22 A Theory of Organizational Knowledge Creation: Understanding the Dynamic Process of Creating Knowledge tkujiro Nonaka, Ryoko Toyama, and Philippe Byosiére In recent years many researchers have argued that knowledge and the capability to create and utilize it are the most important sources of a firm's sustainable competitive advantage (Cyert, Kumar, and Williams 1993; Drucker 1993; Nonaka 1990, 1991, 1994; Nonaka and Ta- keuchi 1995; Quinn 1992; Sveiby 1997; Teece, Pisano, and Shuen 1997; Toffler 1990; Winter 1987). Ina world where markets, products, tech- nologies, competitors, regulations, and even entire societies change very rapidly, continu- ous innovation and knowledge that enables such innovation have become important sources of sustainable competitive advantage. Quinn (1992) observed that a company’s com- petitive advantage increasingly depends on such knowledge-based intangibles as technolo- gical know-how and an in-depth understand- ing of customers. Drucker (1993) argued that knowledge has become the only meaningful Tesource in business today. Toffler (1990) claimed that knowledge is the source of the highest quality power and the key to the shifts in power that lie ahead. Knowledge accumu- lated through organizational learning is an important source of a firm's sustainable com- petitive advantage because it is nontradable and difficult to imitate (Edvinsson and Malone 1997; Grant 19964; Nelson 1991; Prahalad and Hamel 1990). This kind of knowledge has a strong tacit dimension, is embedded in local organizational skills and routines, and is tailored to a firm’s specific needs (Dierickx and ‘Cool 1989; Henderson and Cockburn 1994; Leo- nard-Barton 1992, 1995). Yet, despite all the attention that leading ob- servers have devoted to organizational know- ledge creation, and despite all the talk about intellectual capital and knowledge-based management, very few people understand how organizations create and manage know- ledge. Management scholars recognize the need for new knowledge-based theory that differs ‘in some fundamental way from the Kinds of explicit abstract theories which have characterized both economics and organiza- tional theory’ (Spender and Grant 1996: 8). Such a theory, however has yet to be estab- lished, partly because the theory of the organ- ization has long been dominated by the information processing paradigm. In this para- digm, which is deeply ingrained in the trad- itions of Western management from Taylor (911) to Simon (1947, 1973), the organization is, viewed as an information-processing machine that takes and processes information from the environment in order to solve a problem and adapt to the environment. For example, Choo (2998) still relied on this view of the organiza- tion in his ‘knowing organization’ model, treating knowledge creation as a mere part of the process in which an organization processes information in order to reach rational decisions based on a given goal. The problem with this492. Nonaka, Toyama, and Byosiére paradigm is that its view of the organization and of knowledge creation is static and passive, characteristics that preclude an adequate expla- nation of the dynamic process of innovation. Although the terms ‘information’ and ‘knowledge’ are often used interchangeably, there is a clear distinction between them. In- formation is a flow of messages, whereas know- ledge anchored in the beliefs and commitment of its holder is created by that flow of informa- tion, Information provides a new point of view for interpreting events or objects. As Bateson (1979) put it, ‘information consists of differ- ences that make a difference’ (p. 5). Thus, in- formation is a necessary medium or material for eliciting and constructing knowledge. In- formation affects knowledge by adding some- thing to it or restructuring it (Machlup 1983). ‘When organizations innovate, they do not merely process information. Rather, they create new information and reshape the environment through interactions with their environments (Cyert and March 1963; Levinthal and Myatt 1994; March 1991). Instead of merely solving problems, organizations createand define prob- Jems, develop and apply new knowledge in order to solve these problems, and then further develop new knowledge through problem- solving activities. An organization is not a mere information-processing machine, but an entity that creates knowledge through action and interaction. An organization actively inter- acts with its environment, reshaping this envir- ‘onment and even itself through the process of knowledge creation. Hence, the most import- ant aspect in understanding the dynamic knowledge-related capabilities of a firm is the focus on how it can continuously create new knowledge from its existing capabilities and not on the stock of knowledge, such as a par- ticular technology, that a firm possesses at one point in time (Barney r99r; Lei, Hitt, and Bettis 1996; Nelson 1991; Teece, Pisano, and Shuen 1997; Wilkins 1989). Organizational learning theories have long dealt with the issue of continuous change in organizations (Dodgson 1993). Organizations cope with changes in their environments and change themselves through learning. To con- vey this concept, Senge (1990) proposed a model of what he called the ‘learning organ- ization’, that is, an organization that has the capacity for both passive, adaptive learning and active, generative learning as sustainable sources of competitive advantage. However, there are still some critical limita- tions in the existing studies of organizational learning. First, organizational learning theories basically lack ‘the view that knowledge devel- opment constitutes learning’ (Weick r99r: 122). The majority of studies in organizational learn- ing are based on behaviorism; they focus on stimulus and response. The behaviorist para- digms treat all learning subjects as black boxes, leaving the learning processes existing therein largely unexplained. Second, most of the studies in organizational learning are still based on the paradigm of individual learning (Dodgson 1993; Weick 1991). A comprehensive view of what constitutes organizational learn- ing has yet to be established. Third, most of the studies have failed to address not only the ac- tive and generative side of learning but also the knowledge creation that results from that learning. With few exceptions, such as Brown and Duguid (x991), Daft and Weick (1984), and Duncan and Weiss (1979), organizational learning theories have focused excessively on the passive aspect of learning, on how organiza- tions adapt to change. Fourth, organizational learning theorists implicitly or explicitly as- sume that double-loop learning, which is the questioning and rebuilding of existing perspec- tives, interpretation frameworks, or decision- making premises (Argyris and Schén 1978), 1s difficult to implement and that organizations need special instruments to trigger this type of, learning. However, organizations question and reconstruct existing perspectives, frameworks, or premises on a daily basis through a continu- ‘ous process of knowledge creation. Creating knowledge is a continuous, self-transcending process in which one reaches beyond the boundaries of one’s own existence (antsch 1980); it is not a special kind of learning at one point in time. Building on this view of the organization as an entity that creates knowledge continuously,our goal in this chapter is to understand the dynamic process whereby an organization creates and mariages knowledge. In the follow- ing sections we discuss the basic concepts of the knowledge-creation process in organizations, the ways in which the process is managed, and the organizational issues involved, The Knowledge-creation Process In our theory of knowledge-creation process, we adopt the traditional definition of know- ledge as justified true belief, However, our focus is on the ‘justified’, rather than on the ‘true’ aspect of belief. In traditional Western epistemoiogy, ‘truthfulness’ is the essential at- tribute of knowledge. It is an absolute, static, and nonhuman view of knowledge. This view, however, fails to address the relative, dynamic, and buman dimensions of knowledge. As Whitehead stated, ‘there are no whole truths; all truths are half-truths’ (Whitehead 1954: 16). Knowledge is context-specific and relational. It depends on the situation. Knowledge is dy- namic, for it is dyriamically created in social : ba : (Platforms for Knowledge a creation) : Creating Organizational Knowledge 493 interactions between individuals both within and across organizations. Knowledge is also human and hasan active and subjective nature conveyed by such terms as ‘commitment’ and ‘belief’, which are deeply rooted in individuals’ value systems. Knowledge is essentially related to human action and emotion (Scherer and Tran, Ch. 16 in this volume). In this study we consider knowledge to be ‘a dynamic human process of justifying personal belief toward the “truth” ’ (Nonaka and Takeachi 199s: 58). To understand how organizations create knowledge dynamically, we propose a multi- layered model of knowledge creation (Nonaka, Konno, and Toyama 1998). In this model the three layers of knowledge creation must inter- act with each other in order to form the knowl- edge spiral that creates knowledge (see Fig. 22.1), The three layers are (a) the process of knowledge creation through socialization, externalization, combination, and internaliza- tion (SECI), the knowledge-conversion pro- cesses between tacit and explicit knowledge; (b) ba, the platforms for knowledge creation and (c) knowledge assets, or the inputs, out- puts, and moderator of the knowledge-creation, process. Fig. 22.1. Three layers of the knowledge-creation process, including ba (platforms for knowledge creation) and SECI (socialization-externalization~combination~in- ternalization processes) ‘Adapted from ‘Leading Knowledge Creation: A New Framework for Dynamic Knowledge Manage- ment’, by 1. Nonaka, N. Konno, and R. Toyama, paper presented at the Second Annual Knowledge Management Conference, Haas School of Business, University of California Berkeley, 22-24 September 1998.494 Nonaka, Toyama, and Byosiere The SECI Process: Four Modes of Knowledge Conversion There are two types of knowledge: explicit knowledge and tacit knowledge. Table 22.1 summarizes the qualities of these two types of knowledge. Explicit knowledge can be ex- pressed in formal and systematic language and can be shared in the form of data, scientific formulae, specifications, manuals, and so forth. It can be easily ‘processed’, transmitted, and stored. Explicit knowledge is about past events or objects ‘there and then’, and it is oriented to a context-free theory. It is sequentially created by digital activity. Tacit knowledge, on the other hand, is highly personal and hard to for- malize. As Polayni (1966) put it, ‘we can know more than we can tell’ (p. 4). Subjective in- sights, intuitions, and hunches fall into this category of knowledge. Tacit knowledge is deeply rooted in action, procedures, routines, commitment, ideals, values, and emotions (Cohen and Bacdayan 1994; Sch6n 1983; Winter 1994). In addition, tacit knowledge is often ‘here and now’ in a specific, practical context of time and space (Hayek 1945). It entails an analog quality. It is difficult to communicate tacit knowledge to others because it is an ana- Jog process that requires a kind of simultaneous processing. Tacit knowledge includes technical and cog- nitive elements. The technical elements of tacit, knowledge encompass informal and hard- to-pin-down know-how, crafts, and skills. Mas- ter artisans, for