Ashridge

Virtual Learning Resource Centre

Knowledge management case book

Bookcover

by Tom Davenport and Gilbert Probst, a joint publication of Publicis MCD Verlag and John Wiley & Sons, 2000.

Abstract

The Siemens "ShareNet" System is used to show how knowledge may be shared throughout an organisation, including evaluating the added value in a measurable way and involving everyone systematically.

(Summarised by Kevin Barham in December 2001)

(These book reviews aim to represent some of the key aspects of what the author has written. They do not necessarily represent the views of the reviewer or of Ashridge. Equally the author of the book reviewed must not be held responsible for any misperceptions of the reviewer.)

Siemens wants its employees to share their knowledge with colleagues in other business units and counties. So it rewards its them with what it calls 'ShareNet shares'. ShareNet is the company's knowledge-sharing network. This links sales personnel around the world 24 hours a day, enabling over 6,000 information and communications technology specialists, in more than 40 countries, to provide immediate help for each other and to provide customers with instant access to Siemens' global know-how. And it's not just those who contribute their ideas who receive rewards; those who receive the ideas - the 're-users' of knowledge - are also rewarded. Depending on the number of shares accumulated during a year, these employees are rewarded with incentives such as participation in conferences, telecommunications equipment or other benefits that will help them in their work.

Encouraging people to share ideas across the organisation is just one way in which firms are trying to exploit their expertise more systematically and more intensively than ever before. In the new economy, today's core competencies become tomorrow's core rigidities with unprecedented speed. Under these conditions, companies must ruthlessly reconsider the value of established ways of doing business, and gear the organisation towards exploitation of its most valuable asset - its knowledge base. This book illustrates, by way of case studies, how one leading multinational company, Siemens, a firm once noted for its bureaucracy and its deliberation, has been trying to transform itself from within into a knowledge-based company.

Siemens is an excellent illustration of the challenges involved in knowledge sharing. Knowledge in general, and sales knowledge in particular, is bound to one person. Getting someone to enhance other people's knowledge by voluntarily contributing his or her own does not happen easily. People may consider sharing a time-consuming and tedious exercise. They wonder what benefit they will receive. While one benefit is being regarded as an expert in a certain field, once someone gains such a reputation, other people will solicit their opinion, leading to time lost for the individual's own projects.

As noted above, Siemens believes that both the contributor and the re-user need to be rewarded. The contributor must obviously be rewarded for the time they invest in sharing knowledge. The main reward for the receiver should be the knowledge itself, but other incentives may be needed to overcome the 'not-invented-here' syndrome that is why, at Siemens, the re-user also receives shares.

It is not enough, furthermore, that knowledge is shared; the knowledge must be truly useful. The number of shares given to the contributor therefore depends on the re-use feedback from the taker of knowledge. The higher the usefulness of the knowledge provided, the higher the reward. Based on the feedback, inferior quality knowledge can be removed from the ShareNet, while high quality knowledge can be identified and developed further, leading hopefully to a constant improvement of the quality of the available knowledge.

Between 60 and 80 per cent of the value added that Siemens generates is directly linked to knowledge and the proportion is growing. There are few problems that one or another of its businesses hasn't already addressed, or that one of the 400,000 Siemens. Experts in one of the 190 countries where the firm is active hasn't tackled before. Its treasure trove of experience is one of the firm's key competitive advantages. But Siemens discovered that only a fraction of the knowledge it possesses is ever actually put to use. It has therefore turned to Knowledge Management to rectify the situation.

Knowledge Management, say the editors, makes particular sense for Siemens. First, it is a global firm. This means that, for employees to share knowledge, they must do so through means other than, or in addition to, informal face-to-face communications. Information technology has accordingly become an important facilitator of the firm's diverse businesses. But, as this book shows, knowledge management at Siemens goes far beyond purely IT-based systems.

Siemens is also a highly diverse organisation operating in a wide variety of businesses. Like all conglomerates it faces the question of how a collection of relatively independent businesses can achieve synergies or increased value through collaboration. How can the whole be made greater than the sum of the parts? Firms often hesitate to ask individual business units to help one another for fear that they will suboptimise their own performance. Knowledge management offers a potential solution to this dilemma. If knowledge can be easily shared across business units, then one business unit can take advantage of the learning and expertise of another. Sharing, however, requires more than just technology and a common communications network. There must be a willingness to share, and a sense that employees are all part of one broad organisation, not just their own business units.

In the past, Siemens was known for its strong hierarchy but, according to the editors of this book, its approach to knowledge management has not been hierarchical at all. Instead the approach has been from the grassroots up. Without suggestion or prompting from above, a number of mid-level employees and managers of Siemens business units began to create knowledge repositories, communities of practice, and informal sharing approaches for knowledge. In most business units the opinion of those taking the initiative was simply that the time had come to begin managing knowledge. Clear messages from top management convinced them that they were on the right track and that there was a need for a co-ordinated approach of a Siemens-wide management of knowledge. While a corporate knowledge management function was established in recognition of the need for a co-ordinated approach to knowledge management, most knowledge management takes place in the business units, with the corporate group playing only a co-ordinating role.

Siemens' approach to knowledge management is also notable for the extent of its relationships with external entities, particularly universities. (This book, for example, is produced by Siemens in collaboration with doctoral students from different universities.) Siemens believes that in the current, networked, e-economy, companies that harvest and hoard their knowledge will be at a competitive disadvantage. Companies today live in knowledge ecologies where one company feeds knowledge into another. What counts is a networked approach to knowledge management, involving internal as well as external parties. The logic behind this is simple: if you cut off the outflow of knowledge, you will also cut off the inflow. A firm's openness to external experts and the sharing of ideas within a broad network will be a key driver in maintaining competitive success.

