Mckinsey 1 was founded in 1926, by Professor James Mckinsey of the University of Chicago.
Mckinsey laid the foundation for a world class organization by recruiting experienced executives and training them in systematic business analysis using a framework built around goals, strategy, policies, organization, facilities, procedures and personnel. The turning point came in 1932, when a bright young lawyer, Marvin Bower, who also had a Harvard MBA joined the firm.
Bower injected a strong element of professionalism into his people. He believed in the highest standards of integrity, professional ethics, technical excellence and client focus. Bower emphasized that every assignment should bring the firm experience and prestige besides money.
By the time Bower retired in 1967, Mckinsey had gained widespread acceptance throughout
Europe and North America as a leading consulting firm.
It was in the early 1970s, in the wake of the oil crisis, appearance of new competitors and growing expectations of clients, that Mckinsey realized the need to develop new capabilities and equip its consultants adequately. Ron Daniel, who took charge in 1976, appointed McKinsey’s first full time director of training. Daniel not only established industry based sectors but also gave a new thrust to the development of functional expertise. He set up two working groups to accumulate more expertise in the firm’s core areas of strategy and organization.
The knowledge building initiatives of Mckinsey gathered momentum in the early 1980s. The top management made it clear that knowledge development had to be a core, not a peripheral firm activity, that it needed to be ongoing and institutionalized, not temporary and project based and had to be the responsibility of everyone, not just a few people. The firm set up 15 centres of competence around different areas of expertise like strategy, organization, marketing, change management and systems.
Mckinsey consultants started pursuing thought leadership in a big way by publishing books based on their expertise and consulting experience. Articles were also published in top management journals like Harvard Business Review. To improve knowledge sharing within the firm, Practice
Bulletin, a two page summary of important new ideas was introduced. In 1987, a knowledge management project was launched. As part of efforts to build a common database of knowledge, each practice area appointed a coordinator, who was responsible for the quality of the documents that went into the database. Consultants were begged, cajoled and challenged to contribute documents to the Practice Development Network (PDNet). A list of experts was compiled along with key document titles by practice area and published in a small book, called the Knowledge
Resource Directory.
Meanwhile, Mckinsey realized that it was neglecting the development of the technical and professional skills of its consultants. The company’s partners decided to invest heavily in the development of its bright, young people and make them T shaped consultants, i.e. people who combined specialized industry knowledge/functional experience, with generalist problem solving skills and client development capabilities. The top management realized that while the former could be acquired through formal training and focused experience, the latter needed intensive
1 This caselet draws heavily from Sumantra Ghoshal and Christopher Bartlett’s fascinating book “The
Individualized Corporation” and the case, “Mckinsey & Company: Knowledge & Learning”, Harvard
Business School, 1996

2 counseling and mentoring relationships that Mckinsey people called the “apprenticeship process”.
To send out a clear signal that the consulting firm was serious about people development, Fred
Gluck, the managing director at the time announced, “There are two ways to look at Mckinsey.
The most common way is that we are a client service firm whose primary focus is to serve the companies seeking our help. That is legitimate, but I believe there is an even more powerful way for us to see ourselves. We should begin to view our primary purpose as building a great institution that becomes an engine for producing highly motivated, world class people who in turn, will save our clients extraordinarily well.”
Unlike many rivals who invested in developing tools and techniques and then training consultants in the use of these tools, Mckinsey remained somewhat weary of packaged management concepts. This belief in the craft of consulting, as opposed to the science, led to significant investments in personal coaching and mentoring. Rajat Gupta, Gluck’s successor, set an example by spending a substantial amount of his time, coaching young partners. He introduced a firm wide event called “The Practice Olympics”. Teams of young associates from all over the world, presented new ideas and concepts they had developed. Finalists were judged by a panel that included Gupta himself.
An estimated 10-20% of the average partner’s time began to be spent in coaching and mentoring.
Through the mentoring process, not only problem solving skills but also the firm’s values and aspirations were transmitted. Because of the support from their mentors, mentees were able to operate confidently, often going beyond their comfort zone.
Today, McKinsey is acknowledged as a global leader in managing knowledge. Many companies view McKinsey as the benchmark. But it is clear that replicating McKinsey’s culture that lays a premium on knowledge creation and sharing, will be difficult for most companies.

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2
One global pharmaceutical company which takes knowledge management very seriously is
Pfizer. The company has integrated KM with its succession planning mechanisms. Pfizer has a well defined process for knowledge transfer from the incumbent to the successor in case of key strategic positions. The company carefully determines what knowledge must be transferred and pairs the incumbent and successor together to facilitate the knowledge transfer. The transfer is implemented by combining documented content in various forms with face-to-face meetings and discussions. Follow up reviews are held to see how the successor is faring.
The aim is to make a newcomer competent in the shortest possible time by focusing on the relevant areas of knowledge. Pfizer considers task, process, behavioral system and environmental model as the building blocks. The environmental model explains how things get done. It is about connecting vital things to get an effect. At the next level, come the behavioral issues. Then comes the process, how things ought to get done. Finally, there are the tasks that have to be done as part of the process. By breaking down knowledge into these four levels, Pfizer is able to prioritize what knowledge the incumbent should be transferring to the successor.
Pfizer believes that this kind of knowledge transfer is necessary to reduce the risk of “decision black spot”. New people often have difficulty in understanding where an important decision is required. The process also identifies the areas of self-study needed and when experts must spend time with the successor.
In short, Pfizer employs a six-step knowledge retention process:

Identify the people in transition in a key strategic role.

