Business silos make sense. They create a degree of independence that can be critical to manage conflicts of interest between business units, and increase business flexibility and agility.

But the unintended impact is that this independence may also apply to data. Data silos exist where business units or departments make their own decisions about how and where to capture critical business data, apply data standards, and implement systems. These data silos can work extremely well for individual business silos, but can make it difficult to understand the business at an enterprise level.

Real-World Examples

The IT Distributor: Back in the day I worked for a large South African IT business. They ran several business units, some of them in direct competition with each other. Each business unit ran as its own profit centre – this allowed them to respond directly to tenders without collusion, manage bonuses etc. When we deployed a CRM each business unit had its own implementation. To gain an enterprise view of the sales pipeline each sales person would provide a weekly spreadsheet that was consolidated by Group management.

The Consumer Brands Company: A consumer brands company we worked with had grown over many years through acquisition. When acquiring a new business, they would add custom fields into their ERP allowing them to onboard vendors, inventory and customer data quickly and get the new business operational. This data debt shows up when they try to answer questions at an enterprise level. For example, it can be a struggle to identify their high value customers as individual customers are represented multiple times and with differing levels of importance to each BU.

This is the world of silos, both for businesses and the data they hold. Let’s explore the potential benefits and drawbacks of siloed operations.

Business Silos: Independence with a Price

In many companies individual departments (or business units) like marketing, sales, and finance operate like independent kingdoms. This is a business silo. Each department has its own goals, priorities, and even software systems. There’s a benefit to this autonomy:

• Focus: Departments can deep-dive into their specific areas, becoming experts in their fields.
• Agility: Decisions can be made quickly without needing approval from other departments.
• Accountability: Clear ownership fosters a sense of responsibility for meeting departmental targets.

However, this independence can come at a cost:

• Limited Visibility: The big picture gets lost. Marketing might be pushing a campaign that sales isn’t prepared for, or finance might be unaware of upcoming marketing expenses.
• Redundancy: The same information might be collected by multiple departments, leading to wasted effort and potentially conflicting data.
• Inefficiency: Collaboration across departments becomes difficult, hindering projects that require a cross-functional approach.

Data Silos: Locked Away Insights

Data silos are like locked filing cabinets within departments. They contain valuable information, but it’s inaccessible to those who might need it. This can happen for technical reasons (incompatible systems) or cultural ones (a lack of data-sharing practices).

The benefits of data silos might seem minimal:

• Control: Departments might feel a sense of control over their data, protecting it from unauthorized access.

But the drawbacks are significant:

• Poor Decision-Making: Without a holistic view of the data, it’s difficult to make informed decisions for the entire company.
• Missed Opportunities: Valuable insights hidden in one silo might be crucial for another department, leading to missed opportunities.
• Inaccurate Analysis: Data inconsistencies across silos can lead to skewed results and unreliable conclusions.

Master Data Management: Breaking Down the Walls

So, how can companies leverage the benefits of focused departments and accessible data? Here’s the key:

• Data Governance: Establish clear guidelines for data ownership, access, and quality.
• Data Integration Tools: Invest in technologies that allow data to flow seamlessly between departments.
• Culture of Collaboration: Foster a culture where information sharing is encouraged and rewarded.

By breaking down these silos, businesses can unlock the true power of their data, leading to better decision-making, improved efficiency, and a stronger competitive edge.