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Why are data silos problematic (and how to break them down)?

This article is all about data silos – what they are and how they come to life, how much they cost your business, and how to identify and break them down.

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We live in a world driven by data. In 2020, everyone on Earth created about 2.5 quintillion bytes of data per day (if you’re wondering – there are 18 zeroes in quintillion). And you can imagine how much higher that number is today.

But when it comes to leading a business, just having data isn’t enough. You need to ensure you have quality data as measured by its completeness, validity, timeliness, consistency, and integrity. And even then – the data needs to be actionable, providing you with a way to create value for your customers and your company.

This leads us to the main question: What happens when your company’s data is duplicated and fragmented or, in other words, stored in data silos.

In this article, we’ll cover:

What Are Data Silos?


A data silo is a collection of data accessible to one team or department within the organization but not to others. To make it more tangible, think about how many presentations, meeting memos, or customer presentations you or your team have that you don’t share outside of the group.

It may seem like a minor issue at first – after all, most of us are guilty of doing this – but the number of silos and their size increases exponentially over time. At a certain point, leaders can’t see the whole picture when making decisions, leading to potentially crippling consequences for the company.

Now that we know what they are, you probably wonder how to break them down or stop them from happening altogether. But to get there, we first need to understand what causes data silos in the first place.

How Are Data Silos Created?

Data silos happen naturally over time, as teams create and store data for their own needs. However, for most data silos, four main reasons lead to their creation. And these can be traced to two culprits – people and technology.

Siloed organizational structure

In organizations where teams or departments operate as independent units, it’s natural for data to be siloed. After all, each group has its own way of working with different goals, timelines, and policies. And that will reflect on how they collect data and why.

This is most likely to happen in large organizations made up of teams working completely independently.

Technology

Following up on the reason above – if teams operate as separate units, they will also likely make purchasing decisions for tools and applications independently. That leads to many disparate tools being used across the organization. And each team using the one that fits their specific needs.

To make matters worse, teams have very little room to share data with other departments or stakeholders as these tools often don’t talk to each other and are difficult to integrate.

People and (organizational) culture

Suppose the organizational culture of a company doesn’t promote transparency and openness. In that case, teams will be very reluctant to share their data.

After all, we are only human, so it’s normal for us to have a sense of ownership of our data. But, this makes us suspicious when someone asks for it – especially in a highly competitive business environment.

Business growth and acquisition

Data silos can also be a result of uncontrolled growth spurs. As the organization becomes too large too quickly, structural issues can naturally create data silos. It’s the same in the case of acquisitions or mergers, which can bring their own data silos into the organization or make new ones if the systems between the two are not interoperable.

Cost of Data Silos

There are many ways in which data silos can affect your business and prevent you from being a leader in your market. Below are listed some of the most common ones.

Waste of time and resources

To understand how big of a problem data silos are, let’s look at some stats surrounding bad data and how much time and resources companies waste because of it:

  • The cost of bad data for most companies is between 15% and 25% of their revenue (MIT Sloan)
  • On average, it costs about $1 to prevent a duplicate, $10 to correct a duplicate, and $100 to store a duplicate if left untreated (SiriusDecisions)
  • Employees waste up to 50% of their time dealing with mundane data quality tasks (MIT Sloan)

As you can see, the cost of mismanaging your data can be pretty high. If left unchecked, data silos only grow in number and size and can result in crippling costs for the company.

Lack of cooperation and coordination between teams

An organizational culture that lacks transparency and trust can cultivate organizational silos, but the reverse is also true. The presence of data silos reinforces this behavior – making the teams even more hesitant to share data with others. At extremes, they can even resist organizational change programs which aim to break down the silos.

When data is difficult to share, all teams work independently based on the available data. Unfortunately, this makes it highly unlikely that they will be able to work together towards a common organizational goal.

Incomplete view of the business

If you’re leading a company, there’s a high chance you had to make far-reaching strategic decisions in the past. Maybe you were deciding on a new market to enter. Perhaps it was saying ‘yes’ or ‘no’ to a new product launch. One thing these situations have in common – you want to make sure you have all the data available.

Data silos make it difficult for leaders to see the big picture, as they only have access to separate groups of data without the overall context. This lack of clarity creates space for bad decision-making with potentially devastating consequences.

Poor data quality

Data is one of the most valuable assets your company has. But with time, data becomes outdated, incomplete, or goes missing altogether.

When you store the same data across multiple (isolated) locations in your organization, you don’t just waste storage space. You also prevent data from being cross-checked and corrected, leading to more bad data – and we’ve already covered how much that can cost you.

How Do You Identify Data Silos?

Since data silos sprout naturally over time and are often connected to organizational culture, they can be challenging to identify in the first place. In a perfect world, your IT department would audit all the different systems across the organization, identifying silos as they go. But as you can imagine, in most cases, that’s not possible, especially when it comes to larger organizations.

Luckily some signs can help you realize if there is a data silo lying somewhere around your organization:

  • Your management team needs to ask colleagues where specific data is and then ask for access.
  • Your departments are reporting different sets of data about the same customer.
  • You receive customer feedback saying that your data on them is wrong or outdated.
  • Unexpected or out-of-budget IT costs show up, especially around data storage.

 

How to Break Down Data Silos?

We’ve already mentioned that all data silos are caused by two things – people or technology. So it’s logical that we should also turn to those two when thinking about how to break silos down.

The following initiatives can be more or less effective, depending on why and how silos were created in the first place.

Change in company culture

If company culture is the reason behind data silos in your organization, changing it would be the best solution. But as we all know, that’s easier said than done – especially in large organizations.

An excellent way to start would be to openly communicate with your teams about the adverse effects of data silos. Helping them understand how silos are negatively affecting them and their work goes a long way – as none of us want to spend more time dealing with mundane data tasks than we absolutely have to.

On the other hand, work to promote a culture of openness and transparency throughout your organization. For example, you can organize workshops with people across different departments working together. Workshops will help your teams get a feel of what information others need and what is the best way of getting it to them.

This type of change needs to happen across the organization, so time and management commitment are crucial to success. When working with clients on agile transformation projects, we ensure we have the management buy-in by collaboratively setting the project goals and strategy. On the other hand, once the implementation starts, we always strive to include as many teams as possible to help manage their objections or fears when it comes to sharing data and breaking down silos.

Centralize your data in the cloud

The best way to get rid of data silos is to centralize your data into a single cloud-based solution. The cloud-based solution ensures that all the data you collect through the organization is stored in a single space and then homogenized and consolidated.

This ensures that the data is accessible and easy to use and that you follow all security and privacy regulations, as you can grant different levels of access to teams and individuals based on their needs.

As part of our digital strategy consulting services, we work with our customers to identify and break down silos in their organizations. By closely collaborating with their IT and other business units, we create a unified digital vision for your company. We then design processes and systems that ensure everyone works together towards that common goal.

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