Determine the knowledge that has to be transferred.

Examine the significant work patterns that the successor needs to understand.

Put together a knowledge succession plan that includes printed documents and face-to- face interaction.

Implement the plan, combining documented content and a schedule of discussions.

Use follow up discussions to monitor the knowledge transfer process.
Pfizer also attaches great importance to tacit knowledge. The company attempts to systematically identify and capture tacit knowledge in various ways by addressing some basic questions;

What kind of individual expertise have people added to documented processes?

How are people prioritizing their daily tasks?

What are the factors that determine success on the job?

If they are based on connections in the organization, effective prioritization or a process orientation, how can these skills be developed in others?
In short, Pfizer has brought a strong practice orientation (as opposed to process orientation) to its
KM initiatives.
2 This caselet draws heavily from the interview with Victor Newman, Chief Learning officer, Pfizer
Research University, KM Review, January/February 2002.

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3
The Japanese company, Kao is a six-time MAKE Japan Winner, widely respected for its enterprise-wide knowledge sharing and collaboration, and organizational learning. Kao is a fourtime Asian MAKE Winner (2002-2005), and a six-time Global MAKE Finalist (1999, 2001-
2005).
Kao’s major product lines include Personal Care, Home and Fabric Care, and Feminine and Baby
Care. Kao’s Prestige Cosmetics line (Kao Sofina) is marketed in Mainland China, Hong Kong and Taiwan. In the field of chemical products, Kao has established production bases in Asia,
North America and Europe.
Kao illustrates the role of leadership in building a learning organization. Founded in 1890, Kao initially produced soaps. In the post war era, Kao started offering laundry detergents.
Subsequently, the company moved into dishwashing detergents and household cleaners. It was in the 1970s and 1980s, under the leadership of Yoshiro Maruta that learning became an integral part of the company’s corporate philosophy.
For Maruta, leveraging knowledge went far beyond improving processes and products. He wanted his people to come up with new ideas and products. He made it clear that teaching and learning were core responsibilities of employees. Maruta give managers easy access to the data they needed.
Maruta concentrated on developing an organization designed to run as a “flowing system”, where ideas, abilities and resources flowed freely to where they were most needed. He once remarked:
“Just as the body reacts to pain or to injury by sending relief or support to the affected area, so too must the organization respond. If anything should go wrong in one department, others should sense the problem and help without being asked”. Through such statements, metaphors and analogies, Maruta shaped an environment that became receptive to cross-unit initiatives.
By encouraging redundancy of information, individuals became exposed to a wide range of ideas and perspectives in the normal course of the day’s work. Employees could find out as much as they wanted to know and understand how their job fit into the larger picture. They could easily access information such as the sales record of any product, the performance of any unit, new product development activities and happenings in the company’s research laboratories.
Maruta also realized the importance of Ba or context for knowledge sharing. He designed
“decision spaces” for creative ideas and healthy debate to flourish. These were large open areas at the centre of an office floor or research lab, with a conference table, overhead projectors and whiteboards where people gathered to discuss and decide on critical issues. The agenda was widely publicized and people from different departments could join the discussion.
Maruta encouraged the practice of tataki-dai. Individuals were asked to present their ideas to their colleagues at 80% completion stage so that they could be evaluated by others before the decisions became irreversible.
Kao’s espoused belief of being an “educational institution” encouraged people to work collectively towards shared goals and values, rather than restrictively, within their narrow self
3 This caselet draws heavily from “The Individualized Corporation” by Sumantra Ghoshal and Christopher
Bartlett

5 interests. Employees began to share knowledge with the firm conviction that such sharing would benefit the organization as a whole.
According to Teleos, the KM consulting firm , Kao has succeeded because of a highly flexible and flat organizational structure – referred to by Kao as a ‘bio-function’ – which mimics a living organism and various enabling mechanisms known by such terms as ‘free access to information,’
‘open floor allocation,’ ‘open meetings’ and ‘fluid personnel change.’ These approaches greatly facilitate tacit knowledge sharing and the conversion of tacit knowledge into explicit enterprise knowledge. Staff are regularly rotated among job functions and business units. Typically, employees will serve in at least three different positions in their first 10 years with the company.
The company’s ECHO system (Echo of Consumer’s Helpful Opinions) processes and analyzes customers’ product questions and complaints. Kao receives more than 50,000 queries and comments each year. Information that may be useful in solving problems is often compiled into reports and sent to the appropriate departments, including R&D, production, marketing and sales.
The lesson from Kao is that learning organizations do not evolve on their own. They have to be shaped consciously and deliberately by top management. Clear signals from the top and actions which demonstrate that intentions are genuine can go a long way in shaping a learning organization.

