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Knowledge Management in Production Alliances


Knowledge Management in Production Alliances. Linda Moffat and Norm Archer ... all made extensive use of IOICS and other knowledge management methods. 14 ... – PowerPoint PPT presentation

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Title: Knowledge Management in Production Alliances

Knowledge Management in Production Alliances
  • Linda Moffat and Norm Archer
  • DeGroote School of Business
  • McMaster University

Supply Transformation in the Ebusiness
Environment Toronto,
November 17, 2003
  • Agenda
  • Some Definitions
  • A model
  • Three case studies
  • Some preliminary findings

Some Definitions
  • Network Organizations
  • focused collaborations among distinct
    organizations for joint competitive advantage
  • long term (not contractually limited)
    relationships between independent firms, active
    collaboration, joint goal optimization,
  • Established for market defense or access,
    technology access, resource access, refocusing
  • Production Network Organizations (PNOs)
  • Network organizations that develop and produce
  • Have a relatively complex joint task, requiring
    some asset investment by member firms,
  • may or may not develop a joint venture unit.

Types of Production Network Organizations
  • Networks fall between markets and hierarchies
  • ie. Networks collaborate more closely than in a
    market relationship defined by a limited term
    legal contract. ..
  • But less closely than the divisions or functions
    inside of a vertically integrated hierarchical
  • Networks vary in the complexity of

Markets Opportunistic Competitive Contracts
FIRMS Hierarchical System - Optimizing Collaborati
Tiered Hub and Spokes
Exchanges, Consortia
Types of Production Network Organizations
Scope of joint task
Amount of Collaboration Amount of Structure
Concentration of power in the dominant firm
Open Markets Opportunistic Contracts
Hierarchies System Optimizing Collaboration
Tiered Hub and Spokes
Exchanges, Consortia
Supply Chains and PNOs
  • Classic Supply chains are not network
  • They are a set of short term bilateral contracts
    linking a vertically integrated producer to its
    required resource inputs.
  • The traditional supply system becomes a network
    organization when control over product design
    and/or production is out-sourced, decentralized
    and distributed across a group of specialized
  • Supply chains evolve into tiered hub and spoke
    network organizations around the dominant
    producer/marketer firm. (e.g. the aerospace

Some Definitions (2)
  • Knowledge is ...
  • experientially grounded understanding
  • Information is ...
  • the arrangement of data into meaningful
  • Knowledge Management is
  • the way that organizations…
  • create, capture and reuse knowledge
  • to achieve
    organizational objectives

So what is Knowledge Management?
  • A mixed bag of
  • Business processes
  • IT and Communications tools
  • Leadership Roles
  • Organizational Design practices
  • Learning methodologies
  • All directed towards supporting
  • knowledge creation, capture and reuse

Formal Knowledge Management Tools for Production
Network Organizations
  • Communications tools
  • T1 or Web based networks
  • Network portals, secure email
  • document repositories,
  • teleconferencing and video conferencing tools
  • Netmeeting, whiteboarding,
  • Shared data bases hosted or distributed
  • order, component, design data bases, project work
  • Upstream
  • CRM B2B marketing tools, data mining
  • IPR agreements
  • PM processes and tools and planning tools, Work
    flow tools
  • Collaborative design tools, CASE, CAD,
    simulation tools, design elements, design review
  • Virtual teaming tools,
  • Document repository and management tools,
  • Joint Operations
  • IO MRP2,
  • Production Scheduling,
  • Inventory mngt tools
  • Supply chain management tools,
  • Downstream Coordination
  • IO Order management suites
  • Distribution and tracking tools,
  • Logistics support tools
  • CRM systems
  • Basically everything used inside a Vertically
    integrated firm…. Plus Firewalls

PNO Knowledge Management Framework
Partner Trust
Market Power
Strategic Import
Org Compatibility
Strategic Alignment
Leader Firm Centrality
Task Scope
KM Performance
BP Integration level
User Acceptance
Knowledge Flow
IOICS and formal KM
Alliance and KM Leadership
Business Uncertainty
Formal KM practices
Technological Uncertainty
Informal KM roles
Learning Methodologies
  • Contingency Theory
  • Task Scope (breadth and complexity) of the
  • production task will be jointly shaped by
    the level of
  • environmental and technical volatility
    and the level of
  • specialization/interdependence of member
  • Shared knowledge requirements (volumen,
  • complexity, tacitness, and specificity) is
    shaped by the
  • joint task scope.
  • Alliance form, (concentration of power,
  • formalization and BP integration) is
    shaped by the
  • relationships between the member firms,
    the joint task
  • scope and its related shared knowledge

