Knowledge Engineering

The Knowledge-Creating Company

By Ikujiro Nonaka
What is the knowledge-creating company? We may have a question of how knowledge can be created in a
company because knowledge gives more of a feeling of life. This insightful article not only explains how
knowledge can be created but also provides several illustrations of how Japanese Companies like Matsushita,
Honda, Canon and others became extremely successful due to their knowledge creating capabilities and
disseminating it throughout the organization, and embodying it in products, services and systems overcoming
the tough competition, shifting market trends and short product life cycle.

The more holistic approach to knowledge at many Japanese companies founded the important fundamental
insight that a company is not a machine but a living organism much like an individual that is continuously
evolving and can have a collective sense of identity, understanding and fundamental purpose. In this respect,
the knowledge creating company is as much about ideals as it is about ideas. Inventing new knowledge is not a
specialized activity but a way of behaving, indeed a way of being, in which everyone is a knowledge worker
that is to say, an entrepreneur.

The author has differentiated knowledge into tacit knowledge and explicit knowledge and provided four basic
patterns for creating knowledge which exist in dynamic interaction resulting in the spiral model of knowledge
creation. Tacit knowledge is the valuable and highly subjective insights and intuitions that are difficult to
formalize and communicate to others. It consists of mental models, beliefs, and perspectives so ingrained that
we take them for granted and therefore cannot easily articulate them. For this very reason, these implicit
models profoundly shape how we perceive the world around us. On the other hand, explicit knowledge is
formal and systematic. So, it can be easily communicated and shared, in product specifications or a scientific
formula or a computer program.

Mr. Nonaka has given the detailed illustration of how Osaka-based Matsushita Electric Company developed a
dough maker from the stretching technique of the baker of the popular Osaka International Hotel to explain the
knowledge creation process. The software developer Ms. Ikuko Tanaka of Matsushita Company learns the tacit
skill of the baker through observation, imitation and practice. This becomes the part of her knowledge base
(socialization). This is tacit to tacit conversion of knowledge. Tanaka then articulates her tacit knowledge of
bread making to formalize the specifications and develop a software model which is the tacit to explicit
knowledge conversion (articulation). Based on this model, Tanaka and her team developed the dough maker
which presents the explicit to explicit knowledge conversion (combination). Finally, through the experience
of a new product, Tanaka and her team enrich their knowledge base. This is explicit to tacit conversion
(internalization). Articulation and internalization are the critical steps in the spiral of knowledge. The reason
is that both require the active involvement of the self that is, personal commitment.

The spiral or cyclic process of knowledge conversion between tacit and explicit knowledge is a continuous
process and results in a creation of new knowledge. The key to this process is personal commitment,
individuals sense of identity with the enterprise and its mission. Making personal knowledge available to
others is the central activity. It takes place continuously and at all levels of the organization. The beautiful and
more important aspect of knowledge creation is that anything can be the source for the new knowledge be that
be the conflict or chaos in an organization, metaphors, slogans or mission.

Thanks to Mr. Nonaka for bringing the concept of knowledge creation which existed between us much before
but in a hidden form. He has beautifully uncovered the entire process. I personally believe that this vision will
definitely provide the new dimension to our management practice and also become milestone for the
development of Knowledge Systems.