EMSE 6505 VM3 Summer 2013 - Case Study - MacIsaac
EMSE 6505 VM3 Summer 2013 - Case Study - MacIsaac
EMSE 6505 VM3 Summer 2013 - Case Study - MacIsaac
Author Note
Prepared for EMSE 6505-VM3 Summer 2013 Session
Instructor: Dr. Georgiadis
DAIMLERCHRYSLER KNOWLEDGE MANAGEMENT PRACTICES 2
Abstract
This case study focuses on an “8C analysis” of the DaimlerChrysler knowledge management
practices. The primary source of information was a case study by Kannan, G., Aulbur, W., &
Haas, R. in the Knowledge Management Tools and Techniques textbook (Rao, 2005). A number
of other references were examined to augment the primary source. From a knowledge
system with wide employee use, excellent IT infrastructure, and strong corporate support. They
distributed geographic locations. However, despite these strengths, the failure of the new
organization to do due diligence in assessing and aligning cultures after the merger of Daimler
Introduction
standalone American manufacturer, was facing stiff competition from Japanese manufacturers
who had shorter product-development cycles. In response, the company reorganized its stove-
piped functional units into matrix level “car platforms” that were responsible for all phases of
development for the whole vehicle. This resulted in shorter development times for each vehicle
design, but diminished functional coordination across vehicles. As a result, former colleagues
from the functional divisions (e.g., brakes) started meeting informally to aid coordination
between common technology areas. The value of this practice was recognized by Chrysler
management, which fostered an informal community of practice (CoP) named “Chrysler Tech
As documented in Kannan et al.’s (2005) case study, the success of the Tech Clubs
eventually led to other knowledge management practices such as the Engineering Book of
Knowledge (EBoK), the Corporate Knowledge Management Sharing Forum (KMSF), as well as
the integration of the “Austauschgruppe” (ATG) personnel rotations post-merger. Since its 1998
inception, the company has faced numerous challenges in terms of integration, both cultural and
geographic in nature, as well as economic downturns that would lead to dramatic corporate
changes beyond the scope of this case study. However, it is clear that the company’s leveraging
DAIMLERCHRYSLER KNOWLEDGE MANAGEMENT PRACTICES 4
evidenced by their continued use post-merger across subsidiaries and the systems’ industry
awards. (Kannan, Aulbur, & Haas, 2005) DaimlerChrysler’s (herein referred to as “DC”) KM
system was not brought in by outside management consultants, but rather developed internally
KM Solution/Opportunity/Problem Description
Though Chrysler Tech Clubs and EBoK had been in place prior to the merger with
Daimler Benz, the new international organization faced tremendous challenges in terms of
knowledge distribution across the wide geographic and cultural expanses of DaimlerChrysler
automotive, aerospace, financial and research subsidiaries. The goal of the system was to deliver
integrated knowledge to the engineer’s desktop while motivating and supporting EBoK authors.
Technology. Of these three, Kannan et al. (2005) believe that “people contribute 80% of the
success of the KM initiative.” (p. 3383 Kindle location) DC’s approach to KM has been to
charge groups of employees to improve business processes within a given knowledge area
through use of the CoPs (named Tech Clubs if an engineering CoP), EBoK, and/or ATG
personnel rotations.
DAIMLERCHRYSLER KNOWLEDGE MANAGEMENT PRACTICES 5
The Kannan et al. (2005) case study on DC cited specific qualitative metrics for selecting
a KM solution, such as ease of implementation, fit between needs and available tools, and
usefulness across the company. The cost of development served as a quantitative measure for
such selections. For in-use systems, DC employed performance metrics such as number of tools,
users, log-ins, answers, reuse, etc. The discussion indicated that continuous measurement of
metrics, RoI, and financial baselines (some of which are easier to measure than others) could
lead to more proactive behavior, which be a competitive advantage. (Kannan, Aulbur, & Haas,
2005)
8 C’s analysis
tools do your knowledge workers access when they are in the office or on the road?
The Kannan et al. (2005) case study specifically states, “Technological infrastructural
support was a prerequisite for an organization of our size and geographic distribution…” (p.
