The Growth of Knowledge and its Management

Robert Johnston

ABSTRACT This paper provides a review of the fundamental concepts that form the foundation for a rigorous approach to Knowledge Management. An evolutionary model of knowledge growth is proposed which overcomes the weaknesses of existing models. Based on this a threefold classication of useful knowledge as 1 Capability 2 Insight 3 Objective knowledge is proposed and described. What is of greater potential importance are the recommendations which ow from this model. The main one is that a pool of critical problems relevant to the organisation be made as open as possible within the organisation. This must be recognised as the key driver for the knowledge growth process. Motivation and social conditions are also recognised as being very important but must be addressed in the context of a robust model of valuable information generation. The starting point for the subject of this paper was a critical reading of an increasingly inuential model of knowledge growth. This model will be presented and criticised here and it will be shown that some valuable insights, which can be obtained from it, are compatible with the proposed evolutionary model.

1 Introduction
Corporate knowledge is now realised to be a major resource for an innovative company and is increasingly discussed at information technology and management workshops and conferences. It is a fundamental and probably not controversial assumption of this paper that people are currently the main agents for the growth and maintenance of organisational knowledge and the problem to be solved is how to make them more effective in these roles. Emphasis will be placed in this paper on clarifying the theory of knowledge. This is because there is a tendency in the literature [1] to claim that people are not only the holders of knowledge by default but by necessity, which it is argued here is due to a mistaken and naive but common sense view of what knowledge is. It is because this view seems to be sanctioned by common sense that it will not always be recognised as answering important questions of knowledge creation and growth wrongly, and could therefore be the source of misguided management initiatives. To provide essential background and eliminate some common misunderstandings the theory of knowledge will be discussed. The basic point coming from the discussion is that testability is an essential characteristic of objective knowledge. This contrasts with knowledge as justiable belief, which reduces it to strongly held or argued for opinion supported by some facts but in the end a belief is personal and if it is stubbornly held to then it is unassailable for that person. The theory of objective knowledge (see section 2.3.1) has been presented by Popper [2] and developed by his followers [3]. The application domains which interest Popper and his followers most are sciences and societies that are or should be open, as seen in traditions of academic freedom and personal liberty. This leads to a theory of knowledge growth, known as evolutionary epistemology, which provides a

direct analogy with the growth of wealth in a free market economy as well as biological development. This paper is concerned with knowledge growth and management within organisations which are not completely open and in many cases very closed. It is one of the purposes of this paper to examine the consequences and amendments needed to evolutionary epistemology to provide guidance for Knowledge Management in semi-closed organisations.

2 Growth of knowledge
Those responsible for management will be concerned that knowledge grows within the organisation without impedance. In an open society there are no imposed goals and a free market of knowledge will emerge and provide a competitive mechanism for growth. In a less open society, such as a public limited company, there are constraints which impose goals such as maximising the return on shares as well as wanting to keep some knowledge condential. In this section the evolutionary theory of knowledge growth will be presented in some detail and it will be discussed later how it tends to conict with the desire for business to introduce control structures to ensure condentiality. First of all it is necessary to introduce some background to the theory of knowledge in general and to that theory as applied to knowledge management.

2.1 The empirical theory of knowledge growth

A common sense empirical theory of knowledge is based on the notion that the human senses are the links which each individual has with the outside or physical world. This sensed or empirical data is processes by the mind and becomes information and then matures into knowledge. The opinion that this is the mechanism for the growth of knowledge is a strong tradition in Britain going back to Bacon, continuing through Lock and Hume and becoming more widely accepted through the work of Mach and the Logical Positivists. However a large number of problems arise: How How How How to take account of the fact that people are deceived by their senses. is knowledge induced from sense data justied? does nite experience give rise to universally applicable theories? does belief mature into knowledge?

These problems led philosophers to concentrate on the impression the senses make on the mind and, as this is the direct point of contact between mind and the world at large, it must, according to this point of view, be the source of the secret of the transmission of knowledge about the state of the world. This led to theories about the intensity of these impressions and how the intensity relates to reliability. Therefore the growth of knowledge is a very personal thing taking place in the depths of the mind. Sense data pours in and the mind lls with knowledge. For this reason the theory has been called by its detractors the bucket theory of knowledge [2]. Popper has argued very persuasively that the bucket theory and weaker versions of it are quite mistaken. This theory is the source or justication of many claims that knowledge is a form of belief and that people are both the agents of growth of and repositories of knowledge in organisations, as endorsed in the inuential book of Nonaka and Takeuchi [1]. The empirical theory of knowledge growth gave rise to the problem of induction. That is, how can a nite set of observations give rise to a body of reliable knowledge? It can be quickly established that a nite set of sense data is compatible with an innity of potential theories and therefore the logic of justication cannot be