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4
Knowledge creation is not limited to a single organization. Sometimes, knowledge creation can span organizations. Silicon Valley in California, USA, widely considered to be the world’s leading high tech cluster is a good example.
Silicon Valley’s origins go back to Hewlett Packard (HP) founded in 1937 by William Hewlett and David Packard with the encouragement of their professor, Frederick Terman. HP took off during World War II. A small cluster of technology firms grew up alongside HP and laid the foundation for the electronics industry in the region.
A visionary in every sense of the word, Terman did a lot to strengthen ties between Stanford where he became the dean in 1946 and the local industry. He set up Stanford Research Institute to conduct defense-related research and to assist west coast businesses and opened the university’s classrooms to local companies through the Honors Cooperative Program. Terman also promoted the Stanford Industrial Park which further strengthened the linkages between the university and local industry.
Several companies were attached to the Valley. Shockley Transistor was set up in Palo Alto in
1955. By 1970, it was the largest and most dynamic company in the region. A group of people broke off from Shockley and set up Fairchild semiconductor. Fairchild itself spawned 10 spinoffs in its first eight years, the most celebrated one being Intel set up by Robert Noyce, Gordon
Moore and Andy Grove. By 1975, Silicon Valley’s technology enterprises employed well over
100,000 workers.
Even as the number of tech companies in the Valley increased, a network of suppliers also emerged. By the early 1970s, venture capital replaced the military as the main source of financing for start ups in the valley. Successful entrepreneurs chose to invest their earnings in promising new companies. The Valley’s relatively young companies and the distance from Washington facilitated experimentation with technology and business models. The culture of Silicon Valley encouraged risk taking and accepted failure. Entrepreneurs created firms that were organized as loosely linked configurations of engineering teams. The result was a flexible industrial system organized around professional and technical networks rather than around the individual firm.
Informal collaboration became common in the Valley. Informal conversations kept people informed about competitors, customers, markets and technologies. Competitors consulted one another, with a frequency, unheard of, in other parts of the US. Mobility across firms not only became acceptable but also quickly turned into a norm. Headhunters arrived in the 1970s, as the war for talent hotted up. Signing bonuses, stock options, high salaries and interesting projects, were used to attract smart people. As the firms were located geographically close to each other, people could change jobs with minimal dislocation. Loyalty to one’s craft superseded loyalty to one’s company. When engineers moved from one company to another, they took with them the knowledge, skills and experience acquired in their previous jobs. A distinct technical language evolved in the region.
By the early 1970s, Silicon Valley had developed a solid reputation for the speed with which technical skills and know-how diffused within the local industrial community. The region’s social and professional networks effectively functioned as a kind of large extended organization. The
4 This caselet draws heavily from Annalee Saxenian’s Fascinating book, “Regional Advantage”

7 region and its networks, rather than individual firms, became the focus of economic activity.
Service providers like lawyers, market research firms, consulting companies, public relations companies and electronic distributors facilitated the growth of the region. Berkley, California
State University and various Community colleges supplemented Stanford in supporting Silicon
Valley’s technical infrastructure. The proliferation of firms did not lead to destructive competition. Instead, the Valley’s supportive social structures, institutions and collaborative practices encouraged mutual learning and adjustment. Firms cooperated in various ways – crosslicensing, second sourcing arrangements, technology agreements and joint ventures. Competition demanded innovation which in turn demanded inter-firm cooperation.
The Valley’s companies played a significant role in fostering and reinforcing the region’s culture.
Firms downplayed hierarchy and gave individuals considerable autonomy and responsibility.
Intel set an example by encouraging openness and confrontation. HP used a decentralized structure that attempted to eliminate hierarchy and status and emphasized teamwork.
Essentially, the Valley’s industrial system blurred the boundaries between social life and work, between firms, between firms and local institutions and between managers and workers. In a few decades, the Valley became one of the most prosperous regions in the world, creating wealth at a rate few could have imagined in their wildest dreams, a few decades back. Looking back, it is clear that inter-organizational knowledge creation has played a key role in the emergence of
Silicon Valley as the world’s best known industrial cluster.
San Jose, located in the heart of California's Silicon Valley has topped the WKCI (World
Knowledge Competitiveness Index) 2005 list. The WKCI is an integrated and overall benchmark of the knowledge capacity, capability and sustainability of 125 regions across the globe, and the extent to which this knowledge is translated into economic value, and wealth. WKCI is based on
19 knowledge economy benchmarks, including employment levels in the knowledge economy, patent registrations, R&D investment by the private and public sector, education expenditure, information and communication technology infrastructure, and access to private equity. San Jose is followed by Boston, San Francisco, Hartford and Seattle. The highest ranked non-US region is
Stockholm in Sweden. Tokyo is the highest ranked region outside North America and Europe.
Incidentally, the 2005 WKCI rankings highlight the gap in competitiveness between the US, which has 41 of the top 50 regions in the index, and the rest of the world.

