Knowledge Management at British Petroleum and Toyota - Case Study Example

Running Head: Knowledge Management Knowledge Management [Institute’s Table of Contents Table of Contents 2 Introduction 3 Knowledge Management at Toyota 3 Knowledge Management and British Petroleum 6 Objectives and Implementation 6 Challenges 8 Critical Strategies 9 Knowledge Management and Social Media 10 References 12 Introduction During the last few decades, there have been huge advancements around the world resulting in alteration of various global processes at exponential rate. As a result, human societies have come across a huge pile of knowledge that is not easy to manage and requires thorough understanding and serious efforts. In addition, review of literature has indicated that due to significant importance of this knowledge, the organisations with capabilities and capacities to make use of this knowledge are enjoying leading positions globally. While few years back, everything was depended more on financial capital; nowadays, it is more about intellectual capital that is enabling organisations to acquire competitive edge in the market with effective knowledge management. Particularly, experts have defined knowledge management as a notion in which “an enterprise gathers organizes, shares, and analyzes the knowledge of individuals and groups across the organization in ways that directly affect performance (Frappaolo, 2006, pp. 26-28). While Meredith Levinson defined it as a process, “through which organizations generate value from their intellectual and knowledge based assets” (Becerra-Fernandez & Sabherwal, 2010, pp. 341-348). From this perspective, this paper will focus primarily on different aspects of knowledge management while particularly discussing knowledge management approaches of one of the world’s leading organisations that will enable a comprehensive understanding regarding the subject under focus. Knowledge Management at Toyota For many decades, the Toyota Corporation (Edsall, 2006) has been enjoying its leading position in the international automobile industry. Although it began with its manufacturing bases in Japan and the United States only, and dominated the automobile industry for many years, however, in recent years, this giant corporation has expanded itself to various parts of the world. To ensure its domination in the world market, the company is always looking for strategies to acquire competitive edge over its competitors, and thus, the company has gone through a number of alterations and advancements, which has now become a case study example of academicians, as well as business experts that are always looking for successful stories. Analysis of Toyota’s case study (Ichijo & Kohlbacher, 2008) has indicated that for many years, the company depended solely on transfer of knowledge in terms of supplying manufactured cars from Japan to different parts of the world where there was a demand of its cars. However, as the years passed by, the company came to a realization that in order to stay ahead of other companies, the Toyota will have to make a leap in knowledge management by initiating knowledge creation rather than depending on knowledge transfer and its management. As a result, the company came up with its different perspective which experts call ‘The Toyota Way’ (Liker, 2003) and which has become a noteworthy example to understand and explain effective knowledge management and its benefits, particularly in the global automobile industry. Particularly, analysis of the article (Ichijo & Kohlbacher, 2008) identified three different approaches of the Toyota Corporation that helped it implement knowledge management practices within the organisation. As mentioned earlier, until few years back, the company was relying only on Japanese manufacturing plants to produce cars to fulfill global demand and thus, it used to produce high-quality cars and export them to various parts of the world. Although the company was able to maintain its brand image with quality cars globally, however, the company initiated its knowledge management ‘the Toyota way’ (Liker & Franz, 2011) by expanding its manufacturing bases to make use of local knowledge that was a way to tap tacit knowledge in the emerging markets, such as Brazil, China, India, etc. In this regard, the very first knowledge creation strategy of Toyota was to ‘act global’ (Ichijo & Kohlbacher, 2008). In other words, the company was no more relying on its Japanese units to design and manufacture cars but were giving the opportunities to other countries to fulfill the local demand while maintaining global quality standards of the company, which although came up as a challenge but helped the company in overreaching its targets within a few years. This also was beneficial financially as the company saved millions in import taxes, reduction of shipping expenses, and various other costs that the Toyota was incurring in presence of only Japanese manufacturing units. Another knowledge management strategy identified in the analysis (Ichijo & Kohlbacher, 2008) is ‘learn local’. During the first few years of its global expansion, the company had expanded its manufacturing units but was giving opportunities only to Japanese designers and engineers who were successful in maintaining global standards but were unable to understand global demands and preferences. This inclined the Toyota to initiate ‘learn local’ strategy by giving opportunities to local talent that helped the company to identify and make efficient use of local knowledge while benefiting from global database. The third strategy identified during the analysis (Ichijo & Kohlbacher, 2008) was Toyota’s attempt to externalize its knowledge base by integrating it with its competitors that was unimaginable few years ago. As Ichijo and Kohlbacher (2008) indicated in their study, the Toyota launched the TPCA plant by collaborating with PSA that was the first-ever project