Communities At Caterpillar
T+D (American Society for Training & Development), June 2004
Foster Knowledge Sharing
by Vicki Powers
Knowledge management at Caterpillar used to revolve around coffee.
Jim Coffey remembers how buying a colleague a cup of coffee at
Caterpillar would enable employees to learn anything they needed
"That was our knowledge management for years," says
Coffey. "Now, the Knowledge Network helps support that virtually
for people who can't walk by my desk and buy me a cup of
As a 31-year Caterpillar veteran, Coffey doesn't believe
the Knowledge Network has changed the organization's culture—rather,
that it has supplemented what had already been in place for more
than 75 years: a genuine culture of sharing. Now it takes place
virtually instead of over a cup of coffee. And it achieves significant
savings along the way.
Focusing on Intangible Assets
Thirty years ago, Caterpillar Inc.—a Fortune 100 manufacturer
of construction and mining equipment, engines, and gas turbines—operated
with roughly 70 percent of its outstanding value in hard assets
and 30 percent in intangible assets. Today, the numbers are dramatically
different: Caterpillar's intangible assets, such as intellectual
capital, account for 85 percent of its value.
"Most people don't think of us as a knowledge-asset
company," says Reed Stuedemann, knowledge sharing manager
and a 27-year Caterpillar veteran. "It's an indication
of how important knowledge is to Caterpillar." Just as many
current corporate innovations and strategies started primitively
as a drawing on a dinner napkin, Caterpillar's huge knowledge-sharing
system—with nearly 40,000 registered community members—started
with a laptop computer and a summer intern. Back in 1998, engineers
in Caterpillar's Technical Center wanted to capture "lessons
learned" and avoid duplicated efforts. As the organization
moved from a silo-based organization into 26 business units, its
70,000 worldwide employees lost track of people and knowledge.
"We found we were repeating the same mistakes and doing
the same research multiple times from different business units," Stuedemann
says. "If one business unit funded research, you weren't
aware of it and funded it again."
In January 1999, Caterpillar launched its Knowledge Network as
a Web-based system delivered via the Internet to 12 communities
of practice. In the beginning, these communities comprised employees
working to improve performance by collaborating and sharing knowledge.
Topics for the first communities related mostly to standards and
One early community, for example, focused on bolted joints and
fasteners. In this specialized engineering field, these people
generally work solo in a manufacturing facility without others
to ask questions or gather second opinions. "They had a need
to get the message out to a very focused, limited audience around
the world dealing with bolted joint designs," Stuedemann
Caterpillar structured its system so community members can communicate
to others through community discussions and knowledge entries.
Community discussions provide a way to post a question out to the
community immediately, without any approval, through email. Knowledge
entries allow community members to distribute validated information
that has been reviewed and approved by the community manager. Stuedemann
says this is Caterpillar's way to ensure that members receive
Communities also provide space for reference materials that relate
to the topic and users within a community. Community managers can
select documents and links to add under Tools and Guides. Another
section, Standards and Specs, contains links to standards and regulations
relevant to the community.
Moving KM to Caterpillar University
In 2001, Caterpillar discovered a number of relevant issues that
would affect its business: new technology, a changing marketplace,
and changing demographics of an older workforce that would begin
retiring in the next few years, often with more than 30 years of
service. A team within Caterpillar examined how the organization
could remain competitive in the future. It recommended that Caterpillar
make the transition to a continual, learning organization, of which
knowledge sharing is a key element. In response to that need, the
organization formed Caterpillar University in 2001. Its learning
philosophy centers around a triangle-shaped learning model with "Build
People" as the center. Three elements make up the sides of
the triangle: Leadership, Knowledge Sharing, and Learning Culture.
The Knowledge Network moved under Caterpillar University and
out of the Technical Center at that time because the organization
viewed it more as a knowledge-sharing tool than as technology.
Through this relationship, Caterpillar University has supported
the organization's business objectives of knowledge management
that focus on supporting a learning culture, delivering bottom-line
results, and improving performance.
Mark Shipley, global learning project manager at Caterpillar,
believes that the Knowledge Network's reporting relationship
to Caterpillar University — rather than to a corporate-level
executive—definitely made a positive impact on its success.
Managers within each community facilitate the 3000 communities
of practice. The corporate staff for the Knowledge Network is a
small team of six, including positions in marketing, information
services, technical support, and a knowledge-sharing manager.
Shipley manages several communities of practice, including the
Global Learning community. He especially appreciates how easy it
is to get the word out quickly within a community.
"If anyone has a question [around learning], there are
upwards to 400 people who have part of their job responsibility
for learning," Shipley relates. "There's a wealth
of knowledge out there to tap into quickly."
