Bridging corporate silos - Three ways to enable digital transformation and innovation

Corporate silos are widespread, and they foil companies’ efforts to digitalize and evolve their business models by obstructing their innovative capacity. In this paper, we are highlighting three approaches to bridge those silos.

The lack of innovation is among the primary symptoms of corporate silos. This includes the inability to evolve the current business model, for example to develop away from the traditional focus on standalone products towards a service focus and providing a more complete user experience. For instance, digital native one-stop-shop service providers like WeChat effortlessly steal revenue from telco providers who never really managed to expand their thinking beyond the provision of connectivity. Attempts at providing similar services have not been successful, not only because of the nature or delivery of the service but because of the inability to actually monetize the service properly. Both would require cross-departmental thinking and responsibility. Further symptoms include frequent changes in management as well as a corporate culture that is characterized by a blame focus over a solution focus. Both lead to fortified silo thinking.

We regularly observe departmental silos and we identified a number of causes. Above all, it is the organizational structure that sets the scene for silos to form. A corporate structure, built decades ago to maximize individual functions’ efficiency in performing one step in the process of delivering a certain product has become a blocking point for idea generation and creative thinking. It hinders cross-border communication and collaboration and rewards the success of single departments rather than the whole organization or an overarching mindset. Department-based budgeting and the increased pressure on individual budgets and headcounts puts another brick into the silo wall, reflected in a frequently observed opportunistic way of reporting.

During our work with struggling incumbents and companies which managed the turnaround, three recurring approaches emerged to overcome entrenched silos and to lay the foundation for digital transformation and future competitiveness: Implementation of end-to-end processes, an (at least partly) liquid organizational structure, as well as an innovative and entrepreneurial culture. End-to-end processes facilitate cross-functional collaboration and enable a focused view on the customer while a liquid organization setup provides agile capabilities with flat hierarchies and reduced internal transaction costs. An entrepreneurial culture actively entrenches innovation in the company’s DNA by encouraging exploration, experimentation, and through serious empowerment.

Many organizations are merely at the doorstep to the digital future, especially numerous incumbent corporates. With lukewarm attempts at digitalization they will not make the leap. A true commitment to new demands and the emerging environment must be made, corroborated by a wholehearted call to action.