CHAPTER

25

WORKING ACROSS SILOS

When implementing digital transformation programs, large traditional companies may be caught off guard by their organizational structure. One major stumbling block is siloed structures, which preempt collaboration across entities.¹ Because most digital initiatives require a high level of cross-functional cooperation and resource fluidity to succeed, business leaders must prioritize business alignment to ensure collaboration across all business units and levels of hierarchy.

WHY IT MATTERS

Working in silos is one of the most commonly mentioned obstacles to digital success.^{2, 3} In fact, many organizations have learned the hard way that digital transformation is less about technology and more about people.⁴ Research has shown that, in digitally mature organizations, leaders are more than twice as likely to effectively support cross-functional teams as they are in organizations in the early stages of a digital transformation. Digitally mature organizations tend to be less hierarchical: they drive decision making down and throughout the organization.⁵ By contrast, some early warning signs of poor collaboration include a lack of top-team alignment and an unsupportive culture.⁶ Organizations that struggle to break down silos often overlook the fact that transformation requires a systemic approach to change—one that takes into account the interrelated aspects that can drive (or inhibit) organizational change.⁷

BEST PRACTICES AND KEY INSIGHTS

Our research uncovered two factors that either drive or inhibit collaboration: formal structures and organizational culture.⁸ Not surprisingly, many organizations focus on formal structures, trying to break down organizational silos by making changes in the organizational structure—e.g., by creating more cross-functional committees or by creating a matrix model for some core processes.

But reorganizing is not the way out. Fostering a culture of sharing information and “rallying around the same goal” is a much stronger predictor of success.¹⁰ Our research and experience both point to three things that can help your organization increase its chances of becoming truly collaborative, with a shared sense of unity and ambition. They are incentivization, resource sharing, and agile ways of working.

Incentivize Collaboration

One commonly cited barrier to collaboration is a nonexistent or misaligned incentive system. When Guido Jouret started as CDO of industrial giant ABB, he faced the daunting task of setting up the digital governance system of a globally distributed organization. Although he was equipped with enough financial power to make things happen, he knew that the key for real digital transformation was to align the various business units in the same direction. At ABB, traditional incentive systems were almost purposefully designed to do the opposite—to prevent, rather than foster, collaboration: Which unit has sold more items? Which region outperformed another?

Jouret knew that collaboration was critical to digital success. Many of the most interesting projects were not viable within one business unit but required involvement from multiple groups across traditional boundaries. So Guido put his money where his mouth was, explaining: “I basically put funding behind collaboration incentives and prioritize projects where BUs work together. When that happens, one plus one really equals four: $1 comes from one BU, $1 from the other BU, and I match it with $2 more. So now, all of a sudden, you get $4 for this project when each BU individually would always get only one.”¹¹ Digital leaders have to rethink existing incentive systems, making sure the incentives align with the objectives. To increase collaboration, carrots usually work better than sticks.¹²

Foster Knowledge Exchange and Resource Mobility

A common challenge faced by many organizations is how to set up the digital team. When organizations set up separate digital teams so that dedicated groups of experts can push the agenda forward, they run the risk of losing touch with the rest of the organization. Hence, when the digital leaders at Rabobank were setting up their Digital Hub, they took steps to mitigate this risk. First, the physical location of the new unit had to demonstrate integration rather than separation. Thus, the hub was located in the HQ, in the center of a round office tower, signaling transparency and openness on all sides. Second, the hub chose to improve specific customer journeys, a task that involved the relevant operational people from all over the organization and across different regional units. Employees were seconded (temporarily reassigned) from their original workplaces to form multifunctional teams in the hub. By borrowing people from different functional units to temporarily work in the central hub, the digital leaders at Rabobank created a shared sense of digital vision and ownership—one that would continually grow throughout the global organization after employees returned to their original workplaces.¹³

Support Agile Ways of Working

Many organizations are struggling to find new ways of organizing that recognize the need for both hierarchy and systematic reporting relationships and allow for an agile approach to customer-centric multifunctional teams. There are countless models for agile work practices, and it can be difficult for digital leaders to find the best solution. Therefore, instead of striving for a perfect fit from the get-go, digital leaders should focus on adapting whatever model they choose to their specific needs.¹⁴

Dutch bank ING, a pioneer in digital transformation, followed the so-called Spotify model¹⁵ to systematically (rather than episodically) redesign its organizational structure and fully embrace its digital journey. ING launched this radical transformation at its HQ, to set an example, and then rolled it out to the rest of the business. Adopting this model proved highly successful: not only did it help ING achieve the intended customer-centricity and reduce time to market, but it also generated positive spillover effects, such as hikes in employee productivity and workplace engagement.¹⁶

• • •

Fostering collaboration across organizational silos is a core challenge for many organizations that embark on a digital journey. Successful digital leaders create a sense of unity that makes everyone pull in the same direction through three key elements: incentivization of collaborative efforts, systematic team and knowledge exchange, and implementation of agile ways of working.

Hacker’s Toolbox

Create a shared sense of ownership. The key to achieving business unity is to ensure that everybody is pulling in the same direction. Instead of collaboration initiatives that exist on paper only, lead with concrete actions that show how serious you are about breaking down silos. A good start is to revisit the goals of departments and subunits. Are they fostering suboptimization, or are they well aligned with strategic customer-facing outcomes your organization wants to achieve? Make sure every single employee is working to achieve the shared purpose of the organization, instead of hitting some KPIs or sticking to a plan.

Adjust your incentives. To break down silos, it’s crucial to revisit your organization’s incentive system and make sure that it’s not working against you. Remove incentives that prohibit collaboration and create competing goals among units or functional areas—for example, when the logistics departments are incentivized by product availability while the finance department is incentivized by cash flow. Most incentive systems have such unintended side effects that need to be considered. Make sure incentives are designed to foster collaboration, such as project financing schemes that reward collaborative applications from more than one business unit with higher acceptance rates or extra funding on top. The key is to look at the incentive system as a whole rather than at each unit separately.

Establish an “agile way of working.” A core element of agility is the ability to overcome silos and functional/unit-based rivalries. Many agile methods exist that can help you get inspired, but be aware that whatever you choose needs to be adapted to your specific organizational context. There is no one right way to do agile. A good way to get started is to look at popular and widely reported examples like the Spotify model or Scrum. See which elements would fit your current organization and what changes are necessary to implement agile ways of working at scale.

RELATED CHAPTERS

Funding Your Digital Transformation Program (Chapter 6)

Choosing the Right Digital Governance Model (Chapter 8)

How to Make Digital and IT Work Together (Chapter 9)

Accelerating Digital Using Agile Methods (Chapter 10)

Scaling Digital Initiatives (Chapter 27)