KNOWLEDGE SPIRAL AND SUSTAINED ORGANIZATIONAL ADVANTAGES
THROUGH SECI PROCESS
Knowledge Conversion: Interaction between Tacit and Explicit Knowledge
The history of Western epistemology can be seen as a continuous controversy about which type of knowledge is more truthful. While Westerners tend to emphasize explicit knowledge, the Japanese tend to stress tacit knowledge. In our view, however, tacit knowledge and explicit knowledge are not totally separate but mutually complementary entities. They interact with and interchange into each other in the creative activities of human beings. Our dynamic model of knowledge creation is anchored to a critical assumption that human knowledge is created and expanded through social, interaction between tacit knowledge and explicit knowledge. We call this interaction "knowledge conversion." It should be noted that this conversion is a "social" process between individuals and not confined within an individual. According to the rationalist view, human cognition is a deductive process of individuals, but an individual is never isolated from social interaction when he or she perceives things. Thus, through this "social conversion" process, tacit and explicit knowledge expand in terms of both quality and quantity (Nonaka, 1990b).
The idea of "knowledge conversion" may be partially consonant with the ACT model developed in cognitive psychology .This model hypothesizes that for cognitive skills to develop, all declarative knowledge, which corresponds to explicit knowledge in our theory, has to be transformed into procedural knowledge, which corresponds to tacit knowledge, used in such activities as riding a bicycle or playing the piano. The ACT model has one limitation. It views the transformation as a special case, because this model's research interest is focused on the acquisition and transfer of procedural (tacit) knowledge, not declarative (explicit) knowledge. In other words, proponents of this model consider knowledge transformation as mainly unidirectional from declarative (explicit) to procedural (tacit), whereas we argue that the transformation is interactive and spiral.
Four Modes of Knowledge Conversion
The assumption that knowledge is created through the interaction between tacit and explicit knowledge allows us to postulate four different modes of knowledge conversion. They are as follows: (1) from tacit knowledge to tacit knowledge, which we call socialization; (2) from tacit knowledge to explicit knowledge, or externalization; (3) from explicit knowledge to explicit knowledge, or combination; and(4) from explicit knowledge to tacit knowledge, or internalization. Three of the four types of knowledge conversion-socialization, combination, and internalization-have been discussed from various perspectives in organizational theory. For example, socialization is connected with the theories of group processes and organizational culture; combination has its roots in information processing; and internalization is closely related to organizational learning. However, externalization has been somewhat neglected. Each of these four modes of knowledge conversion will be discussed in detail below, along with actual examples.
Socialization: From Tacit to Tacit
Socialization is a process of sharing experiences and thereby creating tacit knowledge such as shared mental models and technical skills. An individual can acquire tacit knowledge directly from others without using language. Apprentices work with their masters and learn craftsmanship not through language but through observation, imitation, and practice. In the business setting, on-the-job training uses basically the same principle. The key to acquiring tacit knowledge is experience. Without some form of shared experience, it is extremely difficult for one person to project her- or himself into another individual's thinking process. The mere transfer of information will often make little sense, if it is abstracted from associated emotions and specific contexts in which shared experiences are embedded. The following three examples illustrate how socialization is employed by Japanese companies within the product development context.
The first example of socialization comes from Ronda, which set up "brainstorming camps" (tama dashi kai)-informal meetings for detailed discussions to solve difficult problems in development projects. The meetings are held outside the workplace, often at a resort inn where participants discuss difficult problems while drinking sake, sharing meals, and taking a bath together in a hot spring. The meetings are not limited to project team members but are open to any employees who are interested in the development project under way. In these discussions, the qualifications or status of the discussants are never questioned, but there is one taboo: criticism without constructive suggestions. Discussions are held with the understanding that "making criticism is ten times easier than coming up with a constructive alternative." This kind of brainstorming camp is not unique to Ronda but has been used by many other Japanese firms. It is also not unique to developing new products and services but is also used to develop managerial systems or corporate strategies. Such a camp is not only a forum for creative dialogue but also a medium for sharing experience and enhancing mutual trust among participants. It is particularly effective in sharing tacit knowledge and creating anew perspective. It reorients the mental models of all individuals in the same direction, but not in a forceful way. Instead, brainstorming camps represent a mechanism through which individuals search for harmony by engaging themselves in bodily as well as mental experiences.
The second example, which shows how a tacit technical skill was socialized, comes from the Matsushita Electric Industrial Company. A major problem at the Osaka-based company in developing an automatic home bread-making machine in the late 1980s centered on how to mechanize the dough-kneading process, which is essentially tacit knowledge possessed by master bakers. Dough kneaded by a master baker and by a machine were x-rayed and compared, but no meaningful insights were obtained. Ikuko Tanaka, head of software development, knew that the area's best bread came from the Osaka International Hotel. To capture the tacit knowledge of kneading skill, she and several engineers volunteered to apprentice themselves to the hotel's head baker. Making the same delicious bread as the head baker's was, not easy. No one could explain why. One day, however, she noticed that the baker was not only stretching but also "twisting" the dough, which turned out to be the secret for making tasty bread. Thus she socialized the head baker's tacit knowledge through observation, imitation, and practice.
