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In 1995, two Japanese professors, Ikujiro Nonaka and Hirotaka Takeuchi, from Hitotsubashi University published a foundation for the management of knowledge in their book The Knowledge-Creating Company. [1] The authors compare the knowledge management practices of Eastern and Western organizations and find that Eastern organizations are more efficient creators of knowledge. The eastern model allows organizations to use different combinations of tacit and explicit knowledge to create knowledge at every level.
It was Peter Drucker who first coined the term ‘knowledge worker’ to reflect the fact that knowledge and intellectual capital play a major part in driving modern economies. In The Knowledge-Creating Company, Nonaka and Takeuchi take Drucker’s thinking further by creating a model in which knowledge is a resource that should be managed, invested and created in the same way as other forms of capital like property and money. The model is based on exhaustive examinations of leading Eastern organizations’ knowledge management practices in the early 1990s.
The authors identify two separate types of knowledge:
- explicit knowledge: knowledge that can be precisely explained and understood independently of its originator. A good example is an instruction booklet for operating a piece of electrical equipment
- tacit knowledge: knowledge that is understood by its holder but cannot be explained or codified. Often, it is based on insight, intuition and experience. A good example is the ability to deal with the needs and personality of a specific client
Nonaka and Takeuchi found that Eastern organizations have become adept at using different combinations of these types of knowledge to create new knowledge, using a process known as knowledge conversion. For example, existing tacit knowledge can be used to create new tacit knowledge. This process, known as socialization, is one of four modes of conversion.
The following matrix shows all four modes of knowledge conversion and the types of knowledge involved in each process:
The Knowledge-Creating Company: How Japanese Companies Create the Dynamics of Innovation by Ikujiro Nonaka and Hirotaka Takeuchi, ©1995 by Oxford University Press, Inc. Used by permission of Oxford University Press, Inc. Multiple copying not permitted.
- Socialization: the sharing of information with others. This can occur through informal conversation or through formal meetings. Through this process, tacit knowledge is converted into more tacit knowledge
- Internalization: the process of converting explicit knowledge into tacit knowledge. Using this mode of conversion, individuals use existing explicit knowledge sources, such as process guides, as a foundation for creating and implementing their own ideas
- Externalization: the process of creating explicit knowledge using existing tacit knowledge. Nonaka and Takeuchi view this mode as the most important mode of conversion, and the biggest challenge for the modern organization. A good example might be the creation of an innovative design or process
- Combination: the process of combining different bodies of explicit knowledge to create new explicit knowledge. An example might be formal education or a training program
Nonaka and Takeuchi reason that these four modes of conversion form the foundation for developing an effective knowledge management strategy. The first challenge for the organization is therefore to provide an environment in which all four can occur. The next challenge is to devise a strategy to manage the interaction between the four modes to allow efficient creation of tacit and explicit knowledge.
A good example of socialization in industry is the breakfasts that Xerox arrange for maintenance engineers. The breakfasts provide the engineers with the opportunity to share their own maintenance theories and ideas with other engineers. Since many of the machine malfunctions that the engineers encounter are not documented in manuals or easily codified, the breakfasts provide a rare opportunity to exchange and develop new ideas.
The following matrix shows the four types of knowledge created through knowledge conversion:
The Knowledge-Creating Company: How Japanese Companies Create the Dynamics of Innovation by Ikujiro Nonaka and Hirotaka Takeuchi, ©1995 by Oxford University Press, Inc. Used by permission of Oxford University Press, Inc. Multiple copying not permitted.
Since existing tacit and explicit knowledge are used to create new knowledge, if all four modes of conversion are allowed to exist in an organization, the process of knowledge creation becomes a continuous process. Nonaka and Takeuchi describe this process using a ‘knowledge spiral’.
A single cycle of the spiral can be described in the following way. Starting at externalization, tacit knowledge is used to create new explicit knowledge, which is then used to create new explicit knowledge through the process of combination. This explicit knowledge is then used, through internalization, to create new tacit knowledge. In the final stage of the cycle, tacit knowledge is created through the process of socialization. In theory, the knowledge spiral is a continuous combination of cycles and therefore looks like this:
The Knowledge-Creating Company: How Japanese Companies Create the Dynamics of Innovation by Ikujiro Nonaka and Hirotaka Takeuchi, ©1995 by Oxford University Press, Inc. Used by permission of Oxford University Press, Inc. Multiple copying not permitted.
So far, the knowledge and ideas created in the model have been created at the indivdual level. However, Nonaka and Takeuchi developed the model with the entire organization in mind. This involved adding a third dimension to the spiral to show the creation of tacit and explicit knowledge at different levels of the organization, from individual up to the inter-organizational level.
This knowledge spiral can therefore be shown on the diagram:
The Knowledge-Creating Company: How Japanese Companies Create the Dynamics of Innovation by Ikujiro Nonaka and Hirotaka Takeuchi, ©1995 by Oxford University Press, Inc. Used by permission of Oxford University Press, Inc. Multiple copying not permitted.
Nonaka and Takeuchi state that these knowledge management techniques, which culminate in the knowledge spiral, offer an explanation for the competitive advantage that Eastern organizations forged over Western organizations during the 1980s and early 1990s. Whereas Western organizations did not start addressing the issue until relatively recently, Eastern organizations had been taking a systematic approach to knowledge management for years and many had managed to develop environments that promoted the efficient creation of ideas and knowledge.
Although it could be argued that since the early 1990s Western organizations have become equally adept at managing knowledge, it is worth noting that many of the techniques that Western organizations have adopted derive from insights into Eastern practices.
The Nonaka and Takeuchi model of knowledge creation remains influential in its field. It was one of the first models to provide insight into the differences in approaches to knowledge management between Eastern and Western organizations. It is still one of the most successful models to offer an overarching definition of knowledge. And, perhaps most importantly, it provides one of the most enduring attempts to conceptualize the complex practice of knowledge management.
References[1]Nonaka, I., and Takeuchi, H. (1995).
The Knowledge-Creating Company. Oxford University Press. Available
here.
