Essay based on

Ikujiro Nonaka and Hirotaka Takeuchi (1995)

The Knowledge-Creating Company. How Japanese Companies Create the Dynamics of Innovation
Oxford University Press, New York

Summary of the knowledge-creating company

ThisisasummaryofthebookTheKnowledgeCreatingCompanybyNonaka
andTakeuchi(1995),includingfewmyownreflectionsonthevolume.
PartI:Summary
KnowledgeCreatingCompanyisabookworthyofitsname.Thedefinition,
utilizationandproductionofknowledgearethethemesofthishardback.
Thebookincludesanoveltheoryfromtwoauthorssupportedbytheir
casestudiesfromJapaneseindustryandanextensivephilosophical
introductionintoWesternandEasternepistemology.Thephilosophyand
theexamplesmainlyservetojustifyandillustratethemaincontributionof
thebook,whichisanoutlineofknowledgecreation,useandformsof
knowledge.Iwillstartbyreviewingtheformsofknowledge,dismissing
theepistemologicalconcernsandthepartsoncorporatestrategy.
Knowledge
Thebookreliesonthetaxonomyofexplicitandimplicitknowledge
adoptedfromMichaelPolanyi.Polanyihadahistoryinchemistry,but
lateronshiftedhisintereststothephilosophyofscienceandpublished
booksontacitknowing(Polanyi,1958,1967).AsdescribedinWikipedia
(http://en.wikipedia.org/wiki/Michael_Polanyireferenced14.11.2009),
Polanyisinterestinepistemologyshowsinappreciationofroleplayed
byinheritedpracticesforknowledge,andalsopassingknowledgevia
apprenticeship,throughobservationandguidanceofamaster.Thistype

Nonaka & Takeuchi Knowledge-Creating Company commentary by Lassi A. Liikkanen, 2010

ofknowledgewascalledimplicit.Implicitknowledgecouldbefurther
dividedintotechnicalimplicitknowledge,correspondingtoknowhow,
andcognitiveimplicitknowledge.Thelatterpresentsthewealthofbeliefs,
presumptionsandexperiencesthataresharedtypicallywithinacultural
group(nation,company,family,etc.)andarenotcommonlyarticulatedas
theyareassumedtobefamiliartoall(allwordprocessorusersknowwhat
thissymbolstandsfor).Thesetypesofimplicitknowledgeare
functionallydistinctfromexplicitknowledge.
Explicitknowledgereferstobooks,manuals,printedproceduresand
guidesthatexpressinformationclearlythroughlanguage,images,sounds,or
othermeansofcommunication.Explicitknowledgealsoreferstothetype
ofinformationorknowledgethatwesternmanagementstylehas
traditionallybeeninvolvedwith.Forinstance,NonakaandTakeuchi
mentionTaylorismandrationalmanagementtheoryofHerbertSimon
(1945,March&Simon,1958)asexamplesofhowexplicitknowledgeand
procedurescanbeusedtogovernanorganization.
Knowledgeprocesses
Thisbasicdistinctionofknowledgetypesleadstoseveralimplications.
First,theexplicitimplicitcontrastisanessentialbasisforknowledge
creationinacompany.Theauthorsarguethattheconversionofimplicit
knowledgetoexplicitismostcrucialorganizationaland
interorganizationalmethodofknowledgecreation.Earlyon,Nonakaand
Takeuchialsomentionthatideationduringnewproductdevelopment
(NPDhenceforth)andredundancy(competingeffortsandcompetences)
withinNPDorganizationarethesourcesofimplicitknowledge.Thusthe
challengeoftheknowledgecreatingcompanyisensuretheconversionof
implicittoexplicitknowledge.Regardingideation,therolesof
metaphorical,oranalogous,thinkingandambiguityoropennessofdesign

