Feature

posted 30 Jan 2007 in Volume 10 Issue 5

Case report: American Power Conversion

Plugged in

When Rick Wallace joined American Power Conversion with a brief to develop its learning and knowledge management, he probably hadn’t banked on the company merging with a rival just six months later – and a KM pioneer as well.

By Jerry Ash

In this case report we finally find a knowledge professional willing to share his story as it develops – from the very beginning. Err, oops. We’re just six months into the initiative to transform the company into a learning and knowledge-based organisation and now this news arrives: the company is about to be sold… to a competitor… with a mature knowledge management (KM) programme!

Is that the end of our story? Hardly. Not yet. Maybe not at all. But the future is interesting.

Rick Wallace was hired just months ago as the first chief learning officer (CLO) of American Power Conversion (APC), a Fortune 1000 company headquartered in West Kingston, Rhode Island; and he convinced management to let him include KM in his responsibilities.

APC is best known for its uninterruptible power supply (UPS) products, equipment that can help electronic products – especially computers – keep going in the event of a power cut. That may sound unexciting, but such products are an essential of modern business and in North America, APC has a commanding 28 per cent of the market for such products, making it the largest in the US.

Worrisome wrinkle

While Wallace was making plans, unbeknown to him and the rest of the staff, high-level discussions were underway for a merger with Schneider Electric, a large diversified industrial company based in Paris – France, not Texas.

The merger should be completed in the first quarter of this year. Schneider is an international company that designs, manufactures and sells products, solutions and services for electronic distribution, automation and control. Its primary interest is to make client installations safer, monitor equipment and protect people with a line-up devised to save energy, enhance performance and make its customers more competitive.

One crucial piece of the merger is Schneider’s own subsidiary in the UPS market – MGE UPS Systems. MGE and APC compliment each other in the sense that MGE is stronger in Europe than North America, while APC has the edge in the US. However, on the global market APC and MGE have been strong competitors.

At APC, Rick Wallace has been building an action-learning model that combines learning, KM and innovation as a continuous process. With a heavy dependency on developing knowledge-sharing networks, the strategy requires changing APC’s individual and corporate culture.

In most ordinary cases, the two KM leaders would find themselves in a holding pattern, waiting to see how executives and managers re-align the companies before engaging in reorganisation at the line level. But in this case, Wallace and Martin Dugage, director of the KM programme at Schneider Electric, have been brought together by Inside Knowledge to talk about the possibilities the merger raises for them. Neither Wallace nor Dugage knew of each other or their programmes, but the KM community is a small one. They welcomed the opportunity to talk now, not later, and have copied IK on their e-mail discussion.

Unexpected collaboration

Wallace began by describing his KM journey. His CLO position at APC had been newly created within the human resources (HR) group with a mandate to oversee all the talent-development issues that were becoming critical at APC. It was to include leadership development, succession planning, organisational learning, some of the training and anything else he might care to add. He chose KM.

At the time of his move to APC, he was leading the KM practice within the management consulting operation of SAIC. Wallace credits Kent Greenes, the chief knowledge officer (CKO) at SAIC between 1996 and 2004, and Etienne Wenger for much of his KM savvy.

“APC recruiters said I appealed to them because of my breadth of experience and that I was not a ‘one trick pony’,” says Wallace. In other words, thanks to his varied experience with multiple KM clients that he picked up at SAIC. In addition to his practical savvy, Wallace is studying KM theory in the KM graduate programme at George Washington University. He is in the dissertation phase, which he hopes to finish this year.

Wallace had never worked under HR before, but he had become interested in the learning/KM connection while working on his dissertation.

Martin Dugage was also educated by Wenger and Greenes, while an employee at Schneider Electric. He proposed his KM position at Schneider in 2002 by convincing Eric Pilaud and Michel Crochon, senior executive vice presidents – and through them the executive committee – that the company needed to pay more attention to its learning organisation by actively promoting internal communities of practice (CoPs).

In 2002 and 2003, he championed the creation of five CoPs among OEMs [original equipment manufacturers] and then connected them as a knowledge network. A second network of 13 CoPs was developed around additional market segments in 2004 and 2005, and a third network was added in 2006 around product knowledge.

