## The Knowledge-Creating Company > [!Cite]- > > > [link](https://linkinghub.elsevier.com/retrieve/pii/B9780750670098500161) [online](http://zotero.org/users/17587716/items/34JYNHJ7) [local](zotero://select/library/items/34JYNHJ7) [pdf](file://C:\Users\erikt\Zotero\storage\Y2C7CHZF\Nonaka%20-%201998%20-%20The%20Knowledge-Creating%20Company.pdf) ## Notes %% begin notes %% Seminal 1998 Harvard Business Review article introducing the concept of "tacit" knowledge and its role in innovation within organizations. Discusses the four steps in knowledge management: socialization, articulation, combination, integration. Suggests organizations use metaphor, analogy and models to better inspire knowledge creation (i.e., innovation). %% end notes %% %% begin annotations %% ### Imported: 2025-08-05 4:12 pm In an economy where the only certainty is uncertainty, the one sure source of lasting competitive advantage is knowledge. successful companies are those that consistently create new knowledge, disseminate it widely throughout the organization, and quickly embody it in new technologies and products. These activities define the “knowledge-creating” company, whose sole business is continuous innovation. Deeply ingrained in the traditions of Western management, from Frederick Taylor to Herbert Simon, is a view of the organization as a machine for “information processing.” According to this view, the only useful knowledge is formal and systematic—hard (read: quantifiable) data, codified procedures, universal principles. And the key metrics for measuring the value of new knowledge are similarly hard and quantifiable—increased efficiency, lower costs, improved return on investment. But there is another way to think about knowledge and its role in business organizations. It is found most commonly at highly successful Japanese competitors like Honda, Canon, Matsushita, NEC, Sharp, and Kao. These companies have become famous for their ability to respond quickly to customers, create new markets, rapidly develop new products, and dominate emergent technologies. The secret of their success is their unique approach to managing the creation of new knowledge. Managers everywhere recognize the serendipitous quality of innovation. Executives at these Japanese companies are managing that serendipity to the benefit of the company, its employees, and its customers. The centerpiece of the Japanese approach is the recognition that creating new knowledge is not simply a matter of “processing” objective information. Rather, it depends on tapping the tacit and often highly subjective insights, intuitions, and hunches of individual employees and making those insights available for testing and use by the company as a whole. The key to this process is personal commitment, the employees’ sense of identity with the enterprise and its mission. The more holistic approach to knowledge at many Japanese companies is also founded on another fundamental insight. A company is not a machine but a living organism. Much like an individual, it can have a collective sense of identity and fundamental purpose. This is the organizational equivalent of selfknowledge—a shared understanding of what the company stands for, where it is going, what kind of world it wants to live in, and, most important, how to make that world a reality. To create new knowledge means quite literally to re-create the company and everyone in it in a nonstop process of personal and organizational self-renewal. n the knowledge-creating company, inventing new knowledge is not a specialized activity—the province of the R&D department or marketing or strategic planning. It is a way of behaving, indeed a way of being, in which everyone is a knowledge worker—that is to say, an entrepreneur. New knowledge always begins with the individual. Making personal knowledge available to others is the central activity of the knowledgecreating company. Explicit knowledge is formal and systematic. For this reason, it can be easily communicated and shared, in product specifications or a scientific formula or a computer program. Tacit knowledge is highly personal. It is hard to formalize and, therefore, difficult to communicate to others. Or, in the words of the philosopher Michael Polanyi,“We can know more than we can tell.” Tacit knowledge consists partly of technical skills—the kind of informal, hard-to-pin-down skills captured in the term “know-how.” A master craftsman after years of experience develops a wealth of expertise “at his fingertips.” But he is often unable to articulate the scientific or technical principles behind what he knows. At the same time, tacit knowledge has an important cognitive dimension. It consists of mental models, beliefs, and perspectives so ingrained that we take them for granted and therefore cannot easily articulate them. The distinction between tacit and explicit knowledge suggests four basic patterns for creating knowledge in any organization. From tacit to tacit. Sometimes, one individual shares tacit knowledge directly with another. But on its own, socialization is a rather limited form of knowledge creation. True, the apprentice learns the master’s skills. But neither the apprentice nor the master gains any systematic insight into their craft knowledge. Because their knowledge never becomes explicit, Creating new knowledge is as much about ideals as it is about ideas. it cannot easily be leveraged by the organization as a whole. From explicit to explicit. An individual can also combine discrete pieces of explicit knowledge into