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XII Congreso Internacional de la Academia de Ciencias Administrativas A.C. (ACACIA).
BUSINESS PROCESS MANAGEMENT FRAMEWORK: HOW TO TRANSFER KNOWLEDGE AND INTELECTUAL CAPITAL OF
ACQUISITIONS INTO BEST PRACTICES AND SUSTAINABLE BUSINESS VALUE. A SUCCESSFUL CASE STUDY.
Administración del Conocimiento
Martha Corrales, Ph. D EGADE Campus Monterrey Tecnológico de Monterrey
Av. Fundadores y Rufino Tamayo Colonia Valle Oriente
San Pedro Garza García, N.L., Z.C. 66269 México
Tel. +52 81 8625 6152 Fax. +52 81 8625 6098
Email. [email protected]
Tijuana, BC., 13-16 Mayo, 2008
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BUSINESS PROCESS MANAGEMENT FRAMEWORK:
HOW TO TRANSFER KNOWLEDGE AND INTELECTUAL CAPITAL OF ACQUISITIONS INTO BEST PRACTICES AND SUSTAINABLE BUSINESS VALUE.
A SUCCESS CASE STUDY
Abstract: The phenomenon of mergers and acquisitions has been sweeping both the academic
and the practitioners’ agenda. However, there are still many questions to address with
regards to the overall understanding of the merger success. Harrison, O’Neill and
Hoskisson (1999), propose that case research might lead to a grounded theory of
merger success. Bettis (1991), in an editorial essay, encourages more comparative
studies, multicultural studies. This paper focuses on CEMEX, a Mexican cement
manufacturing company that standardized its business processes into a scalable model
that allowed the company to grow without complexity. Its knowledge-intensive model has
been improved in every acquisition for the last decade. How transferable could be this
case study to propose a generic framework to map KM and assess intellectual capital, to
transfer best practices, applying experience during DD and PMI to close the gap
analysis with the right fit regarding organizational technology, customer relationships
and professional competences to get a competitive edge in the market?
Key words: Knowledge Management, Enterprise Integration, Intellectual Capital, and
Business Process Management.
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1. Introduction and KM related concepts
The value of knowledge and intellectual capital in international firms can be particularly
high because foreign markets often provide access to new ideas and stimuli than can be
subsequently applied in other countries (Solvell and Zander, 1995). Knowledge
Management (KM) has moved to CEOs’ agendas, where it is viewed as a strategic tool
in support of enterprise transformation for the new economy (Bresman et al., 1999). In
the United States, more than 90 percent of large private sector and 40 percent of federal
public sector enterprises have at least one KM initiative. Until recently, very few KM
programs outside of professional service firms were approached on an enterprise-scale
from the outset (Garner, 2005).
Knowledge (K) is defined as a justified belief that increases an entity's capacity for
effective action (Huber 1991; Nonaka 1994).
K is personalized information, the state of knowing and understanding, an object to be
stored and manipulated, the process of applying expertise, a condition of access to
information, and the potential to influence action.
KM focuses on exposing individuals to potentially useful information and facilitating
assimilation of information. KM involves enhancing individual's learning and
understanding through provision of information. KM focus is on K flows and the process
of creation, sharing, and distributing K. KM is organized access to and retrieval of
content. KM is about building core competencies and understanding strategic know-how.
KMS is an IT-based system built to support and leverage the creation, storage, retrieval,
transfer, and application of knowledge within the organization (Alavi and Leidner, 2001).
Three common applications were found: the coding and sharing of best practices; the
creation of corporate knowledge directories; and the creation of knowledge networks.
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The role of IT is (1) to provide access to source of K rather than knowledge itself, (2)
gathering, storing, and transferring K, (3) to provide link among sources of K to create
wider breadth and depth of K flows, (4) to provide effective search and retrieval
mechanisms for locating relevant information, and (5) to enhance intellectual capital by
supporting development of individual and organizational competencies.
