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International Journal of Information Management

journal homepage: www.elsevier.com/locate/ijinfomgt

Case Study

A business process-oriented method of KM solution design: A case study of Samsung Electronics

Peter Baloh a,, Katharina Uthicke b, Gyewan Moon b
a b

Faculty of Economics, University of Ljubljana, Ljubljana, Slovenia Kyungpook National University, Daegu, South Korea

a r t i c l e in fo

abstract
Improving how knowledge is leveraged in organizations for improved business performance is today considered as a major organizational change. Knowledge management (KM) projects are stigmatized as demanding, fuzzy and complex, with questionable outcomesmore than 70% of them do not deliver what they promised. A case of Samsung Electronics mobile branch we present shows how KM projects can be more successful if they are treated as business process-oriented organizational change projects. Both organizations and academia can stand on the shoulders of giants as previous experience and research in that area is rich. Adding the KM avor to such organizational change is the goal of this case study; the learning outcomes include a six-step KM solution design method, a justication for the business process level of analysis and managerial action, and the need for modest and just-do-it approach when introducing KM-related organizational interventions. & 2008 Elsevier Ltd. All rights reserved.

Keywords: Knowledge management solution design Organizational design Business process change

1. Introduction Organizations that continuously learn to coordinate and combine their traditional resources and capabilities in new and distinctive ways, provide more value for their customers and, in general, stakeholders, than their competitors can (Teece, Pisano, & Shuen, 1997). Results of successfully utilizing and creating new knowledge are tempting: good knowledge-oriented practices improve decision-making, accelerate learning, improve innovation assimilation, increase productivity and minimize reinvention and duplication (see e.g. Wing & Chua, 2005). Managing knowledge successfully leverages core business competencies, accelerates innovation and time-to-market, improves cycle-times, improves decision-making, strengthens organizational commitment, and builds sustainable competitive advantage (Davenport & Prusak, 1998). CEOs are increasingly aware that they should be consciously paying attention to knowledge-driven organizational change efforts, too. For example, senior executives and analysts Economist 2006 survey feel that improving the productivity of knowledge workers through technology, training and organizational change will be the major boardroom challenge of the next 15 years (Economist Intelligence Unit, 2006b). In closer range and another surveys, CEOs ranked knowledge management (KM) (36%) second to sales and marketing (56%) as the business function that will be the most important in realizing corporate

Corresponding author. Tel.: +38641711317; fax: +38615892698.

E-mail address: peter@baloh.net (P. Baloh). 0268-4012/$ - see front matter & 2008 Elsevier Ltd. All rights reserved. doi:10.1016/j.ijinfomgt.2008.05.004

strategy goals over the next 3 years (Economist Intelligence Unit, 2006a). Similarly, 30% of CEOs have stated that KM is the most important investment for the year 2007, second to marketing and sales improvement investment (36%) (Economist Intelligence Unit, 2007). With the purpose of improving the organizations efciency and effectiveness through better decisions, organizations consciously design and deploy KM solutions that instigate utilization of existing knowledge and new knowledge creation (Desouza, 2003; Desouza, Awazu, & Tiwana, 2006a). Design of KM solution incorporates design of organizational structure, business process design, denition of roles and responsibilities around knowledgerelated activities, the role of information technology, cultural facets of knowledge work, design of incentive schemes, and KMrelated measurement mechanisms. Even though improving how knowledge is created and utilized is of critical importance to businesses, and in spite of vast amount of research ndings published, statistics show that success comes rarely in practice: many KM projects get abandoned and over 70% of them do not deliver what they have promised at the beginning (Davenport & Glaser, 2002; Desouza & Awazu, 2005; Wing & Chua, 2005). Desouza (2003) noted that there are several inherent barriers which prevent the effective use of KMSs. Similarly, Desouza and Awazu (2005) argue that most KM programs lack engagement with organizational realities. Hence, are of limited use when considered in context of the ongoing knowledge work at the organization. To nd a more effective and efcient way of design and deployment of KM solutions, we have studied Samsung Electronics (SE) Gumi branch through their 6 months KM-related

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organizational change project. Data collection was performed by a series of personal interviews conducted with various groups, including managers and employees, within the organization. This allowed obtaining a rst-hand experience of the challenges at a micro-level and by interacting with those directly involved identifying potential ways of resolving them. In addition, company data and reports resulting from the project or touching the area, have been examined. Moreover, industry and academic reports were also used to identify best practices and relate what has happened in SE Gumi to the existing knowledge base. The analysis of this setting opened up new vistas for us and revealed how KM projects get successfully designed and deployed in practice. Numerous learning outcomes both for practice and research are presented towards the end of this paper.

