The 'knowledge boom' has hit the West like lightning in recent years

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Nov 6, 2013 (3 years and 11 months ago)

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The 'knowledge boom' has hit the West like lightning in recent years. Its roots go way back to Plato, in
400 BC, but knowledge is heralded today as one of the newest

ideas in business management.


Beyond Knowledge Management:

Lessons from Japan


Ó June
1998 HIROTAKA TAKEUCHI

Emerging from the West is a wide consensus on the strategic importance of managing knowledge well. A

recent poll of executives from 80 large companies in the US, such as Amoco, Chemical Bank,

Hewlett
-
Packard, Kodak and Pillsbury, sh
owed that four out of five believed managing knowledge of
their

organisations should be an essential or important part of business strategy. These executives have also

come to realise that they have a long way to go to managing knowledge well. In the same
poll, only 15
per

cent felt they managed knowledge well.


Lewis Platt, the CEO of Hewlett
-
Packard, contends that successful companies of the 21st century will be

those that do the best job of capturing, storing and leveraging what their employees know. He
is using the

phrase, "Knowledge is our currency", as a mantra to spread his message across Hewlett
-
Packard's

worldwide Organization.

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CONCLUSION


This paper serves as a warning to Western managers who have jumped on the "knowledge management"

bandwagon. A
lthough the growing recognition of knowledge as the critical resource is welcome news, the

hoopla in the West associated with knowledge management could be a blessing in disguise. As we have

seen, the focus in the West has been on (1) explicit knowledge, (
2) measuring and managing existing

knowledge, and (3) the selected few carrying out knowledge management initiatives. This bias reinforces

the view of the Organisation simply as a machine for information processing.


What Western companies need to do is to

"unlearn" their existing view of knowledge and pay more
attention

to (1) tacit knowledge, (2) creating new knowledge, and (3) having everyone in the Organisation be

involved. Only then can the Organisation be viewed as a living organism capable of creatin
g continuous

innovation in a self
-
organising manner.


This paper has argued that knowledge holds the key to generating continuous innovation. An old concept

dating back to 400 BC has emerged in the West as the newest management idea. It would be pitiful,

h
owever, if it ended up being just a buzzword or if "knowledge management" degenerated into little more

than a fad, as many management concepts have done in the past. For example, re
-
engineering started out
as

a perfectly sensible management concept when fi
rst written about in 1990. But the hype which

subsequently developed meant that the human factor was too quickly ignored. It would be tragic if history

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repeated itself with knowledge management.


WHY KNOWLEDGE?


Why are managers in the West so enthralled w
ith knowledge? Several fundamental shifts are working to

fuel the knowledge movement. They include the following:


• a shift to knowledge as the basic resource,

• a shift to knowledge
-
based industries, and

• a shift to growth as the top managerial priori
ty. We will examine each below.


SHIFT TO KNOWLEDGE AS THE BASIC RESOURCE


Peter Drucker contends that knowledge has become the resource, rather than a resource. Knowledge has

sidelined capital and labour to become the sole factor of production:


"The cent
ral wealth
-
creating activities will be neither the allocation of capital to productive uses nor

"labour"... Value is now created by "productivity" and "innovation", both applications of knowledge to
work."


The productivity of knowledge is going to be the
determining factor in the competitive position of a

company, an industry, an entire country. No country, industry, or company has any "natural" advantage or

disadvantage. The only advantage it can possess is the ability to exploit universally available kno
wledge.

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Knowledge workers, who now constitute 35 per cent to 40 per cent of the workforce, will become the

leading social group as a result of this shift. According to Drucker, "They will own both the 'means of

production' and the 'tools of production'...
the former through their pension funds, which are rapidly

emerging in all developed countries as the only real owners; the latter because knowledge workers own

their knowledge and can take it with them wherever they go."


