4 Common Reasons Digital Transformation Efforts Produce Digital Silos

Improved collaboration and access to information are some of the chief benefits of corporate digitization; yet, many digital initiatives fail to fully deliver on this promise. That failure is typically manifested in the form of “digital silos” – diverging and incompatible approaches to adopting and utilizing technology by different segments of a company. Their defining features are walled-off data collections that one part of the company has access to but others don’t (i.e. data silos). However, the potential consequences of this anomaly go beyond issues related to data management (such as difficulties in finding and verifying information) and may include:

  • Compromised transparency
  • Reduced trust between employees and teams
  • Operational inefficiencies

Obviously, the ultimate downside of digital silos is dwindling business performance, which is also the ultimate reason companies would want to address the issue. Considering the four common causes I discuss below can serve as a good starting point on that path.

1. Non-strategic approach to IT and digital transformation

When conducted strategically, digital transformation takes a big picture approach that accounts for the needs of the company as a whole and aims for technological integration on the highest level. Without a strategic approach, each department ends up crafting it’s path to digitization independently of each other, behaving as small companies within a company. Departments may even resist taking a holistic approach to DT, if they feel they can move more quickly alone and by using disparate solutions. While this can be beneficial in some scenarios (especially where the inert internal IT department slows important technology initiatives down to a crawl), focusing on local optimizations has wide-ranging detrimental effects in the long run.

Without a strategic approach, each department ends up crafting it’s path to digitization independently of each other.

2. Perceived financial risks

While digital transformation initiatives should ultimately reduce direct IT (and overall company) costs, up-front investments in the integrated approach to the process can seem prohibitive. This goes both for the costs of the new solutions being introduced, as well as the costs of integration with legacy systems. Even if these expenses are simply hard to estimate, that can still cause hesitation and tip the scales in favor of the status quo (i.e. a siloed, department-centered approach).

While digital transformation should ultimately reduce costs, up-front investments in the integrated approach to the process can seem prohibitive.

3. Lack of tech expertise

Even if digitization is planned strategically, not having enough in-house expertise to choose the right tech stack or over-the-top (instead of back-end) integration approach can produce digital disparities across the organization. Instead of relying on evaluation of relevant business scenarios across enterprise, decisions are made based on ever-changing tech trends or fascination with specific technologies. When a new technology trend emerges or the error of previous choices becomes clear, the company may end up with a mishmash of different (“best of breed”) and difficult-to-integrate solutions that set different parts of the company apart. Also, lack of tech expertise by end users can negatively affect the way technology is utilized, which is another quick way for digital silos to form.

Not having enough in-house expertise to choose the right integration approach can produce digital disparities across the organization.

4. Organizational and cultural silos

Properly executing digitization from a tech standpoint may not be matched by organizational improvements that allow the new tools to be put to use. Additionally, if departments aren’t used to collaborating and setting common goals, they may find out that their internal cultures have diverged sufficiently to obstruct collaboration even when technology allows it. For digital transformation to fully succeed, processes, structures and mindsets need to be adjusted to the new tech infrastructure. Otherwise, it will remain an underutilized asset, unable to break down the artificial barriers within the organization.

Digitization may not be matched by organizational improvements that allow the new tools to be put to use.

Each company has a different set of reasons why it is siloed, and each of those reasons requires a different way of tackling it. In future discussions on this topic, I discuss the causes touched upon here , as well as their possible solutions (such as over-the-top and API-based integrations) in more detail. Stay tuned.

Sanin Saracevic

Founder and CEO at Maestral Solutions, Inc.