Setting up Communities of Practice for Innovative Russian SMEs Flavius Sturm1, Liza Wohlfart1, Patricia Wolf2, Robert Slagter3, Tanya Emshanova4 1
University of Stuttgart – Institute for Human Factors and Technology Management, Nobelstraße 12,70569 Stuttgart, Germany, {liza.wohlfart, flavius.sturm}@iat.uni-stuttgart.de
2
Swiss Federal Institute of Technology Zurich - Center for Organisational and Work Sciences, Kreuzplatz 5, 8032 Zürich, Switzerland;
[email protected] 3
Telematica Instituut, P.O. Box 589, 7500AN Enschede, Netherlands,
[email protected] 4
ViceVersa Consulting, Komvuzovskaya str. 21g-322, 620066 Ekaterinburg, Russia,
[email protected]
Abstract Innovative small and medium-sized enterprises (iSMEs) play an increasingly important role for the economic development of Eastern European countries during the transition of a planned economy towards a market economy. As innovative firms tend to be exposed to higher levels of risk and uncertainty than the average firm, they need to permanently keep up with new market developments and dispose of the necessary management competencies to sustain their business. Within this paper, the authors present a project dedicated to the development of a Community of Practice (CoP) between iSME clusters in Moscow, St. Petersburg and Ekaterinburg. Its main intention is to enable iSMEs to share knowledge and experiences on subjects of common interest and thereby to enhance individual performance. Based on comparative research on management practices in Western Europe and Russia, a preliminary set of solutions has been identified for putting the CoP in place. Keywords Communities of Practice, Regional Innovation, Training and Education
1
Introduction
Small and medium-sized enterprises (SMEs) play an increasingly important role for the economic development of Eastern European countries. The Russian SME sector – for instance – has steadily grown in the past decade, currently accounting for approx. 50% of employment and continuously coming closer to the Western European equivalent (approx. 65%). During the past years, it has become increasingly evident that Russian SMEs have to extend their market knowledge and management competencies, if they want to compete on the domestic market as well as on a global scale. This is especially true for innovative small and medium-sized enterprises (iSMEs), as they are exposed to higher levels of risk and uncertainty than the average firm. Within this paper, we present the initial phases of a project called RUSMECO, dedicated to the development of a Community of Practice (CoP) between iSME clusters in Moscow, St. Petersburg and Ekaterinburg. The CoP’s main intention will be to enable iSMEs and other interested organisations to share knowledge and experiences on subjects related to “Business Development”. The assumption is that the individual performance of an iSME increases, when members of that iSME learn from past experiences by others in a CoP. Based on comparative research between management practices in Western Europe and Russia, including a literature review, a series of workshops and interviews with Russian entrepreneurs, some first requirements concerning the solution design have been identified for putting the CoP in place.
2
Existing Theories and Work
2.1
CoP as informal collaborative networks
Not all networks are built around contractual agreements or have been built intentionally. Often it is the pure interest in exchanging information and knowledge that will gradually lead to the formation of collaborative structures. Zucker and Schmitz (2000) summarise this movement as the development of cooperation towards collaboration and CoPs are a perfect illustration for this trend. According to Snyder and Wenger (1999), CoPs can be been defined as “[…] informal groups of people bound by a shared practice related to a set of problems”. CoP members typically work on problems, discuss insights and share information. They mentor and coach each other, generate plans for future activities and develop shared knowledge frameworks as well as methods and tools for solving common problems. Over time, these mutual relationships enable the CoP members to define certain forms of interaction and to develop a spirit of belonging, a sense of identity. While the term itself has its roots in the late 80s, the concept of CoPs has found most of its recognition in recent years, especially in the knowledge management domain. Several large organisations have put in place CoP-like concepts to organise their body of knowledge that is usually spread over several countries and continents. Examples include the “learning communities” at Hewlett-Packard, the “family groups” at Xerox, the “thematic groups” at the World Bank, etc. (Gongla/Rizzuto, 2001) The existence of CoPs, however, is certainly not limited to individual big organisations. The emergence of virtual, Internet-based CoPs clearly shows that CoPs can overcome geographic boundaries, even though there are some differences compared to CoPs that meet exclusively face-to-face (Wolf/Sturm 2004). A rising interest can also be observed in projects dedicated to the enhancement of learning capabilities across organisations and even across regions (e.g. within clusters (Porter 1998)) and research into the role of informal networks, such as CoPs, play for knowledge absorption and diffusion. Heidenreich (2000) contends that the economic performance of regions will depend less on the availability of local resources, the reduction of transactions costs, etc. The decisive factor will be the ability to lower the barriers for communication and cooperation as much as possible, and thereby to initiate learning and innovation activities. This perspective is particularly interesting for fostering the SMEs’ skills development. SMEs usually dispose of limited resources and tend to neglect staff training that does not have an immediate added value. Since geographical proximity leads to increased competitive pressure, but also to more possibilities for collaboration and knowledge exchange to cope with this pressure (O’Callaghan/Andreu, 2006), CoPs could be one particular way to strengthen knowledge absorption among SMEs and to help them overcome their shortcomings.