SHIFT TO KNOWLEDGE
-
BASED INDUSTRIE
S


Knowledge
-
based industries are becoming the leading industries in today's economy. To quote Drucker

again:


"The industries that have moved into the centre of the economy in the last forty years have as their

business the production and distribution of
knowledge and information, rather than the production and

distribution of things. The actual product of the pharmaceutical industry is knowledge,
-

pill and

prescription ointment are no more than packaging for knowledge. There are the telecommunications

ind
ustries and the industries, which produce information
-
processing tools and equipment, such as

computers, semiconductors, and software. There are the information producers and distributors: movies,

television shows, videocassettes. The "non
-
businesses" whic
h produce and apply knowledge
-

education
and

health care
-

have in all developed countries grown much faster than even knowledge
-
based industries."


Knowledge
-
based industries include both the service sector and the manufacturing sector. The service

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secto
r includes industries where knowledge is effectively the product (such as management consulting or

training) as well as industries where the product is based on the application of knowledge (such as

architecture). The manufacturing sector includes industri
es, which produce products with high
-
knowledge

intensity (such as packaged software), as well as those which produce products based on the application
of

knowledge (such as pharmaceuticals).


SHIFT TO GROWTH AS THE TOP MANAGERIAL PRIORITY


In the last five

to seven years, Western managers focused their attention on cutting costs to the bone

through downsizing and re
-
engineering. Recently, however, they discovered that the removal of all slack

from a worker's day runs counter to creativity and innovation, wh
ich are the engines of growth. Nonaka
and

Takeuchi argue that Japanese companies have advanced their position in international competition
because

of their skills and expertise at organisational knowledge creation, which is the key to the distinctive way

t
hat Japanese companies innovate.


Organisational knowledge creation is defined as the capability of a company as a whole to create new

knowledge, disseminate it through the Organisation, and embody it in products, services and systems.

Japanese companies,
which have shunned downsizing and re
-
engineering for the most part, even during
the

recent recession, are especially good at utilising this process to bring about innovation continuously and

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incrementally.


The knowledge boom in the West


Signs of what som
e call the 'knowledge boom' are visible everywhere in the Western business world
today.

They include new books and journals, knowledge management conferences, knowledge management
services

backed up by knowledge databases, and new corporate titles among ot
her things. Consider the following:

Five new books on knowledge and intellectual capital have been published in the first five months of
1997

alone, with more to come.


These practitioner
-
oriented books on measuring and managing knowledge include the follo
wing (in

alphabetical order):



Verna Allee, The Knowledge Evolution Expanding Organizational Intelligence. Boston: Butterworth


Heinemann, 1997


Debra M. Amidon, Innovation Strategy for the Knowledge Economy: The Ken Awakening. Boston:



Butterworth Heinemann, 1997


Leif Edvinsson and Michael S. Malone, Intellectual Capital: Realizing Your Company's True Value
by


Finding Its Hidden Brainpower. New York: Harper Business, 1997

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Thomas A. Stewart, Intellectual Capital: T
he New Wealth of Organizations. New York: Doubleday,


1997


Karl
-
Erik Sveiby, The New Organizational Wealth: Managing and Measuring Knowledge
-
based
Assets.


San Francisco: Berrett Koehler, 1997.


New journals, newsletters and electronic me
dia dedicated to knowledge have been established in recent

years. For example, they include the following: o Knowledge Technology Journal, published by IC' in
Austin,

Texas



Journal of Knowledge Management, to be published by IFS International Limit
ed in September, 1997
in


London.


Knowledge Inc., a newsletter published in Mountain View, California


Knowledge Management Forum, an electronic conferencing medium in West Richland, Washington.


Some 40 conferences on "knowledge managem
ent" were held throughout the US and Europe in 1996.
Most of

these conferences were organised by consulting firms, accounting firms, think tanks and management

associations.


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The market for "knowledge management" services jumped from $US400 million in 1994

to $US2.6
billion in

1996, according to Dataquest.


Consulting firms are leading the way in building "knowledge databases", which are attempts to pull

scattered information throughout the organisations together and convert it into organisational memory i
n

the form of a database. For example:


Andersen Consulting set up Knowledge Xchange; Booz Allen & Hamilton developed Knowledge On
-
Line; Ernst

& Young created their Center for Business Knowledge, KPMG Peat Marwick established A Knowledge

Manage; and Price
Waterhouse has Knowledge View.