between two automobile companies in the industry. This not helped both companies to increase its revenues but also facilitated them in learning from each other in terms of manufacturing processes, designing activities, procurement initiatives, and even corporate culture and ethics. Author (Ichijo & Kohlbacher, 2008) in the article deemed it as third level of Toyota’s knowledge management strategy that left behind the culture of knowledge transfer and initiated an era of knowledge creation with the help of emerging players. For instance, although PSA was only dealing in small cars in the European continent; however, the Toyota learned a lot from PSA, such as local needs and relationships, and shift management while the PSA learnt from Toyota regarding management strategies and production activities. In this regard, the two-way learning resulted in an extensive knowledge creation process, which was beneficial mutually. Knowledge Management and British Petroleum In this section, the paper will use example of one of the world leading corporations from the oil industry: British Petroleum also known as BP (Bamberg, 2000). Historically, it began as a local oil company and after years of efforts, the BP has turned into a global corporation and considered as the one of the most successful organisations globally. Particularly, exploration of oil and gas products, refining of these products, and distribution of relevant products include the by-products are some of the aspects of British Petroleum’s involvement in the global oil industry (Bamberg, 2000). One of the major reasons of choosing British Petroleum as a case study for this paper is its significant status in the area of knowledge management since the company began its efforts in the area of knowledge management way back in 1990s when other companies were beginning to think about knowledge transfer. As BP in 1994 announced, “By the end of 1997, we want to deliver a demonstrable increase in our ability to manage knowledge. We want to enhance our knowledge assets, assess our ability to manage these assets, and to look at what the critical areas of knowledge are for us” (Collison, 1997, p. 1-2). Objectives and Implementation Analysis of British Petroleum Company’s documents indicated that since the very start, one of the major objectives was not to acquire only growth but more importantly to achieve sustainability in terms of continued growth. For this purpose, the company always focused on present and the future growth strategies that inclined it to look at the aspect of its knowledge management. One of the earlier strategies to manage its knowledge was reliance of British Petroleum on both organic as well as inorganic growth options. For instance, the company did not rely on only a few countries that were contributing to the exploration activities; however, it also involved countries where the by-product processes were in demand to ensure both organic and inorganic growth. Although it confronted various challenges, especially the process of nationalization in Iran that gave huge losses both financially and in terms of intellectual capital, but the company survived and focused on other countries to manage its needs and demands strategically. The British Petroleum also made use of mergers strategy to make effective use of its expansion plans and to avoid any risk in the future (Collison, 1997, p. 1-2). However, all these objectives and purposes inclined the company to implement a knowledge management system to ensure effectiveness and sustainable momentum in its growth. For instance, Kent Greens stated, “The biggest single source of sustainable competitive advantage in the future will be our ability to create and mobilize knowledge in the interest of new products and services” (Collison, 1997, p. 1-2) that shows the intent and vision of the British Petroleum regarding knowledge management. Particularly, the British Petroleum introduced and launched their knowledge management system in the year 1994 as a pilot project with a valued cost of thirteen billion dollars. The major focus of this system was communication infrastructure of the company with its business units in different parts of the world. The employees and particularly departments got the opportunity to share and discuss their different tasks and events with individuals from relevant and similar departments working in different business units and countries. This knowledge management system encouraged the employees to involve different departments in their planning process so that everyone may learn and more importantly, contribute in the knowledge creation process. This expanded the workplace environment to the whole globe, which was earlier limited to a single department or a single business unit. The British Petroleum (Yergin, 2008) indicated that the purpose of this knowledge management was not to collect every data or knowledge that was in their different business units but the objective was to encourage effective utilization of this knowledge that may subsequently help the company in achieving the targets easily and effectively. For the purpose of implementation, the company created different virtual knowledge teams and installed equipments in every business unit that was required for effective communication. Some of the equipments installed at different workstations of BP were video conferencing, satellite linkage equipments, and equipments essential for documents and information sharing (Yergin, 2008). Since the focus of BP was not only on knowledge transfer but also on knowledge creation, the company’s knowledge management ambassadors encouraged departments to discuss every detail with each other at three stages. Firstly, before any event/activity/process means during the planning stage, then during the process means during the implementation phase, and lastly, after the process to share the information about what happened. In this way, relevant