Comparing strengths

Schneider, then, has been developing KM much longer than APC. Logic would therefore indicate that Schneider is far ahead in KM development. On the other hand, Wallace – working in a smaller company – has launched an ambitious and more rapidly unfolding campaign built around leadership development. It’s a mix of ‘talent scout’ HR, individual and corporate goal integration, knowledge sharing, capture and re-use, and action learning.

APC uses ‘topgrading’ both for hiring and for internal identification of talent. Topgrading is a competency-based interview process developed to find ‘A’ players by Bradford D. Smart, Smart & Associates, a Chicago-based consultancy. “It is a disciplined way to get the HR folks, the hiring manager and the organisation to understand and look for the right kind of talent,” Wallace says. In some ways, it is a knowledge-auditing process built into the hiring and development phases.

Martin Dugage is impressed. “If you have indeed implemented this at APC my hat’s off to you,” he says. “To be honest, we never went so far as to implement Peer Assists, Action Reviews and Retrospects [see the glossary at the bottom of this article] in our communities in a systematic way, even though it was our objective in the first place.

“In 2003 we had a full-fledged Retrospect of a baggage-handling project performed by our Airports Community of Practice. It was an outstanding learning experience involving a client that resulted in many important lessons learnt plus a very happy customer. But since this one-week effort was not fully recognised, the community sponsors did not understand the importance and the experience was not reproduced.

“Same with Peer Assists. It happened once to kick off the electric utilities community, but it was never reproduced for the same reason. Today, we have rather informal and light Peer Assists, Action Reviews and Retrospects, which communities translate directly into sales-oriented material such as solution guides or customer success stories,” says Dugage.

For these reasons, Schneider communities tend to focus on easier, more informal and less time-consuming forms of collaboration.

“We cannot do much more than this because our CoPs are still perceived as very important, but not as the cornerstones of the company’s learning system,” he says. “I think it will change when some of our communities become professional enough to invite prospects, customers and partners to participate in some of their learning events. We have had some of this in 2006 and I really believe that what will make communities eventually earn respect in this company will be the voice of the customer.”

Leveraging the merger

Wallace and Dugage agree they can use the merger situation to strengthen the value of their programmes.

“Once the merger happens, we can – and we must – use the CoPs to cross fertilise within the combined entity. I am absolutely convinced that true integration of two companies comes from the ground up – through sharing of experiences between like-minded practitioners of the same field, not from the top down through formal structures.

“Our job as learning and knowledge managers will be to organise the spaces where this can actually take place. It is also a subtle form of social-network analysis because a community of practice very quickly identifies its true experts. The managers, by themselves, most often cannot.”

Communities at Schneider are now part of the culture because they have proved to be outstanding learning spaces and because some of the company’s commercial successes can be directly associated with the work performed in those communities. Among the many lessons learnt is that community-based learning systems work best when people gather in communities at the local level or regional level (such as northern Europe, southern Europe, North America and China, for example) and when those local or regional communities are actively and consciously linked together.

The trick is that some individuals who belong to several communities actually act as ‘boundary spanners’ and connect communities together. “That, by the way, is what Jerry Ash is doing right now by connecting us (Rick and I) to explore the possibilities of KM after the merger,” says Dugage.

“If we look at communities of practice as vehicles of integration,” he adds, “the post-merger of APC and Schneider should start with the identification of all the relevant communities of practice in both organisations, both at the regional and global level. Then, we could make sure that similar or overlapping communities get to know each other so that experts of one community get recruited by the other to connect, start to coordinate and synchronise communities, and eventually merge into a single community.”

The role of the post-merger team would be to perform the ‘social engineering’ needed which would be a combination of intelligence gathering, technology roll out, training, coaching and organising extremely professional meetings and events. “I would be extremely excited to do this with you, Rick,” says Dugage.

Critical factors

“Of course, we would need a very high-level sponsor in the company to make it happen… because there will be resistance,” observes Dugage. Wallace agrees but sees the post-merger time frame as a ‘target of opportunity’, with the coming together of two cultures and, in many cases, different information networks. He has not pushed the idea of using learning and KM processes as an integration tool because he is concerned that pushing too fast, too soon, will cause what he calls ‘initiative overload’.