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5
In the global automobile industry, Toyota holds a unique place. The way Toyota designs and manufactures cars has led to an unbelievable consistency in its processes and products. Toyota designs cars faster than global manufacturers. Toyota’s cars are among the most reliable and extremely cost competitive. While many American and European car manufacturers have continued to struggle in recent years, Toyota has gone from strength to strength. Soon, Toyota will be the largest car maker in the world, in terms of revenues. Many attribute Toyota’s success to just-in-time and manufacturing excellence. But what is less appreciated is the role played by knowledge creation and sharing in building the company’s strong competitive position.
Toyota has attempted to encourage employees to learn in various ways. The company motivates employees to grow in their jobs by constantly identifying, analyzing and solving problems.
Managers deal with problems by going to the source and personally observing and verifying data rather than theorizing on the basis of what other people tell them. Even senior executives are expected to have an in-depth understanding of the situation. This is called genchi genbutsu. That means studying the problem first hand and having a thorough grasp of the situation before actually solving the problem.
Toyota believes in standardized tasks and processes. The company deploys stable, repeatable methods everywhere to maintain predictability. Toyota standardizes existing best practices. It then encourages individual initiative and creativity to improve the standard. Innovative ideas that work are then incorporated into a new standard. Continuous improvement initiatives result in standards being redefined from time to time.
In many organizations, individual employees do come up with innovative ideas. Where Toyota scores is in its ability to standardize and practice the new idea across the organization until a better way is discovered. The Toyota way of learning is all about standardization punctuated by innovation which then gets translated into new standards.
Toyota emphasizes hansei or reflection at key milestones. After a project is finished, employees identify all the mistakes made. Then steps are taken to prevent the same mistakes from happening again.
Toyota does not believe in flamboyance. Indeed, many observers dismiss the company as boring.
But Toyota could not care less. Toyota believes that learning is all about having the capacity to build on the past and move forward incrementally, rather than start over and reinvent the wheel with new personnel in each project. So the company believes in stability of personnel, slow promotion and very careful succession planning to protect the organizational knowledge base.
At Toyota, kaizen or continuous improvement is an important tool for learning. The essence of
Kaizen is an attitude of self reflection and self-criticism, accompanied by a burning desire to improve. Employees can openly address things that did not go right, take responsibility and propose suitable measures to ensure that the mistakes do not happen again.
5 This caselet draws heavily from Jeffrey K Liker’s book, “The Toyota Way”

9
One technique Toyota uses effectively is to ask “why” five times when dealing with a problem.
By doing so, Toyota employees go beyond the symptoms to the root cause of the problem. The aim is to take counter measures at the deepest level of cause that is feasible and at the level that will prevent recurrence of the problem.
Toyota understands that the key to organizational learning is to align the objectives of all its employees with common goals. Toyota believes that simply setting specific, measurable, challenging goals and then measuring progress, is highly motivating, even when there is no tangible reward associated with success. Toyota sets challenging goals and is passionate about measurement and feedback. Toyota uses Hoshin Konri, the process of cascading objectives from the top to the work group level. Every team member knows his or her small number of specific objectives and works on them through the year. During formal review sessions, the progress towards achieving Hoshin Konri objectives is monitored.
Many companies waste their time on fire fighting and introducing quick fix improvements. What
Toyota does is to focus on long term improvements through Hansei and Kaizen. Reflection and a relentless focus on making further improvements have helped Toyota in creating and applying knowledge almost as a matter of routine. The transformation of Toyota into a learning organization has not happened overnight. It has taken decades. But it is precisely because of its superior ability to learn that today Toyota is far ahead of others in the global car industry. The task of building a truly learning organization is daunting. But the rewards are substantial. That is the message we get from Toyota.

10
6
Partners HealthCare (Partners), a group of Harvard – affiliated hospitals in Boston, illustrates how experts can be supported by a well designed knowledge management system. Partners has attempted to embed knowledge throughout the information systems used by its physicians. While prescribing a drug, ordering a test, referring a patient to another physician or calling up the patient’s medical record, the knowledge base can be accessed. For example, when a doctor calls up a medical record, the system may recommend that some follow-up tests are desirable.
At the core of the KM system at Partners lies a computerized physician order entry system which packs a lot of knowledge. For example, the system may inform the doctor that the drug being prescribed may not be advisable as it may interact with a drug the patient is already taking.
There are also occasions when physicians need knowledge when they are not face to face with a patient. For example, there is a system of alerts to physicians when a hospitalized patient’s monitored health indicators significantly depart from the norms. In that case, the physician can immediately visit the patient or advise a nurse to change the treatment.
A physician may use different systems for different transactions. But all these systems are integrated and leverage a common database of patient clinical information and a common logic engine. Partners has also assembled various other sources of knowledge that are provided through online knowledge repositories in an integrated intranet portal.
There is clear evidence that the system is having a major impact on the way health care is being offered by Partners. According to some estimates, serious medication errors have been reduced by 55%. The quality of prescription has also improved, with cheaper and more effective drugs being used more often.
The tracking mechanisms within the system can detect whether the physicians use the embedded knowledge and change their treatment decisions. This serves as a useful measure and helps understand how effectively the KM system is working. The system facilitates measurement of key processes. The measures serve as the basis for ongoing efforts to further improve healthcare processes.
It has not been easy to put in place such a sophisticated system. Partners had to pull together the knowledge base and logic modules with an integrated patient recording system, a clinical decision support system, event management systems for alerts, an intranet portal and several other system capabilities. Off the shelf packages were not available. But Partners was motivated to go ahead with the KM system in view of the high levels of medical errors.
Having decided to go ahead, Partners planned the project carefully. Partners realized that the knowledge being embedded into critical processes, had to be of a high quality and also current and up-to-date. Committees were set up to identify, refine and update the knowledge in each domain. Participation in these committees became a matter of prestige. Physicians became willing to devote time to codifying knowledge within their fields.
The people for implementing the system were selected carefully. Instead of a back-room IT group, Partners used people skilled in medical informatics, for implementation. Partners
6 This caselet draws heavily from the book “Thinking For A Living” by Tom Davenport.

