Running head: DAIMLERCHRYSLER KNOWLEDGE MANAGEMENT PRACTICES

CASE STUDY: DaimlerChrysler Knowledge Management Practices

James D. MacIsaac Jr.

The George Washington University

Author Note
Prepared for EMSE 6505-VM3 Summer 2013 Session
Instructor: Dr. Georgiadis
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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

management system perspective, DaimlerChrysler had a multi-facet 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. However, despite these strengths, the failure of the new

organization to do due diligence in assessing and aligning cultures after the merger of Daimler

Benz and Chrysler ultimately contributed to the failure of the organization.

Keywords: DaimlerChrysler, knowledge management, communities of practice (CoPs),

knowledge-based engineering solutions, merging cultures

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CASE STUDY: DaimlerChrysler Knowledge Management Practices

Introduction

The knowledge management (KM) activities started in 1988 when Chrysler, as a

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

Clubs.” (Wenger, McDermott, & Synder, 2002)

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
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of KM practices throughout the organization served as a competitive advantage, which is

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

from a legitimate need for sharing knowledge to stay competitive.

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.

(Kannan, Aulbur, & Haas, 2005)

KM Methodology/Strategy Solving the Problem

The DC approach to knowledge management can be summarized as People, Process, and

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.
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Describe Metrics Used If Any

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

1. Connectivity - What connectivity devices, bandwidths, interfaces, technologies, and

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 applications available to employees. DC’s web-based Engineering Book of Knowledge

(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)
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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

web-based solution known as Idee.com to capture KM suggestions.

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,

Aulbur, & Haas, 2005)

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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

stated by Wenger et al. (2002):

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

evolution of knowledge management technologies to knowledge-based engineering solutions.

(Kannan, Aulbur, & Haas, 2005)

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
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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

beginnings of what was, in a few months’ time, to be heralded as a “merger of equals,”

uniting two large automotive companies into a powerful combination, to be administered

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

Rothbard of Wharton School at the University of Pennsylvania (Donnelly, 2011) states:

… 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
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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

the 1996 to 2003 timeframe. It describes DaimlerChrysler as “a leading automotive,

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

during the nine years of the international partnership.

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
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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,

Aulbur, & Haas, 2005)

As stated earlier, the (KMSF) meetings were coordinated and facilitated by

DaimlerChrysler Corporate University (DCU), which also offered a mix of internal training and

formal education. An excerpt of a Pruett (2003) interview of a then current DC employee

provides a good example:

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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

master’s degree from DaimlerChrysler’s corporate university. His international

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

Germans in the workplace are rare. (p. 41)

This example is illustrative of the many means by which the DC KM system built

knowledge-centric capacity in its employees.

6. Cooperation - Do your employees have a spirit of open cooperation, and does your

organization cooperate on the KM front with business partners, industry consortia,

and universities?

One innovative facet of DC’s KM approach was their integration of the integration of

Daimler “Austauschgruppe” (ATG) personnel rotations post-merger. These two-year personnel

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

20,000 ideas from leading business experts. (Business Wire, 2001)

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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?

In terms of incentives, Kannan et al., 2005 states “Organizational culture, top

management support, knowledge-sharing practices, opportunities for learning and development,

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

to frequent or significant contributors. (Wenger, McDermott, & Synder, 2002)

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?

DC developed Knowledge-Based Engineering Solutions (KBS) where patterns and

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
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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

Euro (~81 million USD):

EBoK has resulted in the elimination of printing, shipping, and storage of written

operational manuals; led to more knowledgeable employees, increased productivity, and

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

as Idee.com. (p. 3541 Kindle location)

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

waste time looking for information.

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,

time-to-information, and level of motivation. (Kannan, Aulbur, & Haas, 2005)

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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

between geographic locations. Perhaps using KM system metrics of amount of cross-Atlantic

participation in a CoP, or language translation requests for KM objects could have served as a

measure of levels of use and collaboration.

Summary

A Rao “8C analysis” of the DaimlerChrysler knowledge management practices indicated

an organization with a multi-decade practice of capturing and disseminating knowledge and

expertise even prior to the international merger of Daimler Benz and Chrysler. From a

knowledge management system perspective, the post-merger DaimlerChrysler had a multi-facet

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

failure of the organization.

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References

Business Wire. (2001, September 10). MeansBusiness selected as strategic content by leading

corporate university . Retrieved from TheFreeLibrary:

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

consulting services: http://www.dack.com/web/cost_analyzer.html

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

Technology Work at Daimlerchrysler. In M. Rao, Knowledge Management Tools and

Techniques - Practitioners and Experts Evaluate KM Solutions (pp. Kindle Locations

3356-3537). [Kindle Edition]: Retrieved from Amazon.com.

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

the DaimlerChrysler Merger. Michigan: Regent University; UMI Dissertation

Publishing.

Rao, M. (2005). Knowledge Management Tools and Techniques - Practitioners and Experts

Evaluate KM Solutions. Oxford: Elsevier Butterworth – Heinemann.

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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.

Hanover: Trustees of Dartmouth College.

Wenger, E., McDermott, R., & Synder, W. (2002). Cultivating Communities of Practice: A

Guide to Managing Knowledge . Kindle Edition: Retrieved from Amazon.com.