2.2
Hurdles to overcome for setting up collaborative networks
Much in-depth research has been conducted for identifying and classifying various types of networks, yet the research on the sustainable management of collaborative networks is still in its infancy. As network management is a wide research field, various guidelines have been developed for specific network management issues, such as •
specific industries (e.g. the automotive industry (Killich 2000)),
•
specific types of networks (e.g. regional clusters (O’Callaghan/Andreu, 2006)),
•
the network moderation and coaching process, etc. (Wetzel/Aderhold/Baitsch (2001)).
Still there are some fundamental problems that have to be taken into consideration before initiating SME collaboration. Harding and Pawar (2001), for instance, point out that fear is a
strong inhibiting factor for know-how sharing in SME networks. The individual might fear losing an expert status in the company, the organisation as a whole might fear the disclosure of competitive knowledge. With regard to networking activities of innovative enterprises, the same question arises: to what extent are companies willing to start innovation projects with entirely new partners? Meeus and Oerlemans (2003) presume that many will refrain from doing so, because of the associated increase in risk. Further doubt on the a priori positive image of networking can be found in the analysis of CIS-2 UK data, a survey dedicated to innovation activities within the European Economic Area. Tether (2002, p. 966) comes to the conclusion that co-operative arrangements are far from the norm: “from a subjective (i.e. firm-based) perspective, co-operative arrangements for innovation are far from the norm, and most firms still develop their (essentially imitative) new products, processes and services without (formal) cooperative arrangements with other firms or other organisations.” The same failure rate can be observed in virtual “e-CoPs” (Huysman 2003). An important explanation for project failure might be the naïve managerial and IT-biased assumptions about the motivations of participants to share their knowledge. Finally, and equally important, only few researchers have tried to compare SME networks in different countries. Welter, Kautonen et al. (2003), for instance, have investigated the role of trust as a key to SME cooperation in various regional clusters in Great Britain, Italy, Germany, Estonia and Russia. Their survey data clearly indicates that considerable differences in collaboration practices can be found not only across countries, but also within regions and in sectors.
3
Research Approach
Due to the large variety of factors and potential issues that had to be taken into account for a successful CoP design and set-up, the first pre-requisite consisted of getting a thorough insight into today’s practices related to business development and collaboration. One of the key assumptions was that collaboration patterns are likely to differ between Russia and Western Europe, not only due to cultural differences, but also due to the relatively short time that the market economy exists in Eastern Europe. Thus, it was therefore necessary to investigate in a first step •
the Business Development and Collaboration practices in Western Europe and Russia, as well as
•
the influence of culture on the transferability of Western management concepts into Russian settings.
SME practices
1. State o. t. Art 2. Survey
v v
Problems & Barriers
3. Interviews 4. Gap Analysis
Good Practices Needs
v
Solutions Requirements Figure 1: Sequence of Steps leading to Requirements and Solution Ideas
The topics were identified through a thorough literature review and through a field study that included 53 interviews and 81 surveys with SME and Business Support Organisations (BSO) in St. Petersburg, Moscow and Ekaterinburg. A SWOT analysis was then used to visualise and contrast the strengths and weaknesses of Russian iSMEs compared to their European equivalents, as well the opportunities and threats within the companies’ economical and political environment.