example, develop a wealth of expertise ‘at their fingertips’ after years of experience. But it is often difficult for them to articulate the scientific or technical princi- Table 22.1. Tacitand explicit knowledge ples behind their knowledge. On the other hand, the cognitive elements center on what Johnson-Laird (1983) called ‘mental models’, through which human beings create working models of the world. Mental models, such as schemata, paradigms, perspectives, beliefs, and viewpoints, help individuals perceive and de- fine their world by enabling them to make and manipulate analogies in their minds, It is im- portant to note that the cognitive elements of tacit knowledge reflect an individual’s images of reality (i,e. what is) and his or her visions for the future (i.e. what ought to be). As discussed later in this chapter, the articulation of tacit mental models is a key factor in creating new knowledge. Westerners tend to view knowledge as expli- cit. Japanese, on the other hand, tend to regard knowledge as primarily tacit. In reality, these two types of knowledge are complementary, and both are crucial to knowledge creation. Excessive focus on explicit knowledge can eas- ily lead to ‘paralysis by analysis’, whereas ex- aggerated valuation of tacit knowledge tends to foster overreliance on past successes. Without experiences, one has difficulty gaining under- standing. And unless one goes beyond experi ences, universality cannot be achieved. If one does not analytically reflect on experiences, the same things will be repeated over and over, with no increase in the quality 0f know- ledge. By analyzing experiences, one under- stands their meaning, which can then be applied to the next experience. In this way, tacit knowledge and explicit knowledge inter- act and interchange with each other in the creative activities of human beings. Under- standing this reciprocal relationship is the key Tacit knowledge (subjective) Explicit knowledge (objective) Knowledge of experience (body) Simultaneous knowledge (here and now) ‘Analog knewledge (practice) Knowledge of rationality (mind) Sequential knowledge (there and then) Digital knowledge (theory)to understanding the knowledge-creation process. We call the interaction of the two types of knowledge ‘knowledge conversion’. This con- version isa social process between individuals; it is not confined within an individual. Know- ledge is created through interactions between individuals with different types and contents of knowledge. Through this process of social conversion, the quality and quantity of both tacit and explicit knowledge exparid (Nonaka 1990, x991, 1994; Nonaka and Takeuchi 1995). ‘There are four modes of knowledge conver- sion: (a) socialization (from tacit knowledge to tacit knowledge), (b) externalization (from tacit knowledge to explicit knowledge), (c) combina- tion (from explicit knowledge to explicit know- ledge), and (a) internalization (from explicit knowledge to tacit knowledge). Table 22.2 lists the factors that characterize the four knowledge conversion modes. We discusseach of these four modes in detail below. Socialization Socialization is the process of bringing together tacit knowledge through shared experiences. Because tacit knowledge is context-specific and difficult to formalize, the key to acquiring tacit knowledge is to share the same experience through joint activities. The quintessential ex- ample of socialization is traditional apprentice- ship. Apprentices learn their craft not through spoken words or written textbooks but through observation and imitation of the works of their masters and through practice. Another ‘example of socialization is the use by Japanese companies of informal meetings outside the workplace. Participants talk over meals and drinks, creating common tacit knowledge, such as a worldview, and mutual trust, Social- ization also occurs outside organizational boundaries. Organizational members interact with customers or suppliers in order to share and take advantage of their tacit knowledge. Such socialization often takes place during a new product's development process. Socialization is difficult to manage because it is the conversion of tacit knowledge. In order Creating Organizational Knowledge 495 to promote socialization, the members first should be provided with high-quality physical experiences so that their tacit knowledge can accrue. The richness of tacit knowledge pro- motes the creation of knowledge, and it also becomes the motivating force for the genera- tion of high-quality knowledge. Second, love, care, and trust must be cultivated among mem- bers so that they can transcend the individual boundaries and share tacit knowledge. Externalization Externalization is the process of articulating tacit knowledge as explicit knowledge. Of the four modes of knowledge conversion, external- ization is the key to knowledge creation be- cause it creates new, explicit concepts from tacit knowledge. When tacit knowledge is made explicit, knowledge becomes crystal- lized, at which point it can be shared by others and can be made the basis for new knowledge. Externalization comes about, for example, when a research and development (R&D) team tries to clarify the concept for a new pro- duct or when a skilled worker attempts to set down his or her embodied technical skills in a manual. ‘The successful conversion of tacit knowledge into explicit knowledge depends on the se- quential use of metaphors, analogies, and models. Metaphor is a way of perceiving or in- tuitively understanding one thing by imagin- ing it symbolically as another thing. Metaphor is an important tool for creating a network of new concepts. Using metaphor makes it pos- sible to continually relate concepts that are far apart in one’s mind, even to relate abstract con- cepts to concrete ones. The imbalance, incon- sistency, or contradiction that is brought about by the association of two unlike concepts through metaphor often leads to the discovery of new meanings and even to the formation of a new paradigm. The contradictions inherent in a metaphor are then harmonized by analogy, which throws light on the unknown by highlighting the similarities of two different things. Analogy helps one understand the un- known through the known and bridges the gap496 Nonaka, Toyama, and Byosiére Table 22.2. The factors constituting the knowledge-conversion process in companies Description Factor Socialization: from tacit knowledge to tacit knowledge ‘Accumulation of tacit Managers gather information from sales and production sites, share knowledge experiences with suppliers and customers, and engage in dialogue with competitors Extrafirm collection of social Managers wander about outside their firms, gathering ideas for information corporate strategy from daily social life, interacting with extemal experts, and meeting informally with competitors Intrafiem collection of social Managers find new strategies and market opportunities by information wandering inside the firm Transfer of tacit knowledge Managers create a work environment that allows peers to observe demonstrations by and the practice of master craftsmen in order to understand the expertise that their work involves Externialization: from tacit knowledge to explicit knowledge Managers facilitate creative and essential dialogue, ‘abductive thinking’, the use of metaphors to foster concept creation, and the inclusion of industrial designers in project teams Combin: from explicit knowledge to explicit knowledge ‘Acquisition and integration Maragers plan strategies and operations, drawing on published literature, computer simulation, and forecasting in orcler to assemble internal and external data Synthesis and processing Managers create manuals, documents, and databases for products and services and gather management figures, technical information, or both throughout the'company Dissemination Managers plan and make presentations in order to transmit newly ‘created concepts Internalization: from explicit knowledge to tacit knowledge Personal experience, acquisition Managers engage in ‘enactive llaisoning’ activities with functional of real-world knowledge department through members of cross-functional development teams, overlapping product development. Managers search for and share new values and thoughts, share and try to understand management visions and values by communicating with fellow members of the organization Simulation and Managers facilitate prototyping and benchmarking and foster a spirit experimentation; acquisition of of challenge within the organization. Managers form teams as a virtual-world knowledge model, conduct experiments, and share results with the entire department ‘Note: Adapted from Nonaka et al. 1994: 344. (© 1994 Elsevier Sclence Ltd.between an image and a logical model. Once explicit concepts are created, they can then be modeled. Models are usually generated from metaphors when new concepts are created in the business context. Combination Combination is the process of connecting discrete elements of explicit knowledge into a set of explicit knowledge that is more com- plex and systematic than any of its parts. Knowledge is exchanged and combined through such media as documents, meetings, telephone conversations, and computerized communication networks. The reconfiguration of existing knowledge through sorting, adding, combining, and categorizing can create new knowledge. When a comptroller of a company collects information from the entire organiza- tion and puts it together in a financial report, that report is new knowledge in the sense that it synthesizes information from many different sources. Combination can also include the ‘break- down’ of concepts. For example, middle man- agers analyze and break down a concept, such as a company vision or a new product concept, into workable action plans, suchas operational- ized business plans or design tasks. In practice, combination entails three pro- cesses. First, explicit knowledge is collected from inside or outside the organization and then combined. Second, the new explicit knowledge is disseminated among the organ- izational members. Third, the explicit know- ledge is edited or processed in the organization in order to make it more usable. Creative use of computerized communication networks and large-scale databases can facilitate this mode of knowledge conversion. Internalization Internalization is the process of embodying explicit knowledge as tacit knowledge. It is closely related to learning-by-doing. Through intemalization, knowledge that is created is shared throughout an organization. Internal- ized knowledge is used to broaden, extend, Creating Organizational Knowledge 497 and reframe organizational members’ tacit knowledge. When knowledge is internalized in individuals’ tacit knowledge bases through shared mental models or technical know-how, it becomes a valuable asset. This tacit knowl- edge accumulated at the individual level is, in turn, shared with other individuals through socialization, and it sets off a new spiral of knowledge creation. In practice, internalization entails two di- mensions. First, explicit knowledge must be embodied in action and practice. The process of internalizing explicit knowledge actualizes concepts about or methods for strategy, tactics, innovation, or improvement. For example, training programs help trainees understand the organization and themselves. Second, ex- plicit knowledge can be embodied through simulations or experiments in order to trigger learning-by-doing. Thus, new concepts or methods can be learned in virtual situations. Knowledge is created through