For a few years it has been fashionable to talk about organizational silos and their damage to the progress of humanity. ‘Silo-busting’ has been advocated with passion (including in a latest McKinsey review ominously entitled the ‘Silo syndrome’) as if the world needs to be freed from evil ghosts. The notion of a perfectly connected firm able to leverage all of its skills and resources in an effective and efficient way to provide integrated, differentiated solutions to customers emerged as an ideal worth pursuing. Whilst strategically sound and noble at its heart, the concept of firm-wide integration can easily go too far and be counter-productive: the cost of wholesale connectivity and the complexity it engenders outstrip its benefits more often than not.
The development of the brain provides an interesting case study. The brain’s neurons connect with each other through mouths (axons) and ears (dendrites) and share information through synapses. As it evolves, the brain develops neural pathways to respond to an individual’s environment and experience. Whilst it does so, it prunes back the unused and overabundant synapses. The most valuable pathways are also first to benefit from a special treatment: a process called myelination allows some of them to become highways through faster electrical signals. By the age of twenty-five, the brain has lost a lot of its plasticity, but not all of it: through attention and discipline, new pathways can be created to respond to a change of environment, generally at the expense of less travelled routes.
As for the brain, the objective of a well-functioning organization is not to establish maximum connectivity amongst its sections. Rather, it is to carefully and surgically map the activity areas which benefit from pathways and highways whilst blocking the information flow where it is a source of distraction, or worse, of a pure waste of time and resources. Connectivity is cheap, especially nowadays. Relationship and purposeful dialogue is golden. In mature organizations lacking flexibility (often due to the existence of a ‘deep state’), the intense focus on investing in and building new pathways on a highly selective basis is even more important.
When presented as islands oblivious of their surroundings and unwilling to share information and ideas, silos are nefarious and there is no need for strategic consultants to make the point. If defined as areas of specialization fostering accountability, common purpose, team identity and unity under strong operational control whilst benefiting from carefully selected, value-added knowledge-sharing bridges with other ‘silos’ (within the same organization or outside of such organization), they not only have a raison d’être but they are preferable to larger, integrated ensemble where relevant connectivity is watered down.
With these considerations in mind, the audit of an organization may lead to the identification of a surprisingly high number of pathways which do not fulfil basic cost-benefit requirements. In turn, this may require a pruning and rewiring of connections based on new, carefully designed and simplified organizational maps where vital pathways get the appropriate level of attention.
Furthermore, the audit may reveal the existence of loosely integrated activities which could be considered non-core from a strategic or operational point of view. Finally, it may help corporate buyers make a different, likely more conservative assessment of the potential synergies related to any acquisitions for a better M&A world, including with respect to post-merger integration processes. Seeking to maximize connections with a newly acquired asset may not be the best way to maximize synergies and value.
Sources:
A Trafton, MIT News, ‘Neuroscientists reveal how the brain can enhance connections’, November 2015
A Tierney, C Nelson, Harvard Graduate School of Education, ‘Brain Development and the Role of Experience in Early Years’, November 2009
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