In Table1 organizational knowledge is seen as an intangible asset, residing not only in
the minds of the employees, but as the core of the business processes, procedures,
systems, and organizational culture, shaping the way tangible assets are used to create
value (Lev and Zambon, 2003).
Table 1: Organizational knowledge takes many forms (Corrales and Garcia, 2005)
Internally, Knowledge of: Externally, Knowledge of:
• culture, history • strategic direction • organizations, partnerships, and other
formal relationships • communities of practice, communities
of interest, networks, and other informal relationships
• individual people • processes • products, services • systems, tools • patents, technologies • written and unwritten rules • where knowledge is located and how
to find or access knowledge? • how to use or apply KM? -- how to get
things done ? • how to succeed around here? • who knows what and how to access
him/her?
• customers, markets, and their needs, and activities in the marketplace: existing and potential
• competitors and our position relative to them: short term and strategically, overall and in specific markets and situations
• laws and regulations impacting the enterprise now or in the future
• emerging technologies and other trends of possible significance to the enterprise
• suppliers, partners: existing and potential
• investment market, sources of capital • other parts of the extended enterprise
-- owner, sister business units or companies in a larger corporation or holding company, subsidiaries
• global: countries, cultures, climates - political and geographical, economics, global locations of the enterprise operations and markets
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The enterprise integration is a platform to communicate and coordinate information
across global locations, and it is the ultimate desire of the corporate leader who seeks to
continue to grow globally, while at the same time maintaining access to and control over
day-to-day operations through effective communication and flow of information.
Continued expansion and wise decisions can only serve to guarantee that the industry
leader maintains its posture in the future. Enterprise integration is based on information,
functionality and integration, consolidation, adaptability and currency.
A business process is a set of logically related tasks performed to achieve a defined
business outcome (Davenport and Short, 1990). The business processes describe how
work is done by being recurrent (people carry this out often and in large numbers),
replicable (the process can be transferred to multiple contexts and is not unique to a
single company), consequential (has impacts on some aspect of company
performance), leverageable (base for further improvements in company performance)
and coordinated (coordination of tasks, people, information, and procedures)
(Davenport, 1993; Keen, 2004).
Business process management BPM is a broad term for (1) designing and sourcing
business process capabilities and (2) exploiting the opportunities of information
technology to leverage processes whose efficiency and effectiveness significantly
impact competitive, economic and organizational positioning (Keen, 2004).
Reduction of budgets and a stronger trend for governance to conform to common global
IT platforms are also important factors that will trigger cross-functional synergies. This
would be the next stage of evolution for KM in a manufacturing company.
In the current climate, the challenge in the paper is to make an effective case study for
a CEMEX, a Mexican cement manufacturing company, making explicit how effective the
company has been in its KM initiatives to manage, measure, report and leverage its
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intellectual capital (IC), mapping its business processes and speeding up the enterprise
integration after its acquisitions.
Globalization of markets and production have been a trigger for the Mexican
companyCEMEX to grow thru M&A and to get a better position in its markets to
overcome economic and politic instability with risk diversification in different geographies
with attractive and growing markets to optimize productive capacity, secure profitable
investments, predictable cash flows, competing in price and customer response for a
long term leading position in consolidated and mature markets.
As the consolidation of the manufacturing cement industry became a constant, the
integration of new subsidiaries in different locations worldwide, the service being offered
to thousands of customers around the globe, and the continuous operation of the
Mexican company to support business processes were major triggers for an innovative
business initiative that assured that each region in America, Europe, Africa and Asia was
taking control of the business operations to serve its customers as the day went by
standardizing processes, transferring knowledge, and creating intellectual assets as a
differential competitive advantage.
As competition in these industry intensified and the pace for technological change
accelerated, some Mexican firms like the one under studyCEMEX built cooperative
ventures in order to evolve and enhance its competitiveness, investing in research and
development projects for cost-effective product innovation, energy savings,
environmental efficiency programs, and forging synergies with external contributors for
access to knowledge and capabilities.