Socialization also occurs between product developers and customers. Interactions with customers before product development and after market introduction are, in fact, a never-ending process of sharing tacit knowledge and creating ideas for improvement. The way NEC developed its first personal computer is a case in point. The new-product development process began when a group from the Semiconductor and IC Sales Division conceived of an idea to sell Japan's first microcomputer kit, the TK-80, to promote the sales of semiconductor devices. Selling the TK-80 to the public at large was a radical departure from NEC's history of responding to routine orders from Nippon Telegraph and Telephone (NTT). Unexpectedly, a wide variety of customers, ranging from high school students to professional computer enthusiasts, came to NEC's BIT-INN, a display service center in the Akihabara district of Tokyo, which is famous for its high concentration of electronic goods retailers. Sharing experiences and continuing dialogues with these customers at the BIT-INN resulted in the development of NEC's best-selling personal computer, the PC-8000, a few years later.
Externalization: From Tacit to Explicit
Externalization is a process of articulating tacit knowledge into explicit concepts. It is a quintessential knowledge-creation process in that tacit knowledge becomes explicit, taking the shapes of metaphors, analogies, concepts, hypotheses, or models. When we attempt to conceptualize an image, we express its essence mostly in language- writing is an act of converting tacit knowledge into articulable knowledge . Yet expressions are often inadequate, inconsistent, and insufficient. Such discrepancies and gaps between images and expressions, however, help promote "reflection" and interaction between individuals.
The externalization mode of knowledge conversion is typically seen in the process of concept creation and is triggered by dialogue or collective reflection.13 A frequently used method to create a concept is to combine deduction and induction. Mazda, for example, combined these two reasoning methods when it developed the new RX-7 concept, which is described as "an authentic sports car that provides an exciting and comfortable drive." The concept was deduced from the car maker's corporate slogan: "create new values and present joyful driving pleasures" as well as the positioning of the new car as "a strategic car for the U.S. market and an image of innovation." At the same time, the new concept was
induced from "concept" trips," which were driving experiences by development team members in the
United States as well as from "concept clinics," which gathered opinions from customers and car experts. When we cannot find an adequate expression for an image through analytical methods of deduction or induction, we have to use a non analytical method. Externalization is, therefore, often driven by metaphor and/or analogy. Using an attractive metaphor and/or analogy is highly effective in fostering direct commitment to the creative process. Recall the Ronda City example. In developing the car, Riroo
Watanabe and his team used a metaphor of "Automobile Evolution." His team viewed the automobile as an organism and sought its ultimate form. In essence, Watanabe was asking, "What will the automobile eventually evolve into?"
I insisted on allocating the minimum space for mechanics and the maximum space for passengers. This seemed to be the ideal car, into which the automobile should evolve.
...The first step toward this goal was to challenge the "reasoning of Detroit," which had sacrificed comfort for appearance. Our choice was a short but tall car...spherical, therefore lighter, less expensive, more comfortable, and solid.
The concept of a tall and short car-"Tall Boy"-emerged through an analogy between the concept of "man-maximum, machine-minimum" and an image of a sphere that contains the maximum volume within the minimum area of surface, which ultimately resulted in the Honda City.
The case of Canon's Mini-Copier is a good example of how an analogy was used effectively for product development. One of the most difficult problems faced by the development team was producing at low, cost a disposable cartridge, which would eliminate the necessity for maintenance required in conventional machines. Without a disposable cartridge, maintenance staff would have to be stationed allover the country, since the copier was intended for family or personal use. If the usage frequency were high, maintenance costs could be negligible. But that was not the case with a personal copier. The fact that a large number of customers would be using the machine only occasionally meant that the new product had to have high reliability and no or minimum maintenance. A maintenance study showed that more than 90 percent of the problems came from the drum or its surrounding parts. Aimed at cutting maintenance costs while maintaining the highest reliability, the team developed the concept of a disposable cartridge system in which the drum or the heart of the copier is replaced after a certain amount of usage.
The next problem was whether the drum could be produced at a cost low enough to be consistent with the targeted low selling price of the copier. A task force assigned to solve this cost problem had many heated discussions about the production of conventional photosensitive drum cylinders with a base material of aluminum-drawn tube at a 1ow cost. One day Riroshi Tanaka, leader of the task force, sent out for some cans of beer. Once the beer was consumed, he asked, "How much does it cost to manufacture this can?" The team then explored the possibility of applying the process of manufacturing the beer can to manufacturing the drum cylinder, using the same material. By clarifying similarities and differences, they discovered a process technology to manufacture the aluminum drum at a low cost, thus giving rise to the disposable drum.