Nonaka & Takeuchi Knowledge-Creating Company commentary by Lassi A. Liikkanen, 2010

briefingforNPDareemphasizedaskeyfactorsofsuccessinJapanese
knowledgecreatingcompanies.
Thenextphaseintheexplicitimplicitconversionconcernstheprocesses
ofhowknowledgecanbetransformed.Fourmodesareconsidered:
socialization,externalization,combinationandinternalization.Before
weenterthisspiralthatconnectsthesemodes,weassumethataperson
hasacquiredimplicitknowledge(proceduralorunderstanding)through
hereffortsinresearchanddevelopment(R&D)forNPD.Itisstatedthat
organizationalknowledgecreationislikeaderivativeofnewproduct
development.Orinotherwords,knowledgeiscreatedintheinteractions
ofthefrontlineemployees.Knowledgeisdefinedasameaningful,action
orientedcommitment,whichextendsthetraditionaljustifiedtruebelief
notionprevalentinWesternthinking.
Implicit
Knowledge
production
(R&D)

Explicit
Socialization
Internalization

Externalization

Combination

Knowledge
use and
recycling
(journalists
& analysts)

Thespiralprocessstartsatsocializationwhereknowledgecanbeshared
withanotherpersonthroughdialogue,observation,imitationorguidance.
Accordingtotheauthors,socializationactivitiesforacompanycouldalso
involveresearchorconsultationofusers,andtheylisttamadashikai
(Hondabrainstormingbootcamps)asoneformofsocialization.This
meansthatinadditionlearningortransferofknowledge,socialization
boostscreationofknowledgethroughcombinedperspectives.
Explicitknowledgeappearsaftersocializationintheexternalizationphase.
Atthisstage,thepossiblyvaguemetaphoricaldialogueornonconceptual

Nonaka & Takeuchi Knowledge-Creating Company commentary by Lassi A. Liikkanen, 2010

observationsareturnedintoexplicitknowledgethatbecomesexternalto
thesubject.Forinstance,inacomputerdatabase,servicemanualorvisual
assemblyguide.Afterexplicitknowledgehasbeencreated,itcanbe
refinedfurther.Combinationisaprocessofsystemizingconceptsintoa
knowledgesystem.Thismodeinvolvescombiningdifferentbodiesofexplicit
knowledge.(p.67)NonakaandTakeuchistressthatdifferentcomputer
systemscanplayanimportantroleinthisprocess.Myfeelingaboutthis
poorlyarticulatedstageisthatishasbeenaddedforthesakeofunifying
thewholeandistoopoorlydefinedandoperationalized,lackingaclear
functionincontrasttotheotherphases.
Thefinalmodeofknowledgeprocessingisinternalization.Itisthe
counterpartofsocializationandreferstothesuccessfultransferof
knowledgetoapersonfromabookordatabasetoanotherperson.Once
thepersongainstheabilitytoutilizenovelknowledge,thisknowledge
becomessuccessfullyinternalized.Asexample,theauthorsmentionGE
newNPDstaffreexperiencingcustomerdifficultiesfromhelpcenter
transcriptsorprototyping1,800hoursworktimegoalatMatsushitafor
onemonth.Thisemphasizesthatinternalizationgoesbeyondfacts,into
sharingfeelings,experiencesandknowhowandcouldthiswaybeeasily
connectedtonumerousdesignapproachespresentlypopularin
interactionandproductdesignthinking.
Theauthorsexplainthatthesefourmodesofknowledgecreation
penetratethroughtheidealorganization.Eventhoughtheknowledgeis
createdattheindividuallevel,itshouldbepassedontootherlevelsof
organization(externalization)inordertobeexploitedwidely
(internalizationandcombination).Thisprocessisdepictedasaspiral
modelofknowledgecreatingorganizationshownonthefollowingfigure:

Nonaka & Takeuchi Knowledge-Creating Company commentary by Lassi A. Liikkanen, 2010


Theorganizationneedstosupportthespiralprocess.Thewriters
introducefiveorganizationalenablersofknowledgecreation.Theseare
1.
2.
3.

Intentionandcommitmentintheorganization
Autonomyatalllevels(crossfunctionality,selforganization))
Fluctuationandcreativechaos(breakdownofpatternsand
standards,reflectioninaction,cf.Schn[1983])
4.
Redundancy(internaloverlapsandcompetition)
5.
Requisitevariety(alongAshby,1956;meetingexternal
complexitywithinternaldiversity,staffheterogeneity)

Inthisdescriptionoftheorganizationalsupport,NonakaandTakeuchi
comeclosertorealizingtheirmodelinactualorganizations.Thefive
enablersmainlydescribehowthecompanyR&Dshouldbeorganizedto
ensuresuccessinknowledgecreation.Theyfurthergodescribeafivestep
model,whichissomewhataderivatefromtherugbyteammetaphor(all
playersconstantlymovingandlookingwaystoturnthegamefortheir
teamsadvantage)usedtodescribesuccessfulJapaneseindustryunits.

