5 Ways To Avoid Failure As A Business

By Gillian Tett, author of “The Silo Effect

Two decades ago, Sony seemed to be on top of the world. The reason? Back then, the Japanese giant was basking in the glow of a series of wildly successful product launches. Never mind the fact that Sony had dominated the world of television, cameras, and had an iconic movie studio to its name; it had also been so astonishingly effective in promoting its Walkman product that it had no other competitor in the field of portable personal music.

But these days, Sony is a humbled, wounded giant. It is Apple — not Sony — which dominates the world of portable electronic music, via the iTunes store and its devices; it is Samsung which has recently grabbed market share, and seen its share price soar. At Sony, however, a sense of decline has been afoot as the once admired giant has appeared less innovative, focused and creative than its rivals.

Why? There are many reasons for the decline. But one that is usually ignored is the question of silos, or the problem that as Sony grew large, it splintered into different, rival departments that failed to share information, collaborate or adapt to a changing world. Software, hardware, music and film all stayed in separate silos, even though consumers were increasingly blending them — as were Sony’s rivals, such as Apple.

It is a familiar pattern seen in so many gigantic companies, not just in the tech world. And these are lessons for any small company which aspires to become more successful — and big. Unless company managers recognize this silo peril in advance, they risk replicating Sony’s fate. So what can companies do to safeguard against this hazard?

Recognize that a large company needs to have an organizational structure that divides people into teams. Hold an open and honest discussion about the best way to organize this, and reform it over time. Don’t just keep the boundaries of teams in place because they worked a decade ago; if the wider world has shifted, change the borders of the team.

Try to imagine an alternative way to organize your teams. What would happen if you divided people into groups according to what consumers wanted — not by producers? Or if you grouped people around the need to solve specific solutions, rather than on the basis of how people have been trained in the past? Playing that mental exercise helps everyone to realize which boundaries work (and which don’t).

Keep the boundaries of your teams flexible. Rotate people. Force them to mingle at meetings. Blend them together in projects in unexpected ways. Use architecture to enable people to mix and collide, and thus keep the boundaries of teams flexible.

Share information across the group by using technology platforms to spread data and news. This can help people communicate better with each other — especially if people listen to each other with respect and interest.

Recognize that silo busting is often the key to innovation. Real creativity tends to occur at the margins of companies, or on the edge of boundaries; when people mix up categories they are often very inventive. That’s important to remember inside companies, but also important to remember outside of one, too. After all, silo-busting is not just a defensive move; it can be a competitive weapon. One company’s silo is another company’s opportunity; just think about the history of Sony and Apple. And that is a great reason for managers in companies of any size to think about silos, before it’s too late.

 

Gillian Tett oversees global coverage of the financial markets for the Financial Times, the world’s leading newspaper covering finance and business. In 2007 she was awarded the Wincott prize, the premier British award for financial journalism, and in 2008 was named British Business Journalist of the Year. Tett is the author of The Silo Effect: Ordered Chaos, the Peril of Expertise, and the Power of Breaking Down Barriers.

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