a continuous and dynamic interaction between tacit and ex- plicit knowledge. This interaction is shaped through the SECI process, that is, through the shifts from one mode of knowledge conversion to the next: socialization, externalization, com- bination, and internalization. Figure 22.2 illus- trates the four modes of knowledge conversion and the evolving spiral movement. The SECI process is not confined to one on- tological level, that is, the level of knowledge- creating entities (e.g. individual, group, organ- izational, and interorganizational actors). The organization must tap into the tacit knowledge created and accumulated at the individual level, for tacit knowledge of individuals is the basis of organizational knowledge creation, ‘The tacit knowledge created is organizationally amplified through four modes of knowledge conversion and is crystallized at higher ontolo- gical levels. We refer to this amplification as the ‘knowledge spiral’. It represents a dynamic pro- cess in which the scale of the interaction be- tween tacit knowledge and explicit knowledge increases as it moves up the ontological levels. Starting at the individual level, the spiral as- cends through expanding communities of interaction that spans sectional, departmental,498 Nonaka, Toyama, and Byosiére Socialization Empathizing Tacit Externalization Articulating ypiidsg Embodying Tacit Internalization Explicit Connecting Combination Explicit yous Fig, 22.2. The four modes of knowledge conversion and the evolving spiral movement Adapted from The Knowledge-Creating Company: Hew Jopanese Companies Create the Dynamics of Imovation by ikujiro Nonaka and Hirotaka Takeuchi, copyright © 1995 by Oxford University Press, Inc. Used by permission of Oxford University Press, Inc. divisional, and even organizational bound- aries. The process of organizational knowledge creation is not confined to the organization; it includes many interfaces with the environ- ment as well. Not only does the environment receive the explicit knowledge created by the organization (e.g. technologies, products or services, values, and so on), it also supplies knowledge to be brought into a new cycle of organizational knowledge creation. Firms ac- quire knowledge from outside sources such as customers, suppliers, and competitors and uti- lize such knowledge to create their own know- ledge (see Child, Ch. 29; and Hedberg and Holmqvist, Ch. 33 in this volume). For ex- ample, many dimensions of customer needs take the form of tacit knowledge that custo- mers cannot articulate by themselves. A pro- duct works as a trigger to articulate such tacit knowledge. Customers give meaning to the product by purchasing, adapting, using, or not purchasing it. This mobilization of the tacit knowledge of customers will be reflected back to the organization, anda new process of organ- izational knowledge creation will be initiated. Organizational knowledge creation is a never-ending process that upgrades itself con- tinuously. A spiral emerges when the interac- tion between tacit and explicit knowledge is elevated dynamically from a lower ontological level to higher ontological levels. This interac- tive and spiral process, which we call the cross- leveling of knowledge, takes place both intra- and interorganizationally. Through the cross- leveling of knowledge, new spirals of know- ledge creation are triggered. For example, when created knowledge is presented to other departments, it can lead to the internalization of this knowledge by individuals, who thus gain tacit knowledge. Thus, an entire new SECI process can begin. In short, the continued dynamism of turning ideas into words, words into forms is a main characteristic of organiza- tional knowledge creation. Ba: The Foundation for Knowledge Creation The foundation of the SECI process described above is ba (roughly meaning ‘place’). Based ona concept that was originally proposed by the Japanese philosopher Kitaro Nishida (1933/ 1970) and that was further developed by Shi- mizu (1995), ba is defined in this chapter as a context in which knowledge is shared, created, and utilized, in recognition of the fact that knowledge needs a context in order to exist. In the process of knowledge creation, the gen- eration and regeneration of ba is key (Nonaka and Konno 1998; Nonaka, Konno, and Toyama 1998). Ba does not necessarily mean a physical space. It can be a physical space (e.g. an office or multilocation business space), virtual space (e.g. E-mail, teleconference), mental space (e.g. shared experiences, ideas, ideals), or any com- bination of these kinds of spaces. The most important aspect of ba is interaction. As dis- cussed above, the power to create knowledge is embedded not just within an individual but also within the interactions with other indi- viduals or with the environment. Ba is a space where such interactions take place. Knowledge held by a particular individual can be shared, recreated, and amplified when that person par- ticipates in ba. Ba as an interaction means that ba itself is knowledge rather than a physical space con- taining knowledge or individuals who have knowledge. Interactions between individuals, interactions between individuals and the envir- onment, and ba that contains such interactions are a dynamic form of knowledge. Therefore, the knowledge-creation process is also the pro- cess of creating ba, of creating a boundary of new interaction. Ba is also conceived of as the framework in which knowledge is activated as a resource. Because knowledge is intangible, without boundaries, and dynamic, and because it can- not be stocked, the use of knowledge requires the concentration of knowledge resources in a certain space and at a certain time. For example, when knowledge is created, the per- sonnel possessing knowledge and the know- ledge base of a company are brought together at a defined space and time, that is, ba. Ba works as the platform for the concentration of the organization’s knowledge assets, for it collects the applied knowledge of the area and integrates it. Thus, ba can be thought Creating Organizational Knowledge 499 of as being built from a foundation of know- ledge. The concept of ba seems to have some similarities with the concept of a ‘community of practice’, where members of a community learn by participating in the community and practicing their jobs (Brown and Duguid 1991; Lave and Wenger 1991; Wenger 1998). However, there are important differences between the concepts of community of practice and ba. Whereas a community of practice is a place where members learn knowledge that is em- bedded in the community, ba is a place where new knowledge is created. Whereas learning occurs in any community of practice, ba needs energy in order to become an active ba where knowledge is created. Whereas the boundary of a community of practice is firmly set by the task, culture, and history of the community, the boundary of ba is set by its participants and can be changed easily. Instead of being constrained by history, ba has a here-and-now quality. It is created, it functions, and then it disappears, all as needed. Whereas the mem- bership of a community of practice is fairly stable and whereas new members need time to. learn about the community of practice and be- come fully participatory, the membership of ba is not fixed, for participants come and go. Fi- nally, whereas members of a community of practice belong to the community, participants of ba relate to the ba. Figure 22.3 illustrates the four types of ba, that is, originating ba, dialoguing ba, systemizing ba, and exercising ba. Each ba supports a par- ticular mode of knowledge conversion and offers a piatform for a specific step in the know- ledge spiral process. Understanding the differ- ent characteristics of ba and how they interact with each other can facilitate successful know- ledge creation. Originating Ba Originating ba is the place where individuals share feelings, emotions, experiences, and mental models. It is primarily in this ba that the sharing of tacit knowledge (i.e. socializa- tion) occurs and where the knowledge-creation process begins. Knowledge creation that takes500 Nonaka, Toyama, and Byosiere Socialization Face-to-face Originating Ba 4 WI Exercising Ba On site Internalization Externalization Dialoguing Ba Peer-to-peer Systemizing Ba Collaboration Combination Fig. 22.3. Ba, the shared space for interaction From ‘Leading Knowledge Creation: A New Framework for Dynamic Knowledge Man- agement’, by |. Nonaka, N. Konno, and R. Toyama, paper presented at the Second Annual Knowledge Management Conference, Haas School of Business, University of California Berkeley, 22-24 September 1998. place in originating ba is characterized by phys- ical, face-to-face interaction, for this kind of interaction is the only way to capture the full range of physical senses and psychoemotional reactions (e.g. ease or discomfort), which are important elements in transferring tacit know- ledge. Originating ba is an existential space in the sense that it is the world where an individual sympathizes or empathizes with others, remov- ing the barrier between the self and others. From originating ba emerges care, love, trust, and commitment, which form the basis for knowledge conversion among individuals. Dialoguing Ba Dialoguing ba 's the place where individuals’ mental models and skills are converted into common texms and concepts. It is where the conversion of tacit knowledge into explicit knowledge (i.e. externalization) oceurs. Dialogue and reflection are key in the know- ledge creation of dialoguing ba. Individuals share theit mental models of others through dialogues and reflect on and analyze their own mental models at the same time. To participate ina bais to become involved and to transcend one’s own limited perspective or boundaries. Yet, one remains analytically rational in order to apply the acquired knowledge to one’s own knowledge or perspective. Thus, in dialoguing ba, the individual can profit from the creativ- ity-producing synthesis of rationality and in- tuition, Dialoguing ba is more consciously con- structed than originating ba is. Selecting in- dividuals with the right mix of specific knowledge and capabilities is the key to man- aging knowledge creation in dialoguing ba, where knowledge is created through peer inter- actions. Systemizing Ba Systemizing ba is a virtual world rather than real time and space. It is where new systemic, explicit knowledge is created through a combi- nation of various elements of explicit know- ledge. This combination of elements of explicit knowledge is most efficiently sup- ported in a collaborative environment utilizing information technology, such as on-line net- works, groupware, documentation, and data- banks. The rapid advances in information technology over the last decade have enhancedthis conversion process. Because explicit know- ledge can be transmitted to a large number of people relatively easily, the interaction that takes place in systemizing ba is group-to- group. Exercising Ba Exercising ba is the place where the conversion of explicit knowledge into tacit knowledge (i.e. internalization) is facilitated. Rather than teaching based on analysis, it is continuous learning and self-refinement through on-the- job training or peripheral and active participa- tion that are stressed in exercising ba in order to communicate knowledge. Through such activ- ities, certain patterns of action and thinking are continually stressed so that organizational members internalize them. The internalization of knowledge is constantly enhanced through the use of explicit knowledge in