The book is organised in five parts. Part 1 contains four cases addressing fundamental issues involved in identifying relevant knowledge and transferring it in a timely fashion to the people who need it. The first case describes leveraging knowledge on a global basis and outlines the role and critical success factors of the ShareNet network. This shows the importance of finding the right balance between IT solutions for capturing explicit codified knowledge and leaving enough room for direct personal exchange of more implicit forms of knowledge. It also shows that knowledge-management initiatives have to be embedded within appropriate incentive systems (as described above), structural arrangements that facilitate knowledge sharing (including a network of local ShareNet managers who act as facilitators and trainers) and an organisational culture marked by openness, mutual respect and absence of ambiguity. To ensure global reach, knowledge sharing has to take place on three levels: within one country, between peer countries and between market stages.

Another case looks at the sharing of knowledge within a sales and service environment. By virtue of their intensive contact with customers, sales representatives and service technicians are not only a major source of knowledge and experience, but also of future customer needs. A third case describes the Know-How exchange, a knowledge sharing tool connecting the employees of Siemens Industrial Services which pools the knowledge gained from the experience of diverse projects in more than three hundred locations throughout the world.

Part 2 looks at the challenges involved in creating Communities of Practice. The most critical of these is balancing explicit management of communities on the one hand with the deliberate self-organisation of communities on the other. One of the cases describes how a manager and his team implemented the exchange of process knowledge within the factories of a Siemens microchip business in five countries on three different continents in order to solve manufacturing problems and optimise procedures. The ambitious goals of the business could only be realised if all ten sites were able to achieve the same level and quality of output. This would only be possible if valuable expertise was easily, continously and freely accessible as and when problems arose, rather than sporadically as in the past. The approach developed here is ideally suited to the everchanging and highly competitive field of semiconductor technology, where strategic technological knowledge has a relatively short 'half-life' and thus needs to be transferred and implemented as quickly as possible.

Knowledge management in itself does not necessarily produce superior value. But when knowledge is applied to marketable products and services, the true added value of knowledge management emerges. Part 3 illustrates innovative approaches to knowledge application. These include knowledge management approaches developed in an internal consulting business unit within Siemens and in a leading clinical research centre working in partnership with Siemens. A knowledge management approach to mergers and acquisitions and the benefits of a corporate learning programme for knowledge management are also described.

You can only manage what you can measure, say the editors. It is critical to evaluate the added value that knowledge management provides in some quantifiable manner. Measuring knowledge management provides a basis for developing incentives for further stimulating knowledge sharing and networking. It is also vital to ensure that existing knowledge assets are constantly challenged in a purposeful way. Part 4 therefore addresses the question of developing metrics and incentives for knowledge management. The first case describes how knowledge networking on a global scale is 'given a nudge' through a knowledge network model which measures international knowledge management and the Bonus-on-Top scheme which makes worldwide knowledge transfer and creation attractive by offering employees valuable incentives. Another case looks at the Knowledge Networking (KN) Indicator which was developed as a measured variable for a balanced scorecard. A standardised, online measuring process, it allows interventions by management to improve the distribution and usage of knowledge within the company.

The last case looks at the intersection of knowledge management and e-business and considers the 'daunting' task of managing the expertise of customers. Customer knowledge is a potent competitive asset in the internet age, because it enables companies to scrutinise their established ways of doing business when it is juxtaposed with organisational knowledge. This case offers some valuable perspectives on the forces that are altering established ways of operating:

Unprecedented market transparency - the internet shifts power to the customer as they become more able to compare a firm's solutions to those of its competitors.

Networked business models - formerly integrated value chains of businesses and even industries disintegrate into separate value chains and demand novel ways of aligning our value chains with those of the customer.

Vanishing boundaries between partners, suppliers and customers - the locus of knowledge shifts from within corporate boundaries to customers. Companies must co-opt the latter's competence and knowledge through joint value creation. Motivating the customer to engage in such active dialogue is a key requirement.

Increased speed - this questions the relevance of knowledge accumulated in the past. Companies must be prepared to reconsider and often cannibalise established ways of doing business on an ongoing basis and ensure their knowledge capital evolves in real time in keeping with market requirements.

Knowledge Management as a lever - knowledge management needs to broaden through integrating customer knowledge into the organisational knowledge base and needs to be geared towards challenging existing knowledge. Knowledge management is the backbone of e-business and lack of in-depth experience with it will impair e-success.

Trust as a key enabler - price does not rule the web, trust does. Trust is the single most important source of competitive advantage on the Web. Companies need to gear their processes toward establishing a trust culture between them and their customers.

Each of the 13 case studies in the book concludes with a summary of the key propositions and a list of questions for further reflection. The editors see the book, however, as more than just a collection of, (albeit very useful and insightful,) case studies. In the current, networked, business environment, they say, case writing can be a highly effective tool for creating and exchanging knowledge within your company and also with external partners. Collaboration in a case-writing group between company 'insiders' and 'outsiders' allows the interplay of questions and discussion through which knowledge becomes conscious. Case writing depends, however, on the willingness of top managers to use the lessons and knowledge in the cases - and that of course inevitably raises some questions.

This is not the usual glossy-covered business book. It is a remarkably in-depth and revealing picture of one company's knowledge journey. It has been compiled in the belief that companies must be prepared to disclose and openly discuss the challenges and experiences of the past if they are to learn from them. If Siemens succeeds, the editors believe that knowledge management will become so pervasive within the firm that it will be part of everyone's job, and difficult to isolate as an activity in itself. Perhaps the best future indicator of success with knowledge management will be its invisibility.

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