Introduction

There is a quiet revolution going on across all our major industries, one that has been hiding in plain view until now. A small number of pioneer organizations have successfully created radically differentiated business models to their industry norms, establishing themselves as innovative and even disruptive leaders. They have done that by reinventing the way they manage their resources. In direct opposition to the deeply ingrained and near universally practised principles of resource accumulation and control, they are encouraging instead the flow of those resources, including ideas and information, raw materials and finished goods, employees and customers, even byproducts and waste. In doing so, they have demonstrated the viability of a new route to success and a more sustainable business paradigm for the future. I have called this new model Flow by Design, and am introducing it here in its own blog series. In this first post, I explore the current, dominant business model for resource management, which I call the Silo model, to provide the context within which Flow is emerging as an alternative.

Silos - the dominant paradigm

Everyone agrees that silos in the business world - siloed teams and departments, siloed data and systems, siloed processes and practices - are a bad thing. Every few months another well meaning article urges us to bust, smash, destroy or crash them for the continued wellbeing of our firms. And you’d be hard pushed to find anyone actually admitting to owning or running one. So how is it that they keep cropping up like weeds despite our best intentions? What is it about them that causes them to appear not just in the business world but also in science, where their presence is just as criticized and just as ubiquitous, and in education, and in health care, and just about anywhere else we care to look?

The reason is surprisingly simple. It’s because they work, at least for the silo owner. They’ve been working for a very long time, ever since we built the first physical silos for storing grain some 11,500 years ago and, in doing so, extracted natural resources and accumulated them under our direct control and management for the very first time in our species’ history. From that time on we have found that the more control we have over resources the more value we can get from them. Silos give us that control. We use silos to accumulate valuable resources, create economies of scale, and to release them only when they’re most needed and we can exploit them most fully. As John Hagel III, John Seely Brown and Lang Davison have noted of knowledge resources;

“our firms are organized and operate to accumulate and defend stocks of knowledge and to extract as much value from them as possible.” HBR Blog “Abandon Stocks, Embrace Flow”, January 27, 2009.

This description doesn’t just apply to knowledge, or to grain or even to missiles. It’s how we manage and increase the value of nearly all kinds of resources, and if we look closely enough we will find silos of one kind or another, albeit thinly disguised under different names, just about everywhere. We accumulate gold and seeds and other strategic reserves in vaults, water behind dams, money in banks, patients in waiting rooms, students in classrooms, employees in cube farms, pigs and chicken in factory farms, and so on almost endlessly. The silos that we complain about at our workplaces are not aberrations or anomalies. They’re part of this long and deep tradition of resource management at scale that works for the resource owner if for no one else.

Silo Principles

It’s not just accumulation and protection that all these different kinds of silos have in common. My research has uncovered seven aspects of resource management, seven different principles, that they all share, again regardless of industry and resource type (e.g. grain, money, product, information, animals etc.). These principles are:

Extraction: silos extract resources from their home, native or natural environments, or take them out of general circulation. 

Accumulation: silos gather and then hoard their newly extracted resources, sharing with no one, internally or externally.

Isolation: silos separate their resources from one another to facilitate processing and to protect against unwanted effects of interaction like contagion, decay or combustion.

 Dependency: silos control all aspects of the resource’s existence, including decision making, providing basic needs, and environmental control..

Immobility: silos immobilize their resources for ease of management, processing and control.

Batching: silos control the release of their resources to the outside, generally in batches and at clearly defined intervals, often seasonally.

Silo Success: silos optimize only for improving or processing their resources with maximum efficiency or for extracting the maximum possible productivity or value from them.

To be clear, these principles do not describe the type of improvement or processing that is unique to different organizations and industries. The work of a school is obviously different to that of a hospital or an office or a farm. And yet the ways they manage their students, patients, employees and livestock in order to do that work of improving or processing them most efficiently are strikingly similar, following these principles closely if unconsciously. 

Problems with Silos

These siloed ways of managing resources generate a set of conditions that can be deeply problematic.

Silos create inequalities or incompatibilities between those that own and control resources and those that need them. They can deplete and even exhaust resources that turn out to be finite, and they are often slow, reluctant and even incapable of adapting to changing system conditions and needs.

Additionally, silos are only parts of systems, not systems themselves. Optimizing for the success of the silo can compromise the overall success and wellbeing of the system, whether that system is a company, an industry, a community or an ecosystem.

The silos that we are most familiar with inside our own organizations share the same problems and, more specifically, are responsible for wasting our customers’ time, being unresponsive to their needs and creating poor experiences for them. Internally they routinely generate frustration, wasted time and friction, ineffective communications, untimely decision making, and unresponsiveness not only to customers but more broadly to competitive pressures and changing market conditions. All of which can lead to a loss of business and, at the extreme, to tragedy and loss of life*.

These problems are not random effects, unintended consequences, or accidental byproducts of our otherwise well meaning actions. They are inevitable outcomes of an intentional, millennia-tested model for optimal resource productivity. Nor are they niche, limited to obscure or specialized situations. On the contrary, silo based resource management governs at least 90% of all our industries and institutions. Nearly all our companies, universities, hospitals, schools, farms, prisons and so on apply the same set of management principles to their resources, human and non-human alike. 

An Alternative Model

So, if we really truly want to smash the silos that we are all familiar with at our workplaces and that we all complain about regularly, we’re going to need something much deeper than an impassioned plea. They’re never going to go away just because we don’t like them. We’re going to need an alternative, a whole new business paradigm in fact, and not just for information silos but for all resource types. It turns out that the paradigm Hagel, Seely Brown and Davidson recommended for knowledge holds true for all other resources as well; one based on Flows. A small number of pioneer organizations have already proven the effectiveness of this paradigm, demonstrating that flow based designs can be better for the customer, better for the company and better for the environment than their silo equivalents and, as a result, represent a new, more sustainable business model for the future.

In the next post of this series we will introduce this model and explore the seven principles of Flow by Design that characterize these trail blazing organizations.

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Henry King, March 2020

* for a discussion of the lack of information sharing between intelligence agencies before, and between emergency services during, the terrible events of September 11, 2001, see Gillian Tett’s “The Silo Effect”.