Essay based on Ikujiro Nonaka and Hirotaka Takeuchi (1995) The Knowledge-Creating Company.

How Japanese Companies Create the Dynamics of Innovation Oxford University Press, New York

Summary of the knowledge-creating company

ThisisasummaryofthebookTheKnowledgeCreatingCompanybyNonaka andTakeuchi(1995),includingfewmyownreflectionsonthevolume. PartI:Summary KnowledgeCreatingCompanyisabookworthyofitsname.Thedefinition, utilizationandproductionofknowledgearethethemesofthishardback. Thebookincludesanoveltheoryfromtwoauthorssupportedbytheir casestudiesfromJapaneseindustryandanextensivephilosophical introductionintoWesternandEasternepistemology.Thephilosophyand theexamplesmainlyservetojustifyandillustratethemaincontributionof thebook,whichisanoutlineofknowledgecreation,useandformsof knowledge.Iwillstartbyreviewingtheformsofknowledge,dismissing theepistemologicalconcernsandthepartsoncorporatestrategy. Knowledge Thebookreliesonthetaxonomyofexplicitandimplicitknowledge adoptedfromMichaelPolanyi.Polanyihadahistoryinchemistry,but lateronshiftedhisintereststothephilosophyofscienceandpublished booksontacitknowing(Polanyi,1958,1967).AsdescribedinWikipedia (http://en.wikipedia.org/wiki/Michael_Polanyireferenced14.11.2009), Polanyisinterestinepistemologyshowsinappreciationofroleplayed byinheritedpracticesforknowledge,andalsopassingknowledgevia apprenticeship,throughobservationandguidanceofamaster.Thistype

Nonaka & Takeuchi Knowledge-Creating Company commentary by Lassi A. Liikkanen, 2010

ofknowledgewascalledimplicit.Implicitknowledgecouldbefurther dividedintotechnicalimplicitknowledge,correspondingtoknowhow, andcognitiveimplicitknowledge.Thelatterpresentsthewealthofbeliefs, presumptionsandexperiencesthataresharedtypicallywithinacultural group(nation,company,family,etc.)andarenotcommonlyarticulatedas theyareassumedtobefamiliartoall(allwordprocessorusersknowwhat thissymbolstandsfor).Thesetypesofimplicitknowledgeare functionallydistinctfromexplicitknowledge. Explicitknowledgereferstobooks,manuals,printedproceduresand guidesthatexpressinformationclearlythroughlanguage,images,sounds,or othermeansofcommunication.Explicitknowledgealsoreferstothetype ofinformationorknowledgethatwesternmanagementstylehas traditionallybeeninvolvedwith.Forinstance,NonakaandTakeuchi mentionTaylorismandrationalmanagementtheoryofHerbertSimon (1945,March&Simon,1958)asexamplesofhowexplicitknowledgeand procedurescanbeusedtogovernanorganization. Knowledgeprocesses Thisbasicdistinctionofknowledgetypesleadstoseveralimplications. First,theexplicitimplicitcontrastisanessentialbasisforknowledge creationinacompany.Theauthorsarguethattheconversionofimplicit knowledgetoexplicitismostcrucialorganizationaland interorganizationalmethodofknowledgecreation.Earlyon,Nonakaand Takeuchialsomentionthatideationduringnewproductdevelopment (NPDhenceforth)andredundancy(competingeffortsandcompetences) withinNPDorganizationarethesourcesofimplicitknowledge.Thusthe challengeoftheknowledgecreatingcompanyisensuretheconversionof implicittoexplicitknowledge.Regardingideation,therolesof metaphorical,oranalogous,thinkingandambiguityoropennessofdesign