Nonaka & Takeuchi Knowledge-Creating Company commentary by Lassi A. Liikkanen, 2010

Organizingforknowledgecreation
ThefirstpartinR&D(hereequivalentoforganizationalknowledge
creation)isutilizingtacitknowledgethroughsocializationand
internalization.Throughtheseknowledgeventures,new(product)
conceptscanbecreated.Conceptsneedtobejustified(theanalogyfrom
authorsreferencesthetraditionalepistemologicalclaimofjustifiedtrue
belief,butremainsabithollow)tobeaccepted.Afterthisarchetypescanbe
built.Theprocessconcludesincrosslevelknowledgetransfer,whichshould
involvethewholeorganization.Althoughauthorsareexplicitlyproposing
thisprocess,theydolateroninthebookbringupthatthiscannotbea
cascadingrelaymodel,butaparallel,rugbystyleprocess.
NonakaandTakeuchiarealsoproposinganewkindoforganizational
model,onethatfocusesonknowledgeastheresourceforacompanys
innovativesuccess.Toimplementtheirvision,theycriticallyevaluatethe
existingmanagementmodels.Thebureaucratictopdownmodels(e.g.
Taylor,Weber,Simon)areputanexttobottomupmodels(e.g.3M)anda
new,considerablydifferentmiddlegroundmodelisrequested.The
bottomuporganizationsreceiveinmymindstrangeaccusationsstating
thatthefrontlinehastoonarrowfocusandcannotgeneralizethe
knowledgetheyproduceforthebenefitofthecompany.Sotheauthors
suggestremovingthepressurefrombothtopmanagementandfrontline
employeestomiddlemanagerswhoarecommonlydisapprovedbythe
westernmanagementthinkersquotedbyNonakaandTakeuchi.Itissaid
thatmiddlemanagersprovideaconceptualframeworktoputthingsintoa
perspective,providingthemaheroicroleinthemiddleupdown
structuredepictedbythebook.
Theintroductionofthenewmodelisfollowedbyadiscussiononthe
benefitsofbureaucraticandtaskforceorganizationstyles.Through

Nonaka & Takeuchi Knowledge-Creating Company commentary by Lassi A. Liikkanen, 2010

examplesfromUSandJapanesearmy,theauthorsarguethatbureaucracy
mayworkinstable,predictableenvironmentutilizingitsstandardand
formaloperatingprinciples,butataskforcestructureusedforephemeral,
crossfunctionaltermsmaybebetterfordynamicenvironments.However,
theyseethatagoodorganizationshouldcombinecharacteristicsofboth,
inaformatcalledhypertextorganization.Thismodelismetaphorofthe
hypertextusedincomputers,referringtoconvenientandeasyswapping
betweendifferentperspectives.Itisillustratedinthefollowingfigure:

People move

Business structure

Knowledge is
disseminated

Project structure

Knowledge base

Knowledge is
produced

Themainideaofthehypertextorganizationisthenonambiguous
positioningofknowledgepractitionersbetweenbusinessteamsand
projectteams(bothlabeledstructuresinthefigure),incontrasttoexisting
matrix,taskforceorcrossfunctionalorganizationmodels.Thusproject
teamsshouldbefreeandautonomousastheyplease.Theknowledge
productionhappensmostlywithinprojectteams.
BooksexampleofanidealprojectteamisSharp,whichhadURGENT
projectteams.Theseteamswereseparatedformprojectteamsandregular
structureswithprivilegedgoldenpatches.Withthepatch,theyreceive
unlimitedresourcesandsolelydedicatedtotheURGENTproject.The
knowledgebaseinNonakaandTakeuchithinkingcorrespondstoboth
implicitandexplicitcompanyknowledge,formerinphilosophyand

