Seminal (great) book on how knowledge is or is not created in a company. Takeuchi and Nonaka do a masterful job. Top 50 business book for sure.

1. Theory of Organizational Knowledge Creation Excerpted from the book by Ikujiro (Jiro) Nonaka and Hirotaka (Hiro) Takeuchi The Knowledge-Creating Company Oxford University Press 1995

2. Organizational Knowledge Creation Creating organizational knowledge is as much about bodily experience and trial and error as it is about mental modeling and learning from others. The capability of a company as a whole to create new knowledge, disseminate it throughout the company, and embody it in products, services and systems is the root of continuous competitive advantage. 2/15/2011 2 jpgillis@umd.umich.edu

3. Knowledge Business organizations don’t just process knowledge, they create it as well. Knowledge creation by the business organization has been virtually neglected in management studies. Explicit knowledge and tacit knowledge are the basic building blocks in a complementary continuous dynamic interaction/conversion. 2/15/2011 3 jpgillis@umd.umich.edu

4. Human Knowledge Explicit knowledgecan be articulated in formal language including grammatical statements, mathematical expressions, specifications, manuals and so forth. Tacit knowledgeis hard to articulate with formal language. It is personal knowledge embedded in individual experience and it involves intangible factors such as personal belief, perspective and the value system. 2/15/2011 4 jpgillis@umd.umich.edu

5. Tacit Knowledge Knowledge expressed in words and numbers is only the tip of the iceberg. Tacit knowledge is not easily visible and expressible. It is highly personal and hard to formalize, making it difficult to communicate and share with others. Subjective insights, intuitions, and hunches fall into tacit knowledge, which is deeply rooted in individual action and experience, as well as in the ideals, values and emotions he or she embraces. 2/15/2011 jpgillis@umd.umich.edu 5

6. Tacit Knowledge Two Dimensions of Tacit Knowledge The technical dimension, which contains the kind of informal and hard-to-pin-down skills or crafts captured in the term “know-how.” A master craftsman is often unable to articulate what he knows. The cognitive dimension, which consists of schemata (cognitive schemes), mental models, beliefs, and perceptions so ingrained that we take them for granted. It reflects our image of reality (what is and ought to be) 2/15/2011 6 jpgillis@umd.umich.edu

7. Explicit/Tacit Distinctions The distinction between explicit and tacit is key to understanding the difference between Western and Japanese approaches to knowledge. Explicit knowledge can be processed by computer, but the subjective and intuitive nature of tacit knowledge makes it difficult to process in any systematic or logical manner. 2/15/2011 jpgillis@umd.umich.edu 7

8. Explicit/Tacit Distinctions For tacit knowledge to be communicated and shared within an organization, it has to be converted into words and numbers that anyone can understand. It is during this time of conversion, from tacit to explicit, and back again into tacit, that organizational knowledge is created. 2/15/2011 jpgillis@umd.umich.edu 8

9. Tacit Implications Whole different view of the organization Not as a machine for processing information, but as a living organism. Whole different view of innovation Not a putting together of diverse information, but a highly individual process of personal and organizational self-renewal – ideals not ideas. The essence of innovation is to re-create the world according to a particular ideal or vision. 2/15/2011 jpgillis@umd.umich.edu 9

10. Tacit Implications Whole different view of knowledge Not acquiring, teaching, training. But less formal – metaphors, pictures, experiences, mental and physical transitions. 2/15/2011 jpgillis@umd.umich.edu 10

11. Knowledge Creation 2/15/2011 jpgillis@umd.umich.edu 11 Pure Imagination 1 Analogy (alike and not alike) Metaphor (alike) Logical Thinking New Points of View 2 Conflict and Disagreement From personal to organizational Discussion and Dialogue 3 Redundancy Ambiguity New sense of direction, Alternate meanings, Fresh way of thinking, New knowledge out of chaos Common cognitive ground, Dialogue over and over, Sharing overlapping information, Internalized by employees

12. “You have to feel it…” 2/15/2011 jpgillis@umd.umich.edu 12

13. Japanese Companies Organizational knowledge creation is the key to the distinctive ways that Japanese companies innovate. They are especially good at bringing about innovation continuously, incrementally, and spirally. Their success is not due to access to cheap capital; or manufacturing prowess; or cooperative relationships with customers, suppliers, and government agencies; or lifetime employment and seniority systems – though these factors are important. 2/15/2011 13 jpgillis@umd.umich.edu

