All right. This is not the kind of books you want to read in the subway or in a café. It is academic, and probably made for academics (its price also is for academics…). But I think its main ideas are useful for any leader who wants to build a XXIst Century organization.
I. Nonaka and his co-authors describe in this book the seven key components of the knowledge-based firm. These elements operate together and allow the creation of knowledge in a dynamic interaction of the firm with its environment. The components of Nonaka’s framework are the following :
- Knowledge vision : Based on values, it “defines the kind of future that the company imagines for itself and determines the collective ideal mission and domain” (p. 27). This vision must be noble and difficult to achieve.
- Driving objectives : The concept, goal or action standard that connects the vision to the knowledge-creation process of dialogue and practice (p. 29). The authors give the example of Seven-Eleven Japan concept of “cut opportunity losses” (i.e. the company must not lose a possible sale because the customer could not find in the store what she wants). Such driving objectives link high-level and value-driven vision with the process of knowledge-creation through dialogue and practice.
- Dialogue and Practice : these two compenents, in Nonaka’s model, go together, since it is through the dialectic of thought and action (p. 30) that knowledge is created. The “5 Whys” at Toyota is a dialogic tool to help everyone think in root causes of problems, but in a way that builds a capacity to reflect in action. More fundamentally, dialogue and practice (already present in Nonaka & Takeuchi’s SECI model) are a way to synthesize both objective and subjective views.
- Ba : this physical or virtual space of interaction is the context for knowledge creation. This concept, originated in K. Nishida (Japanese philosopher) thinking, also mean “an existential place where participants share contexts and create new meanings through interaction” or a “shared space for emerging relationships” (p. 34). This concept is key and probably the most difficult component to understand for Western business minds, since rationalization has many times worked in destroying natural ba. Nonaka and his co-authors give five conditions for a ba to be an effective place of knowledge creation : self-organization and own intention, shared sense of purpose, participants with different types of knowledge, open boundaries and commitments of participants (pp. 37-38). They see any organization as a set of ba linked to one another.
- Knowledge assets : Commonly known as intelectual capital, knowledge assets include patents, liceses, databases, documents […], skills, social capital, brand equity, design capabilities, organizational structures and systems, organizational routines and cultures. (p. 42). These knowledge assets are both the output of knowledge creation process and the input for new knowledge creation (p. 42). Key in the intelectual capital of an organization is what the authors call kata, Japanese term to express what Greek philosophy called phronesis – practical wisdom. This is the type of mastery that Bergson would coin through his famous “Agir en homme de pensée,
penser en homme d’action” (Act as a thoughtful person, think as a person of action) but at an organizational level.
- Environment ecosystem : The seventh component of Nonaka’s framework relates to alliances, outsourcing partners, suppliers, customers, university partners,… all what can be found behind the expression “extended enterprise”. The authors see the business ecosystem evolving dynamically in a chain of multilayered ba, that transcends organizational boundaries (p. 47).
After the presentation of the frameword, the book illustrates how these components operate in the case of specific companies (mainly Japanese though). All the examples are quite well documented and allow the reader to put more flesh on rather abstract concepts. It also give us the possibility to see how the components interact with one another in order to foster the process of knowledge-creation on different scales (in a team, in the whole company, between the company and its suppliers, etc.)
It is very difficult to summarize such a book. You may think, while reading this review, that these seven components are commonplace. Let me tell you that why I consider this book so important : I think it offers to us a refreshed view of organizations. This view is totally different from the traditional division of labor (even revisited through a process view). It starts from the one and single competitive advantage that any company can have in our century : the ability to create new knowledge fast (i.e. its ability to learn fast). With this end in mind, Nonaka, Toyama and Hirata seven components help us understand what is the role of any company’s leaders : inspiring a knowledge vision, shaping a driving objective, caring for dialogue and practice processes, nurturing ba where needed, etc. This role, again, is closer to the role of a gardener than to the role of a warlord or, worse, of a prison guard ! I believe that many organizations could benefit from such a shift in their view of leadership.