Knowledge management is power
Economic Times, November 08, 2002

At a meeting convened by Ashok Leyland managing director R Seshasayee to discuss quality issues, a junior executive sitting in a corner was shaking his head in disagreement at what was being discussed and agreed upon. But he was too diffident to express his point of view openly in front of his MD and senior executives.

Fortunately, Seshasayee noticed the dissenting junior executive and encouraged him to share his opinion. Much to everyone’s surprise, the junior executive came up with a bright new idea no one had thought of. Subsequently, Seshasayee asked the HR department to devise a programme to capture ‘pockets of knowledge’ within the organisation, which are normally not very visible.

After several rounds of discussion, Ashok Leyland has finalized its knowledge management programme and is hopeful of implementing it over the next six months.

To many, knowledge management might sound like another fanciful HR programme. However, in era of increased competition, companies are realizing that managing knowledge is as crucial as any other strategic issues. Corporate Dossier explored how knowledge management is deployed in automobile companies in India, what benefits the companies can derive from it and the problems they may face in the process. On talking to several automobile companies, we found that knowledge management is not taken seriously by many of them. Some have actually implemented it, others are in the process of implementing it, and yet others have only just heard of it.

Let’s consider the fallout of poor knowledge management. By 2003, IDC estimates that Fortune 500 companies will lose close to $32bn due to inefficiencies from intellectual rework, substandard performance and the inability to complete work. Northrop Grumman estimates that, on the average, employees spend six weeks a year searching for experts to complete work. In another study, KPMG found that 60 percent of employees spend more than an hour a day duplicating work of other employees.

These three studies clearly illustrate the need to have a proper knowledge management in an organisation. Employees in an organisation, at any level, play an important role in determining the success of any knowledge management initiative. “Who can tell you how to run the core of your business better on an ongoing basis than your own guys?” asks Arun Varadhrajan, founder of VlinkU, a Bangalore-based company focused on delivering solutions in the learning space.

Says J N Amrolia, executive director (HR), Ashok Leyland: “Knowledge is recognised as the single most important factor for competitive advantage. We see tremendous potential for improving effectiveness, leveraging efficiencies and developing organizational capability through a process of systematically capturing, sharing and enhancing knowledge in the organisation.”

Problems with Definition

With knowledge Management evolving slowly, different companies and experts have defined the subject in different terms. Ford India, for example, initiated knowledge management efforts as early as 1997. Knowledge management at Hyundai Motor India Ltd. According to GS Ramesh, vice president (HR), is “the process of increasing organizational intelligence through involvement; participation of the organisation’s knowledge capital.”

Experts in the field agree that a good working definition of knowledge is an essential first block in building a sound knowledge management initiative. Secondly, automobile companies should focus more on processes than on technology. Technology can be used only as an enabler in the implementation; it is the process adopted that play an important role, they say.

The Benefits

The benefits, according to Ritendra Banerjee of QAI, could be classified on three fronts- or the supplier side, intelligent vendor negotiations and planning purchases leading to more sustained vendorships. “As practiced by carmakers in Japan, KM provides an infrastructure to work close to zero inventories," says Banerjee.

On the production side, avoiding rework could reap efficiencies. A typical example is Ford, which managed to save substantial costs by quickly transferring project learning from its economy car models to premium cars. Finally, on the price factor, it can help design and continuously track price points and any overlap. A good example is DaimelerChrysler, whose models never overlap.

How can companies derive such benefits? Banerjee says it all depends on three key leverages. The first is the knowledge management interface within the industry. With consolidation leading to fewer players in the industry, companies – especially in Germany, Japan and US – are sharing cost information to benchmarking with the industry.

Usually, companies are started by sharing cost information relating to channel and branding which constitute less than 20 percent of the total cost. However, companies in certain places have initiated steps to share cost information relating to materials and manufacturing – both more-or-less equally contribute around 40 percent of the cost.

The second key leverage is to try and create a strong interface with customer out  any intermediation. The interaction could be both online and offline.

The third key leverage, which is crucial and not very well understood in the Indian context, is to map the profile of leading car manufacturers. This can be implemented easily in countries like Germany and the US, where a significant number of employees would have experience working with competitors.

In India, the reality is that companies do not even believe their competitors monthly sales and production figures. Also, in most companies, employees would have begun and ended their career working for a single company. Thus, in the Indian context, the key challenge is to externalise the tacit knowledge.

A Question of ownership

According to Amrolia, there are three aspects in implementing knowledge management; the process of capturing and sharing knowledge, putting in place a knowledge management infrastructure and an organisation culture that encourages pooling of knowledge and building on the existing knowledge.

So how can one implement KM, which cuts across IT and HR? “There are three types of owner ship. In some cases, the IT department owns it because by using IT processing, knowledge can be easily communicated. In others, the HR department owns  it because KM is essentially a peoples unit. The third alternative is o have a separate team of people, says a KM expert.

Ashok Leyland has combined IT and KM to create a multifunctional core team comprising six members. Executives from product development, HR and marketing are included in this select team. The rest of the initiatives will be done at individual unit/division level.

Ford has implemented KM at the corporate level. The initiative is owned ny the chief knowledge management organisation. The initiative is supported by a shared infrastrucuture, explain Ford officials.

“At HMIL, the dissemination of knowledge is done through formal as well as informal process. The strategy of sharing knowledge has been through effective networking for example, IT – based networking accessible to all the employees at any movement of time, as well as structured feedback system. Informal process – such as meeting top management over a cup of tea – and other channels have been internalized”.

Traditional manufacturing according to Banerjee, is yet to ride the KM wave – only FSBI, software development and services and nutraceutical companies have implemented its so far.

Hyundai India says KM helped it to implement its 100 PPM program for vendors, resulting in higher quality standards. Ford India, on its part, says the value derived from effective KM are continuity of customer relations – leading to increase orders and greater customer satisfaction, which in turn leads to greater customer loyalty and product leadership.

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