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 / Winter 2008 /Issue 53(originally published by Booz & Company)


The Practical Wisdom of Ikujiro Nonaka

In many companies, people automatically assume that explicit knowledge is more reliable and accurate — a way of thinking that dates back at least to the era of scientific management. When an executive says, “Cut to the chase, just give me the numbers,” he or she is declaring his allegiance to episteme by attempting to exclude information that arrives through subjective means.

But organizations that favor explicit over tacit knowledge limit their capabilities in several ways. They define competence as the ability to rank high in metrics rather than to succeed in real-world business, and so they may promote senior leaders who do not fully understand the subtleties of their enterprise. Such companies also promote a view of people’s skills as static and so fail to invest in the development of talent. Finally, they get mired in IT-based knowledge systems that constrict, rather than enhance, communication among their staff.

For Nonaka, phronetic wisdom represents a potential antidote. If techne is “know-how,” and episteme is “know-why,” phronesis is knowing “what must be done.” This requires an understanding of how the organization should exist in the world: its purpose, its reason for being. Moreover, for an organization to be resilient as well as skilled at creating knowledge, phronesis must be broadly distributed. A phronetic leader mobilizes timely judgment in others by building a culture that is strong, nurturing, and sustained by informal connections.

Revenge and Determination
Nonaka’s insights about knowledge reflect the distinctive arc of his own career, which was rooted in his childhood experience during the Pacific War (the Japanese name for World War II). “I was in the first grade when children from Tokyo were evacuated to the countryside,” he explains. “We used to go outside and watch the B-29s in the sky over Mount Fuji, and the smaller Grumman F4F fighters flying lower. One day, an F4F dropped down and began strafing the children as we walked back from the school. It was so close I could see the American pilot in the cockpit. It looked to me as if he was smiling. I barely survived; I was very shocked. And being a small boy, my first thought was, ‘I will beat them someday!’ I was on fire with the desire to beat America.”

In his studies, Nonaka focused his energies and intelligence — even then considered extraordinary — on strengthening his country so it would never again endure humiliation. Since Japan had been defeated by superior technology and organizational superiority, he concluded it could become resurgent only by adapting the best of both. Still today, says Takeuchi, “This is the ground of his motivation. He’s still an old-fashioned nationalist, but he’s since become a universal man, which is why he can adapt Japanese practices into a universal theory.”

After technical school, Nonaka studied political science at Waseda University. Upon graduation in 1958, after scoring high on a qualifying exam for Fuji Electric, he accepted a position there. “At the time,” he recalls, “Fuji manufactured heavy industrial goods in partnership with Siemens of Germany. I saw rebuilding the industrial infrastructure as the best way to help Japan become strong.”

Appointed personnel manager at a plant outside Tokyo, he started a conventionally organized apprenticeship program for skilled craft workers. He soon saw that line managers needed skill development as well. Management training was unheard of in postwar Japan, so Nonaka looked to other cultures for a model. He found one at a nearby U.S. air base where an instructor offered training, designed originally to promote industrial efficiency, to senior executives and foremen. Nonaka adapted the program for his plant, and then rolled it out at Fuji’s corporate headquarters. Soon he was collaborating with the business school at Keio University to develop a management curriculum for companies all over Japan.

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  1. Aristotle, Nicomachean Ethics, translated by Terence Irwin (Hackett, 1999): Original source on phronesis and other concepts that Nonaka draws upon.
  2. Denise Caruso, “The Real Value of Intangibles,” s+b, Autumn 2008: The case for standards for appraising the worth of nonphysical assets like brands, human capital, and tacit knowledge.
  3. Kevin Dehoff and John Loehr, “Innovation Agility,” s+b, Summer 2007: Knowledge creation lies at the heart of Toyota’s groundbreaking product development process.
  4. Peter Drucker, Adventures of a Bystander (HarperCollins, 1991): Autobiography of the great management writer, with a chapter on the Polanyi family.
  5. Michael Farber, Tom Greenspon, and Jeffrey Tucker, “The Practical Visionary,” s+b, Spring 2008: The new role of the chief information officer may make it easier to implement knowledge management as a process centered in human conversation.
  6. Tim Laseter and Rob Cross, “The Craft of Connection,” s+b, Autumn 2006: Discusses how organizational network analysis is helping companies share knowledge worldwide, one natural broker at a time.
  7. Ikujiro Nonaka and Hirotaka Takeuchi, The Knowledge-Creating Company: How Japanese Companies Create the Dynamics of Innovation (Oxford University Press, 1995): Nonaka’s first major inside look at knowledge creation, primarily at Japanese companies.
  8. Ikujiro Nonaka, Ryoko Toyama, and Toru Hirata, Managing Flow: A Process Theory of the Knowledge-Based Firm (Palgrave, 2008): In-depth theory of knowledge-based management with an emphasis on the practical wisdom called phronesis.
  9. Jeffrey Rothfeder, “Jeffrey Liker: The Thought Leader Interview,” s+b, Summer 2008: A lean process expert explains why companies without ba find it so hard to emulate Toyota.
  10. Ikujiro Nonaka’s Web site, Hitotsubashi ICS Business School: Includes a bibliography of Nonaka’s published work.
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