11 leveraged the several medical informatics departments in Partners, headed by people with a good understanding of patient care as well as information technology.
As the initiative was difficult and expensive, Partners decided to focus on truly critical knowledge work processes. Decisions were made about which disease domains and which medical sub processes to address and in what order. Partners also identified fields with many disease variants and multiple alternative treatments and protocols that were more difficult to include in the KM system.
Partners has attempted to combine the best of information technology and human intervention.
The system only provides a recommendation to the physician. There is no pretension that technology will replace experts. It is expected that the physicians will combine their knowledge with that of the system, to make the right decision.

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7
The Japanese company, DoCoMo is one of the world’s most well known Internet Service
Providers. DoCoMo’s i-mode service allows subscribers to remain connected to the internet via their cell phones. Subscribers can enjoy a range of services like checking stock prices, conducting bank transactions, reading news and horoscopes and playing games.
DoCoMo was spun off from its parent company, the large and bureaucratic NTT in 1992. Koji
Oboshi, CEO of DoCoMo chose Keiichi Enoki as the project leader. Enoki was not only in touch with the market trends but was also not afraid to speak out freely. Oboshi felt such a leader, who could think independently, was necessary to create the right context. Enoki was selected for the role, though he did not have any specialized knowledge of wireless technology.
Realizing the need for creativity and out-of-the-box thinking, Enoki built his team carefully. Mari
Matsunaga, the editor of a women’s magazine was recruited to work on the content. Tsuyoshi
Natsuno, an internet entrepreneur was also appointed. Enoki sheltered the project team from outside influences. He acted as an interface between the project and other departments so that project members were kept out of avoidable conflicts.
The new team came together and started sharing ideas and opinions. They were guided by
Oboshi’s knowledge vision “From volume to value”, which reflected his belief that DoCoMo had to go beyond voice communication into data communication. Matsunaga had good knowledge of young consumers based on her experience as a magazine editor. Her lack of awareness of technology brought the much needed diversity to the team.
Matsunaga wanted the service to be fun, holding appeal to even ordinary technology ignorant people, like herself. She felt the contents should be something “you can enjoy when you have a bit of time, not just useful contents such as news and banking service”. Matsunaga used “my concierge” as a metaphor to explain the concept of i-mode service as someone to help people find what they wanted quickly. This metaphor made more sense to ordinary customers, compared to other equivalent terms like “secretary” or “agent”.
On the other hand, Natsuno had a good understanding of the Internet and came up with an innovative business model. Natsuno sensed that Japanese consumers would access the internet via the cell phone, not PCs. Instead of buying content, the team decided to work collaboratively with content providers. DoCoMo collected fees on behalf of content providers as part of its monthly billing and took a 9% commission. Content providers liked the arrangement because they could reach out to a large number of subscribers. It was a win-win arrangement. Both DoCoMo and the content providers could make money. Natsuno leveraged his experience to cultivate the content providers.
DoCoMo decided not to use the existing Wireless Application Protocol (WAP). By using compact HTML, the team was able to take advantage of the vast amounts of content available in the internet world.
Soon i-mode became popular across Japan and attracted attention across the world.
7 This caselet draws heavily from the article, “Knowledge Creation as a Synthesizing Process” by Ikujiro
Nonaka and Ryono Toyama

