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Dangers of Data Silos: What Are The Warning Signs For Your Company?

by Arthur Zuckerman

Data silos are information kept within a department or business unit that prevents the company from optimizing its potential. This can be best practices, hidden insights or key data to other business units’ objectives that are not shared across the organization.

When data silos occur, your business suffers in many ways. The impact may be obvious, but often, the dangers are subtle, but over time, they diminish your business’ profitability.

Let’s lay down the four major risks inherent in data silos. We’ll also explore how to avoid these silos to keep your company running at its optimum levels.

1. Genius is wasted

Data silos prevents you from optimizing talent. When teams don’t share goals, ownership of a bright idea turns territorial. A line is drawn to keep out “thieves” who might steal the credit.

Bright minds are already egocentric by default, in the sense that the ego is motivated by what the person can achieve. Left on their own they flourish, but without a well defined shared goal, these people develop their own “winning” strategy based on their respective environments and, more dangerously, their unguarded opinion.

A good example is the Steve Jobs-free Apple years. The company developed a long list of unique stand-alone products that nobody wanted: Newton; Performa; Power Macintosh and PowerBook. There was an internal wrangling of teams trying to outdo each other. Apple realized too late that consumers wanted a common desktop platform that work with peripherals. Indeed, when Jobs took over, he built a company whose products–and the teams behind them–are built around a shared ecosystem and goals, and Apple became a tech demigod.

Today, many business solutions, such as CRM, ERP, project management and accounting, feature a centralized database and shared dashboards to avoid data silos. Companies also turn to collaboration apps to nurture a culture of teamplay among different business units. As you have hundreds of software options at your fingertips, you can quickly turn to the internet and read product critiques like review.

2. Warnings signs are missed

The financial crisis of 2008 could have been averted, or at least abated, had financial institutions were aware of each other’s activities. The subprime mortgage crisis didn’t happen overnight; warning signs were staring stakeholders long before the crash.

In the book The Silo Effect, author Gillian Tett said the industry collectively “acted in stupid ways” because each trader was busy concocting his own latest mortgage product, unaware how far the dominoes were stretched precariously and already the first piece was ready to tip over.

Had they shared information, a pattern on defaulting subprime loans would have easily surfaced and alerted them of an impending crisis.Silos also prevented the bureaucracy from anticipating the crisis with regulatory agencies and central banks having myriad worldviews.

Were you once caught unprepared for a crisis? Study it closely and you’ll realize it didn’t blow up in a vacuum; rather, a series of mini-events led to the implosion. Air crash investigators swear by this principle–that a plane crash is always the result of a series of preventable events.

One way to catch warning signs early is to implement a clear communication system across the organization. A shared collaboration platform nurtures transparency and keeps you in the loop. Many of these solutions feature dashboards that let you see the big picture with visual charts, while giving you drill-down ability to check the details.

3. Opportunity is lost

Data silos bury data that otherwise presents an opportunity. This is most evident in customer data. If marketing and sales don’t share information, each one loses an accumulative advantage. Collectively, their data can unearth patterns, user behavior, market trends and more.

For example, when sales data is consolidated, demographic patterns may emerge, such as, recurring locations, age bracket and interest. To sales, this information is nothing unique, it’s already incorporated in their base of customer personas. But to the supply manager, recurring locations may lead to building a more efficient supply chain. The demographic patterns are also useful for marketing to develop new campaigns. By sharing that one consolidated sales data, the company reaps at once two opportunities.

The good news is, the best CRM software today feature shared platforms and tools. All data are entered on the same system, and with user permissions, easily accessed by different business teams. Users can also share reports so no data falls into cracks. You can visit B2B software marketplaces and read reviews to help you shortlist the options.

4. Uncoordinated strategy

What sounds brilliant on paper may fall flat on its face in execution if the idea is conceived in a vacuum. Data silos give planners, product developers or policymakers, at best, an incomplete picture. This can lead to an unintended result or unexpected complications.

For instance, a company may create fulfillment centers to fast track delivery. The logic is simple, bring the products closer to the market, shorten delivery time and fast track the sales cycle. Where the CEO depends solely on sales data, locations will be based likely on sales territory and workflows.

But fulfillment should factor in administrative and operational control, which are often based in the headquarters. With little control over product fulfillment, the head office can’t guarantee fulfillment processes are kept standardized. Deliveries may be delayed or billing uncoordinated. Satisfaction rating may dip and, ironically, the new sales-centric strategy leads to lower profits.

How to avoid data silos

Data silos are easily addressed by nurturing a culture of collaboration, transparency and visibility across the organization. Here are ways to bring down walls between teams:

  1. Standardize processes. Whether it’s product development, policy-making, campaigns or any other strategies, put into place a standard process that includes inputs from other departments. An ad hoc team composed of members from various business units can oversee the development and acts as catalyst for shared information.  
  2. Develop cross-functional strategies. Social media, crowd-sourcing, shared economy and other technological disruptions affect all sectors of the company. Today, departments must share business strategies to react to sudden market shifts faster. Sales can no longer afford to ignore customer complaints without affecting marketing campaigns. IT must become a key business partner, no longer just the tech troubleshooter.
  3. Nurture a culture of collaboration. Teamplay is key to running your business more efficiently. HR, accounting and tech must work closely together to guarantee the best talents are kept. For example, sales and marketing must consolidate their overlapping customer engagement to effect solid messaging and increase customer satisfaction.
  4. Have organizational visibility. CEOs can now gain visibility across departments at the comfort of their desk. They just need to log in on a SaaS-hosted dashboard and see the key performance indicators in each of the business unit. Most cloud business solutions today also let users to drill down to details. This way, CEOs and top-level executives stay in the loop of company developments without having to bug managers constantly.

Data silos are not passive dangers that when left unattended will only lose you opportunities. They are actively chewing bits of the business, one bite at a time, until you realize a large chunk of the business has been taken away. Act now and make sure your teams are sharing data and collaborating on projects. Most importantly that they’re sharing your goal.

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