The Knowledge Creating Company [Nonaka]

Marvin Weisbord’s Productive Workplaces came up in a conversation I was having this week. If you’re into Organizational Design, this book is a must read. But when asked about my biggest insight from the book, I came to a surprising conclusion. My insight wasn’t about a particular concept that the book covered. My insight was a tangible sense of the fragility of human knowledge. Reading through the 80-year history and evolution of the Organizational Design field from Fredrick Taylor circa 1910 to Weisbord’s approach circa 1990, my most glaring insight was how much we seem to have forgotten in the 25 years since then. And how much of our “new” insights are just rediscovering of insights first discovered as early as the 1950s and 1960s.

Today’s paper, referenced in one of the IEX whitepapers I covered a couple of weeks ago, is a real gem, first published in 1991:

The Knowledge-Creating Corporation by Ikujiro Nonaka

Nonaka frames the discussion perfectly:

In an economy where the only certainty is uncertainty, the one sure source of lasting competitive advantage is knowledge. When markets shift, technologies proliferate, competitors multiply, and products become obsolete almost overnight, successful companies are those that consistently create new knowledge, disseminate it widely throughout the organization, and quickly embody it in new technologies and products.

Nonaka makes the key distinction between explicit knowledge (seen, understood, easily communicated, captured in documentation and processes) and tacit knowledge (unseen, habits, hands-on skills, subjective insights and intuitions). Recognizing that tacit knowledge is core to what a company is, stems from the idea that:

A company is not a machine but a living organism. Much like an individual, it can have a collective sense of identity and fundamental purpose. This is the organizational equivalent of self-knowledge — a shared understanding of what the company stands for, where it is going, what kind of world it wants to live in, and, most important, how to make that world a reality.

He then lays out a framework for knowledge processing which distinguishes between 4 types of knowledge transitions (depicted above) — Socialization, Externalization, Combination, and Internalization. SECI for short:

  • Socialization (Tacit → Tacit): Knowledge is passed on through practice, guidance, imitation and observation. Example: a novice cook takes an apprenticeship with a well-known chef.
  • Externalization (Tacit → Explicit): Tacit knowledge is codified into documents, manuals, processes, technology, etc. so that it can spread more easily through the organization and outside of the organization. Example: a product manager communicates her vision for the product using a spec.
  • Combination (Explicit → Explicit): Codified knowledge sources are combined to create new knowledge. Building the full picture from the parts. Example: a comptroller puts together a financial dashboard for the company based on the dashboards of the various departments.
  • Internalization (Explicit → Tacit): As explicit sources are used and learned, the knowledge is internalized, modifying the user’s existing tacit knowledge. Example: an employee applies a new technique that he learned from a book to her day-to-day work.

Nonaka’s key insight is that new knowledge is created in the transitions from tacit to explicit (externalization), and from explicit to tacit (internalization). 

Of those two, Nonaka drills deeper into the less understood process of externalization, and outlines three interim stages in this process — metaphor, analogy, and model:

Indeed, because tacit knowledge includes mental models and beliefs in addition to know-how, moving from the tacit to the explicit is really a process of articulating one’s vision of the world — what it is and what it ought to be.

One kind of figurative language that is especially important is metaphor. It is a way for individuals grounded in different contexts and with different experiences to understand something intuitively through the use of imagination and symbols without the need for analysis or generalization. Through metaphors, people put together what they know in new ways and begin to express what they know but cannot yet say. As such, metaphor is highly effective in fostering direct commitment to the creative process in the early stages of knowledge creation…

But while metaphor triggers the knowledge-creation process, it alone is not enough to complete it. The next step is analogy. Whereas metaphor is mostly driven by intuition and links images that at first glance seem remote from each other, analogy is a more structured process of reconciling contradictions and making distinctions. Put another way, by clarifying how
the two ideas in one phrase actually are alike and not alike, the contradictions incorporated into metaphors are harmonized by analogy. In this respect, analogy is an intermediate step between pure imagination and logical

Finally, the last step in the knowledge creation process is to create an actual model. A model is far more immediately conceivable than a metaphor or an analogy. In the model, contradictions get resolved and concepts become transferable through consistent and systematic logic.