A new corporate title, Corporate Knowledge Officer (CKO), has been created in some 30 plus Fortune
500

companies. Some of these companies converted the Corporate Information Officer (CIO) title to the CKO

title, while other
s are using the two simultaneously.


The creation of a new title on knowledge has not been restricted to the corporate world. The academic

world has followed suit as well. The first chaired professorship dedicated to the study of knowledge and

its impact o
n business was created at the Haas School of Business at the University of California,

Berkeley, in May 1997. The chair, named the Xerox Distinguished Professorship in Knowledge, was
funded by

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a donation given jointly by Fuji Xerox Co Ltd of Japan (80 per
cent) and Xerox Corporation of the US
(20 per

cent). Ikujiro Nonaka, who holds a joint appointment at Hitotsubashi University and Japan's Advanced

Institute of Science and Technology, was chosen to hold the first chaired professorship as a visiting

profess
or. Nonaka was dubbed "Mr Knowledge" in a recent article by The Economist (31 May 1997).


As evident from above, the "knowledge boom" has hit the West like lightning in recent years. Knowledge

management, which Business Week defines as "the idea of capturi
ng knowledge gained by individuals
and

spreading it to others in the Orga>



Transfer interrupted!


most popular management ideas. It contains two dimensions:



Measuring knowledge (or intellectual capital), and


Managing it.


European compan
ies have been international leaders in measuring knowledge, while American
companies

have often been cited as the leaders in managing knowledge effectively.


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MEASURING KNOWLEDGE


European companies have taken the lead in developing measurement systems for
their intangible assets
and

reporting the results publicly. They include (1) Skandia AFS, a subsidiary of the Skandia insurance and

financial services company, (2) WM
-
data, a computer software and consulting company, (3) Celemi, a

company that develops and

sells creative training tools, and (4) PLS
-
Consult, a management consulting

firm. All of the companies listed here are Scandinavian companies
-

the first three being Swedish and the

fourth being Danish. They have all been influenced by the pioneering work

of Karl
-
Erik Sveiby of
Sweden,

who developed a method of accounting for intangible assets in companies in the late 1980s.


Collectively, these companies developed hundreds of indices and ratios in an effort to provide a

comprehensive view of intellectual
assets at hand. For example, these companies measure such things as

"business development expenses as a percentage of total expenses", "percentage of production from new

launches", "information technology investments as a percentage of total expense", "inf
ormation
technology

employees as a percentage of total employees", "percentage of employees working directly with

customers", and the like as indicators of intellectual capital.


In addition, these companies actually report these indices in their annual re
ports to show how effectively

intellectual assets are leveraged. The Skandia AFS annual report, for example, highlights the process of

transforming "human capital", which is an asset the company cannot own, into "structural capital", which

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can be owned by
the company. Human capital is defined as the combined knowledge, skill,
innovativeness

and ability of the company's individual employees to meet the task at hand. It also includes the company's

values, culture and philosophy. Structural capital is defined
as the hardware, software, databases,

organisational structure, patents, trademarks and everything else of organisational capability that

supports those employees' productivity
-

in a word, everything left at the office when the employees go

home. Structur
al capital also includes customer capital and the relationships developed with key

customers.


MANAGING KNOWLEDGE


American companies have taken the lead in managing knowledge effectively. The best practices in
service

industries where knowledge is effecti
vely the product come mostly from American management
consulting

firms. The roles that "intelligent interrogators" at McKinsey & Company and the "knowledge integrators"
at

Andersen Consulting play in managing knowledge are well documented. These knowledge
managers are

responsible for keeping the knowledge database orderly (e.g. Knowledge Xchange in the case of
Andersen

Consulting), categorising and formatting documents and deleting the obsolete. They are also charged with

cajoling consultants into using the

system and identifying topics that ought to become research projects.


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In the manufacturing industries, I have had first
-
hand experience working with GE and Hewlett
-
Packard,

both of whom have received favourable press coverage in the knowledge management
field. At GE, I
served

as one of the facilitators of its Work
-
Out program, which began in 1989. Work
-
Out exemplifies an
attempt

on the part of large companies to create the opportunity for hidden knowledge to be made public.


