Digital transformation is an important enabler for sustainable growth and innovation in a rapidly changing business environment. But digital transformation initiatives frequently fail to deliver the value businesses expect.
While there are a variety of reasons for this — including misaligned company goals, or businesses taking a reactive rather than strategic approach — one of the major reasons digital transformation doesn’t deliver the required results is due to organizational silos.
As Paul Prendergast, Europe CFO and enterprise value lead for Accenture explains, "As we look at transformation programs, they often fall down on the functional silos as you try to break from finance into procurement or into supply chain."
So, what are organizational or functional silos? And what can your business do to break down these silos and give your digital transformation initiatives a higher chance of success? Read on to find the answers.
Organizational silos tend to form around individual departments or functions within a business, such as IT, finance, procurement, HR, legal and compliance, supply chain, or product development. In larger businesses they may also form around sub-functions, for instance accounts payable (AP) and accounts receivable (AR) within the finance department. And it’s possible for siloes to form at distinct sites or locations, or to appear when a business expands through acquisition.
A silo occurs when employees within specific locations, teams or business functions focus almost entirely on their own tasks and goals, with minimal internal communication and collaboration with other teams. This means skills, knowledge and resources get concentrated within these team silos and aren’t shared across the organization.
Digitalization has highlighted the silo mentality, with individual departments frequently using different systems that don’t communicate with one another, limiting visibility and resulting in pockets of data throughout the organization.
In addition to supporting digital transformation initiatives, it’s vital to break down silos so your business can operate with agility and efficiency in a continually changing business climate. No business can maximize productivity and efficiency without cross-functional collaboration.
Let’s take retail as an example. In retail operations there are parallel processes running in different departments such as merchandising, finance, supply chain execution and transportation planning. And they all impact one another. Even seemingly small changes or decisions in one department can have major implications on the others — a concept known as the butterfly effect.
If these different departments are each working in their own individual silo, with little collaboration or visibility between teams, any activity in one department can have unforeseen consequences elsewhere, resulting in duplicated work, bottlenecks, delays and ultimately unhappy customers.
Prevent these divisions is crucial for boosting productivity and business efficiency. Removing silos also increases visibility across the organization so business leaders have access to more information and can make better decisions based on the bigger picture. Lastly, breaking down silos fosters innovation, as people with different skill sets and experiences are able to learn from one another, share knowledge, and collaborate to solve business problems.
Of course there are other, more specific reasons to de-silo. Check out this article to discover how a failure to break down silos is preventing businesses meeting their sustainability goals.
Getting rid of the silo mentality and encouraging internal communication and collaboration takes time. Here are seven strategies for breaking down corporate silos.
The first step in getting rid of organizational silos is showing the business that transparency and open communication between different teams is a positive thing. In an environment where siloes are the norm, transparency can be frightening. During a panel discussion at Celosphere 2022, one business execution expert explained how he has to show people that transparency is a tool for improving processes, not naming and blaming.
Embedding transparency into company culture can be achieved through continuous reinforcement and sharing of positive outcomes. Employees and teams should be incentivized to work together, and rewarded for knowledge sharing and cross functional collaboration.
Find out how ERGO actually created a board game to encourage transparency across its organization, highlight the importance of collaboration, and support its ongoing digital transformation initiatives.
Employees often enter a particular department or team because that’s where their interests, skills or qualifications direct them. And within that group they’ll find other people with similar interests and experiences. So it’s very easy for a team operating in a silo to develop its own method of communication that is incomprehensible to the rest of the business. Finding a common language so every team can understand the others is essential for collaboration.
As Chris Knapik, Senior Director of Process Transformation, PepsiCo explains, "My biggest struggle was always connecting these two worlds. How do you make a system understandable to someone that deals purely in business processes? And how can the business really make technology teams understand their objectives?"
Finding that common language means making time for teams and departments to learn from one another. It means finding the areas of overlap between departments and establishing organization-wide terminology that can be used by all. And it may mean eliminating some of the unnecessary jargon that’s used for communication within team silos.
Discover how Karl Storz created a common language for process improvement across the entire organization to ensure that every team could see the same things and share ideas about how to optimize them.
One of the biggest drivers of organizational silos is each team working towards different goals and outcomes. When departmental targets are misaligned, teams often end up working against each other rather than towards a common goal.
Establishing clear strategic objectives across the organization, that all teams can work towards, goes a long way to breaking down silos. Of course specific KPIs will be different for each business function or team, but they should all be set with the aim of delivering broader business outcomes such as achieving growth, improving cash flow, accelerating productivity, cutting costs, or driving sustainability. Working towards a common goal is a major step in removing corporate silos and encouraging collaboration.
Different business functions are always going to need to use different systems, as finding a single platform that can fulfill every business need is highly unlikely. But that doesn’t mean data needs to stay in its silo within a specific system.
Your business systems must be able to talk to one another, and data needs to flow freely across them to increase transparency and visibility. Data should be integrated across systems, departments and silos for any digital transformation initiative to be successful. Find out how Mercedes-Benz is using Celonis to connect site-specific systems more closely, delivering greater transparency and breaking down silos to make faster, better decisions.
Once data is integrated across systems, and can flow throughout your organization, it’s far easier to provide teams with the collaboration tools they need.
Let's take the Celonis Open Order Processing App as an example. Processing an order requires input from multiple departments — from order management to finance to logistics — who are likely to be sitting in different locations and using different systems. The Open Order Processing App gives a 360° view for all open orders, so each team member has the same view. An employee in order management has the same information as another employee in a different department, such as distribution. The app can prioritize critical orders at risk and suggest next best actions in real time, so you can prevent delivery delays, boost productivity and increase efficiency in daily order processing.
Many businesses already use process mining technology to model, analyze and optimize processes, increasing efficiency, improving performance and identifying opportunities to drive value. Now there is a new iteration known as object-centric process mining, or OCPM, that enables an end-to-end approach and helps to break down those silos.
OCPM reveals the interplay between the objects in cross functional processes — like orders, deliveries and invoices — as they move through their connected lifecycle. It provides insights into how these objects perform together by identifying bottlenecks, inefficiencies, and areas for improvement at the intersection points of business processes.
Adeel Fudda, VP of Intelligence, Automation & Emerging Tech at Mars explains, “Functional silos are a big cause of inefficiencies that disrupt operations and lead to suboptimal customer experiences. Process mining has proven itself as a scalable, data-driven method to derive actionable insights to improve profitability and customer experience. Process Sphere gives us an intuitive and powerful way to easily analyze cross-functional processes to unlock significant efficiencies and value across the organization.”
If your organization is trying to drive innovation and improvement in a specific area, but is being held back by departmental silos, you may want to consider a center of excellence, or COE model.
This cross functional team brings together people from different departments, with different knowledge, to share resources and facilities. It can act as an internal consulting resource for the organization and share best practices to drive improvements in a particular area. A center of excellence can be a powerful way for your organization to align around a common goal, rather than individual departmental KPIs.
Discover how Uniper, one of Europe's largest energy suppliers, created a center of excellence which serves as the main driver for the enterprise-wide deployment of process mining. It includes project managers, data engineers, process analysts, and implementation experts, as well as experts responsible for budget and governance. It benefits every department by enabling transparency and optimized processes across the company.
Digital transformation remains a top priority for businesses trying to navigate a complex and continually changing landscape. But your transformation initiatives are unlikely to deliver the value you hope for as long as your organization continues to operate in silos.
Get in touch with Celonis today to discuss how process mining and more advanced OCPM can help you start to break down the silos in your organization today.