a new whole. But when tacit and explicit knowledge interact, as in the Matsushita example, something powerful happens. It is precisely this exchange between tacit and explicit knowledge that Japanese companies are especially good at developing. From tacit to explicit. When Ikuko Tanaka is able to articulate the foundations of her tacit knowledge of bread making, she converts it into explicit knowledge, thus allowing it to be shared with her project-development team. From explicit to tacit. as new explicit knowledge is shared throughout an organization, other employees begin to internalize it—that is, they use it to broaden, extend, and reframe their own tacit knowledge In the knowledge-creating company, all four of these patterns exist in dynamic interaction, a kind of spiral of knowledge. Think back to Matsushita’s Ikuko Tanaka: 1. First, she learns the tacit secrets of the Osaka International Hotel baker (socialization). 2. Next, she translates these secrets into explicit knowledge that she can communicate to her team members and others at Matsushita (articulation). 3. The team then standardizes this knowledge, putting it together into a manual or workbook and embodying it in a product (combination). 4. Finally, through the experience of creating a new product, Tanaka and her team members enrich their own tacit knowledge base (internalization). Articulation (converting tacit knowledge into explicit knowledge) and internalization (using that explicit knowledge to extend one’s own tacit knowledge base) are the critical steps in this spiral of knowledge. The reason is that both require the active involvement of the self—that is, personal commitment. Indeed, because tacit knowledge includes mental models and beliefs in addition to knowhow, moving from the tacit to the explicit is really a process of articulating one’s vision of the world—what it is and what it ought to be. When employees invent new knowledge, they are also reinventing themselves, the company, and even the world. Through metaphors, people put together what they know in new ways and begin to express what they know but cannot yet say. As such, metaphor is highly effective in fostering direct commitment to the creative process in the early stages of knowledge creation. The next step is analogy. Whereas metaphor is mostly driven by intuition and links images that at first glance seem remote from each other, analogy is a more structured process of reconciling contradictions and making distinctions. Finally, the last step in the knowledge-creation process is to create an actual model. A model is far more immediately conceivable than a metaphor or an analogy. In the model, contradictions get resolved and concepts become transferable through consistent and systematic logic. Still, the three terms capture the process by which organizations convert tacit knowledge into explicit knowledge: first, by linking contradictory things and ideas through metaphor; then, by resolving these contradictions through analogy; and, finally, by crystallizing the created concepts and embodying them in a model, which makes the knowledge available to the rest of the company. Redundancy is important because it encourages frequent dialogue and communication. This helps create a “common cognitive ground” among employees and thus facilitates the transfer of tacit knowledge. Redundancy also spreads new explicit knowledge through the organization so it can be internalized by employees. Another way to build redundancy is through strategic rotation, especially between different areas of technology and between functions such as R&D and marketing. Rotation helps employees understand the business from a multiplicity of perspectives. This makes organizational knowledge more “fluid” and easier to put into practice. no one department or group of experts has the exclusive responsibility for creating new knowledge in the knowledge-creating company. Managers must challenge employees to reexamine what they take for granted. People don’t just passively receive new knowledge, they actively interpret it to fit their own situations and perspectives. Thus what makes sense in one context can change or even lose its meaning when communicated to people in a different context. As a result, there is a continual shift in meaning as new knowledge is diffused in an organization. new knowledge is born in chaos. The main job of managers in the knowledge-creating company is to orient this chaos toward purposeful knowledge creation. In most companies, the ultimate test for measuring the value of new knowledge is economic—increased efficiency, lower costs, improved ROI. But in the knowledge-creating company, other, more qualitative factors are equally important. Does the idea embody the company’s vision? Is it an expression of top management’s aspirations and strategic goals? Does it have the potential to build the company’s organizational knowledge network? Teams play a central role in the knowledge-creating company because they provide a shared context where individuals can interact with each other and engage in the constant dialogue on which effective reflection depends. Team members create new points of view through dialogue and discussion. They pool their information and examine it from various angles. Eventually, they integrate their diverse individual perspectives into a new collective perspective. In this respect, they are the true “knowledge engineers” of the knowledge-creating company. %% end annotations %% %% Import Date: 2025-08-05T16:12:50.601-06:00 %%