Hewlett
-
Packard has been emba
rking on a number of knowledge management initiatives in recent years
to

create a purposeful process for capturing, storing, sharing and leveraging what employees know. One of
the

outcomes of this initiative is the formation of KnowledgeLinks, a program in

which an internal
consultancy

group located at headquarters collects knowledge from one Hewlett
-
Packard business and translates it so

that the other businesses can apply it. An on
-
line version of KnowledgeLinks is now available, enabling

managers to recei
ve a screenful of documents, war stories and best practices on how others have dealt

with key management issues in the past
-

such as decreasing time
-
to
-
market, outsourcing manufacturing,

managing retail channels and others. The KnowledgeLinks web sites no
t only provide access to what
others

have done, but whom to contact as well.


Knowledge management in Japan


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AS EVIDENT FROM THE ABOVE, the boom that has hit the West like lightning is not about
knowledge per se,

but about knowledge management. Europe appe
ars to have an edge on measuring knowledge and the US
on

managing it.


To repeat, knowledge management is about capturing knowledge gained by individuals and spreading it
to

others in the Organisation. Where does Japan stand with respect to knowledge manag
ement? "Nowhere"
is

probably the most accurate answer.


Visible signs of the boom we saw in the West are nowhere to be found in Japan ... no onrush of new
books

and journals on knowledge management being published, no conferences being organised, no new
da
tabases

being formed, and no new corporate titles being created. Neither are Japanese companies sending their

managers in droves to Scandinavia to learn how knowledge is being measured, nor to the US to observe
how

knowledge initiatives are being managed a
t Hewlett
-
Packard, GE or 3M, as they have typically done with

other new management ideas.


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Why are Japanese companies not jumping on the bandwagon with respect to knowledge management? It
is

not because they do not fully recognise the importance of knowled
ge as the resource and as the key
source

of innovation. They do, as Nonaka and Takeuchi pointed out in The Knowledge
-
Creating Company: How

Japanese Companies Create the Dynamics of innovation. What they are not convinced about is the value
of

simply measur
ing and managing existing knowledge in a mechanical and systematic manner. They doubt
if

that alone will enhance innovation.


Japanese companies' reluctance to accept knowledge management reflects Ikujiro Nonaka's influence.

Nonaka's thoughts about knowled
ge are different from the popular Western view in two respects
according

to The Economist:


"The first is his relative lack of interest in information technology. Many American companies equate

"knowledge creation" with setting up computer databases. Profe
ssor Nonaka argues that much of a

company's knowledge bank has nothing to do with data, but is based on informal "on
-
the
-
job" knowledge
-

everything from the name of a customer's secretary to the best way to deal with a truculent supplier.
Many

of these ti
dbits are stored in the brains of middle managers
-

exactly the people whom re
-
engineering

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replaced with computers.


The second thing that makes Professor Nonaka stand out is his insistence that companies need plenty of

slack to remain creative.


Nonaka se
ems to be posing two fundamental questions about knowledge management in the above quote.
Can

you measure the tidbits of knowledge stored in the brains of managers? Can you really create new

knowledge by trying to micro
-
manage it?


Nonaka draws
-
a clear di
stinction between knowledge management and knowledge creation, as illustrated

by the following episode. In naming the first chaired professorship dedicated to the study of knowledge
and

its impact on business, the Haas School of Business at the University
of California, Berkeley, initially

recommended the title "Xerox Distinguished Professorship of Knowledge Management." Nonaka
inquired if

the title could be changed to Xerox Distinguished Professorship of Knowledge Creation." As a
compromise,

they agreed to

call it "Xerox Distinguished Professorship in Knowledge".


The Japanese approach to knowledge differs from the West in a number of ways. We will highlight three

fundamental differences here:


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how knowledge is viewed,


what companies do with k
nowledge, and


who the key players are.


To repeat, in Japan,



knowledge is not viewed simply as data or information that can be stored in the computer; it also


involves emotions, values, and hunches;


companies do not merely "man
age" knowledge, but "create" it as well; and


everyone in the Organisation is involved in creating


organisational knowledge, with middle managers serving as key knowledge engineers.





