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Digital Demands Destruction of Organizational Silos

  |  July 21, 2011   |  Comments

Processes that can be put in place to lay the groundwork for taking advantage of digital insights and more rapidly translating them into competitive advantage.

Digital has already transformed entire industries. It is now necessitating a change in companies' organizational structures as well. In a prior column I wrote about "Digital Is a Philosophy," which details how digital insights and techniques can be used to make all marketing and advertising better. Digital channels give advertisers first-hand and real-time information about their customers. This information could make them more competitive and better able to respond to customer needs by innovating their products and services.

Digital Perturbs Traditional "Org Charts"

However, the typical corporate "org chart" stymies any of these benefits. For example, if the sales department is separate from the product development department, the insights that salespeople have about customers seldom get fed back to the product development people systematically. Even if this does happen, it is usually far too infrequent or slow. In other examples, marketing departments may be separate from market research departments or IT departments. By the time market research commissions, fields, analyzes, summarizes, and sends the customer insights to the marketing department it may be too late to impact ongoing campaigns. Also, advertisers' websites may be handled by the IT department and the web analytics that reveal customers' intent and demand are underutilized in optimizing marketing campaigns while they are still in progress.

Furthermore, because there are so many different departments doing different things, the process of approvals - to get all the necessary parties to approve any action - stifles innovation or delays it to the point of irrelevance. This problem further manifests itself in the form of different departments hiring different agencies for different tasks. If the departments themselves don't share data and knowledge, the chances of their agencies sharing data for efficiency and optimization are less than nil.

Finally, there's the question - where does digital fit? Or where does social media fit? I've seen it in IT departments, PR departments, brand managers, marketing departments, e-marketing groups, or its own department. But, actually, "digital" should be thought of as a "group service" like HR or finance, which intersects with every department. Digital insights can inform brand planning, make market research more detailed, impact supply chain planning, drive product innovation, etc. Digital insights should be used in and by every department.

Speedy Innovation Beats Slow Innovation Any Day

The speed of change that digital necessitates is high. Digital requires organizations to act and react faster to both opportunities and threats. Too often, smaller, nimbler startups outrun and out-innovate larger companies because they have more fluid organization structures, which allow them to take feedback from customers (gathered through digital channels) and turn them into new features and functionality that better meet customer needs. Take Salesforce.com as an oft-cited example. Not only does it gather feedback directly from customers from various digital channels, it has also put in place processes to prioritize the inbound ideas from customers and bug reports so that it could move from a yearly software release cycle to biweekly updates. This has allowed the company to outpace far larger competitors and consistently stay ahead.

Furthermore, ideas are a dime a dozen, even good ones. Many competitors may arrive at the same idea, but the winner is the one that can run faster and execute the ideas more efficiently - so speed is of the essence. Take Groupon, for instance; it proved the model of deep group buying discounts and within months there are dozens of imitators, including behemoths like Amazon, Google, Facebook, Yelp, OpenTable, and Walmart. So, the siloed departments of big companies actually hinder their ability to read and respond to opportunities. Breaking down the silos or adding processes to share knowledge across silos will help increase efficiency and speed.

If You Ain't Got Culture Like Netflix or Zappos, You Ain't Got Nothing at All

However, breaking down the departmental silos alone will not solve the speed and innovation problems for traditional corporations; nor will radical work environment changes - like the recent shift towards open plan work spaces. The tens of millions of dollars wasted so far on completely revamping office work spaces to loft-like arrangements of cubicles has not only not made employees any more creative or innovative, it has in fact made them feel more discomfort, less privacy, more nomadic (no place to even put family photos), and altogether less productive. It is one more distraction they have to deal with, that causes mental strain and drain instead of creativity and innovation.

There are companies that are doing well in fostering innovation and speed in the workplace. Netflix, for example, has put into practice several seemingly counterintuitive management policies with great success:

"1) No vacation policy (take as much as you want, as long as you're doing a great job and covering your responsibilities), 2) "Outstanding" employees only--doing an "adequate" job leads to your getting a "generous severance package," so the company can hire an A-player in your place, 3) "Freedom and responsibility" vs command-and-control: Good managers give their employees the right context in which to make decisions--and then the employees make the decisions, and 4) No "brilliant jerks" -- Star performers who also happen to be hell to work with are sent packing."

And Zappos has a standing $4,000 offer for employees to quit - as a way to see who really wants to be a part of the passionate, customer-focused culture that is Zappos' legend. More than 97 percent decide to stay. It is worthwhile learning from its corporate culture and determining what "baby steps" can indeed be accomplished to move toward that goal, without costly and ineffective experiments.

So Where Do We Go From Here?

In the short term, where more drastic organizational changes are not possible, there are steps that can be taken and processes that can be put in place to lay the groundwork for taking advantage of digital insights and more rapidly translating them into competitive advantage. Companies should arrange for regular knowledge-sharing sessions. For example, various groups can present on a quarterly basis their marketing plans and examples of campaign successes to other departments. The cases and best practices can be captured in documents shared on the intranet (not a novel idea, but still far from common practice). Departments should put in place the procedures of checking these documents for best practices and duplicate efforts during the planning process for new campaigns. Internal employee classes on digital strategy, tactics, and disciplines should be put in place on a periodic basis, including the use of outside speakers and experts. Other cross-functional workshops done quarterly can allow various groups to share input and insight from their respective "silos" to be used to tweak communication plans, optimize marketing messages, or even adjust business priorities.

Companies like J&J and Intel have vibrant and mature digital training and knowledge-sharing programs in place, which translate into their consistently staying "ahead of the curve" compared to most other companies. So if your company is to stay current or get ahead in the new digital world, you should consider taking some steps to break down the traditional corporate silos or "org charts" to enable more speedy and efficient transfer of knowledge and innovation.

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Augustine Fou

Dr. Augustine Fou is the senior digital strategy advisor to CMOs, marketing executives, and global brands. Dr. Fou has over 15 years of Internet strategy consulting experience and is an expert in social media marketing strategy, data/analytics, and consumer insights, with specific knowledge in the consumer packaged goods, financial services/credit cards, food/beverage, retail/apparel, and pharmaceutical/healthcare sectors.

He is a frequent panelist, moderator, and keynote speaker at industry conferences. Dr. Fou is also an Adjunct Professor at NYU in the School for Continuing and Professional Studies and at Rutgers University at the Center for Management Development, where he teaches executive courses on digital strategy and integrated marketing.

Dr. Fou completed his PhD at MIT at the age of 23. He started his career with McKinsey & Company and previously served as SVP, digital strategy lead, McCann/MRM Worldwide and group chief digital officer of Omnicom's Healthcare Consultancy Group (HCG). He writes a blog "Rants, Raves about Digital Marketing" and can be found on Twitter at @acfou.

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