3490 Kindle location) It was through this IT infrastructure that DC made its internal CoPs &
(EBoK) collected and distributed knowledge and was seen as an enabler of the CoPs. (Kannan,
Aulbur, & Haas, 2005) Across the organization, DaimlerChrysler Corporate University (DCU)
DAIMLERCHRYSLER KNOWLEDGE MANAGEMENT PRACTICES 6
was charged with developing IT tools for KM and metrics for KM benefits. DC also stated that
several of its organizations had used Microsoft’s SharePoint Server system (collaboration
software) or Motorola’s One Team solution (mobility and access solution), which were designed
and integrated around each organization’s business process. The company also contracted for a
2. Content - What knowledge assets are relevant to the context of your workflow, and
what are your strategies for codification, classification, archival, retrieval, usage,
and tracking?
DC employed CoPs within a given knowledge area or domain, with their content and
structure determined by the business processes it supports. Each community was tasked with a
common task of creating ontologies, with the scope, standards of objects, and level of
coordination with other communities or suppliers defined by the CoP’s members. A more formal
application of taxonomies can be seen in the EBoK, which was a hierarchical repository of core
knowledge such as best practices and lessons learned, as well as Yellow Pages to help locate
technical expertise within the organization. The EBoK was comprised of multiple books that
were organized by knowledge area in the chapter/subchapter format. There were features to
allow browsing, navigating the structure, and key word search. Above the local structures was a
Corporate Knowledge Management Sharing Forum (KMSF) that was put in place to facilitate
knowledge and experience transfer across regions and business units. Finally, the DC system
incorporated “aging agents” for divesture to keep the EBoK repository up to date. (Kannan,
3. Community - What are the core communities of practice aligned with your business,
and what organizational support do you have for identifying, nurturing, and
harnessing them?
DC CoPs were spread throughout the organization into core communities that were
aligned with functional assignments. For instance there were technical CoPs (e.g., the case study
Kannan et al. 2005 references a Composite Materials Tech Club at German Airbus), an e-
learning CoP that included training, one for IT functional topics, and CoP for infrastructure
experts. The web-based Engineering Book of Knowledge (EBoK) was also useful in providing
peer/expert review support of documents with electronic feedback to the authors. In terms of
organizational nurturing of the CoPs, the DaimlerChrysler Corporate University (DCU) was
tasked with supporting CoPs through numerous means such as coordinating and facilitating CoP
meetings.
4. Culture - Does your organization have a culture of learning where your employees
thirst for knowledge, trust one another, and have visible support from their
management?
The culture of Tech Clubs started in Chrysler back in 1988 when the company was facing
stiff competition from Japanese manufacturers with much shorter product-development cycles
than Chrysler. In response, the company reorganized its stove-piped functional units into matrix
level “car platforms” that were responsible for all phases of development for the whole vehicle.
DAIMLERCHRYSLER KNOWLEDGE MANAGEMENT PRACTICES 8
This resulted in shorter development times for each vehicle design, but diminished functional
(e.g., brake design) coordination across vehicles. (Wenger, McDermott, & Synder, 2002) As
With a clear need for communication across platforms, former colleagues from functional
areas started to meet informally. Managers recognized the value of these informal
meetings in fostering learning processes that cut across all platforms. Still, they wanted to
keep the primary allegiance and formal reporting relationships of engineers within the
platforms. Rather than formalizing these emerging knowledge-based groups into a new
matrix structure, they decided to keep them somewhat informal but to sanction and
support them. The Tech Clubs were born. (p. 113 Kindle location)
From the preceding text, the culture of Chrysler at the inception of Tech Club
communities of practice appeared to have working level and management support within the
culture. In fact, in 1996 it was a manager that revived the Engineering Book of Knowledge
(EBoK) system to augment the CoP by adding a database of technical documents and best
practices. The time period from the 1988 Chrysler reorganization to the 1998 merger with
Daimler Benz appears to be one that was supportive of what Kannan et al. refer to as the use and
The ill-fated 1998 “merger of equals” (- that was anything but) of Daimler Benz and
Chrysler significantly altered the culture of the organization and was a textbook example of a
DAIMLERCHRYSLER KNOWLEDGE MANAGEMENT PRACTICES 9
failure to do due diligence in assessing and aligning cultures when combining two companies.