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8
Chaparral Steel, a leading steel manufacturer in North America, started its operations at its Texas plant in July 1973 with an annual capacity of 0.25 million tons. In 1999, the company completed construction of its modern, low-cost structural steel plant in Virginia, which nearly doubled its structural steel capacity and expanded its product line. Over the years, as it has grown in size,
Chaparral has demonstrated how knowledge can be used to generate a sustainable competitive advantage in a low margin business.
Chaparral utilizes mini-mill technology. Recycled scrap steel is melted in electric arc furnaces, and continuous casting systems convert the molten steel into a broad range of products. The company manufactures hundreds of different types, sizes and grades of structural steel and bar products, sold throughout the United States, Canada and Mexico, and to a limited extent in
Europe. The company sells its products to steel service centers and steel fabricators for use in the construction industry, as well as to cold finishers, forgers and original equipment manufacturers for use in the railroad, defense, automotive, manufactured housing and energy industries.
To stay ahead in the steel industry, Chaparral must be able to produce high quality steel at the lowest cost, without diluting safety norms. That requires knowledge. KM at Chaparral is driven by shared-values, creative problem solving, implementing and integrating new methodologies and tools, formal and informal experimentation and drawing expertise from outside.
For KM to be effective, knowledge must flow in all directions. Chaparral encourages all employees to contribute ideas. The company has taken various steps to minimize both vertical and horizontal barriers to knowledge sharing. There are few layers and plant operators can easily approach the top management. Horizontal boundaries are also minimal. Multi tasking is quite common. Production workers do quite a bit of the maintenance work. All people consider themselves to be sales people. Security guards enter data while on night duty. They are trained to function as paramedics too.
Decisions about process improvements are taken at the lowest levels. These improvements are immediately implemented without waiting for management approval or standardization of best practices. If a process modification works, it becomes the de facto standard and other departments embrace it.
Work is structured, keeping in view the ease of knowledge dissemination. Workers involved in commissioning a new plant or process are dispersed among the other crew to diffuse the knowledge they have created, in particular the unique features of the new process.
There is no separate R&D facility at Chaparral. Indeed, it is often difficult to identify the source of innovation. People share in the pride of doing and if the experiment fails, everyone shares in the failure. Unlike most companies, where a few people take responsibility for innovation,
Chaparral believes that when many people contribute in small amounts, the total adds up to something significant.
8 This caselet draws heavily from Dorothy Leonard’s article, “An Organic Learning System at Chaparral
Steel”, Knowledge Management Review, July-August, 1998

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9
Canon is one of the most admired companies in the world. Canon is a four-time MAKE Japan
Winner (2002-2005), widely recognized for developing knowledge workers through senior management leadership, maximizing the value of enterprise intellectual capital, and delivering value based on customer knowledge. Canon is a two-time Asian MAKE Winner (2003-2004), and 2003 Global MAKE Winner.
Over the years, the company has developed new capabilities and entered new areas. Today, the company has three main product lines: office equipment (photocopiers, facsimile machines and printers for computers), cameras and optical and digital equipment. The company employs over
100,000 people and has marketing and sales operations in over 100 countries. It maintains major research centers in Asia, Europe and North America.
The company’s transformation into a world class corporation started under the leadership of Fujio
Mitarai, who became president in 1995. Mitarai attempted to combine the aggressive bottom line orientation of American managers and the strong people orientation of Japanese leaders.
In informal “asakai” or morning sessions, Mitarai involved his people in discussions where many ideas began to emerge. These meetings also helped identify problems and debate issues from various angles, effectively providing a shared context or Ba where market opportunities could be identified and pursued in line with the company’s capabilities.
Canon provides a good example of knowledge creation using metaphors and analogy. As Nonaka has put it 10 , “metaphor is mostly driven by intuition and links images that at first glace seem remote from each other……analogy is a more structured process of reconciling contradictions and making distinctions….the contradictions incorporated into metaphors are harmonized by analogy. In this respect, analogy is an intermediate step between pure imagination and logical thinking”. Metaphor and analogy lead to concepts which can be embodied in a model which makes the knowledge available to the rest of the company.
Canon made full use of analogy while designing its personal copier. Intended for family/individual use, the personal copier needed to have high reliability and low maintenance costs. Canon’s market research revealed that 90% of the maintenance problems came from the drum and its surrounding parts. So the company’s product development engineers came up with the concept of a disposable cartridge system, in which the drum was replaced after a certain amount of usage.
The next challenge was to figure out how to produce the drum at a low cost, in line with the low selling price of the copier. The task force set up in this regard, discussed the possibility of making conventional photosensitive drum cylinders with a base material of aluminum drawn tube at a low cost. But the team could not make much progress. The breakthrough came only when the team leader asked the question, “How much does it cost to manufacture a beer can?” Soon the team started discussing how to apply the basic principles underlying the manufacture of the beer can to making the copier’s drum cylinder. The team analyzed the situation, examined the similarities
9 This caselet draws heavily from the book “The Knowledge Creating Company” by Nonaka and Takeuchi.
10 Nonaka, Ikujiro. “The Knowledge Creating Company” Harvard Business Review , Nov/Dec 1991, pp 96-
104.

15 and differences and came up with a process technology to manufacture the aluminum drum at a low cost.
The development of Canon’s mini copier explains how externalization, the process of converting tacit knowledge to explicit knowledge works. Tacit knowledge becomes explicit knowledge through metaphors, analogies, concepts, hypotheses or models. While metaphors create a network of new concepts mostly through iteration, analogies focus on the structural/functional similarities and differences through rational thinking. Analogies help in bridging the gap between an image and a logical model or prototype.
According to Teleos, the KM consulting firm, there are several useful lessons to be picked up from Canon’s approach to KM. Canon views itself as a knowledge-creating organization.
Innovation is embedded in the company’s overall business strategy. Canon spends over 7% of its annual sales on research & development. The company has a global network of R&D facilities to tap expertise available in each region. Virtual product development teams and advanced electronic collaboration technologies support Canon's R&D efforts. The organizational culture encourages individual and group learning. Canon has also established best practices in managing its intellectual property.