Watching the Customer
Once the Knowledge Network moved out of the engineering arena,
Caterpillar's nontechnical audience found it difficult to
use. What appeared intuitive to the IT people wasn't so intuitive
to others in the organization.
"It was obvious that this was never going to go anywhere
outside a technical group when we showed it to nontechnical people," Stuedemann
says. "If we even thought of taking this across our value
chain to dealers and suppliers, there was no way it was going to
Caterpillar University brought employees into its usability laboratory
to complete a list of 20 to 25 common functions that occur within
a community. Stuedemann says CU wanted to see whether users could
complete the list without help. Where did they look? Where did
they move their mouse? Where would their eyes go for certain activities?
The group redesigned the system based on feedback and conducted
more usability testing. Stuedemann says CU conducted three different
rounds of usability testing before getting it right. "What
surprised me most was the impact from the redesign," Stuedemann
says. "Our growth rate more than doubled. It turned on a
dime and never stopped."
In January 2002, Caterpillar's communities numbered 800.
A year later, they reached 1800. Its communities hit the 3000 mark
in February 2004.
Over time, Caterpillar's KM measurements have developed
and increased right along with the community participants. The
organization tracks about 50 volume metrics each month, such as
number of discussions, number of searches, number of people logged
into the system, and number of participants. That has evolved into
more sophisticated system queries using real-time data.
"We don't have a set goal for number of communities,
but we do have a goal for engagement," Stuedemann says. "We
try to increase and grow the amount of discussion and activity
in the system because people can leave anytime. That's a
very direct way of measuring whether people are satisfied. Currently,
about 80 percent of participants are highly satisfied."
John Crager, senior adviser at Houston-based American Productivity & Quality
Center, says that measures and return-on-investment are important
elements of KM initiatives from a financial perspective. When a
business case doesn't exist and money seems to be going into
a black hole, organizations have no understanding of KM's
impact on business.
"It's hard to get follow-on funding and support without
it," Crager relates. "The organization needs to tie
KM to tangible success factors that the organization uses."
Focusing on the Day Job
One of the elements that has helped the Knowledge Network succeed
is its delegated management approach rather than a centrally controlled
system. The people who have a need in the community define its
purpose. The community managers in each community of practice define
who the experts are in that specific area and locate them within
the organization. Community managers also invite participants to
join the community, who can either accept or decline based on their
needs and interests. Communities of practice number from a small
team to hundreds of employees spanning the globe from places such
as Australia, Singapore, Asia/Pacific, and Europe .
"By having delegated management, you can have 3000 communities,
and it works. For the people who are involved in managing those
communities, it's about their day jobs," notes Stuedemann. "It's
not something in addition to. Our recommendation is to have very
focused purposes, such as threaded fasteners or contamination control.
World hunger and world peace don't work at Caterpillar!"
Crager, who served as project lead in APQC's consortium
study, "Measuring the Impact of Knowledge Management," says
Caterpillar stood out from other study partners for several reasons.
The first element is the depth of Caterpillar's communities
of practice. These aren't just organized by areas of interest,
he says, but by areas of interest where they can improve and solve
problems. "Caterpillar would rather have small, targeted
communities," Crager says. "And for their culture,
it works very well."
Another aspect that contributed to Caterpillar's success
with its Knowledge Network is the company's long history
of sharing ideas. Although it might have been difficult to find
the right person in the past because of its worldwide audience,
there never was any fear of sharing ideas.
"No tool is going to make people share something they don't
want to share," says Coffey, manager of the Quality and Reliability
community. "But if people are willing to share, a good tool
that supports the community of practice and knowledge sharing increases
the velocity of that sharing in a worldwide organization. That's
what we were aiming to do, and that's what has been successful
here with the Knowledge Network."
Taking it Outside
Caterpillar moved beyond its borders in August 2002, to invite
its independent dealers to participate in the Knowledge Network.
Today, Caterpillar boasts 7000-plus dealers participating in its
external communities, which spread profusely by word of mouth.
These communities, which make up approximately 10 to 15 percent
of Caterpillar's communities, include dealers, suppliers,
and customers. The company expects in the next year that external
users of the Knowledge Network will outnumber Caterpillar employees,
based on its current growth rate.
Crager says Caterpillar's choice to bring external people
into its communities is another unique aspect. Though Caterpillar
was in the forefront with this idea, other organizations are just
now in the early stages, says Crager. Many organizations generally
believe their intellectual property isn't protected with
Dealers such as Don Pratt in Fargo, North Dakota, can't
imagine not having external communities at Caterpillar. Pratt became
involved in Caterpillar's pilot community of practice focusing
on Dealer Service Training in March 2002. At the time, he chaired
the Dealer Advisory Board and jumped at the opportunity to pilot
a tool that only previously existed inside Caterpillar. Communication
throughout 1,800 dealer locations and 90,000 dealer employees proved
challenging before the Knowledge Network.