Dalkir (2011) states that “While not directly observable, culture is the defining, and in many
cases, limiting, factor in creating a new entity that will be healthy, integrated, balanced, coherent,
and effective.” (p. 3071 Kindle location) In a recently published book by Bob Lutz (Lutz, 2013 ),
the former COO of Chrysler during the merger, he recounts the process to unite the companies
under the Chrysler Chairman and CEO Bob Eaton and his new co-CEO Daimler-Benz CEO
Juergen Schrempp:
Jürgen Schrempp soon came to Auburn Hills, and he and Bob sketched out the
by “co-CEOs” Schrempp and Eaton. Lawyers and investment banks were engaged, the
deal was refined, the price per share was agreed upon, both boards blessed it, and the deal
was done late in 1998 to huge applause. (p. 1759 Kindle location)
Throughout this and other accounts of the merger there’s no mention of prior due
diligence to assess two cultures and plan for alignment after the merger. On this topic, Nancy
… recent studies show the failure rate of mergers is close to 75 percent, and the majority
don't produce the expected financial returns for years after the merger has taken place.
In some of the research, there's been a lot of discussion on how the culture piece has been
really central to why they fail. That happens because most companies don't consider the
DAIMLERCHRYSLER KNOWLEDGE MANAGEMENT PRACTICES 10
differences in corporate cultures when analyzing a potential merger in the first place.
Often the things that are harder to assess are the qualitative aspects. It often can create a
lot of challenge for getting the best out of employees. You can get a jump on this problem
by thinking ahead: While the legal team is scrutinizing the proposed merger, have
someone else take a look at the cultural differences between the two companies. (p. 2)
The conclusions of available references varied in relation to the timeframe in which they
were written. For instance, the DC knowledge management case study by Kannan et al. in the
Knowledge Management in Theory and Practice textbook (Rao, 2005) relied on references from
transportation, and services company, with its car, truck, and financial services businesses all
ranked at or near the top of their respective industries.” (p. 3369 Kindle location) During this
timeframe, the newly merged DC corporation was to the outside world a successful company
many customer segments and strong profits. However, during this timeframe the internal
workings of the company were marked by an epic clash of German and American cultures, with
Daimler takeovers of leadership roles that started on day one. These would not be resolved
As a result, the levels of knowledge transfer, trust, and support in the new culture of
DaimlerChrysler were negatively affected during their nine-year partnership. One case study by
the Tuck School of Business at Dartmouth (2002) found that the internal culture clash at DC
“…was eroding the anticipated synergy savings. Much of this clash was intrinsic to a union
between two companies which had such different wage structures, corporate hierarchies and
DAIMLERCHRYSLER KNOWLEDGE MANAGEMENT PRACTICES 11
values.” (p. 5) The culture of Chrysler was to face additional shifts, as the sale of the company in
2007 to the Hedge Fund to Cerberus Capital Management, Chapter 11 bankruptcy in 2009, and
ultimate passage of control to Fiat by the US government. (Taylor, 2013) Though Chrysler is
once again US subsidiary of a European company, its legacy managers should at least be aware
this time that it must focus on the workings of a combined culture to succeed.
5. Capacity - What are your strategies for building knowledge-centric capacity in your
employees, for instance, via workshops, white papers, mentoring, and e-learning?
DC provided training in technical writing skills and news groups to develop the capacity
and motivation of the users to use the system. (The EBoK knowledge stores were so useful that
they averaged at least one read per day.) An overarching Corporate Knowledge Management
Sharing Forum (KMSF) was created to share knowledge and experience across regions and
business units. This KMSF was actively staffed by representatives from each corporate unit, who
met about four times a year in workshops to discuss best practices and guidelines. (Kannan,
DaimlerChrysler Corporate University (DCU), which also offered a mix of internal training and
Mark is a white American male in his late 20s. He has been working for DaimlerChrysler
for about six years as a product engineer. He is also in the process of completing a
experience included four-months’ travel to Austria that was associated with his studies.
While living in Austria, he visited Germany and other European countries as well. At
present, he works at the company’s Auburn Hills headquarters. His interactions with the
This example is illustrative of the many means by which the DC KM system built
6. Cooperation - Do your employees have a spirit of open cooperation, and does your
and universities?
One innovative facet of DC’s KM approach was their integration of the integration of
exchanges were structured around strategic knowledge areas and focused on both knowledge
transfer and building strategic alliances within the organization. The goal of the ATG was not
only to link knowledge domains, but also to foster networking, which can generate future open
cooperation. The DaimlerChrysler Corporate University (DCU) also went outside the
organization and for example contracted with MeanBusiness, Inc. to license access to over
7. Commerce - What commercial and other incentives do you use to promote your KM
practice? How are you “pricing” the contribution, acceptance, and usage of
knowledge assets?
and rewards and recognition were found to have a positive effect on employee value addition.”