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BP is one of the largest oil companies in the world. For many, the oil industry is a commodity business. But BP has demonstrated that there is scope to leverage knowledge even in such a business. BP’s transformation into a learning organization began under the leadership of John
Browne who became CEO in 1995. Browne realized that learning lay at the heart of a company’s ability to adapt to a changing environment. To generate value for shareholders, Browne understood BP had to be a better learner than its competitors and apply knowledge throughout its business faster and more widely than they did. As he put it, “…anyone in the organization who is not directly accountable for making a profit, should be involved in creating and distributing knowledge that the company can use to make a profit”. Browne’s message to his people was that every time BP did something, it should do it better than the last time. If BP would drill each well more efficiently than the previous one, profits would increase substantially. Each time an oil well was drilled, employees were asked to reflect on what went right and what went wrong and how the learning could be applied to future projects.
Browne encouraged employees to learn from contractors, suppliers, partners, customers and the company’s own experiences. Browne defined the purpose of his business clearly, so that people could understand what kind of knowledge was critical and what they had to learn in order to improve performance. He made it clear that BP had to achieve cost leadership, generate acceptable returns for shareholders and conform to high standards of ethics, health, safety and environment. After serious introspection, specific areas came for more attention. One was replacing the falling oil reserves. BP was exploring in many countries. The management realized that advances in technology and the new markets opening up in various parts of the world, were creating opportunities to find and develop big new oil and gas fields where the costs would be lower and the growth potential was higher. BP decided to concentrate on some 20 countries.
Browne made it clear that BP would have a sustainable competitive advantage in the businesses it operated, only if it had the culture and processes to manage these businesses better than anyone else. People in the company had to learn from one another and do things better over time. It was important for people to feel that individually and collectively, they were in control of their businesses. Browne emphasized the concept of self-help, encouraging people to think about how to control the cost structure, get more returns for investments made, upgrade the quality of products and services and improve relationships with suppliers and customers.
Stretch targets and ongoing benchmarking of key parameters became key enablers of learning. Browne also asked employees to challenge conventional wisdom and pursue “breakthrough thinking”, a new way of looking at things and challenging the existing boundaries.
Senior leaders in BP led from the front. The process of setting policies, standards, targets and creating processes was viewed as an opportunity to stimulate learning. As Brown put it, “It is while those processes are being carried out that learning should take place. What determines whether it does is the questions leaders ask and the way they approach what is going on”. During the quarterly reviews, Browne would personally review the performance by exception and facilitate learning by asking what went right and what went wrong.
Browne encouraged the formation of learning communities, each essentially consisting of people grappling with common problems. This kind of peer group learning made a tremendous impact
11 This caselet draws heavily from the interview with John Browne, former CEO of BP, Harvard Business
Review, September – October 1997.

17 on BP. As Browne put it, “People are much more open with their peers, they are much more willing to share and to listen and are much less likely to take umbrage when someone disagrees with them”. Browne also set up a virtual network, to bring people together and share knowledge quickly regardless of time and distance. On BP’s intranet, employees were encouraged to create their home pages. These pages started providing a range of information from functional expertise to technical data. BP started experimenting with a variety of approaches – making videos that could be seen on the network, creating electronic yellow pages that could be searched in a number of ways and encouraging people to list expertise and experiences they were willing to share with others.
Today, BP is one of the leaders in knowledge sharing. BP has also launched new initiatives to link KM with strategic planning. Senior managers meet regularly to identify technology and business trends and deliberate on the kind of knowledge BP needs to acquire for leveraging these trends effectively in the coming months.

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Buckman Laboratories (Buckman) is a specialty chemicals company with operations and marketing activities across the world. Buckman’s value proposition consists of the products it makes and the way it uses them to solve the chemical treatment problems of customers. Selling
Buckman’s products not only involves knowledge of chemistry and other related disciplines but also practical experience in handling problems faced by customers. This practical knowledge is tacit. Buckman knows that it is this knowledge which gives it a competitive edge in the market place.
Buckman’s Knowledge Network facilitates sharing of knowledge among employees irrespective of time zone, geography or language. The network helps in capturing conversations, interactions, contributions and exchanges.
Buckman has attempted to combine the best of integrative and interactive knowledge sharing.
Much of the explicit knowledge about Buckman’s customers, products and technologies is available in online repositories. This integrative application involves the flow of knowledge into and out of the repository. But Buckman has also set up an online Tech forum to facilitate interactive knowledge management applications. The forum has a standard structure. Comments are threaded in conversational sequence and indexed by topic, author and date. The content includes questions, responses and field observations.
There are several subject experts in Buckman for guiding discussions about the areas of expertise and validating the advice given by others. They periodically review the Tech Forum to identify what should be stored in the repository. Technically qualified persons in different units share their knowledge through the forum. Product development managers offer online technical advice to field personnel. Research librarians collect information about different industries. People are actively encouraged to participate in the forum.
Buckman’s KM initiatives have played a key role in developing relationships with customers and in clinching deals. What has made KM so successful in Buckman is not the technology or the process, but culture and the clear organizational intent to create, share and reapply knowledge.
The Tech Forum has become a way of life in Buckman. People are expected to access the Forum regularly, post problems, replies and observations and to contribute wherever possible. The
Forum has gained wide acceptance as a reliable and efficient means of sharing knowledge and solving problems.
What Buckman’s success demonstrates is that a combination of culture, roles, habits, norms and practices is needed to make KM initiatives successful. And such a combination is not easy for competitors to replicate. More generally, as Zack puts it, “….Organizations that are managing knowledge effectively understand their strategic knowledge requirements, devise a knowledge strategy appropriate to the firm’s business strategy and implement an organizational and technical architecture appropriate to the organization’s knowledge processing needs”
12 This case draws heavily from the article, “Managing Codified Knowledge” by Michael Zack, Sloan management Review , summer 1999.