TWO KINDS OF KNOWLEDGE


There are two kinds of knowledge
. One is explicit knowledge, which can be expressed in words and
numbers

and shared in the form of data, scientific formulae, product specifications, manuals, universal principles,

and so forth. This kind of knowledge can be readily transmitted across indi
viduals formally and

systematically. This has been the dominant form of knowledge in the West. The Japanese, however, see
this

form as just the tip of the iceberg. They view knowledge as being primarily tacit, something not easily

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visible and expressible.


Tacit knowledge is highly personal and hard to formalise, making it difficult to communicate or share
with

others. Subjective insights, intuitions and hunches fall into this category of knowledge. Furthermore, tacit

knowledge is deeply rooted in an indivi
dual's action and experience, as well as in the ideals, values or

emotions he or she embraces.


To be precise, there are two dimensions to tacit knowledge. The first is the "technical" dimension, which

encompasses the kind of informal and hard
-
to
-
pin
-
down
skills or crafts often captured in the term

"know
-
how". Master craftsmen or three
-
star chefs, for example, develop a wealth of expertise at their

fingertips, after years of experience. But they often have difficulty articulating the technical or scientific

principles behind what they know. Highly subjective and personal insights, intuitions, hunches and

inspirations derived from bodily experience fall into this dimension.


Tacit knowledge also contains an important cognitive" dimension. It consists of belie
fs, perceptions,

ideals, values, emotions and mental models so ingrained in us that we take them for granted. Though they

cannot be articulated very easily, this dimension of tacit knowledge shapes the way we perceive the world

around us.


The difference i
n the philosophical tradition of the West and Japan sheds light on why Western managers

tend to emphasise the importance of explicit knowledge whereas Japanese managers put more emphasis
on

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tacit knowledge. Western philosophy has a tradition of separating
"the subject who knows" from "the

object that is known", epitomised in the work of the French rationalist Descartes. He proposed a concept

that is called after him, the Cartesian split, which is the separation between the knower and the known,

mind and bod
y, subject and object.


Descartes argued that the ultimate truth can be deduced only from the real existence of a "thinking self",

which was made famous by his phrase, "I think, therefore I am." He assumed that the "thinking self" is

independent of body or

matter, because while a body or matter does have an extension we can see and
touch

but doesn't think, a mind has no extension but thinks. Thus, according to the Cartesian dualism, true

knowledge can be obtained only by the mind, not the body.


In contrast
, the Japanese intellectual tradition placed a strong emphasis on the importance of the "whole

personality", which provided a basis for valuing personal and physical experience over indirect,

intellectual abstraction. This tradition of emphasising bodily e
xperience has contributed to the

development of a methodology in Zen Buddhism dubbed "the oneness of body and mind" by Eisai, one of
the

founders of Zen Buddhism in medieval Japan.


Zen profoundly affected samurai education, which sought to develop wisdom
through physical training.
In

traditional samurai education, knowledge was acquired when it was integrated into one's "personal

character". Samurai education placed a great emphasis on building up character and attached little

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importance to prudence, intel
ligence and metaphysics. Being a "man of action" was considered more

important than mastering philosophy and literature, although these subjects also constituted a major part

of samurai education.


The Japanese have long emphasised the importance of bodily

experience. A child learns to eat, walk and

talk through trial and error. He or she learns with the body, not only with the mind. Similarly, a student of

traditional Japanese art
-

for example, calligraphy, tea ceremony, flower arrangement or Japanese dan
cing

-

learns by imitating the moves of the master. A master becomes a master when the body and mind
become

one while stroking the brush (calligraphy) or pouring water into the kettle (tea ceremony). A sumo
wrestler

becomes a grand champion when he achieve
s shingi
-
ittai, or when the mind (shin) and technique (gi)
become

one (ittai).


There is a long philosophical tradition in the West of valuing precise, conceptual knowledge and
systematic

sciences, which can be traced back to Descartes. In contrast, the Ja
panese intellectual tradition values the

embodiment of direct, personal experience. It is these distinct traditions that account for the difference

in the importance attached to explicit and tacit knowledge.