I’ll wrap up with three insights from Nonaka that are more directly tied to Organizational Design, covering the roles of organizational redundancy, reflection, and teams in knowledge-creating:

The fundamental principle of organizational design at the Japanese companies I have studied is redundancy — the conscious overlapping of company information, business activities, and managerial responsibilities. To Western managers, the term “redundancy,” with its connotations of unnecessary duplication and waste, may sound unappealing. And yet, building a redundant organization is the first step in managing the knowledge-creating company. Redundancy is important because it encourages frequent dialogue and communication. This helps create a “common cognitive ground” among employees and thus facilitates the transfer of tacit knowledge. Since members of the organization share overlapping information, they can sense what others are struggling to articulate. Redundancy also spreads new explicit knowledge through the organization so it can be internalized by employees.

The key to doing so is continuously challenging employees to reexamine what they take for granted. Such reflection is always necessary in the knowledge-creating company, but it is especially essential during times of crisis or breakdown, when a company’s traditional categories of knowledge no longer work. At such moments, ambiguity can prove extremely useful as a source of alternative meanings, a fresh way to think about things, a new sense of direction. In this respect, new knowledge is born in chaos.

Teams play a central role in the knowledge-creating company because they provide a shared context where individuals can interact with each other and engage in the constant dialogue on which effective reflection depends. Team members create new points of view through dialogue and discussion. They pool their information and examine it from various angles. Eventually, they integrate their diverse individual perspectives into a new collective perspective. This dialogue can — indeed, should — involve considerable conflict and disagreement. It is precisely such conflict that pushes employees to question existing premises and make sense of
their experience in a new way.
“When people’s rhythms are out of sync, quarrels occur and it’s hard to bring people together,” acknowledges a deputy manager for advanced technology development at Canon. “Yet if a group’s
rhythms are completely in unison from the beginning, it’s also difficult to achieve good results.”

The Knowledge Creating Company [Nonaka]

Just Like Me [ Delizonna]

Psychological safety is a hot-button topic these days, that’s been getting a lot of attention, at least in my circles.

There’s a growing understanding of what psychological safety is, and its importance in enabling high-performing teams, but there are very few good resources that are able to offer some concrete advice on practices that promote it.

Laura Delizonna’s recent HBR piece is a rare exception which offers some concrete tangible advice:

High Performing Teams Need Psychological Safety. Here’s How to Create It.

Of the six pieces of advice she lists in the piece, the one that really struck a cord with me is a beautifully simple reflection exercise that she credits Paul Santagata, Head of Industry at Google with using, in which participants are asked to consider the following statements:

  • This person has beliefs, perspectives, and opinions, just like me.
  • This person has hopes, anxieties, and vulnerabilities, just like me.
  • This person has friends, family, and perhaps children who love them, just like me.
  • This person wants to feel respected, appreciated, and competent, just like me.
  • This person wishes for peace, joy, and happiness, just like me.

I honestly can’t wait to try a simple variation of it in one of my upcoming meetings.

Just Like Me [ Delizonna]

Constructive Dissent [Suster]

In recent weeks, I found myself coming back to this post by Mark Suster:

Lead, Follow or get the F#@k Out of the Way

Suster often takes an extreme position on matters, and this one is no different. His advice for what you should do when you disagree with the direction that your company is taking is — quit.

I’m not sure that I’m all the way there with him. To me, the most useful part of this piece is the way that he so accurately describes an organizational challenge that many of us have faced — unconstructive dissent:

Dissent is fine. Dissent actually makes groups stronger. I love being challenged because it forces me to think harder about what my convictions are. I love when people come with ideas that conflict with my world view because the conflict either ends up giving me more confidence in my convictions or helps me to evolve. Sometimes it even causes me to consider revolution.

But dissenters need ideas of their own. Dissenters need facts and logic. Dissenters need to be willing to roll up their sleeves and help do the work. Dissenters need to be willing to have their own necks on the chopping block and admit that they were wrong in the end.

Dissenters don’t get to be “back benchers.” They don’t get to yell from the peanut gallery but never own results or the consequences of decisions. Dissenters don’t get to second guess but never lead.

Throughout life I’ve realized that many people are back benchers. “That will never work” is their motto. They like to criticize but they don’t have strong ideas of their own. They “know” what’s wrong but they never do anything about it. They never lead. Yet they don’t follow.

From my perspective, I don’t assign blame to those who have expressed unconstructive dissent by default.