Culture is a system of knowledge and insights serving as basis for interpreting
experiences and generating actions. In Mergers and Acquisitions (M&A), knowledge
bases were combined with the expectation that the joint capabilities would derive
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benefits. Nevertheless, the knowledge transfer needed to be managed carefully to
maintain the intended synergies.
During M&As, knowledge sharing was the initial target, knowledge generation and the
application of knowledge became more important. Managing the target company’s
system of knowledge was crucial for IT planning, especially in case of M&A where two
different cultures were combined.
1.1. Increased International Scope of Companies and the Mexican Scenario for Mergers and Acquisitions
Within the last two decades, an increased amount of attention has been devoted to
studying international industries, initially, to determine whether or not they are distinct
competitive environments. Porter (1986) classified industries at the extreme as being
either “multi-domestic” or “global”. Multi-domestic industries are characterized by
competitive forces that are constrained structurally by country. In contrast, global
industries have been characterized as “a series of linked domestic industries” where
structural forces combine to produce a single competitive arena which transcends
national competitive environments.
Bartlett and Ghoshal (1989), in a more sophisticated taxonomy, classified industry
competitors as global (producing in the same geography), multinational (a portfolio of
nationals with the skills of detecting and satisfy local needs), and international (a group
of nationals with the skills of transferring knowledge and innovation).
The manufacturing industryCEMEX used to be multi-domestic until early 80’s, when a
race of consolidation took place. The switch from multi-domestic to global in the industry
placed the company in a competitive environment where strategic actions taken in one
country affect competitive situations in other countries. Thus, one critical dimension
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delineating international global industry types is the interdependency existing across
national borders.
Market interdependencies result when a competitor that internationally integrates
operations compels other competitors to respond in kind or risk a loss of
competitiveness (Porter, 1986). In the last decades, some of the most important moves
and countermoves have been mergers and acquisitions, with the main goal of reducing
the risk of losing competitiveness and in a more general approach, to create value.
Moreover, international market and competitive interdependencies result from a
combination of tangible and intangible asset flows. Tangible asset flows, as best
represented by intra-industry trade (Porter, 1986), involve the transfer or movement of
component parts and finished goods across national borders that are facilitated by a
number of factors, including homogeneous worldwide product demand, low tariff and
non-tariff barriers to trade, and production cost differentials between countries. In
general, the factors that facilitate trade are increasing because of the aggressive
globalization of markets that we are witnessing.
An essential aspect of KM is the process of knowledge transfer between business units.
While the transfer of knowledge between departments or between sister units in the
same country is far from trivial, it is clear that the problems associated with transfer will
increase with geographical and cultural distance. The value of knowledge transfer in
multi-domestic firms, such as the Mexican companyCEMEX, can be particularly high
because foreign markets often provide access to new ideas and stimuli that can be
subsequently applied in other countries (Hedlund, 1986; Bartlett and Ghoshal, 1989;
Solvell and Zander, 1995).
Multi-domestic transfer of knowledge between units may occur in a number of different
modes. At one end, transfer can occur under a hierarchical mode of governance
between two units of the same firm, and at the other end it can occur through a pure
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market transaction between two independent firms. Knowledge transfer can also occur
in hybrid modes of governance (Borys and Jemison, 1989), such as alliances, joint
ventures and licensing arrangements (Bresman, Birkinshaw and Nobel, 1999).
In the Mexican firmCEMEX, the KM Needs Declaration was made about 4 years ago. As
a direct result, a number of initiatives were implemented. These initiatives grew to
address specific functional needs within each area. For firms similar to this Mexican
companyCEMEX, which has a major proportion of its market value based on tangible
assets and operational competencies, a ‘grass roots’ approach or KM strategy is ideal.
This individual functional approach for addressing KM needs works well up to a point;
that is, until the organizational growth, functional interdependency and complexity
reaches a level where a institutional-wide framework that requires KM disciplines and
methodology is needed to align, integrate and standardize the manner of addressing the
business drivers. There are also significant cost and implementation time savings to be
gained from an integrated institutional KM framework.