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KNOWLEDGE CREATION, NOT KNOWLEDGE MANAGEMENT


The distinction between explicit knowledge and tacit knowledge is the key to understanding the

differences between the Western approach to knowledge (knowledge management) and the Japanese

approach to knowledge (knowledge creation). The West has placed a

strong emphasis on explicit
knowledge

and Japan on tacit knowledge.


Explicit knowledge can easily be "processed" by a computer, transmitted electronically, or stored in

databases.


But the subjective and intuitive nature of tacit knowledge makes it diffi
cult to process or transmit the

acquired knowledge in any systematic or logical manner. For tacit knowledge to be communicated and

shared within the organisation, it has to be converted into words or numbers that anyone can understand.
It

is precisely duri
ng the time this conversion takes place
-

that is, from tacit to explicit
-

that

organisational knowledge is created.


The reason why Western managers tend not to address the issue of organisational knowledge creation can

be traced to the view of knowledge

as necessarily explicit. They take for granted a view of the

Organisation as a playing field for "scientific managements and a machine for "information processing".

This view is deeply ingrained in the traditions of Western management, from Frederick Tayl
or to Herbert

Simon.

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Frederick Taylor prescribed "scientific" methods for the workplace, the most important being

time
-
and
-
motion studies. Time
-
and
-
motion studies encourage "a preoccupation with allocating resources,

...monitoring and measuring performanc
e, and manipulating organisational structures to set lines of

authority. Taylor developed "an arsenal of tools to promote efficiency and consistency by controlling

individuals' behaviour and compelling employees to comply with management dictates. Scientif
ic

management had little to do with encouraging the active cooperation of workers. As Kim and Mauborgne

point out, "Creating and sharing knowledge are intangible activities that can neither be supervised nor

forced out of people. They happen only when peop
le cooperate voluntarily.


Nonaka also contends that the creation of knowledge cannot be managed. The notion of creating
something

new runs counter to the "control" mentality of traditional management science: "Given a certain context,

knowledge emerges na
turally. You will have to give your employees a lot of latitude, not try to control

them," says Nonaka. He sees the experiences and judgments of employees, their commitment, their ideals

and their way of life as an important source of new knowledge. This t
acit dimension is ignored by
Taylor's

scientific management.


Herbert Simon developed a view of Organisation as an "information
-
processing machine." He built a

scientific theory of problem solving and decision making based on the assumption that human cogn
itive

capacity is inherently limited. He argued that effective information processing is possible only when

complex problems are simplified and only when organisational structures are specialised. This

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Cartesian
-
like rationalist view led him to neglect the

human potential for creating knowledge. He did not

see human beings as those who actively discover problems and create knowledge to solve them.


The Japanese emphasis on the cognitive dimension of knowledge gives rise to a wholly different view of

the Or
ganisation
-

not as a machine for information processing but as a "living organism". Within this

context, sharing an understanding of what the company stands for, where it is going, what kind of a world

it wants to live in, and how make that world a realit
y, becomes much more crucial than processing

objective information. Highly subjective, personal and emotional dimensions of knowledge have virtually
no

chance for survival within a machine, but have ample opportunity to grow within a living organism.


Onc
e the importance of tacit knowledge is realised, one begins to think about innovation in a wholly new

way. It is not just about putting together diverse bits of data information. The personal commitment of the

employees and their identifying with the compa
ny and its mission become crucial. Unlike information,

knowledge is about commitment and beliefs; it is a function of a particular stance, perspective or

intention. In this respect, it is as much about ideals as it is about ideas; and that fact fuels innov
ation.

Similarly, unlike information, knowledge is about action; it is always knowledge "to some end." The
unique

information an individual possesses must be acted upon for new knowledge to be created. This voluntary

action also fuels innovation.


Althoug
h we have made a clear distinction bet explicit and tacit knowledge, they are not totally separate.

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They are mutually complementary. They interact with each other in the creative activities of human
beings.

Nonaka and Takeuchi's theory of knowledge creatio
n is anchored to a critical assumption that human

knowledge is created and expanded through social interaction between tacit knowledge and explicit

knowledge. This interaction gives rise to four modes of "knowledge conversion": (1) from tacit to tacit,

whi
ch is called socialisation, (2) from tacit to explicit, or externalisation, (3) from explicit to explicit,

or combination, and (4) from explicit to tacit, or internalisation.