The Alliance Structure is contingent upon member
characteristics. But it should also take into
account the knowledge sharing requirements of
the joint task.
Shared Knowledge Requirements
Shared Knowledge Requirements

Knowledge Management mediates any misalignment
between the Alliance structure and joint task
  • Alliance performance is shaped by the fit
    between the form of the alliance and its its
    knowledge sharing requirements.
  • heavy knowledge sharing requirements and limited
    alliance formalization and structure present
  • formal and particularly informal knowledge
    management practices may be implemented jointly
    or by individual firms to mediate the
  • Improved KM effectiveness leads to greater
    inter-firm understanding, trust and collaboration

Volume Complexity Tacitness Specificity
Three case studies
  • Case 1 a microelectronics PNO Chain
  • Case 2 A telecom joint venture PNO
  • Case 3 a tiered hub and spoke Aerospace
  • NPO
  • all involve some Canadian firms,
  • all experienced some misalignment between task
    scope and venture structure
  • all made extensive use of IOICS and other
    knowledge management methods.

Case 1 A Microelectronics PNO Chain
  • .Network organized to produce a single device--
    with upgrades-- innovative product which has
    become mature. Owns its market, multiple
    globally distributed large endusers
  • Industry for complex specialist network
    management ICs characterized by rapid product
    and process technology evolution and very high
    market uncertainty
  • Member Relationships
  • 6 firms in a chain, specify, design, fabricate,
    package, test, distribute and integrate
    specialized semiconductors for telecommunications
  • The one common denominator is profitability based
    on business volume growth expectations,
    originally for this device and now for future
    product collaborations.
  • Joint Task Scope
  • end to end development of a complex IC by
    utilizing the specialized knowledge and assest
    investments of each of the member firms.
  • But little overlap of tasks in the chain.
  • Information and Knowledge Exchange Requirements
  • across the whole product life cycle.
  • Information volume peaks at the initial design
    transfer, and the required knowledge exchange is
    very specialized and complex, and is formalized
    and highly codified.
  • Venture Structure
  • flat, loosely integrated by the linking pin or
    factoring firm-- the small specialist design
  • The silicon Fab controls the production schedule
    of the venture because of its control over the
    key production capability.
  • Structure/Knowledge Sharing Alignment
  • the legal structure of the venture is simple
  • There is no formal governance or dispute
    resolution structure, and no designated venture
    management board

Case 1 Challenges
  • 1. No governance structure means informal
    dispute identification and resolution process has
    to evolve, operates slowly.
  • 2. The strategic import of the venture is highest
    for the design house, and relatively low for the
    key player, the Fab.
  • Strategic import also fluctuates across the life
    of the venture for each member.
  • 3. Challenge of sharing of tacit specialist
    knowledge, at several phases. Limited the scope
    of joint tasks. Very compartmentalized.
  • 4. The knowledge exchange presented ICT
    challenges to the smaller PNO firms.
  • 5. Turnover of key personnel in some of the
    member firms meant loss of history and of trust
    at operational level of venture.

Case 1 Knowledge Management Efforts
  • Linking Pin firm assumes responsibility for
    establishing joint venture governance structure,
  • Sets up its own formal dispute resolution
    procedure for the venture.
  • Weekly teleconferences with cross-functional
    representation from all member firms -- on as
    needed basis. Chair and minutes responsibilities
    circulate. Records distributed across venture.
  • Strategic alignment maintained by efforts of the
    linking pin firm. Commits executive resources to
    maintaining MIND SHARE with less strongly
    committed (large, more powerful) members. Face
    to face meetings on quarterly basis to exchange
    TACIT knowledge-- strategic and operational
    plans. Creating a community of interests,
    creating shared strategic goals. Critical
    strategic joint KM
  • Different level of ICT capability, managed by the
    Fab-- maintains a lite data exchange capability
    for smaller players, provides ICT services,
    translates data files, for small partners of
    strategic value.
  • Turnover issue requires re-connection and
    re-education period, some raising of the issue
    with partner firms, preference for partners with
    lower turn-over.
  • Specialist Knowledge sharing issues handled by
    assigning specific venture roles, to
    specialists-- often with language skills (french,
    mandarin, german) to match opposite in partner
    firms .
  • Adoption of specific ICT tools to facilitate
    specialist collaborations eg. virtual test