Nonaka & Takeuchi Knowledge-Creating Company commentary by Lassi A. Liikkanen, 2010

vision,latterinlectures,newsletteranddatabases,forexample.Case
studyofKaoCorporationshowedhowtheyhadstackedknowledgebase
intofivescientificcategoriesconsideredcoreelementsoftheirproduct
R&D.
Globalknowledgecreation
Finalpartofthebookconcernsknowledgecreationinglobal,
multiculturalorganizations.Usingtwocaseexamples,Nissanautomobile
andShinCaterpillarMitsubishi,theyillustrateboththedifferences
betweenJapaneseandUSandculturalenvironmentsofEuropevs.Japan
trafficenvironments.Themessageisthatcrossculturalsocializationis
necessarytoovercometheobstaclescreatedbytheconsiderable
differencesin(tacit)knowledgeandvalues.Thissocializationcanhappen
throughexperiencingforeigncultureandsocializingwithforeigners.The
caseofNissantryingtocreatethefirstEuropeanstylesuccess(Primera)
showstwooutcomesofthissocialization:understandingthemarket
(whatsells,attractsinEurope)andbridgingtheknowledgegap
(exportingexpertise,ortacitknowledge,toenableproduction).
Inoverall,itbecomesobviousthattheJapanesehavemoretrustintacit
knowledge,acquiredthroughbeingthere,whereasAmericanemployees
wantthingsspelledoutandjustifiedinanexplicitform.Thisshowsin
howJapanesetrustauthoritiesalmostblindly,possiblybecauseofshared
tacitknowledgeissupposedtocoverupforthelackofexplicit
justificationindecisionmaking.IwouldthusdepictJapanesepractitioners
orknowledgeproducersasdistilledsupermenengineerswithsecretpowers
whereasWesternersareindividualmenwithmanuals.Therealityisnotso
blackandwhitebutthebookdoesentertainthiskindofhypothesis.

Nonaka & Takeuchi Knowledge-Creating Company commentary by Lassi A. Liikkanen, 2010

Thebookconcludesbyputtingtogetherthemainargumentsembeddedin
pairedconcepts.Theyarelistedhere,extremesseparatedbyaslashand
theauthorsmiddleconceptinparenthesesifsuchwaspresented:
Tacit/explicit

[spiralofconversion]

Body/mind

[oneness]

Topdown/bottomup

[middletopdown]

Bureaucracy/taskforce

[hypertext]

Relay/rugby

[Americanfootball]

Eastern/western

[crosssocialization]

Individual/organization

Thisconcludesthesummaryandthoseinterestedinlearningmoreabout
theintriguingcasestudiesarerecommendedtorefertotheoriginal.
PartII:DiscussionandConclusions
Thedescriptionofknowledgecreationanddiscussiononitsimportance
providedbyNonakaandTakeuchiisveryenticing.However,Idonot
findallpartstheirtheoryascompellingasothers.Tometheirgreatest
contributionisinelaboratedanalysisofhowtypesofknowledgecometo
being,interactandwhattheysignify.
Ifeelthatthetypesofimplicitknowledgeshouldaddathirddimension
whichmayalsobeimportantforknowledgecreating,innovative
organizations.Asstressedbytheauthors,requisitevarietymaynotonly
refertotheknowledgebasespossessedbytheorganizationmembers,but
totheirpersonalcharacteristics,values,insightsandfeelingswhichmay
influencetheirproductionanddecisionmaking,performancewithina
companyaliketechnicalandcognitiveimplicitknowledge.Important
notionisthatthesequalitiesarenotkindofknowledgethatcouldbe
easily(ifatall)internalized;i.e.everythingsnotknowledge.Ontheother