2. The case: Samsung Electronics Gumi SE is a South Korean multinational corporation and the worlds largest and leading electronics and information technology company. Headquartered in Suwon, South Korea, it is part of the Korean Samsung Group. SE focuses on four business areas: Digital Media, Semiconductors, Telecommunication Networks, and LCD Digital Appliances. The companys main goal is world leadership and securing overwhelming competitive strength, through innovations in process improvement and operations management. For example, Samsungs SDI division recently presented a 31 in at panel OLED displaylargest ever developed by panel makers based on their active matrix organic light-emitting diode technology. Another example of their worldwide innovation edge is a prototype of a battery, which powers a laptop for 30 days. SE Gumi branch is an independent entity and was established in 1980. Main products include: mobile phones (80%) and fax machines (20%). Mobile phone manufacturings sales amount was around 20 million USD in 2007. Currently the sales share of mobile phone business is 33%, with the mobile phone manufacturing process responsible for 31% prot in SE. Clearly, SE Gumi represents an important business in SE and in the Samsung Group. The global market is currently dominated by the big six mobile handset manufacturers: Nokia (37%), Samsung (13.7%) and Motorola (13%), who account for roughly 60% market share, followed by Siemens, Sony Ericsson and LG Electronics. In order to overrun Nokia, SE Gumi determined to improve the pace of innovation, since their main rival produces new mobile phones at record-rapid rate, dominating the world market. To battle rivals like Nokia and Motorola, SE Gumi has been searching for a way to optimize their product- and technologicalinnovation processes. Previously, they succeeded in training and encouraging employees to be creative, exible, fast thinking and to work well under pressure by establishing so-called ProTeams. ProTeam Project has been a strategy to build internal atmosphere and culture, which would recognize and facilitate Communities of Practice (COPs). ProTeams were meant to integrate the employees and their opinions in the mobile phone manufacturing process, and to connect them. They have facilitated a balanced bottom-up and horizontal communication culture, encouraging employees to work and innovative individually and in out-of-ordinary-hierarchical-structure groups. One of the hallmarks of this solution is the slack time that employees have to play and be innovative. SE Gumi allows 20 h a month per employee for COP activities. The project, however, has become cumbersome to control and focus. There are more than 6000 members (35% of all employees) at present who have been organized in over 360 ProTeams. Too many disparate projects have been running simultaneously, precious efforts from scarce resource (people) have not been prioritized and directed into innovative activities concerning