14. (Western) Epistemology (Knowledge) Cartesian Split: Subject (the knower) and Object (the known) Mind and body/matter/nature And opposing traditions: Rationalism “True knowledge is not the product of sensory experience but some ideal mental process.” Empiricism “The only source of knowledge is sensory experience.” 2/15/2011 jpgillis@umd.umich.edu 14

15. (Eastern) Epistemology (Knowledge) Oneness of humanity and nature Think visually and manipulate tangible images Time as a continuous flow of “present” Oneness of body and mind Wisdom is acquired from the perspective of the entire personality Knowledge is integrated into one’s personal character Oneness of self and other Exist among others harmoniously as a collective self You and I are two parts of a whole 2/15/2011 jpgillis@umd.umich.edu 15

16. Organizational Culture Studies have shown the importance of organizational values, meanings, commitments, symbols and beliefs, and recognized that the organization as a shared meaning system, can learn, change itself, and evolve over time. But these studies have not paid enough attention to the potential and creativity of human beings. The human being is seen as an information processor, not as an information creator. 2/15/2011 jpgillis@umd.umich.edu 16

17. Organizational Culture A major target for research in organizations today is to understand how organizations acquire new products, new methods of manufacture and marketing, and new organizational forms. A more fundamental need is to understand how organizations create new knowledge that makes such creations possible. 2/15/2011 jpgillis@umd.umich.edu 17

18. Knowledge Knowledge (unlike information) is a function of: “a particular stance, perspective, or intention.” Knowledge is anchored in: “the beliefs and commitment of its holder.” Knowledge (unlike information) is always: “to some end.” Knowledge is: “essentially related to action.” 2/15/2011 jpgillis@umd.umich.edu 18

19. Knowledge Conversion Westerners tend to emphasize explicit knowledge, Japanese tend to stress implicit, but tacit and explicit are mutually complementary entities. They interact with and interchange into each other in the creative activities of human beings. Knowledge is created and expanded through social interaction between tacit knowledge and explicit knowledge. This interactionis called Knowledge Conversion. 2/15/2011 jpgillis@umd.umich.edu 19

20. Four Modes of Knowledge Conversion 2/15/2011 jpgillis@umd.umich.edu 20 explicit tacit tacit explicit

21. 2/15/2011 jpgillis@umd.umich.edu 21 Tacit to tacit Tacit to explicit “fusion of participants’ tacit knowledge into a shared mental model” …involves intangible factors such as personal belief, perspective and the value system. Articulating tacit knowledge into explicit concepts. Writing is an act of (often inadequate) converting into explicit knowledge. Subjective insights, intuitions, and hunches fall into tacit knowledge, which is deeply rooted in individual action and experience, as well as in the ideals, values and emotions he or she embraces. Concept creation triggered by dialogue or collective reflection. Conversion in a sequence of metaphor, analogy, and model. tacit explicit Creating new, explicit concepts from tacit knowledge. …metaphor, analogy, brainstorming… tacit …shared “know-how” The key to knowledge creation. Embodying explicit knowledge into tacit knowledge. The process of systemizingexplicit concepts into a knowledge system. explicit “learning by doing” Combining different bodiesof explicit knowledge throughdocuments, meetings, phoneconversations, or computerizedcommunication networks. You can “re-experience” what other people experience An MBA education, for example The internalization of experiences throughsocialization, externalization, combination and trial and error is an explicit to tacit conversion. Reconfiguring existing explicit knowledge through sorting, adding, combining, (like with computer databases) can lead to new explicit knowledge. Internalized knowledge experiences explicit to explicit explicit to tacit

22. Knowledge Creation Five Phases Sharing Tacit Knowledge Building an Archetype Creating Concepts Justifying Concepts Cross-Leveling of Knowledge Four Modes Socialization Externalization Combination Internalization Enabling conditions Intention Autonomy Fluctuation and Creative Chaos Redundancy Requisite Variety 2/15/2011 jpgillis@umd.umich.edu 22

23. 2/15/2011 jpgillis@umd.umich.edu 23 Veritas

24. 2/15/2011 jpgillis@umd.umich.edu 24 Thank You!