Nonaka & Takeuchi Knowledge-Creating Company commentary by Lassi A. Liikkanen, 2010

hand,whathasbecometobeknownasexperientialknowledgeiswidely
appreciatedbytheauthors.Thiscouldbethoughtofasapredecessorof
experienceprototyping,designmethodologylaterondefinedby
innovativeUSdesigncompanies(Buchenau&Suri,2000).
Theperspectivetakenbytheauthors,namelyhowJapanesecompanies
succeedininnovationgamethroughknowledgemanagementisalsotheir
weakspot.Whiletheydogotogreatdetailinrevealingthefallaciesand
culturalbiasesinUSandEuropeanR&Dmindset,theyremainblindtothe
inherentproblemsintheirbelovedJapaneseR&Dculture.Ofcourse,the
roleofdevilsadvocatehereisaneasyone,butmoreselfcriticismwould
havestrengthenedthebook.
Readingthebookabout15yearsafteritspublicationandalmostthree
decadespastfrom1982whentheideasfirstsparked,theR&Dworldhas
somewhatchanged.TheincludedJapanesegiants,Honda,Nissan,
Matsushita,Sharpandsoforthhavenotperished,buttheyhavenot
gainedanyparticularedgesincethen.Forinstance,wouldtherebeany
proofthatthehypertextorganizationpromotedinthebookatSharpreally
achievedsomethingremarkable?
Oneimportantchangeinthetimesincethenisthatthedifferentformsof
usercenteredproductdevelopmentanduserinnovationmethodshave
madeabreakthrough.NonakaandTakeuchidoalreadydiscuss
prototypesascommunicationmediumbetweenR&Dorganizationand
outsider(toplevelmanagement,customers,soforth),buttheirviewof
R&Dremainsscienceortechnologydriven.Thisiscontrastedtothetime
marketdrivenUSdevelopmentstyle.Thetechnologydriveisvery
evidentthroughthebook.Eventhoughsomehintsofhumanfactors
revealthemselveseveryhereandthere,theygenerallyseemtoholdthe

Nonaka & Takeuchi Knowledge-Creating Company commentary by Lassi A. Liikkanen, 2010

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assumptionthatboss(orthesupermanengineer)knowswhatsbestfor
theconsumer.
IbelievethatthisglobalfallacyisaugmentedinJapaneseenvironment
wheretheauthoritarianruleincompaniesisstillstrong.Forinstance,the
caseexampleofdevelopinganElectronicorganizeratSharpcouldbe
interpretedasaprimeexampleofthis(p.190192).Oneyears
developmenteffortswerediscardedbythetopmanagementwithout
explicitfeedback.Laterontheteamresponsiblefortheconceptfoundout
thattheprobablereasonforrejection(andwhatwouldhavebeen
deleteriousinthemarket)wasthelackofKanjialphabet.Tome,this
highlightsalackofinsightforuserdrivenR&Dinnovationandblind
faithinauthority,possiblyemergingfromtheexpectationsofrationalizing
thesituationbasedontacitbeliefs(youshouldknowthatthiscannot
work).Fortheformeraccusation,IseethatNonakaandTakeuchiare
somewhatmisguidedintheirdiscussionofcrossculturalsocialization.
Theyarerightinacknowledgingthevitalityoftheissue,buttheir
methodsofachievingcrossculturalinsightstayfullyexpertdriven.
Tobelessharshonthebook,bytheendauthorsdobringupthevalueof
customerinput.Creativecustomersadeptatexternalizingtheirtacitneeds
(p.235)andactingasopinionleadersarehighlightedasanimportant,
possiblyunderusedsourceofknowledge.However,themainfuelforthe
knowledgecreatingcompanyisitsownknowledgebase(oftechnology
andscience),whichdrivesthedesignercenteredR&Dtoprosper.

Nonaka & Takeuchi Knowledge-Creating Company commentary by Lassi A. Liikkanen, 2010

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References
Ashby,W.R.(1956)AnIntroductiontocybernetics.Chapman&Hall
Buchenau,M.,&Suri,J.F.(2000).Experienceprototyping.Paperpresentedat
3rdconferenceonDesigninginteractivesystems:processes,practices,
methods,andtechniques,NewYorkCity,NewYork,UnitedStates.
March,J.G.&Simon,H.(1958)Organizations.JohnWiley&Sons
Polanyi,M.(1958)Personalknowledge:towardsapostcriticalphilosophy.
UniversityofChicagoPress
Polanyi,M.(1967)TheTacitdimension.UniversityofChicagopress
Simon,H.(1945)Administrativebehavior.Macmillan
Schn,D.A.(1983).Thereflectivepractitioner:howprofessionalsthinkin
action.Aldershot:Arena.

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