(p. 3398 Kindle location) Unfortunately, this and other case studies on DC did not specifically
mention what specific incentives were given for knowledge contribution/re-use in their system.
However, examples in other companies such as Cable & Wireless India cite incentive schemes
such as “Knowledge Dollars” that can motivate employee participation and provide recognition.
(Rao, 2005) Xerox technicians rejected offers of small financial incentives for contributing to the
company’s knowledge base, preferring instead to stick with a system that gave peer recognition
8. Capital - What percentage and amount of your revenues are invested in your KM
practices, and how are you measuring their usage and benefits in monetary and
qualitative terms?
formal knowledge modeling are used to automate processes. Kannan (2005) found “The KBE
tools support the knowledge value chain for engineering and facilitate large savings in cycle time
DAIMLERCHRYSLER KNOWLEDGE MANAGEMENT PRACTICES 14
and rework.” (p. 3490 Kindle location) These authors also report widespread cost savings and
organizational benefits from the implementation of EBoK, with an estimated value of 62 million
EBoK has resulted in the elimination of printing, shipping, and storage of written
improved dealer and customer satisfaction; and generated quantifiable savings. Further
knowledge and ideas management has resulted in a savings of 62 million Euro/ year and
a total of 69,000 suggestions in the year 2001, supported by a Web-based solution known
To confirm these figures, some rough DC employee figures were entered into “The
Excellent Intranet Cost Analyzer” on the dack consulting services website. (dack consulting
services, 2012) Assuming 360,385 employees in 2005, with 5 page visits per day, and 5
confusion seconds per page, at an average annual salary of $80,000, the cost analyzer estimated a
figure of $50 million in lost annual cost for poorly designed internets that cause employees to
Some programs require more investment to implement or continue than others. For
instance, the cost of the two-year international rotations (ATG’s) around knowledge domains is
not stated, but is likely not an insignificant cost. However, the managers of employees that
participated in an ATG were rated 30% higher than average employees in terms of time-to-talent,
Explain what you would have done differently in strategy or metrics used
It is sufficiently apparent that the merged entity did not focus enough on integrating
cultures of the US and European operations. Great technology and systems cannot make up for
problems stemming from a conflicted culture with lack of trust amongst its international
operations. Therefore, DC should have expended more resource on harmonizing the cultures
participation in a CoP, or language translation requests for KM objects could have served as a
Summary
expertise even prior to the international merger of Daimler Benz and Chrysler. From a
knowledge management system with wide employee use, excellent IT infrastructure, and strong
corporate support. They employed innovative technology solutions across a large international
organization with distributed geographic locations, and provided personnel rotations are specific
knowledge areas. However, despite these many strengths, the failure of the new organization to
do due diligence in assessing and aligning cultures after the merger ultimately contributed to the
References
Business Wire. (2001, September 10). MeansBusiness selected as strategic content by leading
http://www.thefreelibrary.com/MeansBusiness+Delivers+World's+Largest+Source+of+E
xpert+Business...-a078019507
dack consulting services. (2012). The Excellent Intranet Cost Analyzer. Retrieved from dack
Dalkir, K. (2011). Knowledge Management in Theory and Practice. Kindle Version: Retrieved
from Amazon.com.
Donnelly, T. (2011, May 9). How to Merge Corporate Cultures. Retrieved from Inc.:
http://www.inc.com/guides/201105/how-to-merge-corporate-cultures.html
Kannan, G., Aulbur, W., & Haas, R. (2005). Knowledge Management in Practice: Making
Lutz, R. (2013 ). Icons and Idiots : Straight Talk on Leadership. [Kindle version]: Retrieved
from Amazon.com.
Pruett, Y. (2003). A Qualitative Case Study: Cultural Adaptation of Germans and Americans in
Publishing.
Rao, M. (2005). Knowledge Management Tools and Techniques - Practitioners and Experts
Taylor, A. (2013, May 2). The Chrysler-Fiat reversal of fortune. Retrieved from CNNMoney:
http://money.cnn.com/2013/05/02/autos/chrysler-fiat-finances.fortune/index.html
Tuck School of Business at Dartmouth. (2002). The DaimlerChrysler Merger; no. 1-0071.
Wenger, E., McDermott, R., & Synder, W. (2002). Cultivating Communities of Practice: A