Ikujiro Nonaka : Knowledge creation.

Nonaka's research on organisation theory and corporate structure has been widely published in both Japanese and English, but his ideas first came to a wider audience with the publication in 1995 of The knowledge-creating company, which he co-authored with Hirotaka Takeuchi. The Association of American Publishers named it the Best Book of the Year in Business and Management in 1996.

The work of Ikujiro Nonaka is best known for its focus on the creation of knowledge within organisations. Nonaka believes that this is the most meaningful core capability for a company, particularly because it leads to innovation. He argues that the knowledge generated becomes the key source of competitive advantage for the firm.

Peter Drucker first used the terms 'knowledge worker' and 'knowledge society' in the 1960s and more recently stated that knowledge has become the only meaningful resource. Nonaka acknowledges Drucker's contribution and takes it a stage further by looking at how knowledge is created and examining the processes and mechanisms involved.

Life and career

Ikujiro Nonaka (b 1935) is the first Professor of Knowledge at the Haas School of Business, University of California, where he previously received his MBA and PhD degrees. He is also Dean of the Graduate School of Knowledge Science at the Japan Advanced Institute of Science and Technology (JAIST) in Japan. He was formerly a professor and Director of the Institute of Innovation Research at Hitotsubashi University, Tokyo.

On the Internet, Professor Nonaka has described his work as comparative research on knowledge-creating processes in companies around the world and also research on the characteristics of innovative activities in Japanese companies. He seeks to answer questions about what knowledge is, how organizations create knowledge, and how we can promote knowledge creation.

Key Theory

The knowledge-creating company

In their book The knowledge-creating company: how Japanese companies create the dynamics of innovation, Ikujiro Nonaka and Hirotaka Takeuchi argue that the success of Japanese companies is due to their skill and expertise in organisational knowledge creation, especially in bringing about continuous business innovation. The metaphor of a journey is used, with a warning that there are new and foreign road signs to follow on the way. The book, which combines theoretical and philosophical analysis with practical case studies, attempts to convey the complex forces at work within creative organisational systems. It is not straightforward to read, but the authors justify this with the declaration that "... managers can no longer afford to be satisfied with simplistic ideas about knowledge and its creation".

Explicit and implicit knowledge

Nonaka and Takeuchis' starting point is a contrast between Western and Eastern philosophies. In the West knowledge is formal, unambiguous, systematic, falsifiable and scientific, and a quest for knowledge normally involves analysis and interpretation of data and information. New knowledge is documented and then transferred by means of formal training. The authors describe this form of knowledge as explicit, and primarily managed through databases and manuals, with expertise and human experience or insights being generally ignored as sources of knowledge.

In the East, however, knowledge is intuitive, interpretive, ambiguous, non-linear and difficult to reduce to scientific equations. Instead of being created through data analysis and interpretation, it grows from the expertise and experience of many people, whose minds are probed for insights. New knowledge is distributed and retained through experience. The resulting Eastern form of knowledge is described as implicit. In the authors' view, implicit and explicit knowledge are not totally separate but mutually complementary entities. Successful Japanese companies are able to convert implicit knowledge to explicit knowledge, so that knowledge acquired by individuals becomes organisational knowledge shared among colleagues, and explicit knowledge is converted into tacit knowledge by individuals. Nonaka and Takeuchi refer to this interaction between implicit and explicit knowledge as knowledge conversion. They suggest four methods of knowledge conversion, otherwise known as the SECI process: Socialisation; Externalisation; Combination; and Internalisation. These are described as the mechanisms by which implicit knowledge is "amplified" throughout the organisation, creating a spiral model of knowledge creation.

Middle-up-down management style

Nonaka and Takeuchi argue that the two traditional Western management styles, "top-down" and "bottom-up", fail to foster the dynamic interaction necessary to create organisational knowledge. Successful Japanese companies acknowledge the vital role played by middle managers in taking the top management vision of "what should be" and the frontline employees' realistic sense of "what is", and developing midrange concepts. Middle managers are, in effect, the real "knowledge engineers" of the knowledge-creating company, serving as facilitators between top and bottom as well as between theory and reality, and playing a key role in innovation.

A "hypertext" organisation which consists of interconnected layers is put forward as the ideal structure for knowledge creation. This combines two traditional structures - the hierarchy and the task force. Surprisingly, Nonaka and Takeuchi admit, the model for this organisational form is the US military, which is bureaucratic in peacetime but highly task-oriented in war. They provide two case studies of Japanese companies which have attempted to implement a hypertext structure - Kao and Sharp.

Transferring knowledge

The knowledge-creating company is rich in case studies which are mostly based on large, well-established Japanese companies, including Matsushita, NEC, Canon, Honda, and Nissan. Many of the case studies describe a "transferring process", in which the organisational knowledge created during new product development in one division becomes transferred to other parts of the company. For example, the knowledge created within Canon while developing the Mini-Copier in the early 1980s was subsequently used in other areas. The product knowledge generated was applied to other equipment such as printers; the knowledge gained from the manufacturing process led to the automation of copier production; and the organisational knowledge gleaned, especially with respect to the role of middle managers and cross-functional working, influenced the way the company was managed.

