Silos are Bad for Business

Stephen DeAngelis

September 13, 2018

Today’s business environment requires organizations to integrate and collaborate more effectively. This can be difficult for enterprises operating with structures better suited for the Industrial Age than the Information Age. Among the most deleterious characteristics of Industrial Age enterprises are siloed data and information. Half a dozen years ago Laurie Sullivan (@LaurieSullivan) wrote, “It turns out one of the biggest obstacles to turning data into actionable insight is that companies don’t share data across departments and partners effectively.”[1] She added, “In the past the departments like sales, marketing, customer service, public relations, and supply chain typically used their own datasets, keeping the information in silos.” It turns out, keeping information in silos is not “in the past,” but is a challenge still plaguing many organizations. Med Yones, an international expert specializing in global strategy, organization development, and innovation management, has remarked: “The larger the organization, the more susceptible it is to the breakdown of communication, the emergence of management silos and misalignment.”[2]

Silos and Supply Chains

“In the traditional organization,” notes Pat McLagan (@patmclagan), a strategy expert, “decisions and actions are heavily influenced by internal (vs. customer) requirements, vertical (vs. horizontal) relationships, functional (vs. integrative) thinking, and static/periodic (vs. dynamic) management processes. While internal, vertical, functional, and periodic ways of thinking continue to play a role, the balance must shift in order for the real benefit of end-to-end supply chains — the ability to operate as a high value network — to be realized.”[3] Lora Cecere (@lcecere), founder and CEO of Supply Chain Insights, insists silos, at the very least, must be linked. She explains, “It is worth noting that the processes of the last decade were vertical supporting the strong silos of make, source and deliver. To build the end-to-end supply chain from the customer’s customer to the supplier’s supplier these strong vertical silos need to be connected by horizontal processes. … Without strong horizontal processes, you cannot achieve balance or drive agility.”[4] Like Sullivan, McLagan and Cecere were writing half a dozen years ago; yet, challenges presented by siloed data and information remain.

Silos and Omnichannel Operations

E-commerce has wreaked havoc in many retail supply chains. One of the most obvious supply chain changes has been the emergence of omnichannel operations. Simply put, omnichannel operations aim to provide consumers with a seamless and positive shopping experience regardless of the path to purchase they take (i.e., whether they’re shopping online, by telephone, or in a brick-and-mortar store). As omnichannel operations have gained in prominence and importance, challenges presented by corporate silos have become glaringly obvious. Retail specialist Laura Heller (@lfheller) reports, “Retail CEOs say internal silos are holding back omnichannel success. In fact, retailers without these operational barriers are more positive about achieving profitability.”[5] Because internal data silos remain, Lauren Horwitz (@lhorwitz) asserts, “The omnichannel mandate of creating a seamless omnichannel experience for customers regardless of whether they’re online or in-store remains a distant goal for enterprises.”[6]

Horwitz adds, “Companies often lack the technology — and the organizational culture — to effectively stitch data together. As a result, they are often handicapped in customer service, operating with a fragmented view of their customers and data siloed in various locations.” Because the digital path to purchase is becoming the preferred consumer journey, having a clear understanding of what consumers want as well as when they want it is critical for omnichannel success. Having the right inventory of products in the right location at the right time to meet consumer demands generally means the difference between making a sale and missing out. Having the right data, analyzed at the right time, providing real-time insights is a must-have capability in today’s retail environment. Siloed data is a barrier to gaining these insights. Heller insists the elimination of data silos results in “significant cost savings, particularly in the area of fulfillment. Notably, costs related to shipping processing returns are down for these retailers. Meeting omnichannel fulfillment needs is a top priority for retailers right now, with the majority of CEOs working to provide or improve click-and-collect programs as shoppers increasing prefer to buy online and pick up in stores.”

Business executives understand to be successful people, processes, and technology must be part of the solution. Technologies, like cognitive computing platforms, can help with data integration and analysis and can even help automate processes. Getting people on board can be a different story. Decision-makers who believe knowledge is power may not be willing to share information with other departments and that can be a problem. Horwitz explains, “For some companies, the effort to get closer to the ‘omnichannel mandate’ is only partly a story about bringing technology sophistication to bear. Another critical issue in achieving an omnichannel experience is organizational culture. … Ultimately, effectively bridging data silos in the service of customer experience is about making a cultural shift within an enterprise.”

Summary

Heller concludes, “Silos are often held up as some of the biggest barriers for retailers, particularly large retailers, looking to link the brick-and-mortar experience to the digital one.” But as Horwitz points out, those barriers cannot entirely be eliminated by technology. People and corporate culture also play a role. Horwitz explains, “Intra-departmental communication and coordination become critical to enabling the technology.” The Information Age requires companies to think and act differently. Data integration, departmental collaboration, and widespread networking all play important roles in today’s business environment. This is particularly true in the area of omnichannel operations.

Footnotes
[1] Laurie Sullivan, “What To Do With All That Data?” MediaPost, 14 March 2012.
[2] Med Yones, “Dysfunctional Leadership & Dysfunctional Organizations,” Course Hero.
[3] Pat McLagan, “Supply Chain Transformation Hits a Brick Wall …,” SupplyChainBrain, 24 October 2012.
[4] Lora Cecere, “I do Believe Bricks Matter. Do you?Supply Chain Shaman, 25 July 2012.
[5] Laura Heller, “Retail CEOs say silos are holding back omnichannel,” FierceRetail, 23 February 2016.
[6] Lauren Horwitz, “Customer data silos continue to hobble the omnichannel experience,” TechTarget, September 2015.