SILO-IZATION: The Silent Killer of Profitability and Growth – VI

The sales and marketing silos very often operate at cross- purposes, most likely so do other parts of the company. The only boss in business is the Customer, and management can’t be working in their silos without having a clear understanding of this vital reality.

Are You a present or future-minded manager?

Are you committed to your power and position versus the health and sustainability of the business? This is a key question every Manager must answer, and if silos are identified, they must be dismantled and eliminated. Steve Jobs rejoined Apple in 1997, amongst a severe decline in revenues and profitability, and he immediately eliminated all silos , of which there were many at that time in Apple’s history. He even allowed product managers to cannibalize other Apple products to make new ones, because he said, “If Apple doesn’t do it, other companies will. This is why Apple invented and successfully launched the iPod and Sony did not. He knew how to keep Apple in a leadership position through staying ahead of the curve even at the risk of competing with an existing Apple product. This Management philosophy saved Apple, and today you are seeing the results – first company in the world to reach the trillion $ mark in revenues – the primary force has been new and innovative products. Yet, I suspect that even NOW silos exist at Apple in some shape or form.

In IBM’S darkest moments under Lou Gerstner as CEO, led to the realization that the only way they could continue save the company from bankruptcy was to save them from themselves. IBM was addicted to silo-ization, and Lou started the long process of stripping the separate business units of their autonomy and power. Yes, IBM was close to bankruptcy as a result of Silos called business units going out on their own and starting businesses that had no fit in the overall strategy of the company (one such example is the skunk works development of a PC, in the early 80’s, at a small IBM facility in Ft. Lauderdale). The world was touting the successful skunk works PC development that was heading towards annihilating Apples successful PC, but there was only one negative, that being the fact that IBM was never able to make a significant profit from this skunk-works project.

IBM was in the mainframe business mindset, and the mainframe silos didn’t put any effort towards dedicating any of the company’s resources in developing a strong PC line to counter Apple. Let’s face it: People don’t like change as they wallow in the comfort of the present situation. IBM finally sold the entire PC product line to Lenovo and Asian high tech company who hasn’t really marketed the product successfully in the U.S..

Where is IBM today vs. Apple?

If IBM hadn’t been instituting changes under Ginny Rommety, the CEO of IBM for the last five years and a fellow Northwestern University graduate . Ginny had to face the same changes that Lou Gerstner faced some years ago and who wrote an excellent book called “Who Says Elephants Can’t Dance”, in which he describes the tedious job of implementing change amongst elephants in the Silos that needed to dance to a different tune. However, Ginny had the same success that Lou had in that she has changed IBM to a company that is gaining strength daily in product lines and markets that didn’t exist for IBM 5 Years ago. Current products and markets are representative of 47% of IBM’s current revenue stream of $60B aimed at AI – Blockchain and Security. In implementing those changes, she went 8 quarters without increases in profitability, and recently had a profitable quarter, only to shift back to no increase during the last quarter. Thank the Board of Directors for their clear understanding of the plan that will take IBM into the future and meet the ever changing requirements on a global basis?

How many future-minded Managers do you have in your organization? How many Silos do you have that will have to be dismantled and instead rebuilt into an effective business strategy?? Are you operating in a mode of knowing where your profits are going to come from today, but more importantly where is the growth and profitability going to come from in the future? Questions that must be addressed if your business will sustain the demands of the future.

Mark Alarik and his organization at Overlays Inc. is responsible for much of the information I have covered in this Blog. I had the pleasure to work with Mark and his son Dan at Gruntstyle LLC a Company that was started with a one page plan at Harper College and happened to be in a class I was teaching as an adjunct professor. Today, Gruntstyle employs in excess of 500 employees of whom 90% + are Veterans and will continue to grow because of the basic blocking and tackling management techniques that were implemented with that one-page plan. To provide a clear example of silo-ization, I would like to thank you in advance for reviewing the following case study which Mark worked on in a recent consulting arrangement:

The company referenced in this case study was a pioneer in data base server technology, and the product they were introducing to the market was the first product that integrated hardware and software to provide extremely high-performance data base processing.

  • Marketing is represented by Silo “A” that was totally focused on OEM/VAR industry markets where the driving metric was price-performance. They viewed the product through the hardware lens.
  • Silo “B”, the Sales Department, viewed the product through a software lens. They focused on the end-user and high-volume transaction and processing markets. They were selling solutions to a critical bottleneck problem.

By ignoring each other and wasting enormous amounts of money and time, in each doing their thing, the results became very evident. For example, the marketing materials generated were virtually useless for the sales organization. Sales needed marketing to expand the end-user market’s awareness that a solution to these very serious limitations of existing technologies was indeed available, but that did not happen. Instead, Marketing did market research (computer/academic collection techniques based on past data) and came up with a solution that it was necessary to implement price decreases of 50% to 60%. The price reduction strategy was implementd by the product managers in spite of the fact that the sales organization was encountering virtually no price resistance from the customer base. Maybe this might have been a good time to test a price increase by Region or Type of Customer!!

Nobody did any in-depth data analysis as a result of talking to the Sales Reps/Management, Customers and getting a complete but brief Competitive/Industry analysis to include competitors present market strategy and their strengths/weaknesses as well as future direction and plans of the Industry. All Marketing needed to do was to ask the right questions of Sales Reps and Customers and gain insights towards a solution. How many times have companies overreacted to poor sales by dropping their price? This company not only did not increase sales, they slashed their profit per sale in half because of the overactive price reductions. This company was working overtime to implode!

Sales and Marketing Silos should have been dismantled and immediate collaboration should have been put in place to create a profit strategy aimed at the real needs of a profitable Customer. Targeting the right prospect with the right solution and at the right price and timing is the foundation necessary for sustainable growth and profitability: and can only be laid by the elimination of Silos and collaboration of these two business units.

Please review this BLOG and think through your present and future Sales/Marketing strategy. If you need to discuss with a third party independent view, please call us, or send in a question. If you have a marketing strategy that is focused on industry, you will find that there is a minimum amount of visits and discussions with a Customer. If the Sales Department is focused on tactics and execution, you will fall on deaf ears of marketing personnel who almost have no communications with the Sales Department – they simply sit behind their computer screens and take an academic approach to identify market opportunities through analysis of past data. They are missing the street beat of the market.

Combining these areas and developing a single strategy, can not only save money, each dollar spent becomes a measurable investment in growing the Customer portfolio, revenues and profitability. Unify the efforts of Sales &Marketing – before you do this meet with each area and dismantle the silos that each entity represents – then get marketing management out to get a hands-on approach to your products and a present/ future insight as to what strategy you need to develop. Also, have Sales become aware as to the need for communications with Marketing, and provide a simple but effective vehicle that Sales can use to communicate.