Knowledge conversion is a "social" process between individuals as well as betwee
n individuals and an

Organisation. But in a strict sense, knowledge is created only by individuals. An Organisation cannot
create

knowledge by itself. What the Organisation can do is to support creative individuals or provide the

contexts for them to creat
e knowledge. Organisational knowledge creation, therefore, should be
understood

as a process that "organisationally" amplifies the knowledge created by individuals and crystallises it as

part of the knowledge network of the Organisation.


The infatuation i
n the West with knowledge management reflects the bias towards explicit knowledge,

which is the easier of the two kinds of knowledge to measure, control and process. Explicit knowledge
can

be much more easily put into a computer, stored into a database, an
d transmitted online than the highly

subjective, personal and cognitive tacit knowledge. Knowledge management deals primarily with existing

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knowledge. But in order to create new knowledge, we need the two kinds of knowledge to interact with
each

other thro
ugh the actions of individuals within the Organisation.


MIDDLE MANAGERS AS THE KEY PLAYER


In Japan, creating new knowledge is not the responsibility of the selected few but that of everyone in the

Organisation. No one department or group of experts has t
he exclusive responsibility for creating new

knowledge. Front
-
line employees, middle managers and top management all play a part. But this is not to

say that there is no differentiation in the roles that these three play. In fact, the creation of new

knowl
edge is the product of dynamic interaction among the three kinds of players.


Front
-
line employees are immersed in the day
-
to
-
day details of particular technologies, products or

markets. While these employees have an abundance of highly practical informati
on, they often find it

difficult to turn that information into useful knowledge. For one thing, signals from the marketplace can

be vague and ambiguous. For another, these front
-
line employees can become so caught up in their own

narrow perspective that th
ey lose sight of the broader context. Moreover, even when they do develop

meaningful ideas and insights, it can still be difficult to communicate the importance of that information

to others. People don't just receive new knowledge passively; they interpre
t it actively to fit their own

situation and perspectives. Thus, what makes se rise in one context can change or even lose its meaning

when communicated to people in a different context.


25

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Top management provides a sense of direction on where the company sh
ould be headed. It does so, first
of

all, by articulating a "grand theory" on what the company "ought to be". In highly universal and abstract

terms, the grand theory set forth by top management helps to link seemingly disparate activities or

businesses in
to a coherent whole. Second, top management provides direction by establishing a
knowledge

vision in the form of a corporate vision or policy statement. Its aspirations and ideals determine the

quality of knowledge the company creates. Third, top managemen
t provides direction by setting the

standards for justifying the value of the knowledge that is being created. It needs to decide strategically

which efforts to support and develop.


Middle managers serve as a bridge between the visionary "ideals" of the t
op and the often chaotic
"reality"

of those on the front line of business. Middle managers mediate between the "what ought to be" mindset
of

the top and the "what is" mindset of the front
-
line employees by creating middle
-
level business and

product concept
s. In other words, if top management's role is to create a grand theory, middle managers

create more concrete concepts that front
-
line employees can understand. The mid
-
range theory created by

middle managers can then be tested empirically within the compa
ny with the help of front
-
line
employees.


Middle managers, who often serve as team leaders of the product development team in Japan, are in a key

position to remake reality according to the company's vision. In remaking reality, they take the lead in

26

http://www.sveiby.com.au/lessonsJapan.htm.

conv
erting knowledge. Although they facilitate all four modes of knowledge conversion, middle mangers

make their most significant mark in converting tacit images and perspectives into explicit concepts. They

synthesise the tacit knowledge of both frontline emp
loyees and top management, make it explicit, and

incorporate it into new technologies, products or systems. In this sense, middle managers are the true

knowledge engineers of what Nonaka and Takeuchi call "the knowledge
-
creating company".


Middle managers
are the key to continuous innovation in Japan. They are at the very centre of a
continuous

iterative process involving both the top and the frontline (i.e., bottom) employees called middle
-
up
-
down.