These examples within Japanese firms clearly show the effectiveness of the use of metaphor and analogy in creating and elaborating a concept . As Honda's Watanabe commented, "We are more than halfway there, once a product concept has been created." In this sense, the leaders' wealth of figurative language and imagination is an essential factor in eliciting tacit knowledge from project members.
Among the four modes of knowledge conversion, externalization holds the key to knowledge creation, because it creates new, explicit concepts from tacit knowledge. How can we convert tacit knowledge into explicit knowledge effectively and efficiently? The answer lies in a sequential use of metaphor, analogy, and model. As Nisbet (1969) noted, "much of what Michael Polanyi has called 'tacit knowledge' is expressible-in so far as it is expressible at all-in metaphor". Metaphor is away of perceiving or intuitively understanding one thing by imaging another thing symbolically.
Theory of Organizational Knowledge Creation in Product DevelopmentProduct (Company) / Metaphor/Analogy / Influence on Concept Creation
City / “Automobile / Evolution” / Hint / of / maximizing / passenger
(Honda) / (Metapor) / space / as / ultimate / auto
development / “Man-maximum,
machine-minimum” / concept
created.
The sphre / Hint / of / achieving / maximum
(analogy) / passenger / space / through
minimizing / surface area / “Tall
and short car (Tall Boy)”
concept created
Mini-Copier / Aluminum beer can / Hin / of / similarities / between
(Canon) / (analogy) / inexpensive aluminum beer can
and / photosensitive / drum
manufacture
“Low-cost / manufacturing
process” concept created
Home Bakery (Mathsushita) / Hotel bread / (metaphor) / Osaka / Hint of more delicious bread
International / Hotel head / baker
(analogy) / “Twist dough” concept created
Metaphors are one communication mechanism that can function to reconcile discrepancies in meaning. Moreover, metaphor is an important tool for creating a network of new concepts. Because a metaphor is "two thoughts of different things...supported by a single word, or phrase, whose meaning is a resultant of their interaction".), we can continuously relate concepts that are far apart in our mind, even relate abstract concepts to concrete ones. This creative, cognitive process continues as we think of the similarities among concepts and feel an imbalance, inconsistency, or contradiction in their associations, thus often leading to the discovery of new meaning or even to the formation of a new paradigm.
Contradictions inherent in a metaphor are then harmonized by analogy , which reduces the unknown by highlighting the "commonness" of two different things. Metaphor and analogy are often confused. Association of two things through metaphor is driven mostly by intuition and holistic imagery and does not aim to find differences between them. On the other hand, association through analogy is carried out by rational thinking and focuses on structural/functional similarities between two things, and hence their differences. Thus analogy helps us understand the unknown through the known and bridges the gap between an image and a logical model.
Once explicit concepts are created, they can then be modeled. In a logical model, no contradictions should exist and all concepts and propositions must be expressed in systematic language and coherent logic. But in business terms, models are often only rough descriptions or drawings, far from being fully specific. Models are usually generated from metaphors when new concepts are created in the business con text.
Combination: From Explicit to Explicit
Combination is a process of systemizing concepts into a knowledge system. This mode of knowledge conversion involves combining different bodies of explicit knowledge. Individuals exchange and combine knowledge through such media as documents, meetings, telephone conversations, or computerized communication networks. Reconfiguration of existing information through sorting, adding, combining, and categorizing of explicit knowledge (as conducted in computer databases) can lead to new knowledge. Knowledge creation carried out in formal education and training at schools usually takes this form. An MBA education is one of the best examples of this kind.
In the business context, the combination mode of knowledge conversion is most often seen when middle managers break down and operationalize corporate visions, business concepts, or product concepts. Middle management plays a critical role in creating new concepts through networking of codified information and knowledge. Creative uses of computerized communication networks and large-scale databases facilitate this mode of knowledge conversion.
At Kraft General Foods, a manufacturer of dairy and processed foods, data from the POS (point-of-sales) system of retailers is utilized not only to find out what does and does not sell well but also to create new "ways to sell," that is, new sales systems and methods. The company has developed an information-intensive marketing program called "micro-merchandizing," which provides supermarkets with timely and precise recommendations on the optimal merchandise mix and with sales promotions based on the analysis of data from its micro-merchandising system. Utilizing Kraft's individual method of data analysis, including its unique classification of stores and shoppers into six categories, the system is capable of pinpointing who shops where and how. Kraft successfully manages its product sales through super-markets by controlling four elements of the "category management" methodology-consumer and category dynamics, space management, merchandizing management, and pricing management.
At the top management level of an organization, the combination mode is realized when mid-range concepts {such as product concepts) are combined with and integrated into grand concepts {such as a corporate vision) to generate anew meaning of the latter. Introducing anew corporate image in 1986, for example, Asahi Breweries adopted a grand concept dubbed "live Asahi for live people." The concept stood for the message that "Asahi will provide natural and authentic products and services for those who seek active minds and active lives."