deductive. Most attempts at constructing an inductive logic use a mixture of probability theory and Ockhams razor. It is still commonly thought that knowledge and specically scientic knowledge grows through a process of applying some inductive logic or that in the absence of such a logic then knowledge has no justication. This has been shown to be wrong by Karl Popper [2] although most of the ground work had been carried out by David Hume, as Popper recognises. Poppers theory of objective knowledge still needs people but as creative authors of speculative but criticisable knowledge. Before explaining this theory and its consequences for Knowledge Management a rival theory, which has already gained inuence, will be discussed.

2.2 The Nonaka and Takeuchi theory of knowledge growth

Nonaka and Takeuchi [1] have proposed a life-cycle model to explain the relationship and interaction between tacit and explicit knowledge. It is illustrated in gure 1. The model has four modes of knowledge conversion: Socialisation Externalisation Combination Internalisation
TACIT KNOWLEDGE EXPLICIT KNOWLEDGE

LEARNING BY DOING

Figure 1: The Nonaka and Takeuchi knowledge life-cycle model.

This model will be discussed in detail because it is inuential and because, as will be shown, it is based on an

inuential but demonstrably mistaken theory of knowledge. The mistaken theory is very old, although currently it would be justied using empiricist theories, and its rst known statement can be found in Plato [4]. It can also be stated very briey and reduces to the following denition: Knowledge is justied true belief. In fact Nonaka and Takeuchi weaken it further by not being very concerned about truth but this weakening does not save them from being wrong. The proof that it is wrong was discovered by Gettier, [5] and[6]. Interestingly it took more than 2000 years to nd a simple proof by counter example. A version of the counter example takes place in a test laboratory.

Example 2.1: A dedicated laboratory technician has used a set of test apparatus for 20 years and the results have always been reliable. One evening a malicious new assistant tampers with the apparatus so that it intermittently gives a false reading, say with probability 0.5. The next day the technician uses the apparatus and fortuitously it gives the correct result. 20 years of experience justies believing the result and it is true. As it is true by mere chance it is not reasonable to claim that the technician knows the result but that is the consequence of the above denition. Therefore Nonaka and Takeuchi have built their theory on a mistaken more fundamental theory. However, there are some insights which may be salvaged and it is interesting as a comparison with the theory which is advocated in this paper. Returning to the model, in more detail the four stages are: Socialisation. In this context socialisation is the process of sharing experiences by showing, doing and demonstrating with a mixture of actions and words. There is no need for knowledge distribution to be conscious. Externalisation. This is the transition from tacit to explicit knowledge. The forms of explicit knowledge includes stories and metaphors as well as theories, hypothesis and models. Combination. This is organising the output of the externalisation process into a systematic form, such as a company data base or a library of reports. Internalisation. This phase closes the cycle. In the systematic knowledge there will still be ambiguities, cultural pre-suppositions and implicit relationships. In applying this knowledge it is given life and developed further in practice. A major part of this further development will be as tacit knowledge. Having gone through the cycle more explicit knowledge and new tacit knowledge are generated. The cycle starts again as a virtuous spiral of increasing knowledge. As presented the model seems quite innocent. It does not seem to need the denition of knowledge as Knowledge is justied true belief and it could be argued that the knowledge which is the result of the externalisation and combination phases need not be believed by any person. However the spiral starts in the subjective quadrant and it will be argued that this is a mistake and gives too much weight to subjectively held opinion rather than to testable explanations. For example, the results in reports are often forgotten and lie dormant, in terms of peoples awareness, but they are still embodied knowledge. It is an example of knowledge in the objective sense as described below.