2. Case Study Research Methodology and CEMEX, the Mexican Cement Manufacturing Company’s Roadmap: From KM to Value Creation
The phenomenon of M&A as the scenario in which a roadmap is presented to go from
core business process definition, mapping, knowledge transfer, knowledge management
and intellectual capital of acquisitions to the acquisition and profiting of knowledge and
intellectual capital (see Figure 1). Bettis (1991) encourages an in depth case study
research methodology to identify, analyze and understand particular situations. The
Case Study was based on corporate presentations as well as interviews with senior
project leaders, internal clients, and project champions. A variety of literature
perspectives have been considered to find relevant traits for the successful post-
acquisition process in the company, such as modes of acculturation, organizational
culture fit, cultural distances in nations, synergies creation, resourced-based
view/reservoirs of knowledge, memory system, competitive-positioning strategy and
international strategy.
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The Case Study addresses a long standing common concern about leveraging
manufacturing companies’ intellectual properties, structural assets and people know
how. Adding to the concern is the complexity of operating as global company with
customers, offices and operations in the world.
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Figure 1: Roadmap from Organizational Knowledge to Value Creation
Value Creation
~US$ 15MM
Organization
~US$ 45MM
Processes and practices
~US$ 100MM
Procurement Maintenance & qualityLogistics / SCM
In-house bankingReady MixCommercial
Internal control
Functions reduction- Integration
- Coordinated
Optimization of global resourcesImprovement in coordination and best practices sharing
Standard management modelCommercial systemOperations system
Optimized IT resources- Cost reduction for
maintenance, support and development
Value Creation
~US$ 15MM
Organization
~US$ 45MM
Processes and practices
~US$ 100MM
Procurement Maintenance & qualityLogistics / SCM
In-house bankingReady MixCommercial
Internal control
Functions reduction- Integration
- Coordinated
Optimization of global resourcesImprovement in coordination and best practices sharing
Standard management modelCommercial systemOperations system
Optimized IT resources- Cost reduction for
maintenance, support and development
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3. Process and Practices
The company under study, CEMEX, is inserted in a dynamic industry in complex
markets. It has launched initiatives to share its best ideas and management practices
and processes. According to the expert process group interviewed in the company,
before the standardization business process initiative, it was very seldom that successful
discoveries and practices in one part of the organization normally were transferred
easily, if at all, to other parts.
Because such standard practices had been embedded and hard to extract, contained in
practices, projects, processes, products, patents, and pieces of paper, and employees
frequently spend large amounts of time reinventing the wheel. The company loosed
productivity, generating redundant activities, processes, wastes.. Clearly, there were
enormous opportunities for improvement.
The Business Standardization Processes included: generating, organizing, developing
and distributing practices, know-how into process maps with updated content (see
Figure 2):
• Generating: identifying the desired content and getting people to contribute ideas,
either through on-line discussions or by submitting deliverables that have emerged
from other work.
• Organizing: information organized so that it can be represented and retrieved
electronically. Standardization sharing systems or tools, including standardization
bases, navigational devices, user interfaces, and taxonomies, must be designated to
facilitated this process.
• Development: the selection and refinement of material to increase its value for
users.
• Distributing: how people gain access to material, making it easy for people to find
what they are looking for, and encouraging the use and reuse of standard practices.
Both training and reward systems play important roles. Pull systems are less
desirable than targeted push systems that are sensitive to users’ interest and even
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their current work context, and proactively deliver material that would be helpful and
relevant.
Figure 2: Business Process Standardization in the Mexican CompanyCEMEX
Revise processes andpractices
Select best practices and redesign new ones if required
Map selected practices
Best practices
Increased central control
Shared services savings
Analyze implications of process changes
Map new organizationalstructure
Implement org. changes
Headcount reduction
Leaner organization
Clearer roles
Select common required systems
Adjust systems to country requirements
Implement systems
Common reports
Gives order to evolution
Visibility of operations
Dynamic Process Standardization Governance
Create Common Organization with Shared Services
Standardized IT, Process Architecture and Support
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In order to create, transfer and manage the business process knowledge, the company
identified, classify and deploy the following five KM activities:
• Creation: The activities that resulted in new knowledge.
