basics of how to get close to their customers and understand the new skills of being part of a digital partnership

Some examples of the impact of silos:

1. Sony (initially a disruptor but then lost the plot)
In the latter part of the 20th century, Sony had a reputation for innovation. Some examples are
- 1960s and 70s it produced radios and television sets
- produced the Walkman (late 1970s) that changed the way millions of consumers listened to music
- in the 1980s it produced camcorders, digital cameras and video recorders
- in the 1990s Sony jumped into computers and developed a vast musical/film empire, generating such hits as Star Wars and Stuart Little

Could Sony adapt to the Internet with its high-speed connection networks, etc?

Sony tried to produce a digital version of the Walkman suitable for the Internet age in 1999. Using different proprietary technology, they offered 3 different types of Walkman. Initial reaction was favourable as Sony had creative consumer electronics engineers, designers, computer division expertise with video games and owned a musical label with such artists as Michael Jackson. It was thought that this combination would be unstoppable.

The reason the 3 different devices were developed was due to the lack of collaboration between the different departments, ie they were acting like silos and could not agree on a single product approach. The different digital Walkmans competed with each other and cannibalised each other. Thus Sony, which once had utterly dominated the world of portable music, had failed to move into the digital age.

2. Banking
Before the GFC, the financial system was so fragmented that is almost impossible for anyone to take an interconnected view of the risks were developing in the financial markets and banking world. Large financial organisations were split into many different departments, or silos. The senior management running these departments/groups, etc did not understand what other departments/groups were doing. For example, UBS (Swiss bank) prided itself on being ultraconservative and risk averse, yet ended up taking terrible risks with sub-prime mortgage portfolios because traders in America did not know what the traders in London were doing - and vice versa

3. BP
In 2010 one of BP's rigs suffered an explosion in the Gulf of Mexico, spurting oil out into the sea and causing terrible pollution, etc. Investigations revealed that BP was an organisation with numerous bureaucratic silos based on technocratic, specialised fields.

4. CIA
After 9/11 it was found that the CIA and other intelligence agencies failed to foresee the threat posed by Al Qaeda in 2001. One of the reasons for this was the pattern of individual departments hoarding data and not sharing it with others.

5. Britain's National Health Service
This bureaucracy made many disasterous decisions over the procurement of the IT system between 2008 and 2011. Management was ordering IT systems in one department and not consulting anybody else

6. Obamacare (2013)
The outcry over the computer glitches that dogged the launch of is the same story about a lack of consultation

7. General Motors (2014)
A similar tale emerged when GM admitted that some of its compact cars, such as Chevrolet Cobalt and Pontiac G5, had been fitted with faulty ignition switches that could slip from the run position to the accessory position while driving. This cut the engine power and disabled the airbags. Apparently some engineers were aware of this fault in 2001 and that it would cost around 1 dollar per car to fix!!! Despite people dying in car crashes from it, the information was held in a tiny bureaucratic silo. Furthermore, the engineers who handled the switches had minimal contact with the legal team that was worried about reputational risk

8. Medical profession. Each specialty is very protective of its area of expertise. For example, in Harvard University, Sleep Medicine Centre is around the corner from the Joslin Diabetes Centre. It is well-known that sleep disordered breathing is linked to diabetes, eg 80% of diabetics have sleep disordered breathing. Yet these 2 centres had never contacted each other until an outsider organised it and now they are doing joint research (Joanne Gray, 2015j)!!!!!!

Some ways to handle the negative impact of silos is to :

- regularly move staff around between different teams, etc to ensure that they have a more complete picture of the organisation and encourage them to collaborate
- create venues/meeting places, etc where staff from different groups can regularly meet informally
- continually reorganise teams, eg a large hospital (Cleveland Clinic) in Ohio changed the classification in medicine from doctor specialisations, (eg surgeon, physician, etc,) to organising medical professionals according to body parts
- have a remuneration system based on the performance collectively rather than individually, eg Blue Mountains Capital (hedge funds in New York)
- classify data in different ways
- get a wider sense of vision for the whole organisation
- step back and look at how we classify things with new eyes, eg compare things with something else
- develop "deep collaboration" and "concurrent engineering", eg Apple did not pass products sequentially from engineering to design to manufacturing to marketing to distribution. Instead these various departments collaborated simultaneously. Also the Apple engineers knew that the music companies had no incentive to help consumers download music over the Internet as they feared that people would listen to music for free, so they developed "iTunes" store (a website where music companies could sell songs to consumers). Furthermore, to boost sales, the engineers designed the platform so it could be accessed by anybody, using any technology

NB need to

"...have the ability to question boundaries, challenge classification systems and try to re-imagine the world..."

Gillian Tett, 2015

Steve Jobs had an unique way of jumping across boundaries and challenging rigidities he saw. For example, at university he dropped out of formal studies. On the other hand, he continued to attend the campus and study courses that interested him like Japanese Calligraphy. At that time it had no immediate benefit. Yet years later when he was creating his designs for Apple's computers, he blended his training in information technology with the seemingly unconnected calligraphy skills to create the multi-typefaces or proportionally spaced font, eg

"...You can't connect the dots looking forward; you can only connect them looking backwards..."

Steve Jobs as quoted by Gillian Tett, 2015


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