This spiral model must be supplemented because essential elements are missing such as measures of quality and relevance of the knowledge generated. This was recognised by Nonaka and Takeuchi who supplement their life-cycle model with organisational conditions and a process of organisational knowledge creation. The organisational conditions for promoting the knowledge spiral are (using their terminology [1]): . Intention. The organisations aspiration to its goals. . Autonomy. All members of the organisation should be allowed to act autonomously. . Fluctuation and Creative Chaos. This stimulates the interaction between the organisation and the external environment. . Redundancy. The existence of information which goes beyond the immediate operational requirements of members of the organisation. . Requisite Variety. This is the desirable match between the internal diversity of the organisation to the variety and complexity of the environment in which it operates. These conditions indicate the culture which is needed for the knowledge creation spiral to operate. It does not provide any controls on quality. These come with the Five-Phase Model of the organisational knowledge creation process. The ve phases are: I Sharing tacit knowledge II Creating concepts III Justifying concepts IV Building an archetype V Cross-levelling of knowledge The rst two phases are self explanatory. The third phase provides the control on quality but in terms of justication. It is envisaged in this model that the justication criteria will be formulated by top management. An archetype can be a proto-type product or a model operating mechanism in the case of services. Cross-levelling of knowledge means moving on to a new cycle of knowledge creation. This model is a mixture of the obvious, the interesting and the wrong. To make the criticism clear an alternative theory of knowledge growth must be explained.

2.3 Evolutionary epistemology

It will be taken as self evident that a body of knowledge cannot be established with absolute certainty but arguments can be presented to support it and it can be criticised. However it is extremely important not to embark on a futile search for ultimate justication and certainty leading to a frozen body of eternal truths. Knowledge growth is an evolutionary process. Knowledge is not something which can be stock piled like gold bars, or mature in a barrel like whiskey it is speculative, fallible and volatile. The evolutionary explanation of knowledge growth has been concisely described by Popper [7]

The way in which knowledge progresses, and especially our scientic knowledge, is by unjustied (and unjustiable) anticipations, by guesses, by tentative solutions to our problems, by conjectures. These conjectures are controlled by criticism; that is, by attempted refutations, which

include severely critical tests. They may survive these tests; but they can never be positively justied: they can neither be established as certainly true nor as probable (in the sense of probability calculus). Criticism of our conjectures is of decisive importance: by bringing out our mistakes it makes us understand the difculties of the problem which we are trying to solve. This is how we become better acquainted with our problems, and able to propose more mature solutions: the very refutation of a theorythat is, of any serious tentative solution to our problemis always a step forward that takes us nearer to the truth. And this is how we can learn from our mistakes.

The process of testing and trail and error provides the knowledge obtained in this way with an objective status and reliability that cannot be obtained by rmly held belief but not infallibility. This gives rise to an alternative life-cycle model shown in gure 2. In this model the cycle starts with the recognition of a problem or a challenge that needs a solution. There is no mechanistic process for creativity but it is mandated that creative outputs should be testable in principal. The reason why only testability in princ ipal should be mandated is that a new explanation or solution can itself suggest new measurement or test methods and therefore provides a new problem in how to realise the test. This can be done because testability is part of the logical structure of an explanation and does not require specic tests to be put forward initially.

SUBJECTIVE INTUITIONS

CANDIDATE KNOWLEDGE

RECOGNITION OF OUTSTANDING PROBLEMS

Figure 2: The evolutionary life-cycle for knowledge growth.

2.3.1 Objective knowledge The theory of objective knowledge was formulated by Popper [2] to explain how non-inductive, informative but criticisable knowledge is possible. He used the concept of three worlds to explain it. The three worlds of Popper are PW1 The world of physical objects and behaviours. PW2 The personal subjective world of feelings, beliefs etc. PW3 The world of objective knowledge such as scientic theories, problem statements, explanations, process models and rules of deduction. The three worlds inuence each other in a straight forward fashion. For example if someone Miss Y expresses a world 2 opinion, based on a feeling of being exploited, as a proposition such as Nobody in the company is payed less than me. This is trivially transformed into the objective proposition Nobody in the company is payed less than X where X is Miss Y . The proposition can be veried by consulting a company data base, for example. There are of course more noble examples which could be used but the point is that the transition from PW2 to PW3 is trivial once feelings, emotions and urges are expressed in some language. Equally, objective propositions from PW3 can give rise to purely emotional states in PW2. The objective status of the proposition Nobody in the company is payed less than X where X is .... makes it an even greater source of pain for X than mere suspicion would. Of prime importance for a technology based company is that, although it is not physical, it is the knowledge resident in PW3 which is essential in giving rise to objects in PW1 such as aeroplanes, computers, software and technical know-how.

