The future belongs to companies that collaborate with partners and suppliers, sharing intellectual capital to produce innovative products and get them to market speedily. But the path to this nirvana is fraught with obstacles. Sharing knowledge at a high level requires trust, notoriously hard to come by in human circles, and there are regulatory, licensing and security concerns as well.
Still, bit by bit, companies are learning how to do it. One of them is Emerson Process Management, a maker of process automation equipment based in Austin, Texas, which in recent years has been collaborating electronically with its global suppliers on the launch and design of new products. Sharing knowledge externally with suppliers is a natural outgrowth of the Emerson Electric Co. unit's overall knowledge management/enterprise content management strategy, which dates to the late 1990s.
Emerson estimates its 150 different content management applications, both internal- and external-facing, have helped it save $3.7 million in reduced printing, shipping, document storage and production costs. That's a pretty impressive return on investment for the $600,000 or so it has spent since 1998 on a content management system from Stellent Inc. of Eden Prairie, Minn. But future returns may be even greater, as Emerson expands its effort to share even more sensitive knowledge with joint venture partners.
Emerson's work is specialized, and the scale on which it operates isn't as huge as that of, say, Boeing, another company that's applying knowledge management in collaborative relationships. Still, the challenges Emerson addresses are more common. "Firms are recognizing their resources are tight and that they can't do everything themselves," says Marjorie A. Lyles, a professor of international strategic management at the Indiana University Kelley School of Business in Indianapolis. "Alliances offer them opportunities to work with the best partners without the same kind of resource commitment that was necessary in setting up foreign subsidiaries, for example."
But the road to sharing knowledge externally is lined with potholes. Most companies prefer to begin knowledge management internally. Emerson is no exception.
Internal affairs
Back in March 1997, several employees began creating an intranet - not an officially blessed site, but a quasi-experimental one - for the Emerson Process Management Fisher Valve Division in Marshalltown, Iowa. One of them was Mark Heindselman, whose previous work as a corporate librarian served him well when the "skunkworks" intranet team was figuring out how to organize the data. "The IT people are good at making things work, but they don't necessarily understand how the information will be used by the end user," says Heindselman, now the company's manager of knowledge networks and information services.
That early intranet pilot, FishWeb, rapidly turned into a production system and became the backbone for how Emerson distributes information throughout the organization to the present. In 1998, Emerson invested in Stellent content management technology, now called Universal Content Management. This document/content management system lets users manage any piece of information (everything from financial reports off the mainframe to Word files to product literature PDFs to three-dimensional computer-aided design drawings), track versions, publish it to one or more Web sites and dynamically update the information wherever it appears.
The information resides in a central repository on a Stellent server (Emerson has six Stellent servers distributed globally) and can be sent to an Emerson intranet site inside the firewall, an extranet site outside the firewall or to the public Internet site, depending both on the nature of the information and the authorization level of the person who is asking to see it. Outside-the-firewall access is limited to authorized users (whether inside or outside the company) via authentication techniques.
The first Stellent applications were straightforward postings of product literature, employee benefits information and the like. In 2001, Emerson began using the intranet to disseminate reports generated by the homegrown enterprise resource planning system, including production and financial data.
"We used to ship those reports all over the world in microfilm. We saved a lot of money when we started publishing them as Web documents," Heindselman says. Emerson opened access to the financial reports to certain suppliers via authorized password and user identification, rather than sending reports or microfilm through snail mail. Soon Emerson turned to using the Stellent system to change how it collaborated with its suppliers to manufacture parts.
Broadening the scope
In 2004, Emerson introduced a new product, the GX control valve. The product was designed in North America, where the engineering center is located. But engineers located all over the world - including employees of Emerson contract manufacturers located in China - needed to collaborate on the material, which included engineering and marketing specifications. "We began to manage the information on Stellent. We have the content on the Web server, and we allowed our permissioned people to access the content to view it or modify it," Heindselman says.
Once the design was complete, the product team (consisting of people inside Emerson as well as suppliers) created manufacturing specs, which were then distributed via Stellent. "We determined what product information the [contract manufacturer] needed to manufacture the parts. We put that information into a Chinese extranet and set up a process where they can get the documents whenever they need them," Heindselman says. Everyone on the product team would also receive an e-mail alert when information concerning the GX control valve changed.
What used to be an Emerson purchasing manager's domain - being the interface for all communication between the home engineers and the supplier personnel - was suddenly handled entirely electronically, saving $20,000. The Emerson personnel involved initially worried the information would not be secure.
"They were concerned if the information was flying over the wires it could go to anyone. You have to prove that is not the case," Heindselman says. This was not a huge burden, largely because the parties involved had been working together for some time; the trust factor was already in place.
"There is always an aspect of withholding information and knowledge" when you're dealing with people, Lyles says. "Communicating and recognizing the other party's importance will help build up that trust."
Since the GX's debut, Emerson has created more Stellent-based supplier extranets, each racking up about $20,000 in additional annual savings per supplier. Heindselman expects the number of suppliers could reach 20. Setting up the individual extranet generally runs smoothly and takes about a week, now that Heindselman's team has experience under its collective belt.
More headaches
Emerson is grappling with several new issues brought on by increased regulations in the wake of Sept. 11. Special federal licensing requirements apply when a company works on certain types of sensitive applications outside U.S. borders. For example, the federal government wants to know which suppliers or third parties from a certain list might have access to information relating to the design and manufacture of valves used in nuclear power plants, which are among Emerson's products.
"There is a list of countries that need to be licensed. That adds complexity to the process. We're still working out the issues of how we will manage that process," Heindselman says. The rules may have a bearing on an Emerson joint venture with a company in India. "That is a country where certain technologies need to be licensed before they can be released," Heindselman says. "We're figuring out if there is anything there that needs to be licensed."
Always on the lookout for more ways to leverage the Stellent system, Heindselman is working to create an application that would drive compliance with quality processes required by International Organization for Standardization and Nuclear Regulatory Commission regs. The way the system now operates, documents detailing myriad quality procedures reside on a Stellent server. An authorized user can call up the documents whenever he or she likes. Heindselman envisions embedding the procedures themselves, rather than the static documents, in a Stellent application so the application itself, not the person, would drive the process.
For now, Emerson is concentrating its KM efforts on sharing information electronically with suppliers - which Heindselman calls the "low-hanging fruit." "We have focused not on distinctly proprietary areas of knowledge - the areas where content and knowledge are a commodity to be managed."
Over time, he says, Emerson will use Stellent, or perhaps another application, to share information with suppliers and customers at the earliest R&D stages.
With the initial fruit plucked, that is the way to drive deeper value, Lyles says. "Having a partner who challenges you to see things in new ways can help you improve your processes and improve R&D. There is always the question of what you share versus what you withhold, but the more strategic the alliance, the more important it is to work those issues out." - Lauren Gibbons Paul
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