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Die Organisation des Wissens

The Knowledge-Creating Company. By Ikujiro Nonaka and Hirotaka Takeuchi

Ikujiro Nonaka and Hirotaka Takeuchi: Die Organisation des Wissens. Wie japanische Unternehmen eine brachliegende Ressource nutzbar machen, Campus Verlag, Frankfurt am Main 1997, ISBN 3-593-35643-0

Also available in English: The Knowledge-Creating Company, Oxford University Press Incorporated 1995

27.06.1999 · Reviewed by Richard Resch

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Why have Japanese companies been so successful in global competition? Contrary to the stereotype that Japanese businesses are very good at imitating but not inventing, Ikujiro Nonaka and Hirotaka Takeuchi argue that it is precisely the ability of Japanese companies to create new knowledge which lies at the heart of their success. In this context, they criticize Western theorists who treat knowledge merely as a resource to be accessed and processed by the company, instead of viewing its creation as any company's central activity, responsible for success. Their work "The Knowledge-Creating Company" is concerned with three issues: (1) a new theory of knowledge creation within companies, (2) an explanation for the particular innovation success of Japanese companies, and (3) the proposal of a new prescriptive management model, that fuses elements of Japanese and Western management practice in order to optimize the process of innovation.

The book distinguishes between two fundamental forms of knowledge. Implicit knowledge in the form of personal experience and intuition is embodied in individuals. It contains technical elements such as concrete know-how, and cognitive elements in the form of mental models: paradigms, perspectives, convictions, ideas and visions. Its idiosyncratic nature limits its communicability. Explicit knowledge on the other hand, embodied for example in mathematical equations and technical data, is abstract rather than personal in nature. It can be easily communicated through the use of formal language. Only when the implicit knowledge of individuals is made explicit can it be used by the whole company to create new competencies, technology and products: "The essential process of knowledge creation takes place when implicit knowledge is transformed into explicit knowledge, i.e. when our ideas, perceptions, mental models, imaginations and experiences are transformed into something communicable and expressed in systematic language."

In the opinion of the authors, Japanese culture traditionally endowed Japanese companies with an advantage in transforming implicit into explicit knowledge. The Japanese tradition puts weight on personal experience, and knowledge is understood in terms of "wisdom" (i.e., it has a personal rather than abstract form). In contrast to the Western rational tradition, which is epistemologically based on the sharp distinction between the subject and object of experience, and focuses on abstract theory and hypotheses, Japanese thinking is described as more "visual", with no such clear cut division between ego and nature. Concrete pictures of things are central to Japanese language, which employs a more metaphorical, not-logical style. This in turn, however, makes it easier for Japanese companies to mobilize implicit knowledge from its members: "Metaphors enable people to exchange ideas and experience, to grasp things intuitively through imagination and symbols."

Based on their analysis of the experiences of Japanese companies, Nonaka and Takeuchi deliver a strong argument that merely hierarchical and merely participatory management structures are both suboptimal means for the efficient creation of new knowledge within the company. The top-down management of bureaucratic hierarchical structures fosters the systematic collection and application of knowledge, but curbs individual motivational initiative and company reaction times to external change. The bottom-up management of flat horizontal structures is better for individual motivation, as well as the exchange and creation of new knowledge. However, its opportunity costs come in the form of inefficiencies in the spread of newly created knowledge to other parts of the company, due to the only temporary nature of project teams.

As a remedy, the authors propose a new management model: a form of "middle-up-down-management," that synthesizes the efficiency and stability of hierarchical structures with the effectiveness and dynamism of a project team. In this new hybrid company structure, the middle managers have to perform the key task of building a suitable environment for a type of dynamic social interaction that, in a continuing process of dialogue, discussion and exchange of experiences "amplifies individually created knowledge and spreads it over the whole company." In addition, it is their responsibility to bridge the gap between the visionary ideas at the top and the real conditions of the creation of new technologies and products at the bottom through the development of concrete conceptions. With the help of a few thoroughly analyzed case studies, Nonaka and Takeuchi show how this can look in practice.

Two points of criticism may be attached. On the one hand, if the advantages of Japanese management practices are truly cultural in origin, how can those practices be applied by Western companies? One cannot exchange a mode of thinking that is culturally grown easily for another. Of course, elements can be copied, but the scope for that is limited. On the other hand, given the anatomy of today's global competition, the book's focus on innovation as the single variable determining success is problematic. Innovation certainly becomes ever more mandatory, but given dramatically shortening product life-cycles and the shortening of technology lead times (due to narrowing gaps technical expertise between the OECD countries), innovation alone no longer guarantees success. Translating innovation into profit is crucial to success in today's global markets. The authors offer useful insights into this process, but not a complete picture.
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