Silos And Point Solutions: The Perfect Storm
Look to new technology to bridge the business.
In "Silo Busting," Ranjay Gulati notes that most businesses are unable to directly address the customer due to the presence of pervasive silos (Harvard Business Review, May 2007). To transcend silos, Gulati advises the build-out of structural mechanisms/processes to sync information and activities across business units.
Retail enterprise silos are profoundly entrenched. Across corporate, marketers market, merchants merchandise, loss preventers prevent, store managers manage stores, etc. In every chain, an insidious 'us and them' mentality exists as a friction against efforts to connect strategy with in-store execution.
Unfortunately, technology is both problem and solution. In search of the elusive 'best of breed,' retailers implement point solutions within narrowly defined process and procedural boundaries. Meanwhile, software vendors spin out new, denser versions of these applications, resulting in a cottage industry called application integration.
Worse still, each point solution requires nearly the same data, a cancer that exists across all retail IT — the burgeoning complexity of disparate solutions and underlying data integration issues that more or less brings IT progress to a coagulated halt.
The Perfect Storm: Point Solutions Exacerbate Silos
Happily, we are observing an industry trend to embrace technology to transcend silos. The emergence of SOA (service-oriented architecture), workflow, open standards, and source technologies are enabling new solutions and approaches that are process-driven, lightweight, faster to implement, and flexible. These same technologies drive new delivery mechanisms, giving rise, for example, to the adoption of software as a service (SaaS), where the solutions providers deliver and manage solutions faster and more economically than the retailer could on their own.
Another important trend is data centralization. The cost of dividing and duplicating data in support of multiple applications occupies a great percentage of IT budgets. Now, a single version of the retailer's information can support multiple applications, reporting instruments, and real-time event-driving workflow management. The cost reductions associated are massive.
Retailers' desires are evident in the vastness of business requirements present in RFIs/RFPs (requests for information/request for proposals) that cannot be satisfied by point solutions alone, but that can, however, be satisfied by integrated solutions that transcend silos.
These are the tools to bring together people and processes across the variety of activities that need to be coordinated across multiple systems and departments within the retail organization. This is how retailers can avoid excessive integration costs and prevent the 'white space' phenomena occurring with the adoption of point solutions. This also involves the adoption of real-time portals and dashboards supplemented by workflow and activity management solutions to ensure the delivery of timely, relevant, and actionable information throughout the enterprise. The adoption of these technological enablers will ensure the retailer's transcendence of silos.
Without the existence of silos, there are few barriers to block optimal business processes. The net result is a comprehensive view of sales, gross margin, inventory, labor, and profit contribution visibility across the business and a company focused on the moment of truth with the customer.
Eric Olafson is president and CEO of Tomax Corporation.
He can be reached via the company's Web site at www.tomax.com.