Flow by Design: A New Business Paradigm (1/2)

There is a revolution going on across all our major industries, albeit one that has been hiding in plain view until now. A small number of pioneer organizations have reinvented the way they manage their resources, encouraging the flow of ideas and information, raw materials and finished goods, employees and customers, even byproducts and waste. In doing so, they have demonstrated the viability of a new, more sustainable business paradigm for the future. In this first of two posts I explore the current status quo, the Silo paradigm and in the second one I will describe the emerging model of Flows.

Silos - the dominant paradigm

Everyone agrees that silos in the business world are a bad thing. Every few months another well meaning article urges us to bust, smash, destroy or crash them for the continued wellbeing of our firms. And you’d be hard pushed to find anyone actually admitting to owning or running one. So how is it that they keep cropping up like weeds despite our best intentions? What is it about them that causes them to appear not just in the business world but also in science, where their presence is just as criticized and just as ubiquitous, and in education, and in health care, and just about anywhere else we care to look?

The reason is surprisingly simple. It’s because they work, at least for the silo owner. They’ve been working for a very long time, ever since we built the first physical silos for storing grain some 11,500 years ago. From that time on we have found that the more control we have over resources the more valuable we can make them. Silos give us that control. We use silos to accumulate valuable resources and to release them only when they’re most needed and we can exploit their value most fully. And it doesn’t just apply to grain, missiles, or information. It’s how we manage and increase the value of nearly all kinds of resource, and if we look closely enough we will find silos of one kind or another just about everywhere. We accumulate gold and seeds and other strategic reserves in vaults, water behind dams, money in banks, patients in waiting rooms, students in classrooms, employees in cube farms, pigs and chicken in factory farms, and so on almost endlessly. As John Hagel III, John Seely Brown and Lang Davison have noted of knowledge resources, “our firms are organized and operate to accumulate and defend stocks of knowledge and to extract as much value from them as possible.” HBR Blog “Abandon Stocks, Embrace Flow”, January 27, 2009.

In short, nearly all of our organizations, across all industries, are silos or are made up of them.  The problem with many of our silos is that we tend to forget that they are only parts of systems, not systems themselves, and that optimizing for the success of the silo can compromise the overall success and wellbeing of the system, whether that system is a company, an industry, a community or an ecosystem. Silos can create inequalities between those that own and control resources and those that need them. They can deplete and even exhaust resources that turn out to be finite, and they are often slow, reluctant and even incapable of adapting to changing system conditions and needs.

So, if we really truly want to smash the silos, we’re going to need something much deeper than an impassioned plea. We’re going to need an alternative, a whole new business paradigm in fact, and not just for information silos but for all resource types. It turns out that the paradigm Hagel, Seely Brown and Davidson recommended for knowledge holds true for all other resources as well; one based on Flows. A small number of pioneer organizations have already proven the effectiveness of this paradigm, demonstrating that flow based designs can be better for the customer, better for the company and better for the environment than their silo equivalents and, as a result, represent a new, more sustainable business model for the future.

For more information on Flow by Design, a new business paradigm which promotes flows of resources including people, information, materials, products, energy and waste, please feel free to comment on this post. I will be sure to reply.