Constructive dissent is not something that comes naturally to many of us, myself included. If you were never taught or never experienced what constructive dissent looks like, it’s not unreasonable that we’ll default to the unconstructive form.

Constructive dissent must be taught. And Peter Senge in his seminal book The 5th Discipline gave us a quick cheat-sheet that can jump-start our efforts:

I’d advocate for patience in dealing with unconstructive dissent, but not endless patience. Unconstructive dissent is debilitating and demotivating, not just to the person expressing it, but more importantly to everyone around them. Once someone was given the benefit of the doubt, was given the feedback that they must change their ways, was given the tools to do so and the time to do so — and still no change. Then, it may be time to part ways…

Constructive Dissent [Suster]

The IEX Series on Organizational Transformation [IEX]

I recently came across an interesting whitepaper by the folks at the Institute for Enterprise Excellence and upon some further digging around, I learned that it’s part of a longer series of 10 whitepapers on driving organizational transformation.

Most of their work is heavily inspired by the seminal work of W. Edwards Deming, which is always a good reminder for how many good decades-old insights are hiding in plain sight. But it also includes some good synthesis of other resources and some interesting fresh thinking of their own.

It’s worth skimming through the whole series, if you can spare the time, but each whitepaper also stands quite well on its own.

Here’s a slightly paraphrased and hyperlinked list of the IEX folks explaining in their own words what each whitepaper is all about:

  • Our first white paper “Foundations For Transformation: Linking Purpose, People and Process” describes the common patterns that we have observed as executives and managers have attempted to create a culture of continuous improvement in their organization. Many find themselves trapped in a cycle of “program of the month” approaches that never seem to produce the sustainable transformation of management that is necessary. However, there are some who desire to break away from this pattern, and wish to switch the direction of their efforts by understanding the power of purpose, as well as learning and practicing new principles of management.
  • Our second white paper “Evolving World View: Implications for All Industries, Including Healthcare” describes the sources of knowledge that will be needed to manage effectively in the twenty-first century. We described how the world view is changing from the “machine age” mindset that has driven the traditional “plan, command and control” approach, to a “systems view.” We explain the evolution of thinking that is the foundation for the principles of enterprise excellence.
  • Our third white paper “Practical Wisdom for Addressing Problems” describes the practical benefits of understanding the difference between convergent and divergent problems, including what we can reasonably expect from ourselves and from others when attempting to address the important problems of management. The tendency for most executives and managers is to look to recipes and formulas to tell us what to do — a prescription for how to deploy a lean management system. There is no recipe, formula or prescriptions. But there is knowledge that can guide our actions.
  • Our fourth white paper “One Approach to Deploying a Purpose and Principle-Driven Transformation” shares our current thinking about “deploying a cultural transformation” based on the knowledge and contributions of many thought leaders, as well as observing patterns in organizations from many industries that are attempting and succeeding at a cultural and management transformation.
  • Our fifth white paper “Principles for Personal and Organizational Transformation — Align” describes the principles behind the IEX model, specifically those principles primarily focused on aligning the improvement efforts so that individuals can have a clear “line of sight” between the work they do every day and how it connects to and supports the organization’s purpose.
  • Our sixth white paper “Principles for Personal and Organizational Transformation — Enable” describes the principles behind the IEX model, specifically those principles primarily focused on enabling people to be engaged in, and improve their work systems.
  • Our seventh white paper “Principles for Personal and Organizational Transformation — Improve” describes the principles behind the IEX model, specifically those principles primarily focused on improving the work.
  • Our eighth white paper “Systems By Design” describes the importance of design and redesign of key systems, in particular supporting systems of alignment, enabling and improvement. We describe a method, including a “system standard” that can help any executive and manager design and redesign key systems that will help them contribute to their organization’s purpose.
  • Our ninth white paper “True, True North” describes the benefits of more fully understanding True, True North and how this can avoid the trap of the narrow definition of True North only as measures. This matters, because without this understanding the pursuit of true north can merely be “management by results” in disguise.
  • Our tenth paper “Side (by Side) Management” describes a more useful view of the traditional hierarchy model, and the implications for connecting strategy deployment to daily management in order to provide value to customers, as well as facilitating true knowledge creation in the organization.

Happy readin’!

The IEX Series on Organizational Transformation [IEX]