Nonaka & Takeuchi Knowledge-Creating Company commentary by Lassi A. Liikkanen, 2010

briefingforNPDareemphasizedaskeyfactorsofsuccessinJapanese knowledgecreatingcompanies. Thenextphaseintheexplicitimplicitconversionconcernstheprocesses ofhowknowledgecanbetransformed.Fourmodesareconsidered: socialization,externalization,combinationandinternalization.Before weenterthisspiralthatconnectsthesemodes,weassumethataperson hasacquiredimplicitknowledge(proceduralorunderstanding)through hereffortsinresearchanddevelopment(R&D)forNPD.Itisstatedthat organizationalknowledgecreationislikeaderivativeofnewproduct development.Orinotherwords,knowledgeiscreatedintheinteractions ofthefrontlineemployees.Knowledgeisdefinedasameaningful,action orientedcommitment,whichextendsthetraditionaljustifiedtruebelief notionprevalentinWesternthinking.
Implicit Knowledge production (R&D) Socialization Internalization Externalization Explicit Knowledge use and recycling (journalists & analysts)

Combination

Thespiralprocessstartsatsocializationwhereknowledgecanbeshared withanotherpersonthroughdialogue,observation,imitationorguidance. Accordingtotheauthors,socializationactivitiesforacompanycouldalso involveresearchorconsultationofusers,andtheylisttamadashikai (Hondabrainstormingbootcamps)asoneformofsocialization.This meansthatinadditionlearningortransferofknowledge,socialization boostscreationofknowledgethroughcombinedperspectives. Explicitknowledgeappearsaftersocializationintheexternalizationphase. Atthisstage,thepossiblyvaguemetaphoricaldialogueornonconceptual

Nonaka & Takeuchi Knowledge-Creating Company commentary by Lassi A. Liikkanen, 2010

observationsareturnedintoexplicitknowledgethatbecomesexternalto thesubject.Forinstance,inacomputerdatabase,servicemanualorvisual assemblyguide.Afterexplicitknowledgehasbeencreated,itcanbe refinedfurther.Combinationisaprocessofsystemizingconceptsintoa knowledgesystem.Thismodeinvolvescombiningdifferentbodiesofexplicit knowledge.(p.67)NonakaandTakeuchistressthatdifferentcomputer systemscanplayanimportantroleinthisprocess.Myfeelingaboutthis poorlyarticulatedstageisthatishasbeenaddedforthesakeofunifying thewholeandistoopoorlydefinedandoperationalized,lackingaclear functionincontrasttotheotherphases. Thefinalmodeofknowledgeprocessingisinternalization.Itisthe counterpartofsocializationandreferstothesuccessfultransferof knowledgetoapersonfromabookordatabasetoanotherperson.Once thepersongainstheabilitytoutilizenovelknowledge,thisknowledge becomessuccessfullyinternalized.Asexample,theauthorsmentionGE newNPDstaffreexperiencingcustomerdifficultiesfromhelpcenter transcriptsorprototyping1,800hoursworktimegoalatMatsushitafor onemonth.Thisemphasizesthatinternalizationgoesbeyondfacts,into sharingfeelings,experiencesandknowhowandcouldthiswaybeeasily connectedtonumerousdesignapproachespresentlypopularin interactionandproductdesignthinking. Theauthorsexplainthatthesefourmodesofknowledgecreation penetratethroughtheidealorganization.Eventhoughtheknowledgeis createdattheindividuallevel,itshouldbepassedontootherlevelsof organization(externalization)inordertobeexploitedwidely (internalizationandcombination).Thisprocessisdepictedasaspiral modelofknowledgecreatingorganizationshownonthefollowingfigure:

Nonaka & Takeuchi Knowledge-Creating Company commentary by Lassi A. Liikkanen, 2010

 Theorganizationneedstosupportthespiralprocess.Thewriters introducefiveorganizationalenablersofknowledgecreation.Theseare 1. 2. 3. Intentionandcommitmentintheorganization Autonomyatalllevels(crossfunctionality,selforganization)) Fluctuationandcreativechaos(breakdownofpatternsand standards,reflectioninaction,cf.Schn[1983]) 4. Redundancy(internaloverlapsandcompetition) 5. Requisitevariety(alongAshby,1956;meetingexternal complexitywithinternaldiversity,staffheterogeneity)

Inthisdescriptionoftheorganizationalsupport,NonakaandTakeuchi comeclosertorealizingtheirmodelinactualorganizations.Thefive enablersmainlydescribehowthecompanyR&Dshouldbeorganizedto ensuresuccessinknowledgecreation.Theyfurthergodescribeafivestep model,whichissomewhataderivatefromtherugbyteammetaphor(all playersconstantlymovingandlookingwaystoturnthegamefortheir teamsadvantage)usedtodescribesuccessfulJapaneseindustryunits.