Transfer of knowledge can also take place at a global level across national boundaries, and one example given is of Nissan's experience of developing a car in the United Kingdom. The case of Shin Caterpillar Mitsubishi, a US-Japanese alliance, shows how knowledge creation can cut across different companies as well as national boundaries, refering to the experience of Mitsubishi of Japan and Caterpillar of the United States in pooling their resources to develop and market hydraulic shovels. Nonaka and Takeuchi demonstrate that use of the four stages of knowledge conversion within the alliance averted potentially damaging clashes of culture, overcoming the weaknesses of both sides in knowledge creation, and leading to effective knowledge creation and innovation.

Practical implications

The authors finish with some recommendations on what Western companies can do to become knowledge-creating companies:

* create a knowledge vision (top management should define the boundaries of organisational knowledge and outline what kind of knowledge ought to be created)

* develop a knowledge crew (of employees with diverse talents)

* build a high-density field of interaction (an environment in which frequent and intensive interactions take place) at the front-line

* piggyback on the new product development process

* adopt middle-up-down management

* switch to a hypertext organisation

* construct a knowledge network with the outside world (meaning external stakeholders such as customers).

The concept of "Ba" or shared spaces 

Since the publication of The knowledge-creating company, Professor Nonaka has developed the theory of "Ba" which provides a platform for creating knowledge. Ba means "place" or "shared spaces" in English and can be physical (for example, an office), virtual (for example, email) or mental (for example, shared experiences, ideas and, by extension, organisation culture). Nonaka argues that knowledge cannot be separated from its context, and is embedded in these shared spaces.

Nonaka describes four kinds of platform which correspond to the four stages of knowledge conversion mentioned above. Each space supports a particular conversion process and thereby speeds up the process of knowledge creation:

* Originating (supports the socialisation stage) - physical face-to-face experiences which provide the environment in which individuals share feelings and experiences. These are the key to the transfer of tacit knowledge.

* Interacting (supports the externalisation stage) - a team-based environment, where individuals' mental models and skills are converted into common terms and concepts. This assists the process in which tacit knowledge is made explicit.

* Cyber (supports the combination stage) - interaction in the virtual world of cyberspace. This facilitates the exchanging and combining of different forms of explicit knowledge.

* Exercising (supports the internalisation stage) - focused training with senior mentors and colleagues which assists the conversion of explicit knowledge into tacit knowledge.

Knowledge "activists" support platforms and cultures by enabling knowledge creation. A knowledge activist can be an individual, group or department taking on a particular responsibility for energising and co-ordinating knowledge creation throughout the organisation. The activist has three roles: to act as a catalyst of knowledge creation, to co-ordinate knowledge creation initiatives and to provide overall direction to these efforts.

In perspective

The second half of the 1990s saw a huge surge of business interest in knowledge, led primarily by practitioners rather than academics. Nonaka, while not responsible for the attention given to knowledge management, provided ideas that gave purpose and direction to practitioner initiatives. His research underlines four important points. Firstly, the rationale for knowledge creation is its link with innovation and therefore with competitive advantage. No other writer in this field has made such a forceful business case for knowledge creation as Professor Nonaka. Secondly, there is a distinction between implicit and explicit knowledge, and it is thanks to Nonaka that this point is now generally well-understood and accepted. Thirdly, in contrast with much of the organisational thinking prevalent on knowledge management today, Nonaka reminds us that information technology is not enough and that human experience and implicit knowledge are important in creating new knowledge. And lastly, Nonaka emphasised the importance of the role of middle management in organisation information creation as early as 1988, and this was a significant departure from the Western view of middle management as a deadweight, potentially expendable part of the corporate structure. In these respects Professor Nonaka's ideas have been absorbed into the mainstream of management thinking and are almost taken for granted. Few organisations, however, have embraced his vision in its entirety, or attempted the kind of cultural and organisational restructuring to improve knowledge creation which he advocates.

Key works by Nonaka

Books

Enabling knowledge creation: how to unlock the mystery of tacit knowledge and
release the power of innovation
with Georg von Krogh and Kazuo Ichijo
Oxford: Oxford University Press, 2000

The knowledge-creating company: how Japanese companies create the dynamics of
innovation
with Hirotaka Takeuchi
New York: Oxford University Press, 1995

Journal articles

Making the most of your company's
knowledge: a strategic framework with
Georg von Krogh and Manfred Aben
Long Range Planning, vol 34 no 4, Aug
2001, pp421-439

SECI ba and leadership: a unified model
of dynamic knowledge creation with Ryoko
Toyama and Noboru Konno
Long Range Planning, vol 33 no 1, Feb,
2000, pp5-34

The concept of "Ba": building a
foundation for knowledge creation with
Noboru Konno
California Management Review, vol 40 no
3, Spring, 1998, pp40-54

Develop knowledge activists! with Georg
von Krogh and Kazuo Ichijo
European Management Journal, vol 15 no
5, Oct, 1997, pp475-483

The knowledge-creating company
Harvard Business Review, vol 69 no 6,
Nov/Dec, 1991, pp96-104

Related management thinker: Peter Drucker Related checklist: Managing Knowledge

Revised Mar 2002