mobile phone design. SE Gumi has realized that they cannot achieve desired results by trying to solve all problems of the whole company at once. The rst step to change has been to focus on an important business processes which offers lucrative opportunities, thus worth improving: the mobile phone manufacturing innovative process. Therefore SE Gumi has set an ambitious goal of increasing the efciency and effectiveness of innovation. There are various measures selected, one of them is a 20% of increase in number of suggestions for new designs per employee. After selecting the important business issues and setting the goal, the problem situation has to be analyzed. A great deal of innovative ideas fail due to lack of market orientation, new products being over-engineered and inadequately addressing customer needs, thus, these were the issues that needed to be tackled in the future organizational design. From the knowledge viewpoint, the main challenge has been to enhance knowledge discovery and knowledge sharing. By focusing on knowledge discovery, SE Gumi has been able to create and develop new explicit or tacit knowledge important for innovation processes, whereas by supporting knowledge sharing acquired valuable knowledge will not get lost, failures are not repeated, and employees are not wasting time reinventing the wheel. To facilitate knowledge discovery and sharing a blend of organizational mechanisms and technological solutions to enable and facilitate the innovation process in SE Gumi have been introduced. SE Gumi Brainstorming Hours has created an effective way of discovering and sharing knowledge in any stage of the product development innovation processfrom early idea generation to diffusion and implementation (cf. Desouza et al., 2006b; Mariello, 2007). It can also be used in any type of innovative activitynot only in the new product design and development, but also to solve complex problems and suggestions for technological improvements. A team of members from each department in Gumi meets weekly for 2 h in a room specially designed for this activity. Rooms are designed to Big oor-to-ceiling windows let in light and airthey make employees feel free to express themselves and follow their interests in order to support a free ow of ideas. Big oor-to-ceiling windows let in light and air, there is wireless connectivity infrastructure for laptops, there is big-screen TV, snacks and drinks are available. A comfortable environment helps employees to socialize with each other and exchange ideas. Furthermore, a SE-wide blogging has been encouraged. Blogs are technologically simple (publishing process is easy, straightforward) yet powerful intervention to encourage socialization, trust, knowledge sharing and knowledge discovery. Through blogs, employees can get to personally know each other more, understand other peoples perspectives, and discuss their own or others opinions freely. Middle and senior management have been taking the lead and acting as role models; workshops on best practices of how and what to blog to have organizational impact, are held by external consultants with experience in this eld. Until recently, SE Gumi followed the model of closed innovation. They have made investments in centralized R&D departments, hired the best people, and zealously guarded their intellectual property. However, today they cannot depend on their R&D departments alone for innovations. Sales of mobile phones today are very much driven by attractive device design and user interface conguration rather than only by advanced software and operating systems (Accenture, 2005). This represents a challenge for the company, since understanding customers needs is a costly and inexact process and even when customers think they know what they want, they often cannot transfer that information to manufacturers clearly or completely (Baloh et al., 2007). Thus SE

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Gumi has improved its innovation process by integrating customers and suppliers into the innovation process as early stage as possible. Costumer decision groups and focus groups have been used for testing and feedback from Korean consumers. For tracking their worldwide clienteles wishes and desires, a userfriendly toolkit has been constructed. This toolkit offers Lego-style virtual external (phone housing, accessories) and a humancomputer interface (software functionalities) design to a selected costumer group (mobile phone users) from different backgrounds and different geographical locations and is used as a playground for customers and employees to create new designs and give feedback and/or amend suggested designs. Idea mobilization is the next meta-process that is supported. An idea, whether internally or externally generated, must move through a series of stages before it is adopted wholly into a company or a marketplace. Modications to any existing products, processes, services or frameworks of thought lead to the movement of ideas from one location (physical or logical) of the organization to another (Argote & Ingram, 2000; Rigby & Zook, 2002). To achieve this, idea management tools have been introduced to help SE Gumi to easily capture ideas from employees, distribute them throughout the organization, and have them evaluated by peers or formal review teams, who add their views and knowledge. Companies who have institutionalized and IT-supported idea management process have signicantly increased the rate of existing product- and process-improvement (Baloh et al., 2007). Very importantly, they opened up the communication inside the companyideas are discussed and developed openly from the earliest stages not only in hierarchical but in horizontal manner. Furthermore, contributions of others to the idea are traceable, which proved (external and public recognition) to be a signicant factor in promotion of a sharing culture and creativity. Additionally knowledge repositories have been set-up to have codiable critical knowledge captured and available throughout the company. SE Gumi has also implemented a Lessons Learned System with Alert function. For capturing lessons learned, project managers have received training in what are organizationally interesting lessons and how one can husk them out at the end of a project. Process-wise, project management ofce has prepared new reporting templates for project managers. SE Gumi has also prepared standard operating procedures (SOPs) in which knowledge-oriented activities in project management are explained and detailed (i.e. how to write a closing report, how to create and store a project model, how to perform an After Action Review, etc.). Then lessons learned are stored in a database, accessible by all employees. Since the amount of information might be overwhelming, they also have introduced Alerts which inform employees via e-mail of any newly stored knowledge, which might be of interest and use to them. To provide feedback information on success of the introduced KM solutions in SE Gumi, different measures were decided to be tracked. To measure increase in knowledge sharing, (1) the proportion of information used that is available on Web pages is measured, along with (2) the activity of the COPs. To measure increase in knowledge discovery, (3) number of ideas generated per employee have been taken as one of the important measures to follow. Also, (4) proportion of ideas that get commercialized (internally or externally) have been seen as a crucial measure. An important result aimed for was a change in organizational climate: employees have been encouraged to be more suggestive, trustful, responsive to change, and eager to innovate. To assess the impact on employees, SE Gumi has continued to use evaluation practice, which was already in place and performed by Human Resource management department, which is (5) measuring different aspects of internal employee satisfaction and motivation.