In the West, however, the very term "middle manager" has b
ecome a term of contempt, synonymous with

"backwardness", "stagnation" or "resistance to change." Some have argued that middle managers are "a
dying

breed" or "all unnecessary evil".


Another impression we have is that the responsibility for knowledge mana
gement initiatives in the West

rests with the selected few, not with everyone in the Organisation. Knowledge is managed by a few key

players in staff positions, including information processing, internal consultancy or human resources

management. In contra
st in Japan, knowledge is created by the interaction of frontline employees, middle

managers and top management, with middle managers in line positions playing the key synthesising role.


With a few exceptions, notably GE and Hewlett
-
Packard, frontline emp
loyees are not an integral part of

knowledge management. This situation is similar to the days of Frederick Taylor, which did not tap the

experiences and judgments of front
-
line workers as a source of knowledge. Consequently, the creation of

27

http://www.sveiby.com.au/lessonsJapan.htm.

new work metho
ds for scientific management became the responsibility of the selected few in managerial

positions. These "elites" were charged with the chore of classifying, tabulating and reducing the
knowledge

into rules and formulae and applying them to daily work. Th
e danger of knowledge management is in
having

the responsibility for capturing the knowledge gained by individuals and spreading it to others in the

Organisation rest in the hands of the selected few.


Footnotes


Thomas A. Stewart, Intellectual Capital: Th
e New Wealth of Organizations. New York: Doubleday,
1997, p

63.


Based on an interview at Stanford, California on 17 June 1997.


Peter F. Drucker, Post
-
Capitalist Society. New York: Harper Business, 1993 p 193.


Ibid., p 8.


Based on an interview with Dan
Holtshouse, who heads the Knowledge Work Initiative at Xerox
Corporation

at Berkeley, California on 19 May 1997

28

http://www.sveiby.com.au/lessonsJapan.htm.


Ikujiro Nonaka and Hirotaka Takeuchi, The Knowledge
-
Creating Company How Japanese Companies

Create the Dynamics of innovation. New York: The Ox
ford University Press 1995.


Debra M. Amidon, Innovation Strategy for the Knowledge Economy: Tile Kei7 Awakening. Boston:

Butterworth
-
Heinemann, 199 7, p 4 1.


The Economist, 'Mr. Knowledge', 31 May 1997, p 7 1.


Thomas A. Stewart, op cit , pp 112
-
113


Dan

Holtshouse, 'The Knowledge Horizon', unpublished paper, May 1997.


Business Week, 'Management Theory
-

or Fad of the Motit/7?' June 23 1997, p 37.


For his most recent book, see Karl
-
Erik Sveiby, The New Organizational Wealth: Managing and
Measuring

Knowl
edge
-
based Assets. San Francisco: Berrett
-
Koehler Publishers, 1997.


See Leif Edvinsson and Michael S. Malone, Intellectual Capital: Realizing Your Company's True Value
by

Finding Its Hidden Brainpower. New York: Harper Business, 1997, pp 10
-
15.


29

http://www.sveiby.com.au/lessonsJapan.htm.

See Thoma
s A. Stewart, op. cit., pp 124
-
127.


Ibid., p 126.


For more on Work
-
Out, see Noel Tichy and Stratford Sherman, Control Your Destiny or Someone Else
Will.

New York: Currency Doubleday, 1993.


See Thomas A. Stewart, op. cit., pp 137
-
138.


The Economist, op.

cit., p 71.


This section of the paper is taken largely from Nonaka and Takeuchi, op. cit. As we will see later,

conversions from explicit to tacit, explicit to explicit, and tacit to tacit are also possible. However, the

biggest "bang" in organisational
knowledge creation comes from converting tacit to explicit.


This section of the paper is taken largely from Nonaka and Takeuchi.


Takeuchi, op. cit.


Ibid.


Ibid.

30

http://www.sveiby.com.au/lessonsJapan.htm.


W. Chan Kim and Renee Mauborgne, 'Fair Process: Managing in the


Knowledge Economy', Harvar
d Business Review. Jul.
-
Aug. 1997, p 71.


Based on a personal interview with him in Tokyo on 24 June 1997.


Knowledge is defined as "justified, true belief," a concept first introduced by Plato