• Capture: The activities that enabled capture and representation of tacit knowledge in
explicit form, thereby moving knowledge from the individual and making it available
across the enterprise.
• Organization of information: The activities that classify and categorize knowledge for
storage and retrieval purposes. The activities included maintenance of knowledge
data as well as the indices, maps and processes that managed it.
• Access: The activities through which knowledge was disseminated to or requested
by users.
• Use: The application of knowledge to work activities, decisions and opportunities.
Use was recursive (it generated feedback influencing other activities, and this
feedback was inserted into the KM process through the other four activities).
4. Organization
The Mexican manufacturing companyCEMEX was redesigned and restructured for profit
and growth, focusing in activating knowledge sharing, collaboration and innovation,
which were activities that occurred within the human processes and social structure of
the enterprise (see Figure 3). The organizations have traditionally operated within a
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cultural framework that encourages and rewards competition and individual
achievement. Employees performed their work and advanced their careers by keeping
their knowledge to themselves (for their own benefit) rather than sharing it with others.
KM demanded a shift to a culture where collaboration, knowledge sharing and team
achievement were valued equally with competition and individual achievement.
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Figure 3: Organizational Redesign in the Mexican companyCEMEX
The Mexican organizationCEMEX used four key business process design principles
(see Figure 4):
• Facilitating implementation of core business processes and systems to share best
practices.
• Leveraging economies of scale by sharing resources.
• Standardizing organizational structures where appropriate.
• Establishing clear accountability and governance.
Systems development
Process revision & redesign
1
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Principles for organization redesign
Facilitate implementation of processes and systems
• Sharing best practices
Leveraging economies of scale
• Sharing resources
Standardize organizational structures where appropriate
Establish clear accountability and governance
Principles for organization redesign
Facilitate implementation of processes and systems
• Sharing best practices
Leveraging economies of scale
• Sharing resources
Standardize organizational structures where appropriate
Establish clear accountability and governance
Required An Organization Redesign
Organization redesign
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By analyzing all of Mexican CEMEXcompany’s global operations, the design of regional
and global processes and organization followed balanced criteria between flexible and
standard:
• Integrated, global, or regional shared services functions (IT, accounting,
procurement, finance, and audit functions). Regional functional leaders are in charge
of worldwide standardization and report directly to the CIO.
• Coordinated communication functions (legal, planning, trading, technology, and
human resources) with local differentiation that require standardized business
process.
• Local business operations functions (commercial, production, operations, and
logistics).
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Figure 4: Regional and Global Organization in Mexican companyCEMEX
4.1. Information Technology Structure
The IT structure for the company under studyCEMEX provided a referent that ensured a
well balanced IT investment decision, meeting all the important knowledge workers
needs from a KM tool or application perspective.
1. Local areas (business
organization)
2. Coordinatedareas (shared
services with local
differentiation)
Profit andgrowth
Top linegrowth
LocalEffectiveness
GlobalEffectiveness
3. Integrated areas
(regional or global shared
services)
Operations
Logistics
Commercial & Marketing
Ready Mix Concrete
Planning
Information Technology
HR
C&I
Regional/global organization
Finance & Treasury
Accounting & Taxes
LegalTrading
Technical
Procurement
Audit
MexicanCompany
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• First stage was to examine the business drivers defined using the strategy
imperatives. The user needs were analyzed and mapped in terms of three process
sub processes: knowledge creation, knowledge sharing and knowledge usage. The
final need was expressed via formal functional specification documentation.
• Second stage was to review and analyze the needs’ statements mapping these into
three basic technologies:
• Knowledge access and storage.
• People finders, expertise location, and improved collaboration.
• E-Learning.
• Third stage was the selection and implementation of the chosen solution. The
Mexican company has a very mature enterprise technology selection, evaluation,
purchasing, and implementation process.
