An Amazing Case Study of a Gigantic Japanese Organization
Why Sony unveiled not one, but two different digital Walkman devices was because it was completely fragmented: different departments of the giant Sony empire had each developed their own – different – digital music devices, with proprietary technology, known as ATRAAC3, that was not widely compatible. None of these departments, or silos, was able to agree on a single product approach, or even communicate with each other to swap ideas, or agree on a joint strategy.
This had debilitating consequences. Within a couple of years Sony had dropped out of the digital music game, paving the way for Apple to storm the market with the iPod. But the only thing that was more startling than the presence of these silos at the time was that so few people inside Sony could see just how crazy the situation had become, far less change this sense of fragmentation. Sony was a company sliding into tribalism, but its employees were so used to this pattern that they had failed to notice it at all.
The CEO, Nobuyuki Idei, looked at Sony’s challenges, he became convinced that the best way to handle the swelling size and complexity of the company was to divide the company into specialist, self-standing units— or what management consultants like to call silos. The idea was that having separate units, or silos, would create more transparency, accountability, and efficiency. Through trial and error, Idei was determined to find the perfect silo. “[We want to] simplify the structure in order to clarify responsibilities and transfer authority so that responses to external changes would be quick,” Idei explained. “[We need to] reduce the levels of hierarchy… [and] encourage entrepreneurial spirit in order to foster a dynamic management base for the 21st century.”
But though these specialist silos made the company appear more efficient, at least in the short term, they also had a drawback. As soon as the managers of the new silos realized that they were responsible for their own balance sheets, they started trying to “protect” their units, not just from rival companies but other departments as well. They became less willing to share experimental ideas with other departments, or even rotate the best staff between departments. Collaboration halted. So did experimental brainstorming or long-term investment that did not offer immediate returns. Nobody wanted to take risks.
The problem with silos was that they could become dangerously introverted. When the team doesn’t communicate with other teams… [or] communicate up and down its own vertical hierarchy, it ceases to become transparent and is not able to take advantage of the changes in the rest of the company or in the rest of the world. This article is taken from the book – The Silo Effect: Why putting everything in its place isn’t such a bright idea (written by Gillian Tett)
Top 9 Lessons for Bursting Silos
- Rotate people between departments and give them space to actually meet each other
- Keep the boundaries of the teams flexible and fluid
- Create places and programs where people from different teams can collide and bond. Encourage social collisions
- Design physical spaces that funnel people into the same area, forcing constant, unplanned interactions
- Encourage departments to share data among themselves. Apart from sharing, departments should also listen to other departments’ data interpretations.
- Think of reorganizing the way organization is structured/classified into different departments
- The leadership team should recognize the existence of silos and its adverse impact on the organization. Instead of resisting, it should talk openly about it.
- Silos in many ways are inevitable and often very beneficial, however we need to negate it’s side effects by encouraging collaboration
- When employees are rewarded purely on the basis of how their group performs, and when groups are competing with each other internally, they are unlikely to collaborate – no matter how many expensive off-sites an institution holds