There have been some issues with regards to a need for manual assignments of rewards (sharing points) at the early stages of the project; now, an automatic rewarding system is being implemented which will automatically reward forum and blog postings. Finally, the (6) rate (efciency) and (7) success (effectiveness) of innovation processes have been chosen as crucial for ongoing evaluation. For the former, the rate of new products launched, and for the latter, the protability of the products launched, have been selected as the measures. Currently the organizational change project is in the transition phase and the results can truly only be evaluated after a period of appropriate duration. Solutions and services need to be designed, new technology injected in the manufacturing process, and the end products commercialized in the market. However, intermediate results at most of the measures chosen to track are favorable as they are moving towards the right direction: faster innovation and increase in the market share.

3. Learning outcomes and discussion Observing the KM project provided us with innumerable learning outcomes. Most importantly, a method for how to design business process-oriented KM solutions can be derived from the case. The discovered cognitions are discussed next. We discovered that a six-step process is being used at SE Gumi to design a KM solution. In the rst step, the organizational areas that needed to be changed were identied. SE Gumi analyzed their strategic vision and position of the company, and created the vision of the future worth pursuing, and determined what the denition of value for their most important customers is. When this was understood, the area of change was easy to nd: processes, which change will bring the highest impact to the business value. In this sense, KM introduction is no different than any other organizational change project. This is positive both for re-focus and for the advancement of the KM research area, as researchers can leap across the foundations provided by the cumulative body of research in management and IS. In example on the question where to start (step one), Davenport and Prusak suggested that the most important process or the one that conicts most with the business vision is changed rst (Davenport, 1993). Barnes (2007) suggested ve selection criteria: which process is critical, which has the quickest pay-off, which has the biggest pay-off, which is the most visible, and which is the easiest to change. For the KM to advance it is necessary to stop reinventing the wheel in the research context, adopt the already existing ndings, and look for areas that have not yet been researched in any of the related disciplines. Similarly, the following ve steps are akin to other organizational change projects: understand the challenge, set the goal, model the as-is and to-be situations, evaluate the results yet, the learning outcomes lie in the KM-project-related specicities and advice. In the second step, knowledge-related problem symptoms were analyzed. SE Gumi looked for knowledge-associated opportunities and knowledge-associated risks; for areas, where (1) the organization fails to apply existing knowledge and ends up in repeating failures or reinventing the wheel; (2) lessons from projects or everyday activities are learned but not shared; (3) no knowledge is gained from failures; (4) problems are not solved in collaboration with others even though they could benet from others attention; (5) there is risk of tacit knowledge walk-outs. Signicant attention was also put into selection of the right team members who were knowledge heterogeneous (the concept of requisite variety was put into action) and socially homogeneous (they needed to get along well to make the collaboration happen). Purposefully designed war rooms where team held all the

