There is a quiet revolution going on across all our major industries, one that has been hiding in plain view until now. A small number of pioneer organizations have successfully created radically differentiated business models to their industry norms. They have done that by reinventing the way they manage their resources.
Henry King is an innovation and transformation leader at Salesforce and author of Flow Design, a new design paradigm for organizations and experiences based on the principles of movement and connections.
King is a former CIO with 30 years of consulting and executive experience, both in the US and internationally, with expertise in innovation, design thinking, and information technology. King also teaches innovation and design topics at the School of the Art Institute of Chicago and the Institute of Design. Henry and I first met when we were tasked with the implementation of Salesforce's first distributed ledger (blockchain) project at a large university in 2016. Since then, King and I have studied digital transformation projects at hyper-growth companies, as well as new business model innovation opportunities, and we believe that flow-based organizational design accelerated digital business transformation. We believe movement is the ultimate status symbol.
We recognize that trailblazer organizations have successfully created radically differentiated business models to their industry norms by removing process friction and establishing continuity of flow of resources. In doing so, they have demonstrated the viability of a new route to success and a more sustainable business paradigm for the future. We call this new model Flow by Design. We are introducing Flow by Design here in its own blog series. In this first post, we explore the current, dominant business model for resource management, which we call the Silo model, to provide the context within which Flow is emerging as an alternative.
Everyone agrees that silos in the business world -- siloed teams and departments, siloed data and systems, siloed processes and practices -- are a bad thing. Every few months another well-meaning article urges us to bust, smash, destroy or crash them for the continued wellbeing of our firms. And you'd be hard pushed to find anyone admitting to owning or running one. So how is it that they keep cropping up like weeds despite our best intentions? What is it about them that causes them to appear not just in the business world but also in science, where their presence is just as criticized and just as ubiquitous, and in education, and health care, and just about anywhere else we care to look?
The reason is surprisingly simple. It's because they work, at least for the silo owner. They've been working for a very long time, ever since we built the first physical silos for storing grain some 11,500 years ago and, in doing so, extracted natural resources and accumulated them under our direct control and management for the very first time in our species' history. From that time on we have found that the more control we have over resources the more value we can get from them. Silos give us that control. We use silos to accumulate valuable resources, create economies of scale, and release them only when they're most needed and we can exploit them most fully. As John Hagel III, John Seely Brown, and Lang Davison have noted knowledge resources; "our firms are organized and operate to accumulate and defend stocks of knowledge and to extract as much value from them as possible."
This description doesn't just apply to knowledge, or grain or even to missiles. It's how we manage and increase the value of nearly all kinds of resources, and if we look closely enough we will find silos of one kind or another, albeit thinly disguised under different names, just about everywhere. We accumulate gold and seeds and other strategic reserves in vaults, water behind dams, money in banks, patients in waiting rooms, students in classrooms, employees in cube farms, pigs and chicken in factory farms, and so on almost endlessly. The silos that we complain about at our workplaces are not aberrations or anomalies. They're part of this long and deep tradition of resource management at a scale that works for the resource owner if for no one else.
It's not just accumulation and protection that all these different kinds of silos have in common. Our research has uncovered seven aspects of resource management, seven different principles, that they all share, again regardless of industry and resource type (e.g. grain, money, product, information, animals, etc.). These principles are:
To be clear, these principles do not describe the type of improvement or processing that is unique to different organizations and industries. The work of a school is different from that of a hospital or an office or a farm. And yet the ways they manage their students, patients, employees, and livestock to do that work of improving or processing them most efficiently are strikingly similar, following these principles closely if unconsciously.
Extraction: silos extract resources from their home, native or natural environments, or take them out of general circulation.
Accumulation: silos gather and then hoard their newly extracted resources, sharing with no one, internally or externally.
Isolation: silos separate their resources from one another to facilitate processing and to protect against unwanted effects of interaction like a contagion, decay, or combustion.
Dependency: silos control all aspects of the resource's existence, including decision making, providing basic needs, and environmental control.
Immobility: silos immobilize their resources for ease of management, processing, and control.
Batching: silos control the release of their resources to the outside, generally in batches and at clearly defined intervals, often seasonally.
Silo Success: silos optimize only for improving or processing their resources with maximum efficiency or for extracting the maximum possible productivity or value from them.
Problems with silos
These siloed ways of managing resources generate a set of conditions that can be deeply problematic. Silos create inequalities or incompatibilities between those that own and control resources and those that need them. They can deplete and even exhaust resources that turn out to be finite, and they are often slow, reluctant and even incapable of adapting to changing system conditions and needs.
Additionally, silos are only parts of systems, not systems themselves. Optimizing for the success of the silo can compromise the overall success and well-being of the system, whether that system is a company, an industry, a community or an ecosystem.
The silos that we are most familiar with inside our own organizations share the same problems and, more specifically, are responsible for wasting our customers' time, being unresponsive to their needs and creating poor experiences for them. Internally they routinely generate frustration, wasted time and friction, ineffective communications, untimely decision making, and unresponsiveness not only to customers but more broadly to competitive pressures and changing market conditions. All of which can lead to a loss of business and, at the extreme, to tragedy and loss of life*.
These problems are not random effects, unintended consequences, or accidental byproducts of our otherwise well-meaning actions. They are inevitable outcomes of an intentional, millennia-tested model for optimal resource productivity. Nor are they niche, limited to obscure or specialized situations. On the contrary, silo-based resource management governs at least 90% of all our industries and institutions. Nearly all our companies, universities, hospitals, schools, farms, prisons and so on apply the same set of management principles to their resources, human and non-human alike.
Salesforce research also shows that the customer experience that companies provide is as important as their products. To deliver the best possible customer experience, businesses must shift away from slio-design principles to a model that minimizes process friction and more resembles how living organisms grow and flourish. Living systems are flow-based. They circulate resources throughout the organism and its environment.
An alternative business model
So, if we really truly want to smash the silos that we are all familiar with at our workplaces and that we all complain about regularly, we're going to need something much deeper than an impassioned plea. They're never going to go away just because we don't like them. We're going to need an alternative, a whole new business paradigm in fact, and not just for information silos but for all resource types. It turns out that the paradigm Hagel, Seely Brown and Davidson recommended for knowledge holds true for all other resources as well; one based on Flows.
A small number of pioneer organizations have already proven the effectiveness of this paradigm, demonstrating that flow-based designs can be better for the customer, better for the company and better for the environment than their silo equivalents and, as a result, represent a new, more sustainable business model for the future. These companies have also shown us that innovation at scale will require the adoption of new business models and flow-based design principles.
In the next post of this series, we will introduce this model and explore the seven principles of Flow by Design that characterize these trailblazing organizations. We will define the seven principles of flow including 1. connection, 2. distribution, 3. integration, autonomy, mobility, continuity, and holistic success. With each principle, we will also provide use cases that illustrate how trailblazer companies are leveraging these principles to delight stakeholders and grow market share.
Designing experiences for flow and continuous motion is an emerging trend in its infancy. Designing organizations for flow is not even being conceived of by most, and yet it is a foundational element for delivering the optimal user experience. We manage our resources including data, ideas and innovation, communications, expertise, and even colleagues the same way as we do our customers, amassing them and bringing them to a standstill before processing and releasing them again. This must change.
This article was co-authored by Henry King, a business innovation and transformation strategy leader at Salesforce.