Nonaka & Takeuchi Knowledge-Creating Company commentary by Lassi A. Liikkanen, 2010

Organizingforknowledgecreation ThefirstpartinR&D(hereequivalentoforganizationalknowledge creation)isutilizingtacitknowledgethroughsocializationand internalization.Throughtheseknowledgeventures,new(product) conceptscanbecreated.Conceptsneedtobejustified(theanalogyfrom authorsreferencesthetraditionalepistemologicalclaimofjustifiedtrue belief,butremainsabithollow)tobeaccepted.Afterthisarchetypescanbe built.Theprocessconcludesincrosslevelknowledgetransfer,whichshould involvethewholeorganization.Althoughauthorsareexplicitlyproposing thisprocess,theydolateroninthebookbringupthatthiscannotbea cascadingrelaymodel,butaparallel,rugbystyleprocess. NonakaandTakeuchiarealsoproposinganewkindoforganizational model,onethatfocusesonknowledgeastheresourceforacompanys innovativesuccess.Toimplementtheirvision,theycriticallyevaluatethe existingmanagementmodels.Thebureaucratictopdownmodels(e.g. Taylor,Weber,Simon)areputanexttobottomupmodels(e.g.3M)anda new,considerablydifferentmiddlegroundmodelisrequested.The bottomuporganizationsreceiveinmymindstrangeaccusationsstating thatthefrontlinehastoonarrowfocusandcannotgeneralizethe knowledgetheyproduceforthebenefitofthecompany.Sotheauthors suggestremovingthepressurefrombothtopmanagementandfrontline employeestomiddlemanagerswhoarecommonlydisapprovedbythe westernmanagementthinkersquotedbyNonakaandTakeuchi.Itissaid thatmiddlemanagersprovideaconceptualframeworktoputthingsintoa perspective,providingthemaheroicroleinthemiddleupdown structuredepictedbythebook. Theintroductionofthenewmodelisfollowedbyadiscussiononthe benefitsofbureaucraticandtaskforceorganizationstyles.Through

Nonaka & Takeuchi Knowledge-Creating Company commentary by Lassi A. Liikkanen, 2010

examplesfromUSandJapanesearmy,theauthorsarguethatbureaucracy mayworkinstable,predictableenvironmentutilizingitsstandardand formaloperatingprinciples,butataskforcestructureusedforephemeral, crossfunctionaltermsmaybebetterfordynamicenvironments.However, theyseethatagoodorganizationshouldcombinecharacteristicsofboth, inaformatcalledhypertextorganization.Thismodelismetaphorofthe hypertextusedincomputers,referringtoconvenientandeasyswapping betweendifferentperspectives.Itisillustratedinthefollowingfigure:

People move

Business structure

Knowledge is disseminated

Project structure

Knowledge base

Knowledge is produced

Themainideaofthehypertextorganizationisthenonambiguous positioningofknowledgepractitionersbetweenbusinessteamsand projectteams(bothlabeledstructuresinthefigure),incontrasttoexisting matrix,taskforceorcrossfunctionalorganizationmodels.Thusproject teamsshouldbefreeandautonomousastheyplease.Theknowledge productionhappensmostlywithinprojectteams. BooksexampleofanidealprojectteamisSharp,whichhadURGENT projectteams.Theseteamswereseparatedformprojectteamsandregular structureswithprivilegedgoldenpatches.Withthepatch,theyreceive unlimitedresourcesandsolelydedicatedtotheURGENTproject.The knowledgebaseinNonakaandTakeuchithinkingcorrespondstoboth implicitandexplicitcompanyknowledge,formerinphilosophyand