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meetings reinforced the already socially constructed feeling of ba (Nonaka & Takeuchi, 1995) where knowledge exchange and creation happened. Next (step three), knowledge-related goals that will lead to business goals achievement, were dened. What kind of KM strategy is tting to the business context? SE Gumi had to determine whether they needed a solution to improve utilization (exploitation) of existing or creation (exploration) of new knowledge (March, 1991). Which knowledge processes (i.e. socialization, externalization, combination or internalization Nonaka, 1991) do they need to nurture? Developing a company-wide KM strategy cannot be fruitful, as very different knowledge needs exist in organizations, calling for different KM solutions. People perform different tasks in course of their daily work, for which they need different knowledge. Afterwards, existing KM activities need to be analyzed to assess the current state. For this fourth step, SE Gumi used ve questions which helped reveal the nature of the knowledge needs: (1) What is the shelf-life of knowledge that is needed in everyday decision making? (2) How do employees learn from past experience before they make a decision? (3) How they instigate the double loop learning, e.g. learning after an event? (4) How is knowledge most naturally shared? (5) How do employees make decisions: on their own, by collaborating with people in the same knowledge domain, or with people from other knowledge domains? The purpose of these questions was to understand how knowledge work is being performed currently and how well it is supported by KM technologies and mechanisms. In the fth step, the same questions were answered from their improved perspective: what are the appropriate organizational mechanisms and technologies that will improve how knowledge is leveraged in the chosen business process. The argument for interest in how learning before making decisions is done is that it is highly likely that there is somebody out there who already has done something similar before. Thus, how can a KM solution be designed in a way to provide up-front all the information necessary for fullling the task or making a decision? The argument for learning after an event is that experience and insights should be captured and transferred to similar future occasions. Again the goal is to design such a KM solution that will facilitate this. In example, ways to learn after included immediate project team meetings, codifying insights into a searchable database, and holding retrospect meetings. To facilitate learning after, the After Action Review method was employed by SE Gumi. Answers to four questions: What did happen?, What was supposed to happen? Why did it happen? and What can we learn from that? lead to rapid learning. Currently, they are in the process of building up the storytelling capability. Another critical learning outcome is that KM has to be completely aligned to the way business is done. Mechanisms and technologies need to be embedded in the business processes and not be seen as extra effort with no clear purpose. Obviously, knowledge needs goals, which rstly must be understood thoroughly. An example that shows how important detailed knowledge needs analysis comes from a corporate credit risk analysis process in a British nancial institution. Study showed that implementation of the ofcial KMS failed because its design was inuenced by the theory of nance, which states that credit ofcers use standard nancial models to focus on quantitative credit risk management mechanisms in an attempt to eliminate complexity and uncertainty. In practice, credit ofcers balance their use nancial data, models and systems [codied knowledge] with less formal processes of meaning making within a community of practice [collaborative knowledge construction] (Mondale, Scott, & Venters, 2006, p. 13). In other words, design of KM failed to include collaborative organizational and techno-

logical platform, as they implemented what they thought they were doing instead of what they actually were doing. In the last step, measures to analyze the impacts KM solution will lead to, were selected. It was crucial to (1) align the choice of measures to the goals and to the purpose of the KM solution, and to (2) communicate them throughout the organization. SE Gumi selected measures that reected the impact of KM on the knowledge processes of sharing and discovery, to the business process under change (rate and success of innovation), and to the employee satisfaction. Published research seems to be struggling with advice on how to plan and operationalize KM on the whole organization basis. An important learning outcome from this case is that organizations need to take subunit approach when designing a KM solution. This has already been known from the organizational change literature, however, mostly avoided in the KM research. Such approach, rst, enables a focused thinking about the goal of the KM solution. KM will only be effective if the KM strategy is derived out of the business strategy that is aimed at achieving business goals. The KM strategy namely provides a path for introduction of organizational and technological mechanisms that will facilitate improved outputs by achieving knowledge-related goals: leveraging experience and knowledge of organizational members. Clear connection to the goal also makes performance assessment easier. All this is important from the KM solution viewpoint, as it has to consist of such mechanisms and technological tools that will help employees being efcient and effective. Second, many critical success factors studies have been pointing out that one of the major obstacles for active KM is not knowing where to start. Subunit approach enables prioritization and selection of the areas that should be improved in knowledge-related sense, as it provides clear criteria on which of the processes or organizational areas should be analyzed and renovated in the KM sense rst. Another interesting learning outcome was that KM projects can be done in the keep it modest and just do it approach. From the analysis of the six project phases, SE Gumi has approached the KM improvement project as an ordinary, everyday organizational change project. There were no CKO positions announced and there was no pompous and ofcial change of company policies, when the project started. This helped the senior managers to lower the fear and anxiety factors that could hinder the success of the project. Managing expectations has always been seen as one of the crucial success factors of complex projects (Desouza, Yuttapongsontorn, & Braganza, 2008). Moreover, the change does not need to be revolutionary and introduced through a large-scale mega project. As we know from the IS projects, the risk of failure signicantly increases with the project duration. Taking the business process-oriented approach proves to be the natural choice as it is goal-driven, focused, manageable and prioritisable. In this line, showing that KM-related interventions introduced in the company are merely the way to improve everyday work (which will result in improved efciency and effectiveness of employees and the company) was a major success factor in SE Gumi. This is not to say that one does not need the top management support or the grand vision; on the contrary, senior management must have a very clear grand vision of where it wants to arrive at the end. Yet, the grandeur of this vision must be downplayed into plain wordsconcrete, measurable and reachable business related goalsthat make sense to the middle management and the rest of employees.

