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Navid malekpresenthyundai
- 1. Crisis construction and organizational learning: capability building in catching-up at Hyundai Motor In the name of god Navid malek nmalek@ce.sharif.edu
- 2. Introduction •Organizational Learning and Innovation •Catching-up process •Crisis •Goal Prerequisite knowledge •Organizational Learning •Absorptive Capacity •Knowledge and Learning •Crisis Construction Organizational Learning in Catching-up at Hyundai •Assimilation of Assembly Operations •Development of a "Korean" Car Under License •Development of an Advanced Car Under Limited License •Becoming Independent Summary and Discussion •Questions •Lessons Learned 2Index
- 3. Introduction
- 4. Organizational Learning and Innovation Crucially important subjects in management Models •Mainly in advanced countries •extend the theories developed in advanced countries •scanty in developing countries •essential to understand the dynamic process of capability building in catching-up in such countries 4
- 5. Catching-up process important to firms in advanced countries Not all firms can be pioneers of novel breakthroughs Most firms must invest in second-hand learning much less attention is paid to the imitative catching-up process than to the innovative pioneering process Total of 9,006 articles on the subject of innovation but only 145 on imitation 5
- 6. Crisis Usually regarded as an unpopular, largely negative phenomenon in management Appropriate metaphor for strategic and technological transformation •Strategic •Technological •Learning 6
- 7. Develop a model organizational learning in an imitative catching-up process At the same time a model of crisis construction and organizational learning Goal 7 Analyzing the history of technological transformation at the Hyundai Motor Company
- 9. Organizational Learning • Individual • OrganizationalTwo Levels 9 Invidual sum Knowledge Distribut ed Communicated Integrat ed Strategy Management
- 10. Absorptive Capacity Organizational learning is a function of an organization's absorptive capacity 10 •Requires for learning Capability •assimilate knowledge (for imitation) •develops problem-solving skills •create new knowledge (for innovation) Absorptive Capacity •Prior knowledge base •intensity of effort Important Elements
- 11. Absorptive Capacity Accumulated prior knowledge increases the ability to make sense of and to assimilate and use new knowledge Developing countries comprises basic skills and general knowledge Advanced countries the most recent scientific and technological knowledge 11
- 12. Absorptive Capacity Intensity of effort Internalizing external knowledge learning how to solve problems before complex problems can be addressed through many practice trials involving related problem 12
- 13. Knowledge and Learning Two types of knowledge Explicit books, technical specifications, and designs Tacit observation, imitation, and practice Tacit knowledge is the core of a firm's prior knowledge base 13 Blue Prints useful Tacit Knowledge
- 14. Knowledge and Learning Types of Learning •Tacit to Tacit (socialization) •Through training •Explicit to Explicit (combination) •combines discrete pieces of explicit knowledge •Tacit to Explicit (externalization) •Documentation •Explicit to Tacit (internalization) •reframe their own tacit knowledge 14
- 15. Knowledge and Learning 15 Organizational learning in the catching-up process migratory knowledge Organizational factors Intention and autonomy shape the knowledge frame sociocultural factors influence the formation of work ethic Goal of organization Explicit tacit
- 16. Knowledge and Learning Learning •Linear and Cumulative •Crises •Major change •invest heavily in the acquisition of new tacit and explicit knowledge as well as in knowledge conversion activities to overcome the crisis in the shortest possible time 16
- 17. Crisis Construction Top managers can construct a crisis internally • either in response to or in the absence of an external crisis corporate level Crisis (corporate crisis) Sub organization level Crisis (team crisis) • Crises constructed at Hyundai are primarily team crises • more frequent and easier to manage • they may have more focused and clearer goals. • The shared sense of the internally constructed crisis 17
- 19. Assimilation of Assembly Operations 1. Construct a team team members from its construction division who had strong project management and engineering background recruiting some from other auto producers who had production experience 19 Migratory knowledge Tacit knowledge
- 20. Assimilation of Assembly Operations 2. Agreement with Ford Assemble Ford compact cars on a semi-knocked-down (SKD) basis Ford transferred "packaged" technology to Hyundai with a set of explicit knowledge training of Hyundai engineers at Ford sites dispatch of 10 Ford engineers to Hyundai to help translate the transferred explicit knowledge into tacit knowledge The most competent engineers trained by Ford were assigned to production and production engineering departments 20
- 21. Assimilation of Assembly Operations 3. Reinvention Migratory knowledge alone is not sufficient It must be reinvented by its user through learning by doing or learning by using (assimilation) 21
- 22. Assimilation of Assembly Operations 4. Construct intentional crisis 1. complete plant construction in the shortest possible time intensifying knowledge conversion in a spiral manner at the individual, group, and organization 22
- 23. Assimilation of Assembly Operations 4. Construct intentional crisis 2. acquire a production capability in the shortest possible time While plant construction was underway production teams disassembling and reassembling 3. evolve gradually from SKD toward a complete-knocked down (CKD) operation 23 Explicit Tacit
- 24. Development of a "Korean" Car Under License 1. the government imposed a crisis radical policy change requiring the automobile industry to shift from assembly production to the development of locally designed "Korean" cars. government's plan was very specific ordered four automobile companies to submit detailed plans to develop Korean cars 24
- 25. Development of a "Korean" Car Under License 2. foster growth government established seven principles protection of the local market from new entrants and from new foreign knockdown imports significant tax reduction Promotion vertical integration leading to new business opportunities preferential financing tax concessions guarantee a large market share for the indigenous model 25