Nonaka & Takeuchi Knowledge-Creating Company commentary by Lassi A. Liikkanen, 2010

vision,latterinlectures,newsletteranddatabases,forexample.Case studyofKaoCorporationshowedhowtheyhadstackedknowledgebase intofivescientificcategoriesconsideredcoreelementsoftheirproduct R&D. Globalknowledgecreation Finalpartofthebookconcernsknowledgecreationinglobal, multiculturalorganizations.Usingtwocaseexamples,Nissanautomobile andShinCaterpillarMitsubishi,theyillustrateboththedifferences betweenJapaneseandUSandculturalenvironmentsofEuropevs.Japan trafficenvironments.Themessageisthatcrossculturalsocializationis necessarytoovercometheobstaclescreatedbytheconsiderable differencesin(tacit)knowledgeandvalues.Thissocializationcanhappen throughexperiencingforeigncultureandsocializingwithforeigners.The caseofNissantryingtocreatethefirstEuropeanstylesuccess(Primera) showstwooutcomesofthissocialization:understandingthemarket (whatsells,attractsinEurope)andbridgingtheknowledgegap (exportingexpertise,ortacitknowledge,toenableproduction). Inoverall,itbecomesobviousthattheJapanesehavemoretrustintacit knowledge,acquiredthroughbeingthere,whereasAmericanemployees wantthingsspelledoutandjustifiedinanexplicitform.Thisshowsin howJapanesetrustauthoritiesalmostblindly,possiblybecauseofshared tacitknowledgeissupposedtocoverupforthelackofexplicit justificationindecisionmaking.IwouldthusdepictJapanesepractitioners orknowledgeproducersasdistilledsupermenengineerswithsecretpowers whereasWesternersareindividualmenwithmanuals.Therealityisnotso blackandwhitebutthebookdoesentertainthiskindofhypothesis.

Nonaka & Takeuchi Knowledge-Creating Company commentary by Lassi A. Liikkanen, 2010

Thebookconcludesbyputtingtogetherthemainargumentsembeddedin pairedconcepts.Theyarelistedhere,extremesseparatedbyaslashand theauthorsmiddleconceptinparenthesesifsuchwaspresented: Tacit/explicit Body/mind Individual/organization Topdown/bottomup Bureaucracy/taskforce Relay/rugby Eastern/western [middletopdown] [hypertext] [Americanfootball] [crosssocialization] [spiralofconversion] [oneness]

Thisconcludesthesummaryandthoseinterestedinlearningmoreabout theintriguingcasestudiesarerecommendedtorefertotheoriginal. PartII:DiscussionandConclusions Thedescriptionofknowledgecreationanddiscussiononitsimportance providedbyNonakaandTakeuchiisveryenticing.However,Idonot findallpartstheirtheoryascompellingasothers.Tometheirgreatest contributionisinelaboratedanalysisofhowtypesofknowledgecometo being,interactandwhattheysignify. Ifeelthatthetypesofimplicitknowledgeshouldaddathirddimension whichmayalsobeimportantforknowledgecreating,innovative organizations.Asstressedbytheauthors,requisitevarietymaynotonly refertotheknowledgebasespossessedbytheorganizationmembers,but totheirpersonalcharacteristics,values,insightsandfeelingswhichmay influencetheirproductionanddecisionmaking,performancewithina companyaliketechnicalandcognitiveimplicitknowledge.Important notionisthatthesequalitiesarenotkindofknowledgethatcouldbe easily(ifatall)internalized;i.e.everythingsnotknowledge.Ontheother