4 4.1
Findings Business Development in Europe and Russia
Based on the SWOT analysis, the main gaps were identified. These gaps do not focus on the difference between Russian and European iSMEs but illustrate the needs in business development and collaboration of Russian SMEs, i.e. where do Russian iSMEs have their biggest deficits and where do they need support? Having identified the gaps, five different scenarios have been developed (1-2 for each region) as an input for the solution design process, which is still ongoing. BUSINESS DEVELOPMENT: SKILLS/COMPETENCIES Foreign Language Skills foreign language skills 5 4
Product Quality
3 2
Financial Management Skills
1 0
Management Skills (including knowledge on business management methods/ tools)
Awareness of Importance of Training Marketing Skills Russian Russian SMEs SMEs
1= very low/ bad
European European SMEs SMEs
5 = very high/ excellent
Figure 2: Example of Gap Analysis Results
This gap analysis revealed that • most of the Russian iSMES, despite their high innovation potential and solid scientific background, lack the necessary marketing competences to bring their innovations successfully to the national or even global market, a problem that is further aggravated due to missing English language skills (figure 2). • with regard to collaboration, Russian iSMEs are less developed in terms of supply chain management, customer relationship management (CRM) and quality management/certification. They do, however, master informal contacts better than their European counterparts. • collaboration and knowledge-sharing within firms is considerably less common in Russian organisations. They tend to neglect building organisational structures that encourage knowledge-sharing, especially between hierarchical levels, and do barely deploy reward mechanisms for knowledge-sharing. • the concept of communities, and especially communities of practice, is something entirely new to Russian iSMEs. An important part of the solution design will therefore have to concentrate on how to communicate and promote the general idea of a CoP. • Russian SMEs prefer the local community for choosing partners, but do not know how to organize collaboration between competitors.
All the discrepancies between Western Europe and Russia identified during the user needs assessment were taken into account for deciding about the features of the RUSMECO Solution. As the short excerpt above shows, some aspects of Russian and Western European business practice differ signifcantly. This will have a strong impact on the decision which trainings, articles, guidelines, etc. should be included in the final solution, and in which way these contents should be presented.
4.2
Collaboration Practices and Use of Technologies
Russian iSMEs mainly practice one form of collaboration: production cooperation. This classic form of cooperation has been known for many years and is based on formal contracts, long-term agreements. It requires complimentary skills and resources from different firms. Other forms of collaboration, for instance based on knowledge sharing, are far less found. Like in other transition economies, Russian entrepreneurs use personal relationships as safeguards against institutional and environmental uncertainties. The surveys and interviews done in the project revealed that in Russia personal, informal networks are essential for iSMEs: they form the main basis for collaboration and new business development. However, we also observed that formal contracts are a prerequisite to collaboration for many Russian iSMEs. Many iSMEs e.g. share the conviction that a patent is not sufficient to safeguard innovation. Therefore, it is a widespread practice to sign confidentiality and non-disclosure agreements. Apart from the traditional collaboration means such as face-to-face meetings and phone calls, all of our respondents from iSMEs (n=160) use e-mail to collaborate. 87% of them use the Internet daily. More than 50% of the interviewed iSMEs use an electronic document management system. However, the available bandwidth is usually quite limited, which reduces the possibilities for synchronous online collaboration, for instance via audio or video-conferencing.
4.3
The Influence of Culture on the Transferability of Management Concepts
While it is easily possible to compare the “hard facts” of doing business in Russia and Western Europe, it was considered just as important to explore the underlying cultural “soft facts” that eventually led to these discrepancies. Various authors have developed approaches to illustrate the similarities and differences of national cultures, such as Hall, Hofstede and Trompenaars (Kutschker and Schmid 2002, Hofstede 1997, Trompenaars 1993), who have elaborated different "cultural dimensions" for differentiating one culture from another. One example1 for such a cultural dimension is "uncertainty avoidance", which manifests itself in clear and precise decisions and strongly formalised processes and structures. In Russian companies, the level of uncertainty avoidance is very high (Frey and Denison 2003), as the communist era fostered the fear of misinterpretation and the tendency to hoard knowledge. Showing initiative during the communist regime was a discouraging venture (Puffer 1994), passiveness was and still is considered as a valid strategy for avoiding mistakes (Michailova/Husted 2003). One of the traditional Russian management instruments e.g. is the "ukaz", a top level decision that is not open for discussion (Hospitx Consulting 2003). Without such a decision, processes may break up, which has a serious impact on the employees' way of work. Further factors that differentiate Western European iSMEs from Russian ones include the fact that Western European iSME managers make a much stronger distinction between personal and professional life than their Russian colleagues. And while Western managers plan their work on a long-term basis with regular revisions and updates, Russian managers prefer a short-term planning with small and safe steps (Michailova 2000).
