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Strategic Market Management, 10th Edition by David A. Aaker

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CHAPTER SIXTEEN

From Silos to Synergy—Harnessing the Organization1

All progress is initiated by challenging current conceptions and executed by supplanting existing institutions.

George Bernard Shaw

Structure follows strategy.

Alfred Chandler, Jr.

Those that implement the plans must make the plans.

Patrick Hagerty, Texas Instruments

In 1922, Alfred Sloan, a legend in management history, instituted a divisional structure at GM with Chevrolet at the low end, Cadillac at the high end, and Pontiac, Oldsmobile, and Buick in between. The divisions had distinct offerings and no price overlap. His admonition at the time was that “The responsibility of the CEOs of each operation should be in no way limited.” In no way limited!! Total autonomy. The business world now had a method to deal with the emerging complexity of multiple product lines. Since that time, decentralization has refined and became the dominant organization form. Nearly every organization, from Nestlé to HP to Bank of America to Nissan to Stanford University, prides itself on being decentralized with autonomous organizational groups termed silos, a metaphor for a self-contained entity.

There is good reason why silo units, usually defined by products or countries, are widely used—they have enormous inherent advantages. The managers are close to the market and can therefore understand customer needs. They are also intimate with the product or service and the underlying technology and operations, and thus can make informed ...

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