The current KM technology portfolio managed by IT planning in the firm demonstrated
value creation from IT selection process, ensuring that the IT and KM technology
architecture was aligned to company’ strategies, as well as improving the IT budget and
resource management. IT group was structured for a central role in defining, deploying
and supporting process standardization, leveraging pre-existing process design
expertise and integrating IT and process user support (Figure 5).
Figure 5: IT Structure in CEMEXthe Mexican company
TECHNOLOGY
PEOPLE
PROCESS
ENTERPRISE
INFORMATION
SYSTEMS
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5. Value Creation
The institutional criteria for all IT (KM, BPM and Virtual Work Model) initiatives were
based in presenting a sound business case, showing the economic, pragmatic and
sustainable value for the process, organization and the community before getting the
final approval. in the Mexican company. CEMEX has four major elements derived in
following order:
• Common understanding and interpretation of the KM or BPM discipline and concepts
between all the actors connected with the program.
• Business value identification from IT programs. What were the current important
business drivers that KM or BPM could address? Once the critical drivers were
defined, the KM or BPM strategy were defined to best address these drivers, such as
information overload, ROI on KM, IC and competitive environment.
• Best approach or intervention solutions that will address the situation. Since market
value is largely composed of tangible assets and operational competencies. The
approach would be to have a corporate wide vision but focus initial implementation
on solutions that use IT to strengthen operational competencies or tangible asset
management.
• To measure the results of the IT initiatives. This last stage initiates the ongoing cycle
of assessing the impact of the company business drivers, adjusting the knowledge
strategy to attack the drivers, applying knowledge assets with robust applications and
measuring the value achieved.
5.1 Company Growth and Evolution
The Mexican companyCEMEX’s mission was to serve the global needs of its customers
and build value for its stakeholders by becoming the world’s most efficient and profitable
manufacturing company.
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This firm began global expansion in the 1980’s obtained operating efficiencies and
transfer of best practices program. In 2000, the Mexican companyCEMEX defined an
initiative to manage its knowledge base more efficiently, identify and disseminate best
practices, standardize business processes, implement key technologies, and foster
innovation.
Its acquisition strategy was to control the acquired organization, control the best
practices, and deploy an own management team. The strategy allowed leaders to
identify performance gaps, capture value, and implement best practices immediately
after acquisition. In contrast, the competitions’ acquisition model was to start with a
minority position and maintained it.
The Mexican companyCEMEX has been at the front of the consolidation trend. Better
cost positioning through scale and strategic benefits of a global presence drive
acquisitions. The firm launched an IT value management project to analyze the value
that IT could add to the operations organization. The organization realized that in order
to have common platforms and common systems, there is a need to have common
processes. IT did not define the processes. A solution was the creation of a new
governance model to manage business processes and business results, such as sales
and costs.
The benefits of the IT initiatives were:
• A standard blueprint for managing processes across the world in all operations,
• For use in all post merger and acquisition integrations, and
• A methodology that allows the organization to continually evolve, identify and adopt
best practices, and promote innovation.
Documentation of company’s CEMEX’s strategy was of utmost importance. Different
groups used a common template to document processes and stored them in a common
knowledge base repository. All employees used the intranet to access the knowledge
database that contained process documentation, policies, procedures, and process
maps. The Mexican company obtained three major benefits (see Figure 6):
• Resource optimization
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• Simple, efficient, and scalable processes
• Operation and IT costs reduction
– Avoid duplication of efforts by providing shareable services
• Sharing knowledge and improving control
• Improvements realized through flexible operations
• Facilitate quick adaptation of new practices and IT platforms
• New business processes governance model
– Authority to coordinate and collaborate global process innovations
– Alignment of HR, business processes, and IT functions
• Growth Facilitation
• PMI’s integrated to Company’s management model in less time and with less
effort
• Set the basis for bigger acquisitions (across countries).