1
Others e.g. include time orientation, information speed, status ascription versus status attainment, power distance and individualism/collectivism (Kutschker and Schmid 2002, Hofstede 1997, Trompenaars 1993).
Taking into account the insights from cross-cultural research, a simple transfer of European CoP management practices into Russian settings will most likely not suffice to make the CoP work, it may even be counter-productive. Clearly, some characteristics of the Russian business culture are not in favour of a successful implementation of the CoP concept. The sharing of (personal) information with a wider audience, for instance, is a key mechanism within a CoP. On the other hand, the weaker distinction between personal and professional life, may result in a stronger readiness to invest time in activities beyond the regular work.
4.4
High Level Solution Design & Proposed Solutions
The RUSMECO CoP solution will consist of social and technical aspects that the project will need to put in place for enabling an effective CoP. More concrete, the CoP solution will consist of: •
Guidelines about the process of forming and maintaining successful CoPs
•
Insight in the dynamics of CoPs: enablers and barriers, and how to influence them
•
A technical infrastructure (platform) to support the CoP
•
Basic (pre-loaded) content (incl. learning material) for the platform
• Trained people, who understand what it takes to engage other people in a CoP Based on the outcomes of the previous project activities (survey, interviews, literature review and subsequent gap analysis), we have drafted a series of examples of envisioned solution use and key characteristics of the envisioned CoP. Combining this with knowledge regarding key social and technical enablers and barriers of successful CoPs we have started a participatory design process, involving three Russian SME networks, as well as experts on CoP facilitation and solution designers. Although we are currently still working on the detailed design and implementation of the solution, some key characteristics have already emerged: •
There will be a web-based environment, that is easily accessible for all interested organisations, where SME members can share information and good practices, find business partners, do assessment tests and train skills in an integrated learning environment (figure 3).
•
As high-bandwidth connections are not as widespread in Russia as in Western Europe, the platform will be based on an existing open-source solution that does not require a high-bandwidth connection and can be accessed via any web browser.
•
The platform will be preloaded with content and learning material aimed specifically at iSMEs. This content is needed to provide "quick wins" for people making use of the solution. As a result of the Gap Analysis, training modules are likely to address the training of marketing/management and English skills.
•
As trust plays such an important role, it will be crucial to offer a certain level of security for establishing collaborations. The platform will therefore provide secure workspaces where (potential) business partners can collaborate.
•
Given the importance of face-to-face contact in the Russian culture, the solution will also provide features to organize seminars, workshops and other face-to-face events.
Figure 3: Extract of High Level Design of Platform Functions
Together with the technical developments, RUSMECO will develop facilitator training material and train a group of Russian facilitators from the different target regions to be effective CoP leaders, provide energy to the CoP and engage people in collaboration and knowledge sharing.
5
Conclusion
By comparing Communities of Practice in Western Europe and Russia, we have contributed to research in several areas of interest, such as network management, regional development, training and education and cross-cultural management. The main findings from the work can be summarised as follows: •
There are significant differences between the ways European iSMEs organise their Business Development activities compared to those of Russian iSMEs, due to cultural differences, but also due to the transitory state of the Russian market economy.
•
One of the biggest hurdles for Russian iSMEs is their limited marketing knowledge in conjunction with missing language skills, whereas their innovation potential remains high.
•
The concept of CoPs and its advantages are virtually unknown to Russian iSMEs. Collaboration happens mostly on production level, little knowledge-sharing can be observed within organisations and across organisational boundaries.
•
A solution design process has been initiated under the supervision of the three regional networks involved in RUSMECO. The solution is not limited to the technical infrastructure only, it also describes the process of building and maintaining CoPs as well as the pre-loaded contents. The implications for RUSMECO’s next project phases are manifold. Above all, it seems necessary to go through several iterations to deal with the large amount of requirements. Apart from the technical issues related to set up the platform, a considerable amount of work will have to be invested in a simultaneous awareness-building process among iSMEs.
