Six silo-busting strategies to unleash innovation and growth (by IMD)

“The business landscape is littered with the carcasses of corporations that failed to adapt to shifting externalities. In today’s knowledge-based economy, never has innovation been more crucial to corporate survival.   

 

As the Fourth Industrial Revolution unfolds with dizzying speed, innovation has become organizations’ most pressing priority as they race to keep up with the business zeitgeist. 

Not only are governments forcing companies in high-polluting industries to transition to low carbon emitters to achieve net zero carbon emissions, but there is also an increasing emphasis on achieving high ESG scores to attract the surging sustainability bid. 

Added to this, the impact of digitalization on customer interaction and workforce engagement, combined with factors such as operational sustainability and regulatory risk, means the rate of change is faster than ever.  

The shift in working habits prompted by the COVID-19 pandemic has also ushered in a new era of introspection around values, work-life balance, a just society, environmental and health concerns, and an equitable economic status quo.  

Within this radical new environment – widely referred to by the acronym VUCA (volatile, uncertain, complex and ambiguous) – it is more important than ever to create an organizational model which removes barriers to innovation for short-term compliance and efficiency and long-term differentiation, value creation and growth. 

Escaping the vacuum to create an innovative work culture

 Innovation cannot occur in a vacuum, and within corporations it depends on propagating an action-oriented, collaborative culture ready to respond to the challenges posed by a VUCA environment with agility, creativity, and a willingness to adapt and transform.   

The acronym VUCA stands for volatile, uncertain, complex and ambiguous.

A chronic organizational impediment to this is the silo – a barrier between different groups within an organization that occurs for a variety of reasons such as differences in culture, values, priorities, or a natural tendency towards team insularity based on specific goals and objectives which become ringfenced. 

Silos, whatever their cause, can produce negative outcomes for organizations operating in an increasingly fast-changing and complex business environment in the form of reduced morale and concentration, and a raft of operational defects including duplication, poor decision making, inefficient use of resources, and missed opportunities. 

Unlocking innovation may seem elusive, but it is no longer the sole responsibility of the R&D department as it was in the “analogue” era of the second half of the 20th century.  

So, if innovation is the essential component of a fully engaged organization operating within the challenges of VUCA, then senior management must build bridges proactively between silos and foster cross-silo collaboration across the whole organization to allow it to flourish by design and reliance on informal networks and social capital. 

Here are some strategies that organizations can use to encourage collaboration and innovation across different teams, departments, and business units. 

1. Create a shared vision and purpose 

Organizations with a clear and compelling vision – a source of inspiration and motivation shared with their workforce – can create a common goal which fosters collaboration as silo barriers break down.  

Using this modus operandum, Amazon’s cross-functional teams working on a shared goal were able to develop innovative products through customer centricity focus. The teams were asked to draft a future press release explaining the benefits of the new product and service to customers which included an inspirational quote explaining why the product has been developed. 

This “Working Backwards” process helped the company to develop the Kindle e-reader, the Echo smart speaker, and its AWS web service. Using the clarity of the press release as a filter, this process provided a product development roadmap for product managers, designers, engineers, and other stakeholders to get a “gut feel” about the desirability, feasibility, and viability of the product and service to determine which ones get green-lit for development. 

 

2. Prioritize and foster a culture of collaboration 

To encourage cross-silo collaboration, organizations need to create a culture which values and rewards collaboration. This means fostering an environment that encourages teamwork, experimentation, open communication, and knowledge sharing.  

Goldman Sachs created a Sustainable Finance Group (SFG) as part of the investment bank’s “One Goldman Sachs” initiative which was specifically designed to bridge silos within the bank. This approach was then adopted by industry peers including UBS. Interestingly, the initiative was driven not only by its clients but by an increased focus within its asset management division on ESG-oriented investing to meet customer needs.  

The requirement to invest portfolios according to sustainability and ESG criteria was subsequently expanded to other key areas of activity and identified as central to the entire investment bank’s core overall mission. 

3. Develop shared metrics and goals 

As sustainability has risen as a key variable in the consumer goods sector, companies which manufacture products and source materials according to sustainable principles can tap into the common goals of environmental protection and reduction of carbon emissions to motivate teams to collaborate.  

Allbirds, which manufactures shoes largely composed of sustainably sourced wool, operates a Carbon Footprint Task Force which brings together employees from across different functions to develop and implement strategies to reduce the company’s carbon footprint. This cross-silo collaboration is aligned with the company’s mission to create sustainable products and reduce its environmental impact. 

The company’s employee KPIs manifest organically within its collaborative culture which emphasizes diversity, equity, inclusion, and belonging (DEIB) and in which employees – framed by Allbirds as its “flock” – are positioned as key stakeholders. 

Lorem ipsum dolor sit amet, consectetur adipiscing elit. Ut elit tellus, luctus nec ullamcorper mattis, pulvinar dapibus leo.

 

 4. Create and enable cross-functional teams 

Big pharma has long been eyed by startups eager to disrupt an industry where research and development costs are astronomical and the average return on investment is a paltry 3%.  

Like many players in the pharmaceutical industry, BenevolentAI – which utilizes AI in analyzing big data for drug development – deploys cross-functional teams in its quest to break the Big Pharma model. Within a team there could be an engineer, an AI or user interface expert, a chemist, a biologist, and a data scientist, all collaborating to solve a problem guided by a clear common goal.

 

5. Invest in collaboration tools and technologies: 

A range of tools and technologies are available in the quest to achieve cross-silo collaboration, including project management software and the use of shared workspaces. Where geographical distance or time zone differences might once have been an impediment to collaboration, videoconferencing platforms such as Zoom, MS Teams or BlueJeans (used by multinational food company Danone) offer tools such as screen sharing to eliminate these concerns. 

 

6. Provide training and development opportunities 

Innovation can be fostered by training and development – particularly in the unfolding Fourth Industrial Revolution where, thanks to the importance of knowledge sharing, the distinction between work and learning is increasingly blurred. While informal “cohort learning” exemplifies this blurring dynamic and is the natural propagator of a creative and experimental working environment conducted in safe, non-judgmental spaces, it can be complemented by other processes in the training and development arena. Formal training in communication, teamwork, and leadership can play a crucial role in enabling employees to develop the skills needed to work effectively across different teams and departments.  

Countries with high historic levels of innovation like the US have high levels of investment in training, often funded with government assistance in key sectors such as technology. California-based outdoor apparel company Patagonia offers a range of programs and resources to help employees develop new skills and work effectively across different teams and departments – including in-house training programs in leadership development, technical skills, and sustainability as well as external training programs and conferences. These initiatives help to bridge silos and encourage employees to share ideas and best practices, leading to greater innovation and efficiency. 

Enabling these to flourish is a complex undertaking but one thing is certain: the rigidity of silos must be eliminated, and an ecosystem of collaboration propagated if organizations are to adapt and prosper in the new VUCA world of the Fourth Industrial Revolution.   

 

Author:

Louise Muhdi

Affiliate Professor of Innovation and Strategy at IMD