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Figure 6: Value creation in Mexican company CEMEX
In summary, the Mexican firmCEMEX obtained a core set of best business practices
through KM with which company conducted its business throughout all of its locations
by:
• Standardizing key processes, practices, and operational systems,
• Redesigning the organization to support and take advantage of these new processes
and systems; and
• Creating the cultural transformation necessary to encourage speed, flexibility, and
innovation throughout company.
Its mission is to improve, streamline, and simplify company’s global operations. Three
months after implementing process improvement recommendations, the Mexican
manufacturing companyCEMEX realized improvements. Such enhancements enabled
the organization to improved customer performance, decreased operational costs,
improved the order fulfillment process, and increased ROI.
6. Acknowledgements
The author expresses her gratitude to the CEMEX’s executives form the manufacturing
Mexican conpnay who contributed with useful information to support her research case
study. Special thanks are offered to the personnel interviewed during a time span of 18
Past low level of standardization
Best practices not shared Mexican organization needed added flexibility to lower response time Poor benchmarking across businesses No global innovation process Duplication of processes, systems, and projects Better management of IT costs
Establishment of IC
Standard blueprint for processes across the world
• All countries to adopt it
Use for all PMIs Evolve continuously to adopt best practices and innovation
Creation of significant value for Mexican Company
From tangible results . . .• Cost reduction • More efficient
investments To more strategic benefits . . .
• Sharing best practices
• Faster PMI • Flexibility
Will allow the Mexican company to grow faster while maintaining process excellence
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months. The sponsor (CEO), the owner (CIO), the leader (CKO), CFO, 12 Business
Process Directors, 8 Regional Directors, HR Manager, 12 Business Process Internal
Clients, a Project Coordinator, a Project Manager, a External Consultant,
7. Conclusions
In this particular study, a variety of literature perspectives has been considered to find
relevant traits for the successful post-acquisition process in the company under study.
The knowledge transferring activities have proved to be of great importance for the
Mexican companyCEMEX, transferring best practices, applied experience during DD
and PMI, organizational knowledge, organizational technology and professional
competencies. Being this acquisition of knowledge and intellectual capital so relevant to
the company’s acquisition process, and in general, important to lead in international
markets, it would not be very ambitious to extrapolate findings in this study to a larger
population of firms and industries that compete in a global context.
Competitive advantage is based, in part, on the competitive positioning of the business;
included, among others, low cost, service, and quality offerings. Yearly financial savings
have been classified as recurring and non-recurring (mainly qualitative benefits that are
hard to measures). Each year savings have been reported. Since the KM, BPM and IC
initiatives were implemented, the organization realized approximately $143 USD million
in savings. To continue the trend, the company will maintain its growth by acquisition
strategy.
Operational and Technical Process: Transferring of Best Practices. The operational and
technical organization consists of two groups that were responsible for sharing best
practices. The technical and engineering group were accountable for building new plants
and the operational expert group had the “know how” to operate manufacturing plants.
The operational and technical organization shared the same goal – to enable faster
integration of business processes, to improve practices, and to protect organizational
knowledge. The operational expert groups were highly specialized, global, and make
significant contributions to organizational knowledge.
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The organizational structure of the operations and technical group were very similar to
the company structure. A council was responsible for identifying and prioritizing best
practice projects. A technological disclosure team defined best practices to implement in
different domains and determine which practices were mandatory. Mandatory meant that
an e-Group had determined that a defined process will benefit the organization and had
documented the process. When a best practice was optional, that meant that a location
may not select or create an alternative plan of action. The company’s scorecard, a
tracking system, was used to track and to identify locations that have adopted standard
processes.
It was very important that all operating locations adopted best practices and used
standard processes. For example, a variation in quality implies cost for the end
customer. A slight change in a formula could equate to a disaster for customers.
Therefore, the company focused on having the same quality of product and service for
all locations and all customers. The philosophy helped its customer saved money and
avoided costly mistakes and contributed to operational efficiencies. Currently, all the
plants operate at a profitability level of at least 95 percent.
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