Acknowledgement This work has been partly funded by the European Commission through IST Project RUSMECO: Enhancing Russian SME collaboration and business development through Communities of Practice (No. IST-1999-29107). The authors wish to acknowledge the Commission for their support. We also wish to acknowledge our gratitude and appreciation to all the RUSMECO project partners for their contribution during the development of the ideas and concepts presented in this paper. This specifically applies to Irina Alexeeva and Alexandr Prilepin (RCSME), Victor Tisenko (SPbSPU), Yuri Plotinski (MSU), Lilia Efimova and Freek Ebeling (TELIN), whose contributions are strongly reflected in this paper. References Frey, C.; Denison, D. (2003). “Organisational Culture and Effectiveness: Can American Theory Be Applied in Russia?”. Organisational Science, vol. 14, no. 6, pp. 686-706. Gongla, P.; Rizzuto, C.R. (2001), Evolving communities of practice: IBM Global Services experience. IBM Systems Journal, 40(4), pp. 831-841. Harding, S.; Pawar, K. (2001), "Know-how Share and Transfer in SME Networks: A Contingent Approach", in the proceedings of the International Conference on Concurrent Enterprising (ICE2001), Bremen, Germany. Heidenreich, M. (2000), „Regionale Netzwerke in der globalen Wissensgesellschaft“. in: Johannes Weyer et al.: Soziale Netzwerke. Konzepte und Methoden der sozialwissenschaftlichen Netzwerkforschung. München/Wien: Oldenbourg, pp. 87-110. Hofstede, G. (1997). Lokales Denken, globales Handeln. Kulturen, Zusammenarbeit und Management. Munich: dtv. Hospitex Consulting (2003), How to use knowledge of cultural differences. http://www.consulting.hospitex.ru/ (www document, accessed 04/11/03, in Russian). Huysman, M. (2003), Knowledge sharing in e-Communities of Practices. Amsterdam (unpublished). Killich, Stephan (2000), Aufbau erfolgreicher Unternhemenskooperationen – Ein Leitfaden für mittelständische Automobilzulieferer, available online: http://www.kompetenzzentrumnetzwerkmanagement.de/pdf/Leitfaden.pdf (last visit 22 Feb 2006). Kutschker, M. and Schmid, S. (2002). Internationales Management. München: Oldenbourg Verlag. Meeus, M. and Oerlemans, L. (2000) Firm behaviour and innovative performance. An empirical exploration of the selection-adaptation debate, Research Policy, Vol. 29, pp. 41-59. Michailova, S. (2000). “Contrast in culture: Russian and Western perspectives on Organisational change.” cademy of Management Executive, vol. 14, no. 4, pp. 99-112. Michailova, S. and Husted, K. (2003). “Knowledge-Sharing Hostility in Russian Firms.” California Management Review, vol. 45, no. 3, pp. 59-77. O'Callaghan, R., & Andreu, R. (2006). Knowledge dynamics in regional economies: A research framework. In Proceedings of the 39th HICSS (pp. 1-10). Washington: IEEE Computer Press Porter, M.E. (1998), “Clusters and Competition: New Agendas for Companies, Governments, and Institutions”, in: On Competition, M.E. Porter, Boston, 1998, pp. 197 - 287. Puffer, S. (1994). “Understanding the bear: a portrait of Russian business leaders”, Academy of Management Executive, vol. 8, no. 1, pp. 41-54. Snyder, W.; Wenger, E. (1999), Communities of Practice. Lessons learned from Auburn Hills. DaimlerChrysler Corporate University, Stuttgart Sturm, F.; Wolf, P.(2004): The Co-Existence of Communities of Practice and Virtual Organisations, in: eAdoption and the Knowledge Economy: Issues, Applications, Case Studies, Part 2, Amsterdam, Netherlands 2004, pp. 1169-1174 Tether, B.S. (2002). “Who co-operates for innovation, and why an empirical analysis”. Research Policy, vol. 31, pp. 947–967. Trompenaars, F. & Hampden-Turner, C. (1993), Riding the Waves of Culture: Understanding Cultural Diversity in Business. London: Nicholas Brealey. Welter, F., T. Kautonen, A. Chepurenko, E. Malieva and U. Venesaar (2003), Does Trust Matter? - A Cross Cultural View of Entrepreneurship in Different Trust Milieus. Paper to the 23rd Babson College - Kauffman Foundation Entrepreneurship Research Conference, Babson Park, USA, June 5-7 2003. Wetzel, Ralf; Aderhold, Jens; Baitsch, Christof (2001), Netzwerksteuerung zwischen Management und Moderation: Zur Bedeutung und Handhabung von Moderationskonzepten bei der Steuerung von Unternehmensnetzwerken. in: Gruppendynamik und Organisationsberatung, vol. 32, no. 1, 2001, pp. 21-36.