"One of the frustrations as dealers is how do we communicate," says
Pratt of Butler Machinery. "If you have a central place to
share projects and emails, it makes it easier to get the resources
all in one place. The biggest value of the Knowledge Network is
it made me aware of not reinventing the wheel in the training area." Pratt
serves as training and development manager for the dealership's
450 employees and manages three full-time trainers.
"We have responsibilities to stay ahead of the training
curve, and the Knowledge Network has allowed us to do that—how
to communicate and stay on the same page," Pratt says. "It
has helped in many different areas—not only the problem solving,
but also the ideas that come out for a competitive edge."
One improvement example, according to Pratt, focused on a hands-on
aptitude test to hire quality technicians. A dealer posted a question
in the Dealer Service Training community about this test and its
validity. Pratt says dealers lost this as a hiring tool through
the years. While some dealers were using the test, many didn't
know it was available. In just two hours, dealers could get the
schematics by email from the community after learning about it
Stuedemann says people in an external community such as this
have an easier time correlating how knowledge and expertise impact
more than time savings. In this example, it's customer satisfaction.
Stuedemann says the impact of an ineffective mechanic calling on
a customer will provide a much greater impact on the bottom line
and the customer.
Analyzing Value and ROI
Caterpillar University wanted to provide credibility to its US$2.5
million investment (from 2000 to 2003) for its knowledge management
group and expanding Knowledge Network. CEOs and other leaders started
asking questions about the tangible business value of the Knowledge
Network. The organization studied its ROI impact by working with
Merrill Anderson, CEO of MetrixGlobal LLC. It selected two communities—one
internal and one external—to examine bulletin board discussions.
The organization interviewed 120 people who had initiated discussions
that received more than one response. After studying 23 threads
in the Bolted Joints and Fasteners community and five threads in
the Dealer Service Training community, MetrixGlobal identified
the qualified benefits and calculated a business-cost ratio and
ROI for each. The return-on-investment ranged from 200 percent
for the internal community to more than 700 percent for the external
The breakdown of intangible benefits fell into these specific
areas: productivity (40 percent), cost (25 percent), speed (15
percent), quality (4 percent), and other (16 percent). The survey
determined the percentage of value derived from the Knowledge Network
and validated the confidence level of that estimate.
The findings revealed a number of interesting factors. One, members
in these two communities saved more than $1.5 million from online
discussions in the Knowledge Network. One entry exceeded more than
$1 million, which was removed for the ROI calculations. Two, ROI
study results illustrated that the value of discussions in external
communities is four times higher ($2500) than the value from internal
communities ($600). The total estimated savings from 2003 to 2008
is estimated to reach $75 million.
"Caterpillar was obviously happy with how the results came
out," says Anderson . "Clearly, it's a conservative
estimate because we examined only the bulletin board. The real
strength of the Knowledge Network is its bottom-up approach. People
are using what they really need to use in a way they need to use
Caterpillar has also achieved a number of intangible benefits
from its Knowledge Network. The organization's communities
of practice have improved decision making, increased collaboration
and teamwork, improved work quality, and improved product design
Just as important, leaders' perceptions shifted to managing
knowledge as a strategic asset with a bottom-line return. What started
as a grassroots knowledge management program escalated into a vast,
enterprise-wide solution involving more than half of Caterpillar's
How Do the Best Do It?
Caterpillar participated as a best-practice partner in "Measuring
the Impact of Knowledge Management," a consortium
study sponsored by the Houston-based American Productivity & Quality
Center (APQC). In this study, Ford Motor Company, IBM,
Schlumberger, and Halliburton, along with Caterpillar,
illustrate how measuring their KM efforts significantly
impacts their knowledge management initiatives. These organizations
have a 200 percent measurable ROI, which translates to
an annual impact of US$7 million to $200 million.
What makes these organizations successful in terms of
their knowledge management results and their ability to
acquire additional funding to expand?
- KM programs are specifically focused on the objectives
of their organizations and not loosely linked to strategy.
- These organizations track the impact of knowledge
management in addition to KM costs and activities.
- Study partners use the language of the firm to define
and measure knowledge management. They refer to sharing
and leveraging knowledge—in place of using the
term "knowledge management—which is more
tangible and easier to explain.
- These organizations have a core KM support group to
coordinate and facilitate the activities in support of
the business goals.
Source : Measuring the Impact of
Knowledge Management, (2004), American Productivity & Quality
Center, Houston, Texas.