real life or in simufated applications. Exercising ba synthe- sizes” transcendence and reflection through action, whereas dialoguing ba achieves this synthesis through thought. The interaction that takes place in exercising da is on-site, which means that it shares both time and space. The knowledge generated in each ba is even- tually shared and forms the knowledge base of organizations. Moreover, ba exists at many on- tological levels, and these levels may be con- nected to form a greater ba. Individuals form the ba of teams, which, in turn, form the ba of an organization. The market environment then becomes the ba for the organization, The organic interactions between these different levels of ba can amplify the knowledge- creation process. These ba have to be strategically coherent within the organization's vision of knowledge. In this context coherence means the organic relationships in which each part interacts with each other part, not a mechanistic concentra- tion in which the center dominates. This inter- active, organic coherence of various ba and the individuals who participate in them has to be supported by trustful sharing of knowledge and constant exchange between all units involved Creating Organizational Knowledge 501 in order to create and strengthen the relation- ships. Knowledge Assets Knowledge assets, which are inputs and out- puts of the knowledge-creation process, form the basis of organizational knowledge creation. Knowledge assets also influence how ba func- tions as a platform for the knowledge-creation process. We define assets as firm-specific re- sources that are indispensable to the creation of values for the firm, and many researchers today agree that knowledge is precisely such an asset. However, an effective system and set of tools with which to evaluate and manage knowledge assets does not exist yet. Because of the tacit nature of knowledge, the current accounting system cannot adequately capture the value of knowledge assets. There is a need to build a system for evaluating and managing the know- ledge assets of a firm more effectively. In order to understand how knowledge assets are created, acquired, and exploited, we cat- egorize knowledge assets into four types: experi- ential knowledge assets, conceptual knowledge assets, systemic knowledge assets, and routine knowledge assets (see Fig. 22.4). Experiential Knowledge Assets Experiential knowledge assets are the shared tacit knowledge that is built through hands-on experiences that are shared between organiza- tional members; between organizational mem- bersand customers, suppliers, or affiliated firms, orboth. Individual skillsand know-how that are acquired and accumulated through experiences in a particular context at work are examples of such knowledge assets. The tacit nature of experiential knowledge assets makes them difficult to grasp, evaluate, or trade. Because of this tacit nature, experien- tial knowledge assets are firm-specific, difficult- to-imitate resources that give a firm sustain- able, competitive advantage. Firms must build their own knowledge assets through their own experience in their own context.502 Nonaka, Toyama, and Byosiére Experiential knowledge assets Tacit knowledge shared through common experiences * skills and know-how of individuals, * care, love, trust, and security * energy, passion, and tension Conceptual knowledge assets Explicit knowledge articulated through images, symbols, and language * product concepts design * brand equity Rout 1e knowledge assets Tacit knowledge routinized and embedded in actions and practices * know-how in daily operations * organizational routines + organizational culture Systemic knowledge assets Systemized and packaged explicit knowledge + documents, specific + database * patents and licenses ns, manuals Fig. 22.4. Four categories of knowledge assets From ‘Leading Knowledge Creation: A New Framework for Dynamic Knowledge Management’, by |. Nonaka, N. Konno, and R. Toyama, paper presented at the Second Annual Knowledge Manage- ment Conference, Haas School of Business, University of California Berkeley, 22-24 September 1998. Experiential knowledge assets. are built through a process of socialization. Therefore, an important characteristic of experiential knowledge assets is that they are human. Ex- amples of such knowledge assets are emotional knowledge, such as care, love, and trust, phys- ical knowledge, such as facial expressions and gestures, energetic knowledge, such as the sense of existence, enthusiasm, and tension, and rhythmic knowledge, such as improvisa- tion and entrainment. Conceptual Knowledge Assets Conceptual_knowledge assets are explicit knowledge articulated as concepts through images, symbols, and language. Brand equity, product concepts, or product designs are examples of such knowledge assets. Because they are explicit, conceptual knowledge assets are easier to grasp than experiential know- ledge assets are. Conceptual knowledge assets are built through a process of externalization. The experiential knowledge assets, which are shared tacit knowledge built through social- ization, are articulated through externaliza- tion and turned into conceptual knowledge assets. Systemic Knowledge Assets Systemic knowledge assets are systematized and packaged explicit knowledge. Explicitly stated technologies, patents, licenses, product specifications, manuals, and documented in- formation about customers and suppliers are examples of such knowledge assets. When aca- demics and practitioners talk about knowledge assets, they often mean systemic knowledge assets, A characteristic of systemic knowledge assets is that they are made explicit as documents or data through a process of combination and therefore are transferable. This transferability means that conceptual knowledge assets can be purchased or sold. It also means that they can be stolen. Protecting these assets through legal and other means is an important and urgent issue for a firm that bases its com- petitive advantage on this type of knowledge asset Routine Knowledge Assets Routine knowledge assets are the tacit know- ledge that is routinized and embedded within the actions and practices of an organiza- tion. Know-how, organizational routines, andorganizational culture in carrying out the daily business of the organization are the ex- amples of sich knowledge assets. Routine . knowledge assets are created and shared by the organization through a process of internaliza- tion. Through continuous exercises, certain patterns of thinking and action are reinforced and shared among organizational members. Hence, routine knowledge assets are practical knowledge. Sharing the backgrounds and ‘stories’ of the company also helps form routine knowledge. Knowledge assets form the basis of the knowledge-creation process. Hence, to manage the creation and exploitation of knowledge effectively, a company needs to ‘map’ its stocks of knowledge assets (Reinhardt, Bornemann, Pawlowsky, and Schneider, Ch. 36 in this volume). However, cataloging existing know- ledge is not enough. It is important to under- stand that knowledge assets are dynamic, for new knowledge assets can be created from ex- isting ones. Knowledge assets are both inputs and outputs of an organization’s knowledge- creation activities. For example, experiential knowledge about customers’ needs, through socialization and externalization, may become explicit conceptual knowledge about a new product concept. Such conceptual knowledge then turns into systemic knowledge through combination. For example, a new product con- cept guides the combination phase, in which newly developed and existing component technologies are combined in order to build a prototype. Systemic knowledge, such asa simu- lated production process for the new product, turns, through intemalization, into routine knowledge for mass production. The routine knowledge then triggers a new spiral of know- ledge creation. For example, the routine tacit knowledge that line workers have about the new production process can be socialized and can thereby initiate a new spiral of knowledge creation for improving the process. Creating Organizational Knowledge 503 Managing the Knowledge- creation Process In the previous section, we presented a model of the organizational knowledge-creation pro- cess, illustrating and explaining its constitu- ents: SECI, ba, and knowledge assets. An organization, building on its existing know- ledge assets, creates new knowledge through the SECI process that takes place in ba. The knowledge created then becomes part of the knowledge assets of the organization and the basis for a new cycle of knowledge creation. The key to engaging in this dynamic process of knowledge creation is to manage the three layers effectively. For this reason we now turn our attention to the question of how such knowledge creating task can be accom- plished. The knowledge-creation process cannot be managed in the traditional sense of ‘manage- ment’, which centers on controlling theinform- ation flow (von Krogh, Nonaka, and Ichijo 1997; Nonaka and Takeuchi 1995). The management process that fits organizational knowledge creation differs decidedly from traditional man- agement models such as the top-down and the bottom-up models. But the top-down model, with its foundation in bureaucracy, and the bottom-up model, with its emphasis on auto- nomy, fail to grasp the dynamic dimension of organizational knowledge creation. In these models, knowledge is seen as something to be created by individuals, and the creation of knowledge through interactions between indi- viduals or between individuals and the envir- ‘onment is ignored (Child and Heavens, Ch. 13 in this volume). In order to capture the dy- namic nature of organizational knowledge creation, we propose another model, the mid- dle-up-down model. The middle-up-down management model is suitable primarily to promoting the efficient creation of knowledge within business organ- izations. It is neither top-down nor bottom-up. In middle-up-down management, middle managers, who are often leaders of a team or a task force, play a key role in facilitating the504 Nonaka, Toyama, and Byosiére process of organizational knowledge creation. The process puts middle managers at the very center of knowledge management, positioning them at the intersection of the vertical and horizontal flows of information and knowledge within the company. It also puts top manage- ment in the role of ‘leading’ rather than ‘man- aging’ the knowledge-creation process. Two Types of Traditional Management Models: Top-down and Bottom-up In this section we describe the characteristics of top-down and bottom-up models as concept- ualized by management scholars. Top-down management is basically the classic, hier archical model. In this model, the organization is viewed as a bureaucratic information- processing machine, which functions through division of labor and hierarchy (Simon 1947, 1983; Taylor 1911) rather than through a know- ledge-creating entity. Simple and select infor- mation is passed up the pyramid to top managers, who then use it to create plans and orders, which are passed back down the hierar- chy. Top managers create basic managerial con- cepts and break them down hierarchically so that they can be implemented by subordinates. Top managers’ concepts become operational conditions for middle managers, who then de- cide how to put the concepts into practice. ‘Middle managers’ decisions, in turn, constitute operational conditions for lower managers, who implement the decisions of the middle managers. If this model is to work, the concepts held by