Organizational Silos: Is your New Vision or Strategy Enough to Demolish them?

In my work with a major think tank years ago, I made a discovery I thought would delight everyone. Major corporate members and donors would pay 10 or 20 times the amount they currently contributed if their relationship was more customized. They wanted account managers who understood their companies and knew which of this institution’s dispersed intellectual assets might be relevant to their challenges, and what combinations, delivery option and formats would turn them into applicable solutions. They had neither the knowledge nor the time to navigate the rich resources of the institution themselves, and lacked the expertise and imagination needed to figure out how intangibles could be converted into tangible outcomes. This is where the opportunity was for the institution.  A no-brainer, right?  Not so much, as it turned out.

The advancement office and specialized content centers had a separate portfolio of corporate relationships each that they zealously guarded. They had no incentive for sharing or collaborating.  It was a story that would be repeated throughout my career. In spite of enthusiastic leaders, the politics of who owned what and the narrow understanding of customers through the lens of transactions within a single department made collaboration and team work across units impossible. The tyranny of silos: is a new vision or strategy enough to eliminate them?

So here we are; in the midst of a market that values constant and flexible solutions more than stand-alone products.[1]  Some associations have responded with more customer-focused, solutions-oriented rhetoric and initiatives. Others have earnestly explored ways to increase member value and deliver solutions to member needs. Yet, we have all under-estimated the near impossibility for delivering customer solutions within a product and silo-oriented organization. There seems to be a step missing between strategy and execution.  The late Jay R. Galbraith, an internationally recognized expert on organization design, has an answer:  “The first thing that such organization has to do,” he says, “is to create a customer-centric, solutions-unit.” Such unit would accesses and synthesizes assets from all other units to craft solutions, and be integrated with the rest of the organization. 

 This is what APICS, an association for supply chain management, did when it launched a corporate services unit. While the rest of the organization consists of units organized around products, its Corporate Services does not produce or “own” any of the products they incorporate into strategic solutions for corporate clients. 

The differences between product and demand/solutions-centered organizations below illustrate why you have to organize differently for customer solutions:

  • “A product-centric company tries to find as many uses and customers as possible for its product. In contrast, a customer-centric company tries to find as many products as possible for its customer, and it has to integrate those products.”

  • “Product-centric companies are structured around product profit centers called business units. Information is collected around products. Business reviews focus discussions around product lines.” Customer-centric companies are organized around customers (market segments, regions, customer challenges etc.). Conversations and mindshare are focused on customers.

  • “Perhaps the feature that is most different,” Galbraith writes, “is that a customer-centric unit is on the side of the customer in a transaction.” My little community bank has a new feature that allows you inter-bank transactions. While the bank doesn’t benefit from me having accounts in different banks, it benefits from my loyalty if it makes my life easier. Similarly, Amazon decided that their customer feedback forums, while jeopardizing the sales of poorly reviewed products, gain the far greater benefit of repeat customers by facilitating these customers’ purchase decisions.   

    Galbraith breaks down the design requirements for a solutions-based organization. These include:

  • Structure:  “strong customer-centric profit centers to pull together the products into effective solutions” that are integrated with the product units. 

  • Processes: integration and coordination; the ability to rapidly assemble and disassemble project teams from across the organization.  

  • Reward system:  customer-centric measures, such as customer satisfaction and share; emphasis on the overall performance of the company rather than that of individual units.

  • People: demand for different talents and capabilities and greater customer knowledge; new positions of account managers and project managers.

  • Product portfolios: The emphasis is not on individual products alone but how products from one unit might work with those from other units to deliver solutions.  “The product units cannot independently develop their own product lines without a dialogue. Again, a strong top management team is required to guide the portfolio planning process.”

  • Solutions Development Process: The beginning of the process is the customer rather than any product line, stakeholder interests or board mandates. This means that people skilled in relationship-building and attuned to customer needs and challenges develop or follow leads, identify customer problems and market opportunities, meet with customers, shepherd the solutions development process and customer relationships. 

  • Leadership: According to Galbraith, “the biggest change for leaders is usually the shift away from a one-on-one style.”  Instead of top-down, one-on-one supervision, leaders have to manage distributed teams and networks of internal and external stakeholders. They have to make quick decisions, and apply judgment and creativity in matching resources to solutions and opportunities. 

     Of course you don’t have to re-design an entire organization all at once. All you have to do is create a cross-functional unit, project team or other mechanism that is shielded from the hierarchical reporting and territorial perspectives of the rest of the organization.  My main take-away from Galbraith’s article and books is this:innovation cannot only involve strategy but the design of execution as well. And this has to be put in place on day one!

     

     


    [1] By “products,” I mean programs, benefits, services or experience when the focus of an organization is on producing and delivering them. Conversely, customer-centric, solutions-oriented organizations are focused on customer needs and the development of distinctive solutions for these needs, whether or not they contain the organization’s existing products. 

     


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