Nonaka & Takeuchi Knowledge-Creating Company commentary by Lassi A. Liikkanen, 2010

hand,whathasbecometobeknownasexperientialknowledgeiswidely appreciatedbytheauthors.Thiscouldbethoughtofasapredecessorof experienceprototyping,designmethodologylaterondefinedby innovativeUSdesigncompanies(Buchenau&Suri,2000). Theperspectivetakenbytheauthors,namelyhowJapanesecompanies succeedininnovationgamethroughknowledgemanagementisalsotheir weakspot.Whiletheydogotogreatdetailinrevealingthefallaciesand culturalbiasesinUSandEuropeanR&Dmindset,theyremainblindtothe inherentproblemsintheirbelovedJapaneseR&Dculture.Ofcourse,the roleofdevilsadvocatehereisaneasyone,butmoreselfcriticismwould havestrengthenedthebook. Readingthebookabout15yearsafteritspublicationandalmostthree decadespastfrom1982whentheideasfirstsparked,theR&Dworldhas somewhatchanged.TheincludedJapanesegiants,Honda,Nissan, Matsushita,Sharpandsoforthhavenotperished,buttheyhavenot gainedanyparticularedgesincethen.Forinstance,wouldtherebeany proofthatthehypertextorganizationpromotedinthebookatSharpreally achievedsomethingremarkable? Oneimportantchangeinthetimesincethenisthatthedifferentformsof usercenteredproductdevelopmentanduserinnovationmethodshave madeabreakthrough.NonakaandTakeuchidoalreadydiscuss prototypesascommunicationmediumbetweenR&Dorganizationand outsider(toplevelmanagement,customers,soforth),buttheirviewof R&Dremainsscienceortechnologydriven.Thisiscontrastedtothetime marketdrivenUSdevelopmentstyle.Thetechnologydriveisvery evidentthroughthebook.Eventhoughsomehintsofhumanfactors revealthemselveseveryhereandthere,theygenerallyseemtoholdthe

Nonaka & Takeuchi Knowledge-Creating Company commentary by Lassi A. Liikkanen, 2010

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assumptionthatboss(orthesupermanengineer)knowswhatsbestfor theconsumer. IbelievethatthisglobalfallacyisaugmentedinJapaneseenvironment wheretheauthoritarianruleincompaniesisstillstrong.Forinstance,the caseexampleofdevelopinganElectronicorganizeratSharpcouldbe interpretedasaprimeexampleofthis(p.190192).Oneyears developmenteffortswerediscardedbythetopmanagementwithout explicitfeedback.Laterontheteamresponsiblefortheconceptfoundout thattheprobablereasonforrejection(andwhatwouldhavebeen deleteriousinthemarket)wasthelackofKanjialphabet.Tome,this highlightsalackofinsightforuserdrivenR&Dinnovationandblind faithinauthority,possiblyemergingfromtheexpectationsofrationalizing thesituationbasedontacitbeliefs(youshouldknowthatthiscannot work).Fortheformeraccusation,IseethatNonakaandTakeuchiare somewhatmisguidedintheirdiscussionofcrossculturalsocialization. Theyarerightinacknowledgingthevitalityoftheissue,buttheir methodsofachievingcrossculturalinsightstayfullyexpertdriven. Tobelessharshonthebook,bytheendauthorsdobringupthevalueof customerinput.Creativecustomersadeptatexternalizingtheirtacitneeds (p.235)andactingasopinionleadersarehighlightedasanimportant, possiblyunderusedsourceofknowledge.However,themainfuelforthe knowledgecreatingcompanyisitsownknowledgebase(oftechnology andscience),whichdrivesthedesignercenteredR&Dtoprosper.

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References Ashby,W.R.(1956)AnIntroductiontocybernetics.Chapman&Hall Buchenau,M.,&Suri,J.F.(2000).Experienceprototyping.Paperpresentedat 3rdconferenceonDesigninginteractivesystems:processes,practices, methods,andtechniques,NewYorkCity,NewYork,UnitedStates. March,J.G.&Simon,H.(1958)Organizations.JohnWiley&Sons Polanyi,M.(1958)Personalknowledge:towardsapostcriticalphilosophy. UniversityofChicagoPress Polanyi,M.(1967)TheTacitdimension.UniversityofChicagopress Simon,H.(1945)Administrativebehavior.Macmillan Schn,D.A.(1983).Thereflectivepractitioner:howprofessionalsthinkin action.Aldershot:Arena.

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