top management shouldnot beambigu- ous or equivocal; they should be strictly func- tional and pragmatic. This traditional model is based on an implicit assumption that information and knowledge are processed most efficiently through a tree structure. The division of labor within this kind of bureaucratic organization is associated with a hierarchical pattern of information- processing. Moving from the bottom to the top, information is processed selectively, so that people at the top only receive simple, processed information. Moving in the reverse direction, information is processed and trans- formed from the general to the particular. It is, this deductive transformation that enables human beings, with their limited inform- ation-processing capacity, to deal with a mass of information. In this model informatiqn- processing by middle and lower members of the organization is of minor relevance to knowledge creation. Only top managers are allowed to and supposed to be able to create information. Moreover, information created by these top managers exists for the sole pur- pose of implementation. In this model, inform- ation isa tool rather than a product. In the bottom-up model, on the other hand, information is typically created by middle and lower managers, not top managers. In this model, top managers give few orders and in- structions, serving rather as sponsors for individual employees who function as intra- company entrepreneurs (Nonaka and Kiyosawa 1987; Pinchot 1985). Knowledge is created by these individual employees at the frontline of business. However, as in the top-down model, this model is alsoanchored to the critical role of the individual as an independent, separate actor. There is little direct dialogue with other members of the organization, either vertically or horizontally. Autonomy, not interaction, is the key operating principle in this model. As pointed out in the previous section, in- tense interactions among organizational mem- bers are a key to organizational knowledge creation. However, such interactions hardly take place in the military-like hierarchy of the top-down model or between the. autonomy- driven individuals of the bottom-up model. Furthermore, notions such as fluctuation and chaos are not permitted in the top-down model and are incarnated only within individuals in the bottom-up model. ‘The fact that individuals, not teams or groups, are the primary knowledge creators is potentially problematic. In the top-down model, there is the danger of depending too much on a few top managers. In the bottom- up model, because knowledge creation de- pends on the patience and talent of a particular individual, knowledge creation tends to bemuch more time-consuming than in the top- down model. Another limitation of the two models is the lack of recognition and relevance given to mid- dle managers. In the top-down model, top managers are the ones who create knowledge. Middle managers process information but do not create knowledge. In the bottom-up model, the knowledge creator is the entrepre- neur-Itke individual at the frontline of busi- ness. Small headquarters, a flat organizational structure, and a propensity for top managers to serve as direct sponsors characterize a typical bottom-up model and the autonomy granted. to individuals. In neither model do middle managers seem to have a role. Hence, many business scholars have looked upon middle managers as employees whose roles and useful- ness have been disappearing, as employees to be shed (Dopson and Stewart 1990; Peters 1987; Quinn 1992). However, such a view over- looks the important role played by middle managers in creating knowledge, as shown by de Haén, Tsui-Auch, and Alexis (Ch. 4r in this volume). Middle-up-down Management for Knowledge Creation Given the limitations of the top-down and bot- tom-up models, we suggest a third kind, the middle-up-down management model, as the most suitable for knowledge creation. Unlike the two models discussed above, the middle- up-down model portrays all members of the organization as important actors who should work together horizontally and vertically (Nonaka 1988, 1990; Nonaka and Takeuchi 1995). The model is characterized by the wide scope of cooperative relationships and interac- tions between top, middle, and lower man- agers. Especially important in this mode{ is the role of middle managers, who work as knowledge-producers, in facilitating the pro- cess of organizational knowledge creation. Table 22.3 provides a summary comparison of the three models in terms of their knowledge creator, resource allocation, structural charac- Creating Organizational Knowledge $05 teristics, process characteristics, knowledge ac- cumulation, and inherent limitations. In the middle-up-down model, top manage- ment articulates visions, which provide direc- tion. Middle managers, working as knowledge- producers, translate these visions into more concrete concepts, which are to be realized in the fields. Whereas top management articu- lates the dreams of the firm, frontline employ- ees and low-level managers look at its reality. The gap between these two perspectives is nar- rowed by and through middle managers. In other words, top management's sole is to create a grand theory, whereas middle management, as knowledge-producers, create a mid-range theory that can be empirically tested within the company with the help of frontline em- ployees. Knowledge is created through such interactions and then disseminated through- out the company. ‘Top and middle management take up a lea- dership role in knowledge creation by working on all three layers of the knowledge-creation process. They provide knowledge vision, de- velop and promote the sharing of knowledge assets, create and energize ba, and enable and Promote the continuous spiral of knowledge creation (see Fig. 22.5), Especially important is the provision of the knowledge vision, which affects all three layers of the knowledge- creation process. Providing Knowledge Vision In order to create values through knowledge- creation activities, an organization needs a vi- sion that orients the entire organization to the kind of knowledge it must acquire and wins spontaneous commitment by the individuals and groups involved in knowledge creation (Dierkes, Marz, and Teele, Ch. 12; Stopford, Ch. 11 in this volume). To create knowledge, organizations should foster the commitment of its organizational members by formulating the organizations’ intention, for commitment underlies human knowledge-creating activity (Polanyi 1958). It is top management's role to articulate this knowledge vision and com- municate it throughout and beyond the company.506 Nonaka, Toyama, and Byosiére Table 22.3. Comparison of three management models of knowledge creation Management model Dimension Top-down: Who Agent of knowledge Top management creation ‘Top management role Commander Middle-management role Information-processor What Accumulated knowledge Explicit Partial conversion focused ‘oncombination and inteialization knowledge conversion Where Stage of knowledge Computerized database and manuals How: Organization Hierarchy ‘Communication ‘Orders and instructions ‘Chaos/fluctuation Not permitted Weakness Great dependence on top management Bottom-up Middle-up-down Entrepreneurial individual Team (with middle managers as knowledge- producers) Sponsor/mentor Catalyst Autonomous Team leader intrapreneur Tacit Explicit and tacit Partial conversion focused on socialization and externalization Spiral conversion of the SECF process Embodied in individuals Organizational knowledge base Project team and informal Hypertext hetwork Self-organizing principle Dialogue and use of metaphor and analogy Permitted Create and amplify Time-consuming process, Physical exhaustion, costs of coordinating redundancy costs individuals ® Socialization-externalization-combination-internalization. Source: Adapted from The Knowledge-Creatirig Company: How Japanese Companies Create the Dynamics of Innovation by Ikujiro Nonaka and Hirotaka Takeuchi, copyright © 1995 by Oxford University Press, Inc. Used by permission of Oxford University Press, Inc. A knowledge vision defines what kind of knowledge the company should create in what domain. It gives direction to the know- ledge-creation process and to the knowledge created by it. In short, it is a vision that deter- mines how an organization and its knowledge base will evolve in the long term. Because knowledge is without boundaries, any form of new knowledge can be created regardless of the company’s business structure. It is therefore important for top management to articulate a knowledge vision that transcends the bound- aries of existing products, divisions, organiza- tions, and markets. A knowledge vision also defines the value system according to which one evaluates, jus- tifies, and determines the quality of knowledge that the company creates. Together withBuild and energize ba t Synchronize Moderate. Knowledge assets Develop and redefine knowledge assets t Define Knowledge vision Creating Organizational Knowledge 507 Lead SECI Justify Direct Fig. 22.5. Leading the knowledge-creation process with ba (platforms for knowledge yn) and SECI (soci creat ization-externalization-combination-internalization processes) From ‘Leading Knowledge Creation: A New Framework for Dynamic Knowledge Management’, by |. Nonaka, N. Konno, and R. Toyama, paper presented at the Second Annual Knowledge Management Conference, Haas ‘School of Business, University of California Berkeley, 22-24 September 1998, organizational norms, routines, and skills, the value system determines what kinds of know- ledge are needed, created, and retained (Leo- nard-Barton 1995; Nonaka 1985). Serving as a bridge between the visionary ideals of the top management and the chaotic reality of organizational members on the front- line, middle management then has to take the values and visions created by top management and break them down into concepts and images that can effectively guide the know- ledge-creation process. Middle managers work as knowledge-producers in order to remake reality, or produce new knowledge according toa particular company’s vision. Researching on visionary companies, Portas and Collins (1994) found that an excellent and clear vision gives a company a sustainable com- petitive advantage. Many of the visionary com- panies have values that are closely related to thought and activity principles that relate to knowledge creation. For example, at 3M, the evaluation standard ‘Thou shall not kill ideas for new products’ has been established as a fundamental part of company ideology and an essential part of company culture. Motorola continues to focus on the value ‘stimulate the latent creativity of the employees.’ Kao empha- sizes the ‘pursuit of the truth’ beyond the pur- suit of profit. Honda bases its management on the ‘respect for theory’ and firmly denies that there is any value attached to great effort unless it is grounded in ‘a correct theory’. The value articulated by Sharp—‘Do not imitate. Create Products that are imitated’—harks back to its founder, who recognized the importance of creativity. Developing and Promoting the Sharing of Knowledge Assets Building on the knowledge vision of the com- pany, top management must facilitate dynamic508 Nonaka, Toyama, and Byosigre knowledge creation by taking a leading role in managing the three layers of the knowledge- creation process. First, top management must develop and manage the knowledge assets of the company, which form the basis of its knowledge-creation process. Recently, many companies have created a position of Chief Knowledge Officer (CKO) to oversee the man- agement of their knowledge assets (Davenport and Prusak 1998). CKOs evaluate and manage the development, acquisition, and exploit- ation of companies’ knowledge assets, just as Chief Financial Officers (CFOs) manage the tangible assets of companies. However, the role of CKOs so far has been limited mostly to managing knowledge assets as a static resource to be exploited. Top management has to play a more active role in facilitating the dynami process of creating knowledge from know- ledge. Because knowledge is without boundaries, top management has to redefine its organiza- tion in terms of the knowledge it owns rather than in terms of existing definitions, such as technologies, products, and markets. Top man- agement and knowledge-producers can take an ‘inventory’ of their knowledge assets and then form a strategy based on the knowledge vision to build, maintain, and utilize these knowledge assets effectively and efficiently. Knowledge assets, especially routine know- ledge assets such as organizational routines and organizational culture, could hinder know- ledge creation as well (Berthoin Antal, Len- hardt, and Rosenbrock, Ch. 39 in this volume; Leonard-Barton 1992; Levit and March 1988). In- ertia makes it difficult for an organization to diverge from the course set by its previous ex- periences (Hannan and Freeman 1984). Hence, leaders should be careful not to let a firm’s knowledge assets become hindrances. Building and Energizing Ba Ba can be spontaneously created, or it can be built consciously. Top management and know- ledge-producers can facilitate knowledge crea- tion by providing physical space, such as meeting rooms, or cyber space, such as a com- puter network. They can also facilitate know- ledge creation by promoting interactions between organizational members, using such means as a task force. It is also important for managers to find and utilize spontaneously formed ba, which change or disappear very quickly. However, building or finding ba is not en- ough for a firm to manage the dynamic process of knowledge creation. Ba should be ‘energized’ so that individuals or the organization can cre- ate and amplify knowledge through the SECI process. To energize ba, knowledge-producers must therefore supply the necessary condi- tions, including autonomy, creative chaos, re- dundancy, requisite variety, love, care, trust, and commitment. ‘Autonomy Autonomy is important in motivating organ- izational members to create new knowledge. Autonomy can be a source of unexpected knowledge as well. By allowing the members of an organization to act autonomously, the organization may increase the chance of acces- sing and utilizing the knowledge held by its members (Grant 1996a, b; Wruck and Jensen 1994). Self-organizing teams can be used as power- ful tools with which to create autonomy within firms. The use of cross-functional teams that involve members from a broad cross-section of different organizational activities is very effec- tive in the process of innovation (Clark and Fujimoto r991; Imai, Nonaka, and Takeuchi 1985). At NEC, autonomous teams have been used to foster the expansion of NEC’s technol- ‘ogy program. To develop strategically impor- tant products, Sharp uses the ‘Urgent Project System’, in which the team leader is given sole responsibility for the project and the power to recruit any necessary personnel. Fluctuation and Creative Chaos Fluctuation and creative chaos stimulate the interactions between the organization and its environment. Fluctuation is characterized by ‘order without recursiveness’, which is differ- ent from complete disorder. It is order whosepattern is initially hard to predict (Gleick 1987). Examples include changes in market needs, the growth of competing companies, and chal- lenges given by top management. When fluctuation is introduced into an organization, its members face a ‘breakdown’ of routines, habits, or cognitive frameworks. Such breakdowns, or unlearning, are import- ant, for they give one an opportunity to recon- sider one’s own fundamental thinking and perspective (Hedberg 1981; Hedberg and Wolff, Ch. 24 in this volume; Winograd and Flores 1986). The continual process of questioning and reevaluating existing premises, of unlearn- ing by individual members of the organization fosters organizational knowledge creation. Thus, an environmental fluctuation often trig- gers breakdown within an organization, asitua- tion out of which new knowledge can be created. Some have called this phenomenon the creation of ‘order out of noise’ or ‘order out of chaos’ (Prigogine and Stengers 1984; von Foerster 1984). Chaos is generated naturally when an organ- ization faces a real crisis, such as a declining market. It can also be generated intentionally when the organization’s leaders try to evoke a sense of crisis among organizational members by proposing challenging goals or ambiguous visions. For example, Wal-Mart encourages its employees ‘to oppose fashion and to overthrow common thinking’. This intentional chaos, re- ferred to as ‘creative chaos’, increases tension within the organization and focuses the atten- tion of organizational members on defining the problem and resolving the crisis situation. Redundancy The term ‘redundancy’ may sound like some- thing to avoid because of its connotations of unnecessary duplication, waste, and informa- tion overload. However, redundancy is abso- lutely essential if the knowledge spiral is to take place organizationally. Redundancy here means the existence of information that goes beyond the immediate operational require- ments of organizational members. In business organizations, redundancy refers to intentional overlapping of information about business ac- Creating Organizational Knowledge 509 tivities, management responsibilities, and the company as a whole. Redundancy of information promotes the knowledge-creation process in two ways, First, sharing redundant information fosters the sharing of tacit knowledge because one’s sense of what others are trying to articulate better is often improved if a great amount of informa- tion is shared in the effort to form the basis for common understanding. Redundancy is espe- cially important in the concept-development stage, when it is critical to articulate images rooted in tacit knowledge. Redundant informa- tion enables individuals to invade each other's functional boundaries and to offer advice or Provide new information from different per- spectives. In short, redundancy of information brings about ‘learning by intrusion’ into each individual's sphere of perception. Second, redundancy of information helps or- ganizational members understand their posi- tion in the organization by letting them see themselves from the outside. Thus, redun- dancy of information influences their direction of thinking and action and provides the organ- ization with a self-control mechanism that keeps it heading in a certain direction. Redundancy of information is also a pre- requisite for the ‘principle of redundancy of po- tential command’ (McCulloch 1965), according to which each part of an entire system has the same degree of importance and has the poten- tial to become the leader of the system. Even ithin a strictly hierarchical organization, re- dundant information helps build unusual com- munication channels. Thus, redundancy of information facilitates the interchange be- tween hierarchy and nonhierarchy. At Mae- kawa Seisakusho, different people take turns in leadership during the course of a project. ‘The member who best fits the issues or prob- lems steps into the center of the team and drives the project forward, guaranteeing the right person in the right place for each phase of the project. These handovers are possible because team members have overlapping information and thus are well able to recognize the strengths of their colleagues. By rotating specialists between different positions and roles510 Nonaka, Toyama, and Byosiére within the team (leader, support, and so forth), specialists gain both additional knowledge in related fields and management skills and knowledge specific to different roles in teams and leading functions. In short, redundancy is created in order to support innovation by shar- ing knowledge and hence by generating highly specialized generalists in technical areas and highly generalized specialists in management and leadership. There are several ways to build redundancy into an organization. One is to have different functional departments work together in a ‘fuzzy’ division of labor (Takeuchi and Nonaka 1986). Another way is to foster internal compe- tition. Some companies divide the product de- velopment team into competitive groups that develop different approaches to the same pro- ject. Competing groups then argue over the advantages and disadvantages of each of their approaches so that they eventually develop a common understanding of the ‘best’ approach. Internal competition encourages the team to look at a project from a variety of perspectives. Yet another way to build redundancy into an organization is the ‘strategic rotation’ of per- sonnel. This kind of rotation helps members of an organization understand its business from multiple perspectives, making organiza- tional knowledge more ‘fluid’. It also enables each employee to diversify his or her skills and information sources. This additional informa- tion held by individuals across different func- tions helps the organization expand its knowledge-creating capacity. Redundancy of information does have its costs. It increases the amount of information to be processed and can lead to information overload. It also increases the cost of know- ledge creation, at least in the short run. One way to deal with these possible problems is to make clear where necessary knowledge and in- formation can be located. Requisite Variety Requisite variety helps a knowledge-creating organization strike a balance between order and chaos that is necessary for knowledge crea- tion to take place. In order to deal with chal- lenges posed by the environment, the internal diversity of an organization has to match the variety and complexity of the environment (Ashby 1956). To cope with environmental changes, which are impossible to predict com- pletely, an organization must possess requisite variety, or minimax internal diversity, which should be at a minimum for organizational in- tegration (order) and at a maximum for effect- ive adaptation to environmental changes (chaos). Requisite variety can be enhanced by com- bining information differently, flexibly, and quickly and by providing equal access to infor- mation throughout the organization. When. information differentials exist within an organ- ization, organizational members cannot inter- act on equal terms. That inequality hinders the search for different interpretations of new in- formation. Organizational members should be able to know where information is located, where knowledge is accumulated, and how in- formation and knowledge can be accessed at the greatest speed. Kao Corporation, Japan’s leading maker of household products, utilizes a computerized information network to give every employee equal access to corporate information, which then serves as the basis for exchanges of opinion between various organ- izational units. Love, Care, Trust, and Commitment In order for knowledge (especially tacit know- ledge) to be shared and for the knowledge-crea- tion process to occur, there needs to be strong love, caring, and trust among organizational members, for these qualities are the foundation of knowledge creation (von