Organizational silos can be a vexing barrier to everything from innovation to improving customer experiences. But the demands of digital business are driving cross-functional structures and making structural boundaries increasingly irrelevant.
Although organizations have been using cross-functional teams for decades, they are rarely the primary way work gets done. However, according to the 2017 MIT Sloan Management Review and Deloitte Digital study of technology and organizations, the demands of digital business are making these teams more necessary and dissolving company silos in the process.¹
Providing the agility needed to thrive in the face of digital change, cross-functional teams are hallmarks of what the report calls “digital maturity.” In contrast to launching short-term initiatives focused on a new technology or devoting several years to building new capabilities, digital maturity is an ongoing, enterprisewide process. It aligns strategy, workforce, technology, and culture to ensure an organization can continually change as technology alters customer and competitor behaviors.
“It’s just more difficult to think about any function in isolation because processes are becoming so integrated,” says David Cotteleer, vice president and chief information officer at Harley-Davidson. “The opportunity for integration and collaboration is so great that it drives greater effectiveness and efficiency.”
More than 70 percent of organizations furthest along the path toward digital maturity organize around cross-functional teams. Among organizations at early stages of digital development, the percentage drops dramatically. Moreover, digital progress in early-stage organizations is severely hampered by management structures and processes (Figure 1).
A Hotel’s Cross-Functional Hospitality
The digitally enabled customer experience is one of the main factors pushing traditional organizational boundaries aside. As digital platforms allow customers to engage with all parts of a company, companies will need cross-functional organization to deliver on customer expectations at each interaction point.
A global hotel chain offers a prime example. The senior vice president of digital for the chain tried various digital apps from competing hotels and discovered that, although they worked well technically, on one occasion he wasn’t automatically checked in at the hotel upon arrival and the dinner he ordered never showed up in his room. It was a lightbulb moment. “We can create the best website on the planet and the best search campaigns to reach customers,” he says, “but if we can’t deliver an exceptional stay, guests won’t come back.”
To make sure the hotel chain didn’t suffer that fate, the executive began working closely with hotel operational groups, spending more time with them than with his own team. He put the operational knowledge to work and has been able to mobilize personnel from across the organization to make sure the guest apps deliver on their promises. Today, cross-functional teaming is permanent. Functions across the hotels have the same performance metrics and digital professionals work in most units.
Elsewhere, product design and production are also increasingly driven by cross-functional collaboration. Cotteleer points out that connected vehicles demand rigorous teaming. “It’s no longer just about product engineering,” he says. “It is about software design, system integration, and other elements that fall outside traditional product engineering. Multiple functions in the company are now realizing that what used to be their domain is now also a domain of technology.”
Spurring Cross-Functional Collaboration
In addition to being a catalyst for collaboration, technology can also help drive it. A life sciences company, for example, is combining collaboration software and artificial intelligence tools to keep track of the topics its more than 6,000 scientists search online. It then connects like-minded researchers to stimulate collaboration and expedite early-stage drug discovery.
Individuals can encourage enterprisewide collaboration without technology. At CarMax, teams within the IT organization sponsor weekly open houses for the entire company that are attended by the CEO and other senior leaders. “The open houses foster a tremendous amount of openness and cross-communication that we didn’t have before,” says Shamim Mohammad, chief information officer and senior vice president. “They also show our teams that we support them. If the senior executives take time from their busy schedules to attend the open houses, that means they are important to the company.”
Rewards and incentives are also critical, and digitally maturing companies have put them in place. Nearly 80 percent of digitally maturing entities reward cross-functional collaboration versus only 34 percent of companies at early stages of digital development.²
Successful collaboration requires shared goals and incentives that can create new mindsets by exposing employees to different ways of thinking and engaging. New mindsets and working styles, in turn, can strengthen the company culture. Digitally maturing companies understand the connections. They intentionally cultivate collaboration and digital cultures, which allows them to rely on their employees to embrace and push digital change.
1. Gerald C. Kane, Doug Palmer, Anh Nguyen Phillips, David Kiron, and Natasha Buckley, “Achieving Digital Maturity: Adapting Your Company to a Changing World,” MIT Sloan Management Review in collaboration with Deloitte University Press, summer 2017.