2.3.2 Market place of ideas and the growth process Knowledge grows through learning on both an individual and organisational level. The creative part of the learning process takes place through speculation and correction mechanisms and it is suggested it should follow a cycle like that in gure 2. There is no method for generating genuinely new knowledge but the notion of the market place of ideas provides a guide to which regulations are permissible and which are not. There are methods for generating the logical consequences of existing bodies of knowledge, which is essential if tests are to be found, but this does not constitute in any way a method for generating knowledge. New knowledge comes into the world or an organisation in an act of creation followed by testable communication or demonstration. Although there are no knowledge creation recipes, there are conditions which are more or less favourable to the process. Favourable conditions, in addition to those suggested by Nonaka and Takeuchi under the name organisational conditions, are: ease of communication organisational connectivity recognition of fallibility and making mistakes as essential to the knowledge generation process recognition of creative individuals with proven track record

open information policy

2.4 Useful knowledge

Nonaka and Takeuchi have proposed a model which is based on a subjective or inter-subjective view of knowledge. Knowledge, for them, is justied belief and remains tacit until it is formulated and it becomes explicit and communicable. Through communication the knowledge becomes inter-subjective. In this model what are essentially external controls, called justication criteria, are imposed to make sure that the knowledge generated is useful to the organisation. This should be contrasted with the evolutionary model. The starting point is with the problems facing the organisation. The creative facilities of the organisation are applied to solving these and there is a built in test of how well the solutions solve the problems. The solution which solves the problem best at any time is the best solution at that time. This gives rise to a body of objective knowledge. It is explic it and consists of the generated solutions and the background information which makes the solutions understandable. In this process some untestable but interesting insights and stories will also be generated. Skills will be developed which are often called know-how and could be classied as useful tacit knowledge but will be called capabilities here. This leads to three fold classication of valuable knowledge as 1 Objective knowledge 2 Insights 3 Capabilities. All three will be generated by the evolutionary knowledge growth process and are all of value to the organisation. It is the nurturing and protection of the culture and organisation which generates this knowledge which is the goal of knowledge management.

3 Managing knowledge
A business is at best a semi-closed rather than open organisation and, in general, it needs fairly free and open markets outside to prosper. However the businesses themselves will not in general operate an internal open system and their interfaces with other businesses will also not be free. There are many different models for the management of a business ranging from authoritarian with tight controls to almost completely free within the context of a broad strategy and business goals. The question is: what is the business model which allows knowledge to be created, nurtured and managed as a key corporate resource?

3.1 Knowledge market

One of the motivations behind the knowledge management movement is the recognition that knowledge will become the primary source of wealth. If knowledge is wealth then the management of knowledge is a special case of the management and maintenance of wealth. There is wide recognition now that the ideal of a free market provides the most favourable conditions for the growth of wealth. For Bartley [3] a free knowledge market would provide the most favourable conditions for the growth of knowledge. Bartley was arguing for the grow th of knowledge in the society as a whole where arguments for freedom and openness are well known. A corporate body is more closed than a liberal democratic society because it has responsibilities, such as to make returns on

investment, which form centralised goals. The analogy which is well known between free market competition and Darwinian evolutionary theory provides the bridge to evolutionary knowledge growth. The free market mechanism can be considered to be an evolutionary process from which it is obvious that the evolutionary model of knowledge growth shows that as long as an open market in problems is maintained, together with a number of cultural freedoms and attitudes, then the mechanism should work. Therefore as extensive freedom as required in a liberal society is not needed to allow an organisation to be effective in generating knowledge. What is needed is an internal open market in problem statements and solutions.

3.2 Control and trust

Control of existing tangible knowledge is largely an IT task involving the management of the corporate intranet, keeping databases up to date as well as ensuring everyone has access to the corporate network and has state of the art software and hardware. This role is largely to ensure connectivity and to maximise the free ow of information. Control of capabilities involves encouraging teams to make sure that recognised critical skills do not reside in only one person and providing tools to help to make as much of the knowledge as possible objective. Control of the growth of knowledge is strictly speaking impossible knowledge grows through irreducible or at least unpredictable acts of creation. What is required from the organisation is the provision of an environment which minimises the obstacles to knowledge growth and provides recognition for those who have made key contributions. The recognition must be perceived as fair and equitable. The organisation will need to convince its members of this and persuade and enthuse them with the organisations goals. It may not be possible to objectively measure knowledge growth in all areas. This issue should not be forced if no convincing metric is available. If the management has the trust of the members of the organisation and it trusts the members to contribute towards the organisations goals then a direct objective metric is not needed. The recognition which the management provides will be a reward which motivates the competitive market of ideas. Note that it is the value of the reward and the perception that the market is fair enough to make participation worth while that drives the market on, not the existence of a metric for knowledge growth.