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The right social environment is a crucial requirement for effective Knowledge Management. The well known American steel company, Nucor is a good example.
Anil Gupta and Viay Govindarajan use the term social ecology to describe the social system in which people operate. As they mention, “It (Social Ecology) drives an organization’s formal and informal expectations of individuals, defines the types of people who will fit into the organization, shapes individuals’ freedom to pursue actions without prior approval and affects how people interact with others both within and outside the organization”. Social ecology spans culture, structure, information systems, reward systems, processes, people and leadership. IT platforms are not proprietary. Sustainable advantage depends on how smartly the company can use the technology. This in turn depends on the social ecology. Nucor is an excellent example of a company which has shaped its social ecology to promote creation and sharing of knowledge.
Nucor’s end product is steel, generally recognized as a commodity with little scope for differentiation. So cost leadership is a critical success factor. Nucor has focused on developing knowledge that can help it to retain its status as one of the most efficient steel producers in the world. More specifically, Nucor has focused on three competencies: plant construction and startup know-how, manufacturing process expertise and the ability to embrace breakthrough technologies faster than competitors. Nucor’s KM initiatives have focused on creating knowledge from direct experimentation, acquiring external knowledge and retaining internally created or externally acquired knowledge.
To give a boost to knowledge creation, Nucor has focused on superior human capital, high powered incentives, and a high degree of empowerment. By locating plants in rural areas, Nucor has been able to attract hardworking, mechanically inclined people. The company has also invested in continuous, on-the-job, multifunctional training. A high powered incentive system has helped in cultivating hunger for new knowledge. Since the incentives are linked to output, workers have continued to look for ways to improve productivity. Since incentives are also linked to quality standards, employees are motivated to do things right the first time. At the same time, employees are encouraged to experiment, even if it leads to failures occasionally. As Ken
Iverson, former chairman of Nucor once remarked: “We believe that if you take an average person and put him in a management position, he’ll make (or take) 50% good decisions and 50% bad decisions. A good manager makes 60% good decisions. That means 40% of these decisions could have been better. The only other point I’d like to make about decision making is ‘Don’t keep making the same bad decisions’. Every Nucor plant has its little store house of equipment that was bought, tried and discarded”.
Nucor encourages risk taking among its employees while embracing new technologies despite the risk involved. Because of their ongoing efforts to run their plants more efficiently, managers, engineers and operators have developed deep mastery of the manufacturing processes. This mastery has given them the confidence in their ability to resolve unknown bugs that tend to crop up in the case of new technologies. That is why Nucor employees are able to take more risk, compared to their counterparts in other steel companies.
13 This caselet draws heavily from the article, “Knowledge Management’s Social Dimension: Lessons from
Nucor Steel” Sloan Management Review, by Anil Gupta & Vijay Govindarajan.

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Nucor has also been far more successful in retaining knowledge. That is mainly because of its people oriented policies that have helped in cultivating a high degree of commitment and loyalty amongst its employees. For example, Nucor has not sacked employees during recessions. During tough times, the company’s strategy has been to shorten the work week and lower the compensation.
Nucor has also been highly proactive in encouraging individuals to share their knowledge, building efficient transmission channels and convincing individuals to accept and use the knowledge they receive. By making the performance data of different departments visible across the company, best practice dissemination has been greatly facilitated. Group incentives have also encouraged individuals to share expertise with their peers. Nucor has used IT to transmit explicit knowledge. But Nucor has also been good at sharing unstructured knowledge. Plant managers, supervisors and machine operators periodically visit other plants to understand first hand, superior practices followed there. Nucor has also systematically recycled process innovations from existing plants to start up plants. Nucor has discouraged the Not-Invented-Here syndrome in two ways. The incentive system has sent clear signals to employees that staying focused on increasing output is important and trying to create all the knowledge required may be too expensive. At the same time, by building peer pressure, the weaker performing units have been motivated to learn from the high performers.
As Gupta and Govindarajan conclude, the ability of a company to function as a knowledge machine depends more than the IT infrastructure, on the social ecology. Creating the right social ecology is a huge challenge. Building a social ecology involves putting in place “a whole
. ecosystem of complementary and mutually reinforcing organizational mechanisms”. So it cannot be easily replicated.