FINAL CASE # 1: SIEMENS KNOWS WHAT IT KNOWS THROUGH KNOWLEDGE MANAGEMENT

THE PROBLEM

Siemens AG, a $73 billion electronics and electrical-engineering conglomerate, produces everything from light bulbs to X-ray machines, from power generation equipment to high-speed trains. During its 156-year history, Siemens has developed into one of the world's largest and most successful corporations. Siemens is well known for the technical brilliance of its engineers, but much of their knowledge was locked and unavailable to other employees. Facing the pressure to maximize the benefits of corporate membership of each business unit, Siemens AG needed to learn to leverage the knowledge and expertise of its 460,000 employees worldwide.

THE SOLUTION

The roots of knowledge management at Siemens go back to 1996, when a number of people within the corporation with an interest in knowledge management (KM) formed a community of interest. They researched the subject, learned what was being done by other companies, and determined how KM could benefit Siemens. Without suggestion or encouragement from senior executives, midlevel employees in Siemens business units began creating repositories, communities of practice, and informal techniques of sharing knowledge. By 1999, the central board of Siemens AG confirmed the importance of knowledge management to the entire company by creating an organizational unit that would be responsible for the worldwide deployment of KM.

The movement toward knowledge management by Siemens has presented several challenges to the company, the most notable of which are technological and cultural. At the heart of Siemens's technical solution to knowledge management is a Web site called ShareNet, which combines elements of a database repository, a chat room, and a search engine. Online entry forms allow employees to store information they think might be useful to colleagues. Other Siemens employees are able to search the repository or browse by topic, and then contact the authors for more information using one of the available communication channels. In addition, the system lets employees post an alert when they have an urgent question. Although KM implementation at Siemens involved establishing a network to collect, categorize, and share information using databases and intranets, Siemens realized that IT was only the tool that enabled knowledge management. Randall Sellers, director of knowledge management for the Americas Region of Siemens, states: "In my opinion, the technology or IT role is a small one. I think it's 20 percent IT and 80 percent change managementdealing with cultural change and human interfaces."

Siemens used a three-pronged effort to convince employees that it is important to participate in the exchange of ideas and experiences and to share what they know. The challenge is managing the people who manage the knowledge. You have to make it easy for them to share, or they won't. Siemens has assigned 100 internal evangelists around the world to be responsible for training, answering questions, and monitoring the system. Siemens's top management has shown its full support for the knowledge management projects. And the company is providing incentives to overcome employees' resistance to change. When employees post documents to the system or use the knowledge, Siemens rewards them with "shares" (like frequent-flyer miles). An employee's accumulation of shares can be exchanged for things like consumer electronics or discounted trips to other countries. However, the real incentive of the system is much more basic. Commission-driven salespeople have already learned that the knowledge and expertise of their colleagues available through ShareNet can be indispensable in winning lucrative contracts. Employees in marketing, service, R&D, and other departments are also willing to participate and contribute once they realize that the system provides them with useful information in a convenient way.

The ShareNet has undergone tremendous growth, which resulted in several challenges for Siemens. The company strives to maintain a balance between global and local knowledge initiatives as well as between knowledge management efforts that support the entire company and those that help individual business units. Furthermore, Siemens works to prevent ShareNet from becoming so overloaded with knowledge that it becomes useless. A group is assigned to monitor the system and remove trivial and irrelevant content.

RESULTS

ShareNet has evolved into a state-of-the-art Webbased knowledge management system that stores and catalogs volumes of valuable knowledge, makes it available to every employee, and enhances global collaboration. Numerous companies, including Intel, Philips, and Volkswagen, studied ShareNet before setting up their own knowledge management systems. Teleos, an independent knowledge management research company, has acknowledged Siemens as one of the Most Admired Knowledge Enterprises worldwide for five years in a row.

Siemens has realized a variety of quantifiable benefits afforded by knowledge management. For example, in April 1999, the company developed a portion of ShareNet to support the Information & Communications Networks Group at the cost of $7.8 million. Within two years, the tool helped to generate $122 million in additional sales.

Ultimately, knowledge management may be one of the major tools that will help Siemens prove that large diversified conglomerates can work and that being big might even be an advantage in the Information Age.

QUESTIONS:

1. How does Siemens view knowledge (intellectual) assets? How did the Siemens knowledge management system evolve?

2. What does leveraging expertise means? How did Siemens do this? Explain how this relates to the high return on investment.

3. Explain the meaning of culture transformation as it occurred at Siemens. Include how the various constituencies bought into the system in your answer.

4. Explain how Internet and Web technologies enabled the knowledge management system.