“Those of us in the company being acquired are still in the ‘what’s in it for me’ and the ‘do I still have a job?’ modes,” Wallace says. Nevertheless, APC communities have been focused on spanning the stovepipes within APC. “I can see great utility in using them to span the APC/Schneider cultural divide as well,” he adds.

Dugage has some knowledge and experience about more than 100+ mergers and acquisitions at Schneider over the years. “If you want both companies to collaborate within communities to propose something coherent, the first thing to do is to make sure members of those communities will not be fighting to keep their status or their jobs,” Dugage says. “Without trust you will not have collaboration. The sponsors of those communities should be able to say something like ABB’s CEO said a few years ago to a working group in charge of solving a difficult IT situation:

“‘Ladies and gentlemen, I am counting on you to propose a workable plan to the company. If you cannot agree within ‘so many’ weeks, I will hand it over to consultants. But if you do, you have my word that none of you will lose your present job.’”

“Let’s hope we hear something like this when we establish the post-merger APC-Schneider working groups,” says Dugage.

If such an approach occurs, it will be unusual. In his years at Schneider, Dugage has never been involved in real post-merger KM work involving communities and collaboration spaces. As with most companies, mergers are mostly handled through top-down reorganisations involving organisational charts and, to a minor extent, the standardisation of processes and tools.

Sometimes systematic networking of practitioners of both companies is done only when there is a real need to rationalise and elaborate a new strategy which would build on the strengths of both companies.

“I have seen this happen only once at Schneider,” Dugage says. Ten years ago Schneider acquired AEG Modicon. In that case, the two companies had a number of combined working groups already acting as think tanks for the new management, one under Dugage’s responsibility. “Something like this is likely to take place between MG-UPS and APC when we have a green light,” says Dugage.

Analysis

APC is a $6.1bn acquisition by Schneider Electric. We don’t know the basis for that figure. Perhaps the sum takes into account the value of APC’s knowledge. Maybe not. Regardless of the value of such intangibles, they don’t show up on the balance sheet. Yet savvy organisations are gaining a better understanding of the value of intangible assets and that surely describes Schneider and APC. There is also a reasonable chance that KM might be used as a tool to help Schneider identify, evaluate and draw value from the bonus of knowledge assets acquired in the sale. And there is a reasonable chance that learning and KM will be understood as the best tools for integrating the two workforces.

Although the merger is characterised as one between Schneider and APC, it is largely with Schneider’s UPS subsidiary, MGE UPS, one which has been somewhat peripheral to Schneider’s core business. But the serendipitous acquisition of APC’s vigorous knowledge initiative is glorious happenstance. “The APC acquisition is huge,” Dugage says. “APC has a larger market than MGE-UPS which likely means there will be substantial work in this instance to create a common culture.

Certainly, the opportunity Rick Wallace and Martin Dugage have had to anticipate and collaborate on the future is of great value to them and to us. Together, these are the elements of an effective ‘power backup’ for two sensitive intellectual programmes. So far, no interruptions in service.

IK could not have found a better case to follow… from the beginning.

Jerry Ash is KM coach, founder of the Association of Knowledgework, http://www.kwork.org, and special correspondent to Inside Knowledge. He is the author of the ARK Group’s latest major reports, Next Generation Knowledge Management and Next Generation Knowledge Management II. To order either of these, contact Adam Scrimshire at publishing@marketing.ark-group.com. Jerry Ash can be reached at jash@kwork.org.

Glossary

Peer Assists

A meeting or workshop where people are invited from other teams to share their experience, insights and knowledge with a team that has requested some help.

Action Reviews

Often called After-Action Reviews, originating with the US Army. A short (typically 15 minute), honest review of events and/or actions on a regular basis to enable staff to continually learn from them and to build integrity in the team.

Retrospects

Originally developed by oil giant

BP, a facilitated review meeting (ranging from half-a-day to two days for major initiatives) designed to draw out detailed lessons from the successes and disappointments surrounding a significant piece of work. The meeting is conducted with a ‘customer for the knowledge’ in mind and lessons are expressed as guidance for future teams.