Case 2 A Telecom Joint Venture
  • 2 strong VI partners, one with new technology,
    other with market access.
  • Required major commitment of equity and
    engineering resources-- design and mfg. By both
    partners, for high risk entry to new market.
  • Venture Scope very broad, and deep integration
    of design and prodn.
  • Knowledge Flow requirements HUGE Joint design
    venture required deep knowledge transfer from
    company A to company B-- new wireless technology.
    Joint mfg required full integration of both
    companies mfg systems and processes.
  • Venture Structure Legal Joint Venture unit
    established for design unit, PMO for
    manufacturing units.
  • Couldnt do the design in a PMO because of IP,
    tacit knowledge transfer difficulties.
  • Allignment Issues Depth of collaboration for
    tech transfer and collaboration led to creation
    of a formal joint venture structure for design
  • This was not sufficient for effective
    collaboration-- even with own management
    structure and assets.
  • Goal was high level of process integration--Profes
    sional, Cultural and organizational differences
    presented significant barriers

Case 2 Knowledge management Efforts
  • KM strategy was formal and heavily resourced by
    Company B, (more experience with global
    production and ICT) to acquire key new technology
    (a KM driven venture)
  • Joint Venture unit created-- to prevent loss of
    key Knowledge holders-- but also to introduce
    Company Bs processes and tools to Company As
  • Addressed cultural, language and organizational
    issues, as well as specialist engineering
    knowledge transfer. (codification and
    personalization approaches both used)
  • Used ICT infrastructure to create virtual
    development teams with members in Europe and NA.
  • Invested a lot in long term postings of key
    personnel in JV and Company A and B units to
    handle strategic knowledge sharing and transfer.
  • Outcome Project was a huge success
  • Eventually company B absorbed the JC unit-- and
    didnt loose the key personnel.
  • Eample of using a JV-- extended enterprise-- to
    transfer key knowledge and human resources
    between companies- in a high risk situation.

Case 3 An Aerospace Supply Chain
  • An experiment that is currently under way.
    Evolution of a traditional supply chain to a
    tiered hub and spoke PNO.
  • Challenge is to outsource production activities
    and decentralize design responsibility.
  • Leveraging an advanced internal ICT
    infrastructure, and industry wide design and
    manufacturing standards and data exchange
    standards and tools.
  • Partners already experienced in using ICT to
    manage regular supply relationship, but partner
    ICT capabilities and resources are limited and
  • Challenges The joint task scope is being
    greatly expanded, based on the premise that the
    knowledge sharing capabilities will be strong
    enough to support the required collaboration.
  • The transition to a virtual enterprise will
    require a significant transfer of both codified
    and tacit, complex, specialist knowledge outward
    from the hub firm to its new production partners.

Comparison of Cases
(No Transcript)
Some Preliminary Conclusions
  • PNOs linking very large and some very small
    players require strong strategic incentives for
    specialization or market penetration to encourage
    the large players to collaborate deeply.
  • Small players need to invest heavily in informal
    knowledge sharing and knowledge management
    methods across the PNO to maintain strategic
    mind-share with their large partners.
  • PNO chain alliances are best for specialist
    collaborations. They are not sufficiently
    integrated for tech transfer or for the
    deverticalization of previously highly integrated
    production systems.
  • PNO chains need scale flexible project
    focused collaboration processes and KM tools, to
    support and reduce the collaboration load on
    member firms.
  • Large, sophisticated players have the distinct
    advantage of migrating their complex and
    advanced internal ICS and KM practices to support
    PNO integration, but may need to transfer
    knowledge as well as information to partners.
  • Smaller players benefit from selectively adopting
    the technologies and experience and from
    utilizing the ICS resources of their larger
    partners. But this must be done carefully, to
    avoid lock in or take-over.
  • The scope of collaboration varies over the life
    cycle of PNO ventures heavy in the development
    phase and much lighter in the operational phase.
  • PNOs work best for Collaboration, not for deep
    Technology Transfer