The Meltdown of Silos…

…As Functional Organizations encounter Metamorphosis.

…As Functional Organizations encounter Metamorphosis.

It was not very long ago, we spent hours discussing how to break ‘the silo mentality.’

We devised elaborate matrix structures. We dream’t of cross-functional teams, working in sublime collaboration, leading us to a radiant future. Some of these efforts worked. But the ‘silo mentality’, perpetuated by the functional organization, always got the better of us.

What we could not achieve, technology soon will. The breakdown of the traditional, functional organization is now imminent.

In the ‘Future of Organization in three minutes’, the main point was how a hierarchical organization would give way to one that was built on networks and platforms. In ‘Data and Technology plot the end of experience’, it was clear that years of tenure and experience are being made irrelevant by data, technology, and code.

Combining these two trends makes the picture very clear. The meltdown of the functional organization is looming on the horizon, if not already here.

Here is why…

Functions are now businesses:

Remember ‘vertical and horizontal integration?’ How quaint does it sound now? We used to think that a company needed to own all parts of the value chain to ensure quality and capture all value. We now know that shareholders, outsourcing, and competition broke that model down.

In the next step of evolution, aided by technology, companies can now unlock greater value by obtaining entire functional contributions from other companies for whom such functions are primary business. Why be a Finance or Product Development function for one company, when you can be for many at the same time?

Technology and entrepreneurship will steadily chip away the logic of a vertical organization plagued with multiple hand-offs and frequent finger-pointing.

Above all, internal functions will not be able to keep pace with technology as easily as companies for whom these functions are primary business.

Business is now a function:

The new talent, with support of data and technology, can put together end to end businesses in an amazingly short period of time. Their mental model is not functionalist.

Talent, technology, marketing, capital and finance are elements of just one end: a business that makes an impact and creates value. These elements are not seen as different practices or as functions. Strategic and intelligent choices about each one is no different than an intelligent choice about anything.

As more and more businesses are based on algorithms, a business, even mathematically, is no more than an elaborate ‘function.’

Value Chains have lost their cool:

When value chains are being dis-aggregated and data is eating process, being part of a horizontal value chain no longer reaps any attractive benefit for individuals. Alternatively, being one of the nodes in a value network is far more appealing and profitable.

‘Returns’ have taken the spotlight as salaries have lost their cool. Simply put, why would you want to be part of the cost of goods or general and administrative expenses when you can be part of the capital?

The ‘big fish in a small pond’ argument is winning over the ‘small fish in a big pond’.

You always want to stay the big fish. With luck, the pond becomes big too.

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Even though currently, you may be of a functional organization, there are strategies where you can influence your metamorphosis. Keep an eye out for my next article where I will elaborate on what you can do if faced with this meltdown.