The Knowledge-Creating Company

The Knowledge-Creating Company

Ikujiro Nonaka

The fundamental principle of organizational design at the Japanese companies I have studied is redundancy—the conscious overlapping of company information, business activities, and managerial responsibilities. To Western managers, the term “redundancy,” with its connotations of unnecessary duplication and waste, may sound unappealing. And yet, building a redundant organization is the first step in managing the knowledge-creating 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. Since members of the organization share overlapping information, they can sense what others are struggling to articulate. Redundancy also spreads new explicit knowledge through the organization so it can be internalized by employees.

Free access to company information also helps build redundancy. When information differentials exist, members of an organization can no longer interact on equal terms, which hinders the search for different interpretations of new knowledge. Thus Kao’s top management does not allow any discrimination in access to information among employees. All company information (with the exception of personnel data) is stored in a single integrated database, open to any employee regardless of position.

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. The comptroller’s proposal causes a revision of the company’s financial control system. Other employees use the innovation and eventually come to take it for granted as part of the background of tools and resources necessary to do their jobs

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?

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. Mobilizing that commitment and embodying tacit knowledge in actual technologies and products require managers who are as comfortable with images and symbols—slogans such as Theory of Automobile Evolution, analogies like that between a personal copier and a beer can, metaphors such as optoelectronics—as they are with hard numbers measuring market share, productivity, or ROI.

because tacit knowledge includes mental models and beliefs in addition to know-how, 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.

At some of the Japanese companies I have studied, CEOs talk about this role in terms of their responsibility for articulating the company’s “conceptual umbrella”: the grand concepts that in highly universal and abstract terms identify the common features linking seemingly disparate activities or businesses into a coherent whole.

terms like “metaphor,” “analogy,” and “model” are ideal types. In reality, they are often hard to distinguish from one another; the same phrase or image can embody more than one of the three functions. 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.

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. This dialogue can—indeed, should—involve considerable conflict and disagreement. It is precisely such conflict that pushes employees to question existing premises and make sense of their experience in a new way. “When people’s rhythms are out of sync, quarrels occur and it’s hard to bring people together,” acknowledges a deputy manager for advanced technology development at Canon. “Yet if a group’s rhythms are completely in unison from the beginning, it’s also difficult to achieve good results.”

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 self-knowledge—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.

As team leaders, middle managers are at the intersection of the vertical and horizontal flows of information in the company. They serve as a bridge between the visionary ideals of the top and the often chaotic market reality of those on the front line of the business. By creating midlevel business and product concepts, middle managers mediate between “what is” and “what should be.” They remake reality according to the company’s vision.

Sometimes, one individual shares tacit knowledge directly with another. For example, when Ikuko Tanaka apprentices herself to the head baker at the Osaka International Hotel, she learns his tacit skills through observation, imitation, and practice. They become part of her own tacit knowledge base. Put another way, she is “socialized” into the craft. 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, it cannot easily be leveraged by the organization as a whole.

Senior managers give voice to a company’s future by articulating metaphors, symbols, and concepts that orient the knowledge-creating activities of employees. They do this by asking the questions, What are we trying to learn? What do we need to know? Where should we be going? Who are we? If the job of frontline employees is to know “what is,” then the job of senior executives is to know “what ought to be.” Or in the words of Hiroshi Honma, senior researcher at Honda: “Senior managers are romantics who go in quest of the ideal.”

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.

Making personal knowledge available to others is the central activity of the knowledge-creating company. It takes place continuously and at all levels of the organization.