Krogh 1998; von Krogh, Nonaka, and Ichijo 1997). To foster such love, care, trust, and commitment, know- ledge-producers need to be highly inspired and committed to their goal. They also need to be selfless and altruistic. If a manager tries to monopolize the knowledge created by an organ- ization or take credit for other members’ achievements, it destroys the love, care, trust, and commitment among organizational mem- bers. Knowledge-producers should also be posi- tive thinkers and should avoid having orshowing negative thoughts and feelings. Cre- ative and positive thoughts, imagination, and a drive to act are important characteristics of a good knowledge-producer. Promoting the SECI Process Taking the direction given by the knowledge vision, knowledge-producers must facilitate or- ganizational knowledge creation by furthering ali four modes of knowledge conversion, although their most significant contribution is made in externalization. An empirical study has shown that middle managers of high- performing firms spend more hours in externalization than middle managers of low- performing firms (Shakai Keizai Seisansei Honbu 1998). Middle managers synthesize the tacit knowledge of both frontline employees and top management, make it explicit, and in- corporate it into new technologies, products, or systems. To do so, knowledge-producers need to create their own concepts and express them in their own words. One effective method of concept creation is ‘reflection in action’. As Schén (1983) explained, when a person reflects while in action, he or she becomes independ- ent of established theory and technique and is able to construct a new theory about the unique case. The effective use of language is another way to facilitate knowledge conversion processes. Language includes tropes (such as metaphor, metonymy, and synecdoche); the ‘grammar’ and ‘context’ of knowledge; and nonverbal, visual language, such as design. Each of the four modes of knowledge conversion requires different kinds of language in order for know- ledge to be created and shared effectively. For example, nonverbal language, such as body language, is essential in the socialization pro- cess, for tacit knowledge cannot be expressed through articulated language. Conversely, clear, articulated language is essential in the combination process, for in this process know- ledge has to be disseminated and understood by many people. In externalization, tropes such as metaphor, metonymy, and synecdoche are effective for creating concepts out of vast Creating Organizational Knowledge 511 amounts of tacit knowledge. Hence, know- ledge-producers need to carefully choose and design language to promote the SECI process. Another important task for knowledge-pro- ducers is to facilitate the knowledge spiral across the different conversion modes and across the different organizational levels. It is the middle managers who facilitate the cross- leveling of knowledge to other departments of organizations. In order to facilitate the creation of knowledge effectively, knowledge-producers need to improvise and facilitate improvisation by all the people participating in the process. Improvisation is an important factor in dy- namic knowledge creation, especially when it is focused on tacit knowledge (Weick 1993). The Organizational Structure for Knowledge Creation In the previous sections, we discussed how knowledge is created through a dynamic knowledge-creation process and that process can be best managed through middle-up- down management style. For effective know- ledge creation, we need an organizational struc- ture that can support this knowledge-creation, process. We propose that a new organizational structure, called ‘hypertext’ organization, is best suited to creating knowledge efficiently and effectively (Nonaka, Konno, and Kosaka 1993; Nonaka and Takeuchi 1995). For most of the twentieth century, organiza- tional structures oscillated between two basic types: bureaucracy and task force. Bureaucratic structure is based on the division of labor anda hierarchical distribution of authority and re- sponsibility (Simon 1947; Weber 1922). It is a highly formalized, specialized, centralized structure and is largely dependent on the standardization of work processes for organ- izational coordination. Bureaucracy is suited to conducting routine work efficiently on a large scale when conditions are stable. How- ever, it does not work well when it faces uncert- ainty and radical, rapid change. Hence, firms with bureaucratic organizational structures512 Nonaka, Toyama, and Byosiére encounter difficulties in creating new know- ledge when they face ‘radical uncertainty’, for they ‘do not, they cannot, know what they’ need to know’ (Tsoukas 1996: 22). Other costs of bureaucracy include intraorganizational re- sistance, red tape, tension, sectionalism, the hobbling of individual initiative, the shrinking of employees’ sense of responsibility, and the problem of means becoming objectives (Gowld- ner 1954; Merton 1940; Selznik 1949) ‘The task force, conversely, isa flexible, adapt- able, dynamic, and participatory organizational structure. The task force is an institutional- ized team or group that brings together rep- resentatives from a number of different wits for intense work on a flexible basis, in many cases to deaf with a temporary issue. However, the task-force organizational structure has its own weaknesses as well, Because of its ad hoc nature, the task force is not appropriate for ex- ploiting and transferring knowledge continu- ously and widely throughout an entire organization. When composed of many differ- ent small-scale task forces, an organization be- Project-team layer (creation of knowledg je) Dynamic knowledge cycle continuously creates, ‘exploits, and accumulates organizational knowledge Knowledge-base layer {accumulation and sharing of knowledge) Fig, 22.6. The hypertext organization comes incapable of setting and achieving its goals or vision at the corporate level. Thus, bureaucracy is more efficient and effective in implementing, exploiting, and accumulating new knowledge, whereas the self-organizing task force is more effective in generating new knowledge. A knowledge- creating organization should pursue both the efficiency of a bureaucratic organization and the flexibility of a task-force organization, In short, some combination or synthesis of the two is needed to provide a solid basis for know- ledge creation. We refer to such an organiza- tional structure as a hypertext organization, ‘The critical factor for the design of the hyper- text organization lies in coordinating time, space, and resources in such a way as to achieve requisite variety. As illustrated in Fig. 22.6, the hypertext organization can be visualized as an organization with three layers: the knowledge base, business system, and project team. The bottommost layer of the hypertext organiza- tion is the knowledge-base, which embraces both tacit knowledge associated with organiza- Business-system layer (utilization of knowledge) ‘Adapted from ‘Chisiki Beesu Sosiki’ [The Knowledge-based Organization], by I. Nonaka and H. Takeuchi, Business Review, 41/1 (1993), 71. © 1993 Adapted with permissiontional culture and procedures and explicit knowledge in the form of documents, filing systems, computerized databases, and so on. This layer functions as an archive, or corporate university, for the knowledge creation of the company. The second layer is the business sys- tem, where normal, routine operation is carried out by a formal, hierarchical, bureaucratic organization. The topmost layer, the ‘project team’, relates to the area where multiple, loosely interlinked self-organizing project teams share in the joint creation of knowledge through a common corporate vision. Thus, the hypertext organization takes different forms, depending on the perspective from which it is observed. Organizational knowledge creation is a dy- namic cycle of knowledge and information tra- versing the three layers. Members of project teams on the top layer are selected from diverse functions and departments across the business- system layer. Based on the corporate vision pre- sented by top management, they engage in knowledge-creation activities interacting with other project teams. Once the task of a team is completed, members move ‘down’ to the knowledge-base layer and inventory the know- ledge acquired and created in the project. After categorizing, documenting, and indexing the new knowledge, they return to the business- system layer and engage in routine operation until they are called for another project. A key design requirement for the hypertext organiza- tion is the forming of this kind of circular movement of organization members. Conclusion In this chapter, we have discussed how organ- izations manage the dynamic process of know- ledge creation. We have proposed a new, multilayered model of knowledge-creation in order to understand the dynamic nature of knowledge creation and to manage the process effectively. Three layers of knowledge assets, Creating Organizational Knowledge 513 ba, and the SECI process must interact with each other organically and dynamically. The knowledge assets of a firm are mobilized and shared in ba, where the tacit knowledge held by individuals is converted and amplified by the knowledge spiral through the socialization, ex- ternalization, combination, and internaliza- tion of knowledge. We have also discussed the role of managers in facilitating the knowledge-creation process. Creating and understanding the knowledge vi- sion of the company, understanding the knowledge assets of the company, facilitating and utilizing ba effectively, and managing the knowledge spiral are all important tasks that managers have to perform. Especially import- ant is the role of the knowledge-producers, the middle managers who are at the center of this dynamic knowledge-creation process. We have proposed middle-up-down management and hypertext organization as the effective man- agement system and organizational structure that can support this knowledge-creation process. In focusing mainly on the organizational knowledge-creation process that takes place in companies, we have described it as the dynamic interaction not only between ot- ganizational members but also between organ- izational members and the environment. The latter dimension of this interaction underlines the fact that the knowledge-creation process is not confined within the boundaries of a single company. The market, where social interaction brings together the knowledge held by compan- ies and that held by customers, is also a place for knowledge creation. In addition, the aggre- gated creation of knowledge by groups of com- panies is possible. If we were to raise the level of analysis further, we would arrive at the discus- sion on how so-called national systems of in- novation can be built. The next step, then, is to examine how companies, governments, and universities might intertwine in order to facil- itate knowledge creation in the future.514 Nonaka, Toyama, and Byosiére References Argyris, C. and Schén, D. A. (1978). Organizationaleaming: A Theory of Action Perspective. Reading, Mass.: Addison-Wesley. Ashby, W. R. (1956). An Introduction to Cybernetics. London: Chapman & Hall. Barney, J. B. (1991). ‘Firm Resources and Sustained Competitive Advantage’. Journal of Manage- ‘ment, 17: 99-120. Bateson, G. (1973). Steps to an Ecology of Mind: A Revolutionary Approach to Man's Understanding of Himself. London: Paladin. —(1979). Mind and Nature: A Necessary Unity. New York: Bantam Books. Brown, J.. and