3.3 Knowledge Protection

There is a real dilemma in that a company will want its knowledge to grow but not want to freely disseminate its own knowledge. The dilemma is that the only viable model for sustained knowledge growth needs some elements of a free market. Intellectual property protection measures such as patents act against the free market of ideas. The intention is that it should restrict the knowledge which competitors may exploit but equally patents will close areas of growth to your own organisation. The other mechanism is secrecy. There will always be need for discretion but secrecy should not be allowed to become an automatic way of life. If a need to know policy is introduced then someone must be competent in deciding who needs to know. Using the market model of growth then the manager is put in the position of a central planner who must allocate resources without having access to all the information which would enable the correct allocation to be made. Therefore free and, beyond general guidelines, uncontrolled distribution of information should be the norm. Even if the freedom is constrained to distribution within the organisation then

leakage is inevitable and this must recognised. There will be exceptions which will be major ones for a defence company that must conform to national security standards. Judgement must be used to make the organisation as open as possible subject to contractual and other outside constraints. The model of knowledge growth being advocated here needs some non-trivial pool of organisation problems to be made widely available. This should be done in a culture in which criticism is encouraged but must be constructive eliminating a mistaken theory is a constructive contribution.

3.4 People
People are currently the source of new ideas and therefore provide the seeds for knowledge growth. At the moment they are also the sole source of articulation of tacit knowledge and they transform it into tangible knowledge. To carry this out effectively they need, in addition to an understanding of the model of knowledge growth, enabling social and cultural conditions, such as: A culture of constructive criticism. Openness about the problems facing the organisation Tools to help in the formulation of solutions and explanations Recognition of their contribution to knowledge growth and dissemination. A sense of discipline and loyalty that will enable them to be open within the company but discrete in interactions with others. Allowances of time to work on problems of their choice To be provided with a fair rewards system. Reassurance that mistakes will be tolerated as part of the creative process with rewards for creative mistakes. A culture which recognises change as essential and welcomes continuous change.

To be capable of executing this role people will have to contribute a level of discipline, intellectual rigour and creativity which is extremely rare. It is hoped that studies such as this paper and a fuller report [8] will be of help in mapping out the roles for people in a knowledge creating organisation and deciding on the appropriate education and training measures. The management must provide a system which responds to the needs of the members of the organisation. It will also provide the structure and policy for the corporate information network. It must work to gain the trust of the members and also trust the members to work towards the companys good. It must not stie the creativity of the members by imposing controls which are justied only by the lack of trust. However it must be recognised that a corporate enterprise will be more closed than society at large and there will therefore be more control but as knowledge creation becomes critical to the wealth of an enterprise an increasingly enlightened approach to controls is required, erring on the side of less to produce more.

4 Conclusions
This paper has discussed the theory of knowledge growth. It has been argued that to create knowledge, which is of value to the organisation, then subjective theories must be discarded. The need for rigour and rationality have been stressed to compensate for and contrast with models which concentrate on the subjective and social aspects and are devoid of rational foundation. However, the need for the appropriate motivational, cultural and social

conditions within the context set by the model is fully recognised and has also been discussed. For the knowledge growth process an evolutionary model is advocated which describes knowledge growth as a problem solving process for the organisation. This model is founded on an analysis of the nature of useful knowledge and a criticism of the other main candidate. The critical evolutionary theory has consequences for the management of a knowledge creating organisation. Therefore the recommendations are: The evolutionary model of knowledge growth and its consequences must be understood by all participants. Problems must be recognised as key to knowledge growth. Identication of problems is an essential contribution to the good of the organisation and mus t be rewarded. Problems are to be seen as opportunities for innovation. Once identied and prioritised problems must be tackled with purpose and urgency. The set of problems facing an organisation must be made as open as possible. The members of the organisation, or some signicant subset, must be allowed to tackle problems free from the constraints of specic projects Secrecy for its own sake or short term personal advantage should be discouraged. A culture of constructive criticism of solutions to problems should be nurtured.

References
[1] I Nonaka and H Takeuchi. The Knowledge Creating Company. OUP, Oxford, 1995. [2] K R Popper. Objective Knowledge. Oxford, 1972. [3] W W Bartley. Unfathomed knowledge, unmeasured wealth. Open Court, Illinois, 1990. [4] Plato. Theaitetos. [201], circa 387 B.C. [5] E Gettier. Is justied true belief knowledge? Analysis, 23:1213, 1963. [6] R Bradley and N Swartz. Possible Worlds. Hackett, 1979. [7] K R Popper. Cojectures and refutations. Routledge and Kegan Paul, London, 5th edition, 1974. [8] R Johnston. Knowledge modelling, growth and technology. Technical report, MESL, 1999.