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The Silo Effect:

The Peril of Expertise and the Promise of Breaking Down Barriers

Gillian Tett

WHY do organisations fail? Sometimes it is because their market or purpose disappears completely, as in the case of, say, video-rental shops. But often it is because as they grow, they lose the same innovative streak that made them a success. Like individuals, groups can become stuck in their ways, with fatal results.

In her new book Gillian Tett, the US managing editor and a columnist with the Financial Times, blames silos for such failures to adapt. Through eight fables, Ms Tett argues that internal divisions and classifications, say, between doctors and surgeons, hold back creative thinking and encourage turf wars. Breaking them down can lead to innovation and, subsequently, success.

Take Sony. Having invented the path-breaking Walkman, a portable cassette player, in the late 1970s, Sony was one of the world's foremost technology companies. Yet it fell behind during the transition to digital music, despite launching three different digital music players two years before Apple invented the iPod.

The problem, argues Ms Tett, was Sony's silos. The firm knew it needed to evolve, but its divisions did not work together on a unified strategy or draw on each other's strengths. Instead, Sony's staff were concerned with protecting or expanding their own turf by producing their own - incompatible - products. The company's record label, which should have been an asset, was a hindrance: it feared losing revenue and therefore resisted the digital transition.

Ms Tett contrasts these rigidities with the flexibility of modern organisations like Facebook. By rotating staff through different teams, having only one profit-and-loss account for the entire company and designing offices to encourage social 'collisions', it avoids divided thinking. Lest this seem woolly, Ms Tett devotes another chapter to showing how silo-busting has created profitable trading opportunities for hedge funds that ignore the usual distinction between debt and equity analysis.

This is not just a business book. An anthropologist by training, Ms Tett is fascinated by how people organise themselves. Early on, she describes the anthropologist's thirst to seek out and question 'social silences' - unspeaking acceptance of the status quo. She compares norms for domestic arrangements in the Kabyle people of Algeria to the rules dictating the layout of New York's City Hall. In both cases, the choices seem natural to those involved but appear strange - even random - to an outsider. To escape cultural silos, people should question everything. Sometimes Ms Tett stretches the definition beyond recognition. She claims, for instance, that economists who failed to predict the financial crisis fell into a single intellectual silo. Such herding behaviour is the product of thinking that is too homogeneous, not too divided; elsewhere she criticises banks whose different teams value the same security using different models. Using the term 'silos' so indiscriminately makes the book's thesis seem imprecise.

Many readers will recognise the problems Ms Tett describes. Although the human tendency to categorise and subdivide can increase efficiency, groups often forget that the divisions they create are artificial. That makes them hard to break down; the success stories Ms Tett describes are typically the result of a new venture, like Facebook, or of a change in leadership. For those languishing at the bottom of a silo, there may be no way out.

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