- 26. Development of a "Korean" Car Under License 3. Submitting the master plan The plan posed a major constructed crisis for Hyundai engineers 4. Lack of absorptive capacity Unpackaged technology Goal: assimilation of foreign technology 5. project team Various aspects of car design and production 26 explicit tacit base
- 27. Development of a "Korean" Car Under License 6. Sign contracts observation tours own sites the leading automobile manufacturing plants using the suppliers' technology Hyundai had signed 54 licenses 22 for Daewoo, 14 for Kia, and 9 for SsangYong 27
- 28. Development of a "Korean" Car Under License 7. assimilated style design a team of five design engineers goal of assimilating all the styling technology from Italdesign Undertake subsequent style designs on their own Fast conversion 28 Explicit Tacit
- 29. Development of a "Korean" Car Under License 8. Lack of assimilator engineers hired for a three-year period (1974-1977) a former managing director of British Leyland as its vice president and six other British technical experts Moonlighting Japanese engineers fro troubleshooting 29 explicit tacit base
- 30. Development of a "Korean" Car Under License low performance goal And hence required little effort decreasing returns on efforts changing learning paths Construct crisis Prior training for engineers before sending them abroad Faster knowledge growth 30 Assimilating Innovating
- 31. Development of a "Korean" Car Under License The Model 31 preparation acquisition assimilateimprove apply
- 32. Development of an Advanced Car Under Limited License 1. Second oil crisis major investment to develop the next generation FF car to sell in the North American market 2. External to internal crisis goal: local market to global market 3. Foreign technologies all those companies demanded equity and management participation viewed Hyundai as a local assembly subsidiary of their FF cars 32
- 33. Development of an Advanced Car Under Limited License 4. Mitsubishi agreement license engine, transaxle, chassis, and emission control technology 10% share Without latter management participation Sufficient basis for design and production from past 33
- 34. Development of an Advanced Car Under Limited License 5. Two Technological constraints 1. Meet US standards 2. adoption of the CAD/CAM systems collecting literature and catalogs on CAD/CAM for 14 months Convert explicit knowledge to tacit Selecting CATIA software after 19 months of study 36 months ahead of implementation 6. best-selling importcar of the year in the United States 34
- 35. Becoming Independent 1. technological dilemma Losing market in US Old technology 2. Suppliers unwilling to share their latest technology lacked the absorptive capacity to keep upgrading 3. Goal: extensive international R&D 35
- 36. Becoming Independent 4. The R&D Passenger Vehicle R&D Center Commercial Vehicle R&D Center the Manufacturing Technology R&D Center joint R&D laboratories with local universities US R&D centers technical center in Frankfurt monitor technological developments & design improvements in Europe R&D center in Japan for entering the market 36
- 37. Becoming Independent 5. Hiring researchers half of the engineers hold postgraduate engineering degrees recruited many Korean-American engineers from U.S. universities invested heavily in continued training 37
- 38. Becoming Independent 6. develop a state-of-art engine another major crisis in technological learning taskforce was divided into several teams collected all available English and Japanese language Raise prior knowledge base 7. Agreements for alpha engine British Ricardo Engineering Former GM and Chrysler Korean engineers 38
- 39. Becoming Independent 8. First models 14 months before first model 12 models before first success Need of 324 models for tests 9. Launching new cars 4 sizes from small Biggest share of local market 10. Aim to being a pioneer competitor to high class Japanese car at competitive price became technology exporter 39
- 41. Questions Is Hyundai's learning model evident in other industries in Korea? • A similar learning process is used widely • crisis construction and expeditious learning in catching-up Hyundai is the most outstanding company in constructing crises proactively for opportunistic learning • because it has the most entrepreneurial and boldest risk-taking top managers • top and middle managers have been trained largely in the crisis construction and transformational process 41
- 42. Questions Can Hyundai also use crisis construction for pioneering? •Learning goals may be more specific and clearer in catching-up than in pioneering Can catching-up firms in other countries emulate Hyundai's learning model? •The answer is yes and no 42
- 43. Questions Yes • Improve organizational learning by emulating the learning process • Figures 2 and 3 and the learning cycles listed in Table 1 No • lack some of Hyundai's implicit advantages • well-developed human resources • trait of being hardworking • cushions provided by the government and subsidiaries 43
- 44. Lessons Learned A proactively constructed crisis is a more effective strategic than a reactively evoked crisis Entrepreneurial owners are more likely to construct and resolve crises than employed managers Specially with the support of government 44
- 45. Lessons Learned Crisis construction and its transformation into expeditious learning may be easier to implement in catching-up than in pioneering Catching-up firms in can elevate their prior knowledge base significantly by tapping migratory knowledge 45
- 46. Lessons Learned Catching-up firms in the developing countries reverse the sequence of technology trajectory of the advanced countries reversing the direction of research, development and engineering (R,D,&E) For catching-up firms in developing countries, a strategy of independence is more difficult to manage but more effective in organizational learning than is joint venture with firms from advanced countries. 46
- 48. Reference Kim, L., (1998) "Crisis construction and organizational learning: capability building in catching-up at Hyundai Motor" from Organization Science 9 (4) pp.506-521, Providence, R.I.: Institute for Operations Research and the Management Sciences © 48