The Knowledge-Creating Company: How Japanese Companies Create the Dynamics of Innovation

How have Japanese companies become world leaders in the automotive and electronics industries, among others? What is the secret of their success? Two leading Japanese business experts, Ikujiro Nonaka and Hirotaka Takeuchi, are the first to tie the success of Japanese companies to their ability to create new knowledge and use it to produce successful products and technologies. In The Knowledge-Creating Company , Nonaka and Takeuchi provide an inside look at how Japanese companies go about creating this new knowledge organizationally. The authors point out that there are two types of knowledge: explicit knowledge, contained in manuals and procedures, and tacit knowledge, learned only by experience, and communicated only indirectly, through metaphor and analogy. U.S. managers focus on explicit knowledge. The Japanese, on the other hand, focus on tacit knowledge. And this, the authors argue, is the key to their success--the Japanese have learned how to transform tacit into explicit knowledge. To explain how this is done--and illuminate Japanese business practices as they do so--the authors range from Greek philosophy to Zen Buddhism, from classical economists to modern management gurus, illustrating the theory of organizational knowledge creation with case studies drawn from such firms as Honda, Canon, Matsushita, NEC, Nissan, 3M, GE, and even the U.S. Marines. For instance, using Matsushita's development of the Home Bakery (the world's first fully automated bread-baking machine for home use), they show how tacit knowledge can be converted to explicit knowledge: when the designers couldn't perfect the dough kneading mechanism, a software programmer apprenticed herself with the master baker at Osaka International Hotel, gained a tacit understanding of kneading, and then conveyed this information to the engineers.

Georg Von Krogh is Professor of Management and member of the board, the Institute of Management, University of St. Gallen, Switzerland. An active consultant, his clients include Hoffman La-Roche, PricewaterhouseCoopers, USB, and Unilever. He lives in St. Gallen, Switzerland. Kazuo Ichijo is
Associate Professor, Faculty of Social Sciences, Hitotsubashi University. Author of Management by Values, winner of the Japan Management Association's 1998 Best Book Award, he also works with the leaders of Toyota, General Electric, Fujitsu, Sony, Hitachi, and others, to help them transform their
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