Why Are Data Silos Problematic? 3 Reasons and Solutions

If you have ever driven by the modern farm, you’re bound to see huge metal cylinders. These cylinders store grain and other products are also called silos. They also represent what can we happen to data inside companies. Data can also end up stuck inside silos. This post will help you understand why data silos are problematic and how to start breaking down the walls.

Reason #1: You’re Leaving Growth on the Table

The main reason why data silos are problematic is that they force your company to leave growth and productivity on the table. Let’s imagine that we have two teams: marketing and sales. 

They each have their own data, and their work is heavily dependent on the other. Marketing generates the leads, and sales close them.

Their teams don’t share data and have their own silos. Marketing will do their best to hit their goals which is more leads. Sales will do their best and close as many sales as possible. However, if these two teams talked to each other and share data, they could likely uncover opportunities to help both of them.

Sales could share information on why leads don’t buy, and marketing could use that information to qualify leads at the funnel’s top better. Marketing could share information about potentially profitable segments and new customer groups.

I actually worked with a client in a similar situation. Their marketing and sales teams didn’t communicate with each other, and they were almost working against each other. Talking is the first step to breaking silos. 

The next step is to share data in real-time. Sales could see the latest marketing campaign results, and marketing teams can see if their leads actually converted down the funnel.

An extreme example of how silos can derail a company is Intel. Despite being one of the biggest chip makers, Intel has struggled in recent years. They have fallen behind competitors, and their best customers, like Apple, are now moving into making their own chips.

Intel likely saw all of these trends internally, but they were unable to take action on them. Their teams function as silos, doing their best but still failing to make progress on meaningful goals.

Reason #2: Incentives Can Get Out of Whack

The second reason why silos are bad comes down to incentives. In the previous example, I mentioned a client whose sales and marketing teams didn’t speak to each other.

The lack of communication led to incentives going completely out of whack. Marketing was rewarded for driving as many leads as possible. As you can imagine, the quality of these leads wasn’t very high.

Sales would lose upwards of 50% of the leads from day 1. They wouldn’t show up to calls or respond to emails. Sales had to work extra hard then to convert the remaining leads.

By looking at things in isolation, you can end up in funky places. Companies function holistically, and things rarely happen on their own. Sales and marketing is an obvious example, but every team takes actions that affect other teams. 

You may be dealing with customer support and operations or manufacturing and sales. Silos can create unexpected incentives and bottlenecks. Trying to solve the “sales issue” in my client was pointless. The clear issue was at the top of the funnel, not at the sales level.

Reason #3: It Causes Political Issues

The third and final reason is about politics. Politics is common in companies, and I would even argue that is needed. Everyone has different ideas on reaching a goal, and politics is the way of working through all those ideas.

However, silos can further exacerbate political issues. Teams can become resentful for being blamed for things that aren’t their fault. The sales team can get frustrated with being the bottleneck when they know the issue isn’t 100% their fault.

Teams that hit their goals (despite what happens elsewhere) can get credit and more budget access. You might as well give the money to the team that is actually hitting their goals, right?

Everyone is doing their best within companies. You might have a small percentage that is actively working against other people, but that’s a minority. Getting people to align around company-wide goals ensures that you win and lose as a team, not as silos.

Data silos can form of their own volition, but they need a counterforce to broken apart. Remember that this is primarily a people question and should be handled as such. The technical aspect of breaking silos is straightforward and getting easier by the day.

One more thing before you go! Do you know how to get more insights out of your data? 

All companies are sitting on a goldmine of data that they haven't fully explored. It's not about technology or capturing more data. The key is to learn how to make the most of your current data and convert it into actionable insights. This is the main idea behind my first book, The Data Miage: Why Companies Fail to Actually Use Their Data

I'm excited to announce the release of the book through all major retailers. If you're interested, you can download the first chapter for free using the form below. You'll learn what the best data-driven companies do differently and how to make sure you're playing the right data game.