4. Conclusions This paper contributes to the KM and organizational design bodies of knowledge. It looks at the highly relevant area of KM, as

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practical experience and written reports show alarmingly high rate of KM-project failures. We have addressed a decit in the existing body of literature, namely, the lack of practically relevant advice on how to plan, design and build KM solutions that facilitate leveraging knowledge in a given context. In spite of vast body of research that discussed aws and failures when trying to derive a blanket prescription KM strategy for the whole organization, on the one hand (i.e. Davenport, Jarvenpaa, & Beers, 1995; Desouza & Evaristo, 2004; Hansen, Nohria, & Tierney, 1999; Kankanhalli, Tanudidjaja, Sutanto, & Tan, 2003), and encouraging preliminary evidence when applying KM strategy within a business context, on the other hand (Becerra-Fernandez & Sabherwal, 2001; Michailova & Gupta, 2005), little research has been done on how to develop and deploy a process-dependent KM solution. With the benets of hindsight we can say, that when analyzing business context on a narrower level, KM solution for a particular scope can be more formulated, and IT support for KM practices designed. For the KM research area, our study hopefully encourages more process-related research, recognizing the aws of blanket approaches, and demonstrating how subunit based approach makes it easier to narrow down the scope, the goals and to design a KM solution for a particular organizational context. Finally, we must acknowledge the limitations of our work. First, the discovered six-step method is only one possible method of KM solution design. It does not dismay other existing methods, methodologies and roadmaps; rather, it can serve as one of many, among KM practitioners can decide. Second, the operationalization of the project in SE Gumi only passed few initial milestones. To be able to report unambiguously on the dependencies of the organizational performance improvement, a longitudinal study is necessaryevaluating results of innovation-process-change project can only be done in appropriately long time-span. Moreover, the true benet of the method artifact will only be known after several implementations. As KMS implementations are time consuming, costly, and fragile (Soliman & Spooner, 2000), time is needed for the ndings of this research to diffuse and make its way into the both KM and IS research and practice. The current assessment could nevertheless be adequate enough, as the change today became so constant and as the organizations are such complex systems (human actors, technology, institutional properties, etc.), that it is becoming increasingly difcult for management and IS research to provide ndings on how change of a certain variable improved the whole organization performance. Immediate results can better be measured though at the business process level; for the latter, however, the measures chosen to track have been favorable as they measurements indicate the move towards the right direction: faster and open innovation. References
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Peter Baloh is a research fellow at Information Management Department, Faculty of Economics, University of Ljubljana. He is active in the areas of IS, Management of Technology and Innovation, Project Management and Knowledge Management, which are considered through the lens of successful implementation in various organizational settings. He has authored over 40 articles, which were presented at international conferences, featured and/or published in practitioner and academic journals.

Katharina Uthicke is majoring with emphasis on Organizational Design at the School of Business Administration, Kyungpook National University. Having lived in several countries, including the UK, China and Korea, she has work experience in many multinational organizations.

Gyewan Moon is an associate professor at the School of Business Administration, Kyungpook National University, Daegu, S. Korea. He received his Ph.D. in strategic management from Southern Illinois University at Carbondale. His research focuses primarily on organizational decline and turnarounds, organizational innovation, knowledge management, organizational culture & strategy.