Duguid, P, (1991). ‘Organizational Learning and Communities-of Practice: Toward Unified View of Working, Learning, and Innovation’. Organization Science, 2: 40-57. Choo, C. W. (1998). The Knowing Organization: How Organizations Use Information to Construct, ‘Meaning, Create Knowledge, and Make Decisions. Oxford: Oxford University Press. Clark, K. B. and Fujimoto, T. (191), Product Development Performance: Strategy, Organization, and ‘Management in the World Auto Industry. Boston: Harvard Business School Press. Cohen, M. D. and Bacdayan, P. (1994), ‘Organizational Routines Are Stored as Procedural Memory: Evidence from a Laboratory Study’. Organization Science, 5: 554-68. Cyert, R.M., Kumar, ». K., and Williams, J. R. (1993). ‘Information, Market Imperfections and Strategy’. Strategic Management Journal, 14 (Winter special issue): 47-58. —and March, J. G. (1963). A Behavioral Theory of the Firm. Englewood Ciifs, Nj: Prentice Hall. Dafft, R. L. and Weick, K. E. (1984). ‘Toward a Model of Organizations as Interpretation Systems’. ‘Academy of Management Review, 9: 284-95. Davenport, T.H. and Prusak, L. (1998). Working Knowledge: How Organizations Manage What They know. Boston: Harvard Business Schoo! Press. Dierickx, |. and Cool, K. (1989). ‘Asset Stock Accumulation and Sustainability of Competitive Advantage’. Management Science, 35: 1504-14. Dodgson, M. (1993). ‘Organizational Learning: A Review of Some Literatures’. Organization Stud- les, 14: 375-94, Dopson, S. and Stewart, R. (1990). ‘What Is Happening to Middle Management?” British journal of Management, 1: 3-16. Drucker, P. (1993). Post-capitalst Society. London: Butterworth Heinemann. Duncan, R. and Weiss, A. (1979). ‘Organizational Learning: Implications for Organizational De- sign’, in B. M. Staw (ed.), Research in Organizational Behavior: An Annual Series of Analytical Essays and Critical Reviews (Vol. 1). Greenwich, Conn: JAl Press, 75-123. Edvinsson, L. and Malone, M. S. (1997). intellectual Capital: Realizing Your Company's True Value by Finding Its Hidden Brainpower. New York: Harper Business. Gleick, J. (1987). Chaos. New York: Viking Press. Gouliner, A. W. (1954). Patterns of industrial Bureaucracy: A Study of Modem Factory Administration. Glencoe, il: Free Press. Grant, R. M. (1996a). ‘Prospering in Dynamically-competitive Environments: Organizational Cap- ability as Knowledge Integration’. Organization Science, 7: 375-87. —(19966). ‘Toward a Knowledge-based Theory of the Firm’. Strategic Management journal, 17 (Winter special issue): 109-22. Hannan, M. T. and Freeman, J. H. (1984). ‘Structural Inertia and Organizational Change’. American Sociological Review, 49: 149-64, Hayek, F.A. (1945). ‘The Use of Knowledge in Society’. American Economic Review, 35: 519-30. Hedberg, B. L. T. (1981). ‘How Organizations Learn and Unlearn’, in P. C. Nystrom and W. H. Starbuck (eds.), Handbook of Organizational Design: Vol. 1. Adapting Organizations to Their Environments. Oxford: Oxford University Press, 3-27. Henderson, R. and Cockbum, |. (1994). ‘Measuring Competence: Exploring Firm-Effects in Phar- maceutical Research’, Strategic Management journal, 15 (Winter special issue): 63-84. Imai, K., Nonaka, |., and Takeuchi, H. (1985). ‘Managing the New Product Development Process: How Japanese Companies Learn and Unlearn’, in K. B. Clark, R. H. Hayes, and C. Lorenz (eds.),Creating Organizational Knowledge 515 The Uneasy Alliance: Managing the Productivity—Technology Dilemma, Boston: Harvard Business School Press, 337-81 * Jantsch, E. (1980). The Self-ocganizing Unjverse. Oxford: Pergamon Press. Johnson-Laird, P. N. (1983). Mental Models. Cambridge: Cambridge University Press. Kogut, B. and Zander, U. (1996). ‘What Firms Do? Coordination, Identity, and Learning’. Organiza- tion Science, 7: 502-18. Lave, J. and Wenger, E. (1991). Situated Leaming: Legitimate Peripheral Participation. Cambridge: ‘Cambridge University Press. Lei, D,, Hitt, M.A, and Bettis, R, (1996). ‘Dynamic Core Competences through Meta-leamning and Strategic Context’. Journal of Management, 22: 549-69, Leonard-Barton, D. (1992). ‘Core Capabilities and Core Rigidities: A Paradox in Managing New Product Development’. Strategic Management Journal, 13: 363-80. —(1995). Wellsprings of Knowledge: Building and Sustaining the Sources of Innovation. Boston: Harvard Business School Press, tevinthal, D. and Myatt, J. (1994). ‘Co-evolution of Capabilities and Industry: The Evolu- tion of Mutual Fund Processing’. Strategic Management Journai, 15 (Winter special issue): 45-62. Levit, R. and March, J. G. (1988). ‘Organizational Learning’. Annual Review of Sociology, 14: 319-40, Machlup, F. (1983). ‘Semantic Quirks in Studies of information’, in F. Machlup and U. Mansfield (eds.), The Study of Information. New York: John Wiley & Sons, 641-71. March, |. G. (1991). ‘Exploration and Exploitation in Organizational Learning’. Organization Science, 2: 71-87. McCulloch, W. (1965). Embediments of Mind. Cambridge, Mass.: MIT Press. Merton, R. K. (1940). ‘Bureaucratic Structure and Personality’. Social Forces, 18: 560-8. Nelson, R. R. (1991). ‘Why Do Firms Differ, and How Does It Matter?’ Strategic Management journal, 112 (Winter special issue): 61-74. Nishida, K. (1970). Fundamental Problems of Philosophy: The World of Action and the Dialectical World (D. Dilworth, trans.). Tokyo: Sophia University. (Original work published 1933) — (1990). An Inquiry into the Good (M. Abe and C. Ives, trans.). New Haven: Yale University. (Original work published 1921) Nonaka, |. (1985). Kigyo Shinka-ron (Corporate Evolution: Managing Organizational Information Creation). Tokyo: Nihon Keizai Shumbun-Sha. — (1988). ‘Toward Middle-up-down Management: Accelerating Information Creation’. Sfoan Management Review, 29/3: 9-18. (1990). Chishiki-Souzou no Keiei (A Theory of Organizational Knowledge Creation). Tokyo: inon Keizai Shimbun-sha. (1991). "The Knowledge-creating Company’. Harvard Business Review, 69/6: 96-104. —-(1994). ‘A Dynamic Theory of Organizational Knowledge Creation’. Organization Science, 5: 14.37. ——Byosiére, P, Borucki, C. C., and Konno, N. (1994). ‘Organizational Knowledge Creation Theory: A First Comprehensive Test’. International Business Review, 3: 337-51. -—and Kiyosawa, T. (1987). 3M no Chousen (The Challenge of 3M). Tokyo: Nihon Keizai Shin- bunsha. —konno, N., and Kosaka, S. (1993). ‘Chisiki Beesu Sosiki’ (The knowledge-based Organization). Business Review, 41/1: 59-73. —— (1998). The Concept of ’Ba”: Building a Foundation for Knowledge Creation’. California Management Review, 40/3: 40-54. -———— and Toyama, R. (1998). Leading Knowledge Creation: A New Framework for Dynamic ‘knowledge Management. Paper presented at the 2nd Annual Knowledge Management Confer- ence. Haas School of Business, University of California at Berkeley, 22-24 September. —and Takeuchi, H. (195). The Knowledge-creating Company: How Japanese Companies Create the Dynamics of innovation. New York: Oxford University Press. Peters, T. |. (1987). Thriving on Chaos. New York: Aifred A. Knopf.516 Nonaka, Toyama, and Byosiére Pinchot, G., (1985), Intrapreneuing: Why You Don’t Have to Leave the Corporation to Become a Entrepreneur. New York: Harper & Row. Polanyi, M. (1958). Personal Knowledge, Chicago: University of Chicago Press. (1966). The Tacit Dimension. London: Routledge and Kegan Paull Porras, J. and Collins, }.C. (1994). Built to Last: Successful Habits of Visionary Companies. New York: Harper Collins. Prahalad, C. K. and Hamel, G. (1990). ‘The Core Competence of the Corporation’, Harvard Busines: Review, 68/3: 79-91. Prigogine, . and Stengers,|.(1984). Order out of Chaos: Man’s New Dialogue with Nature, New York: Bantam Books. Quinn, |. B. (1992). Inteligent Enterprise: A Knowledge and Service Based Paradigm for Industry. Ne York: Free Press. Schén, D. A. (1983). The Reflective Practitioner. New York: Basic Books. Selznik, P.(1949). TVA and the Grass Roots: A Study in the Sociology of Format Organization. Berkeley, University of California Press, Senge, P. M. (1990). The Fifth Discipline: The Age and Practice of the Learning Organization. London Century Business. Shakai Keizai Selsansei Honbu (1998). Shin Nihon-gata Sangyou, Kigyou Keiei Saikouchiku Teigen (New Japanese-type Industries: A Proposal for Reconstruction of Corporate Manage ment). Tokyo: Shakai Seisansei Honbu. ‘Shimizu, H. (1995). ‘Ba-principle: New Logic for the Real-time Emergence of Information’. Holonics 5:67-79. ‘Simon, H. A. (1947). Administrative Behavior: A Study of Decision-making Processes in Administrati ‘Organization. New York: Macmillan. —(1973). ‘Applying information Technology to Organization Design’. Public Administrati Review, 33: 268-78. — (1983). Reason in Human Affairs. Stanford, Calif.: Stanford University Press. Spender, ). C. and Grant, R. M. (1996). ‘Knowledge and the Firm: Overview’. Strategic Management Joural, 17 (Winter special issue): 5-9. Sveiby, K. E. (1997). The New Organizational Wealth: Managing and Measuring Knowledge-bas Assets. San Francisco: Berret-Koehler. Takeuchi, H. and Nonaka, |. (1986). The New New Product Development Game’. Harvard Busines Review, 64/1: 137-46. Taylor, F.W. (1911). The Principles of Scientific Management. New York: Harper. Teece, D.J., Pisano, G., and Shuen, A. (1997). ‘Dynamic Capabilities and Strategic Management’ Strategic Management Joumal, 18: 509-33. Toffier, A. (1990). Powershift: Knowledge, Wealth, and Violence at the Edge of the 21st Century. New York: Bantam Books. ‘Tsoukas, H. (1996). ‘The Firm as a Distributed Knowledge System: A Constructionist Approach’ Strategic Management Journal, 17 (Winter special issue): 11-25. von Foerster, H. (1984). ‘Principles of Self-organization in a Socio- managerial Context’, in H. Ulrich and G. J.B. Probst (eds.), Seltorganlzation and Management of Social Systems. Berlin: Springer 2-24, von Krogh, G. (1995). Organizational Epistemology. New York: St. Mattin’s Press. ——(1998). ‘Care in Knowledge Creation’. California Management Review, 40/3: 133-53. —Nonaka, |., and Ichijo, K. (1997). ‘Develop knowledge Activists!” European Managemen. Journal, 15: 475-83, Weber, M. (1922). Wirtschaft und Gesellschaft. Tibingen: Mohr. Weick, K. £. (1991). ‘The Nontraditional Quality of Organizational Learning’. Organization Science] 2:116-24, — (1993), "The Collapse of Sensemaking in Organization: The Mann Gulch Disaster’. Adminis trative Science Quarterly, 38: 628-52. Wenger, E. (1998). Communities of Practice: Learning, Meaning, and Identity. Cambridge: Cam bridge University Press.Creating Organizational Knowledge $17 Whitehead, A. N. (1954). Dialogues of Alfred North Whitehead (Recorded by L. Price). Boston: Little, Brown and Company. - Wikstrom, S. and Norman, R, (1994). Knowledge and Value: A New Perspective on Corporate Transformation. London: Routledge. Wilkins, M. (1989). The History of Foreign Investment in the United States to 1914. Cambridge, Mass.: Harvard University Press, Winograd, T. and Flores, F. (1986). Understanding Computers and Cognition: A New Foundation for Design. Reading, Mass.: Addison-Wesley. Winter, S. G. (1987). ‘Knowledge and Competence as Strategic Assets’, in D. J. Teece (ed.), The ‘Competitive Challenge: Strategies for Industrial Innovation and Renewal, Cambridge, Mass.: Ballin- ger, 159-84. (1994). ‘Organizing for Continuous Improvement: Evolutionary Theory Meets the Quality Revolution’, in}. A. C. Baum and J. V. Singh (eds.), Evolutionary Dynamics of Organizations. New York: Oxford University Press, 90-108. Wruck, K. H. and Jensen, M.C. (1994). 'Science, Specific Knowledge, and Total Quality Manage- ment’. Journal of Accounting and Economics, 18: 247-87.