Sony and the silo effect
This is documented history rather than a laboratory result. The events are well recorded. What they teach is an argument, and the entry makes it openly.
In 1999, two years before Apple released the iPod, Sony was better positioned than any company on earth to own the future of digital music. It had the legendary Walkman brand, world-class engineers, and it even owned a major record label, giving it both the hardware and the music. At a single industry event that year, Sony unveiled its vision for digital music, and revealed the problem: it showed two different, competing digital music players, built by rival internal divisions that would not cooperate, using incompatible formats. Each division guarded its own turf, pursued its own targets, and treated the others as competitors rather than colleagues. The divisions' pride and separate goals strangled the products, and a computer company with none of Sony's advantages walked in and took the entire era. Sony had everything except the ability to combine it.
When the parts of an organisation compete with each other instead of combining, even overwhelming advantages get squandered. Sony lost a market it should have owned not to a stronger rival but to its own internal divisions, each optimising for itself while the whole company lost. This is worth watching in any organisation large enough to have separate teams with separate goals: the silos quietly turn colleagues into competitors, and the company ends up fighting itself while an outsider takes the prize. The strength of an organisation lies less in the quality of its parts than in whether those parts can act as one, and impressive pieces that will not combine are a weakness disguised as strength.
Smith's pin factory says splitting work into specialised parts multiplied output by thousands. Sony's two rival music players say the same specialisation, once each part has its own goals, turns colleagues into competitors and squanders every advantage. Division of labour is the whole gain and it is also the failure mode. What separates them is whether the parts still have to combine into one product at the end, and whether anyone is responsible for making them do it.
Source: Documented corporate history. Analysis drawn in part from Gillian Tett, The Silo Effect, 2015.
Gillian Tett, 2015
On how organisations fracture into competing parts, and what it costs them when they do.
Draw your own card. It does not take long, and it rewards taking your time.