departments may contribute to all the three: planning, implementation, and monitoring/evaluation phases of the British Petroleum company. Challenges One of the major challenges that the company faced was lack of reception by the company staff as they were surely not ready for any of this first-ever kind thing. In addition, the staff initially hesitated sharing their information that was considered sensitive and confidential earlier, thus, this came out as a challenge for the company. Moreover, taking out time for video conferences and responding to others’ requests was considered a burden rather than an opportunity, and thus, it created hassles for the company to promote and encourage knowledge management practices in the organisation for the first two years (Yergin, 2008). Another challenge was regarding the technical expertise of individuals to make use of computerized systems since during the late 1990s, the video conferencing and similar processes were limited to elites and thus, usage of such equipments also came out as a challenge. However, the company did not give up and implemented various strategies discussed below that resulted in a successful knowledge system that reached its target half a year earlier than its estimated time. The company also saved approximately one hundred million dollars in costs of this system excluding the other financial advantages that it achieved through this knowledge management. Critical Strategies One of the most successful strategies to increase the possibility of success for the knowledge management system at the BP was that the company integrated individual and departmental performance targets with that of knowledge management system. This critical step by the company automatically motivated employees to begin their participation in the system and which evidently showed results from the third year. Besides, during the initial phase, the company had planned frequent information-sharing meeting; however, to tackle employee issues, the number of these meetings were reduced that also helped in ensuring motivation of the employees in this system. Another strategy used by the BP was to include experience sharing and informal sessions on the video conferencing systems that encouraged individuals to use these systems frequently, and this strategy helped the company to alter the image of knowledge management system, which was earlier a monitoring and evaluation system rather than a knowledge sharing system. Knowledge Management and Social Media Exponential growth and advancements in the field of information and technology have altered almost everything and so it has affected traditional approaches of knowledge management in organisations globally, particularly from the perspective of social media (Crampton, 2011). One of the major impacts of social media has been on the nature of knowledge that was limited in terms of its creation in a point of time. For instance, as in the case of BP, employees used to store and share the information of planning with their colleagues on the system. However, in this era of social media, an online conversation begins the planning and the planning process continues to evolve over formal and/or informal conversations that have completely altered the nature of information from fixed to iterative (McDonald, 2013). Moreover, in the earlier era, the subject matter used to be the property of its creator; however, in social media, every content becomes a social content and its nature and intent continues to evolve with every new comment and discussion on it (Levy, 2009). This has made the management (Laudon & Laudon, 2013) of knowledge in organisations completely complex and difficult due to absence of any structures that used to manage data in the previous years. This all looks complex and negative; however, it is anticipation that social media will play a positive and constructive role in the near future with the beginning of social media enterprise solutions. With these solutions, although corporate formal knowledge databases will be in use to gather data; however, social media networks will also be in use to provide soft and informal information related to companies and their employees that will be very effective in dealing the staff effectively. From this aspect, the role of management will emerge as a facilitator or as an analyst rather than as management or key holder of the knowledge as happened in the education system with teachers emerging as facilitators rather than tutors. References Bamberg, James. 2000. British Petroleum and Global Oil. Cambridge: Cambridge University Press. Becerra-Fernandez, Irma., & Sabherwal, Rajiv. 2010. Knowledge Management: Systems and processes. M.E. Sharpe. Collison, Chris. 1997. Greater than the sum of its parts: Knowledge management in British Petroleum. Inside Knowledge, 1(1), pp. 1-2. Crampton, T. 2011. Social media in China: The same, but different. China Business Review, 38(1), pp. 28-31. Frappaolo, Carl. 2006. Knowledge Management. San Francisco: John Wiley & Sons. Ichijo, K., and Kohlbacher, F. 2008. Tapping tacit local knowledge in emerging markets - the Toyota way. Knowledge Management Research & Practice, 6(3), pp. 173-186. Laudon, Jane P. and Laudon, Kenneth C. 2013. Management Information Systems, 13th ed. Harlow: Pearson Education Limited. Levy, M. 2009. WEB 2.0 implications on knowledge management. Journal of Knowledge Management, 13(1), pp. 120-134. McDonald, Mark P. 2013. Social media versus knowledge management. Gartner Blog Network. Retrieved on April 24, 2015: http://blogs.gartner.com/mark_mcdonald/2013/05/09/social-media-versus-knowledge-management/ Edsall, L. 2006. Toyota. Chicago: Motorbooks. Liker, J. 2003. The Toyota Way. New York: McGraw-Hill. Liker, J. and Franz, J. K. 2011. The Toyota Way to Continuous Improvement. New York: McGraw-Hill. Yergin, Daniel. 2008. The Prize: The Epic Quest for Oil, Money, and Power. Chicago: Free Press. Read More