Sunday, October 19, 2014

Anti-digital Mindset: The Cause and Effect of Silo Thinking

See the trees, but don't miss the forest!

Silo is perhaps one of the most paradoxical symptoms in running business at the industrial era, on one side, most of the organizations are still operating in the functional base to improve efficiency; on the other side, the digital nature of hyper connectivity and interdependence makes it inevitable to break down the silo, because more often than not, the silo thinking becomes the root cause of ineffective leadership; the silo team fragment the strategy, stagnate execution, motivate the unhealthy internal competition and cause more problems than benefits. More specifically, what’s the cause and effect of silos and silo thinking?

Silo discourages the system thinking. System thinking is the fitting mindset to run today’s business. An organization is a system; and for it to work in a self-sustaining (emergent) way, it needs to be a system. If it is split up into segments or reorganized into silos it can’t behave like a system because it’s no longer a system. The individual parts (Marketing, Production, Policy, Corporate Services) might in some ways work like a system; but, each will emerge toward behaviors that are favorable to itself rather than to the whole organization, each going off in their own direction. This is the key reason why silos are so dangerous. 

Silo stifles strategic thinking: Silos are opposite of the strategy alignment a systematized management model requires to achieve its vision, its mission, and its goals. If you find that you need to organize in silos in order to be effective then there's a good chance, you don't have an overall organizational strategy. A good strategy shall diagnose business issues with holistic viewpoint and systematic thinking, set choices and take actions via cross-functions collaboration, and continuous interaction. Here are some cause-effect of silos:
     1)   incomplete strategy: either the assumptions in the strategy were not fully vetted or market dynamics wasn't anticipated.
     2)   good strategy, but poor execution. As a result, in both cases, choices get made to rethink structure first vs. addressing the underlying strategic and execution issues.
    3)   See the trees, but not enough for the forest. Systems, Silos are semantics. What is needful and paramount is defined and well thought out structures to fit for situations that would serve as a driver of purpose. There should be a general vision/mission statement that covers the general idea and purpose of the Organization’s strategy, so in the end, every aspect of that organization’s goal is spread out in modes of operations.

      Strike the right balance between centralized and decentralized efforts: Is silo still efficient? A good question to ask as companies migrate back and forth between centralized efforts and decentralized efforts. This question requires greater context -- what is the state of the organizations, what is the life cycle stage of the product or program? It can make sense to create a silo to protect an embryonic program. A mature organization is a different story in optimizing the structure and improve performance.

Still, more and more organizations are marching toward the digital journey, the mentality to smash the sillo thinking will allow the leaders to see further and beyond for effective decision and execution in an adaptive way.


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