In the last post I described why silos have come to be so successful (their superpowers!). In this post I want to show how they work and how they impact the companies, industries, communities and ecosystems of which they are, whether they like it or not, a part.

The model I am going to use is simplified for the sake of clarity but real silos work in exactly this way, as we will see in the example of modern fish farming (below). Figure 1 represents an ecosystem, the orange dashed line marking its boundary. The line is dashed, rather than solid, because ecosystems are not completely cut off from each other and do in fact allow for overlap and movement between neighbours. This ecosystem, which could be natural, or a community or even a business, contains resources (the green triangles) and resource users (the blue circles) spread across it more or less evenly.

Figure 1: A Model Ecosystem

Real ecosystems contain many different types of resources (e.g. grain, water, money, information, expertise etc.) but to keep things simple our model contains just one type, the green triangles. These resources are available and used locally, shared by the blue circles who are situated or live nearby. This is, in effect, how we lived for hundreds of thousands of years as hunter gatherers, moving from space to space, using the resources available in those places. Nowadays we would say that this is how distributed business models work. Airbnb, for example, turns bedrooms in people’s homes into locally available accommodation for travelers. We’ll be coming back to this model when our focus returns to the flow paradigm.

Figure 2: A New Silo

Now imagine that a silo is built in that ecosystem [figure 2]. For simplicity let us assume that the silo is a physical one. Unlike the ecosystem, the silo has solid walls that let nothing in or out except under tightly controlled circumstances. We have now created in our ecosystem a separation, a distinction, between the insides of the silo and the outsides of the ecosystem. This is the first time in the ecosystem that such a distinction has existed and sets the stage for all that happens next.

The silo has an owner. And that owner travels throughout the ecosystem, collecting all the green triangles they can find, with the intention of filling the silo with them. In place of the green triangles you can substitute any resource type here; grain, acorns, diamonds, water, information, money, expertise, oil, chicken, fish, potatoes, beds, and so on. The list of things that we now consider resources is long indeed. The silo owner controls what goes into the silo and what goes out and when.

Figure 3: A Full Silo

Once all the green triangles are in the silo [figure 3] you can see that there are none left in the ecosystem at large or as a whole. Any of the blue circles who may have enjoyed or used or needed them is no longer able to gain access to them. The silo owner holds all the resources and, as we have seen before, increases their value and his power the longer he does so (up to a threshold beyond which their value declines, sometime precipitously).

And that, quite simply, is how silos work. They collect up available resources and withhold them, making other members or parts of the larger system dependent on them and increasing their value or perceived importance by controlling the rate and timing of their release.

This may seem innocuous enough but the impact of accumulating and isolating resources can have implications on the system as a whole that are anything but benign. To illustrate this, let’s take a look at a “real” silo, the modern fish farm. If you were to do a Google image search for “fish farm” you would see plenty of photos just like the one below (credit: Loic Gouzer, see his Instagram post on salmon farming for a clear description of the severe problems with industrialized fish farms  https://www.instagram.com/p/BmXQg8bHLxn/?taken-by=loicgouzer).

Farmed Fish are kept in netted cages, each one an individual silo (as in the model above). These cages are typically circular, accumulating the fish at much higher densities than they would be in the wild. This creates stress in the fish and facilitates the spread of lice and disease, which means that they have to be sprayed with chemicals which then get into the surrounding waters. Since they’re isolated from the environment at large by the nets they have to be fed, typically a diet of fish, chicken and soy that is unnatural to them.  Their excrement and other waste pollutes the environment since it is produced in much higher concentration in a static location than by wild free-swimming fish shoals. Some of the lice, disease and farmed fish escape the nets and endangers the well being of the local, wildfish and other aspects of the aquatic ecology.

For a more detailed discussion about the impact of industrial fish farms on the environment and on the fish themselves, see  https://phys.org/news/2016-04-fish-farming-sustainable.html among numerous other articles drawing attention to the problem.

All silos, regardless of the resources they capture and control, can have a similar impact:

• They weaken, deplete or contaminate the system or community of which they are a part by removing needed resources, dumping concentrated byproduct and waste, and rendering other parts of the system ineffective.

• They compromise the resilience of the resources themselves by stripping them of their natural defenses, immobilizing them in high densities, thereby increasing the likelihood of corruption, disease or decay.

• They risk their own downfall by ignoring the outside world and its tendency to find alternatives, substitutes or competitive resources from elsewhere.

Organizations of all types and sizes can choose to act like silos or like systems.  A company that is too focused on its own resources and business model to see what’s happening “outside” may collapse almost overnight when conditions change. Smith Corona, Blockbuster and Tower Records are clear examples of companies that acted like silos and collapsed as a result. Even countries can act like silos. Any time a country prevents its citizens from leaving or foreigners from entering, any time it inhibits the exchange or trade of resources (currency, goods, raw materials, expertise etc.) with others, it is acting like a silo and can end up diminishing its status in the world rather than enhancing it (e.g. the former USSR). In short, any organizational unit can act as a silo, isolated and controlling and focused on its own success, or as part of a system, connected and sharing and intent on the success of the system as a whole.

It might still seem overly dramatic to suggest that organizational silos have the same or similar effects as other silos like industrial fish farms, that hoarding and withholding information is more than just an irritation to other parts of the business. But let’s assume that our hearts suddenly decided to act in the same way and hoard blood instead of pumping it around the body. We’d be dead in seconds. In a company, silos really do prevent the organization from coming to life fully. When a department hoards its expertise or information or some other asset, other parts of the organization are unable to do their job promptly, accurately and/or completely. So at least one of three things happen. Either the business is slowed down as a whole with the attendant risk of becoming noncompetitive, or it finds alternative sources for the resource, in which case the silo becomes a dispensable burden rather than an asset, and/or the resources themselves become obsolete because the data is out of date, or the technology is superseded, or the expertise becomes commonplace.

……

In an earlier post I stated that silos can not be removed from organizations without first understanding them and how they come to survive and even thrive despite everyone being critical of them. I’ve tried to provide a way to increase that understanding and in the next post I will summarize the common characteristics of silos in order to complete the picture.

Subsequently, I will start the process of defining an alternative way to manage valuable resources, a way that I have already described as “flow-based”, and will continue to do so over the next sequence of posts.