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


The Practical Wisdom of Ikujiro Nonaka

“The lead professors on our team had gone to Harvard Business School and were experienced in using the case study method, which was common in the U.S. but not widely practiced at the time in Japan,” recalls Nonaka. “Because of my wartime trauma and my desire for revenge, I decided I must learn this method and bring it back to Japan so we could use it to become better than the Americans. But to do this, I needed to go to business school in the U.S.”

In 1960, he married a Fuji co-worker, and they spent the next six years saving money so he could study abroad. Meanwhile, he worked in a broad range of functions at Fuji, including industrial marketing and finance. This diverse career path was unusual in Japan, but Nonaka wanted to deliberately prepare for a broad-based mission. In 1967, Nonaka and his wife, Sachiko, arrived at the University of California at Berkeley, where he had been accepted as a graduate student. He found work as a gardener, and she waited tables. They spoke little English and at times survived solely on tips. It was difficult, but Nonaka regards everything about the experience as profoundly fortunate.

“I was lucky that I didn’t go to Harvard. I had conducted case studies as a manager, but I needed a grounding in theory, where Berkeley excelled.” He earned an MBA and then a Ph.D. at Berkeley, studying consumer marketing and philosophy. He says, “The Western phi­losophers I admire draw on a tradition going back to Heraclites, who believed that knowledge comes from direct experience. This is the opposite of the Platonic view that the material world we perceive is not the real world, but a kind of shadow, and that reality exists only in ideal forms.” Platonists have traditionally been oc­cupied with the search for universal principles, an approach that finds modern expression in the scientific method.

“Over the last few hundred years,” says Nonaka, “the Heraclitean strain has been secondary in Western thought because it is considered nonscientific, given that individual experience cannot be tested. The scientific method and the case study method both emerged from the dominant strain. They seek to discern objective principles rather than describing subjective experience, so they overlook the value of relationship and the evolving nature of human capabilities. In a world of ideal forms, there is no becoming. That’s why the Platonic view can’t explain how knowledge is created.”

Nonaka’s teachers at Berkeley included Francesco Nicosia, a pioneer in studying consumer decision pro­cesses, and cognitive scientist Herbert Simon (who would later win the Nobel Prize in economics). In his dissertation, Nonaka used Simon’s then-pervasive information-processing model (also known as “bounded rationality”) to explore how decisions are made in orga­nizations through a process comparable to the algorithms and heuristics of a software program. It was also at Berkeley that Nonaka met his future collaborator Takeuchi, then a fellow student.

Nonaka returned to Japan in 1972 to teach at Nanzan University. Then he moved to the National Defense University in Tokyo, studied military history, and wrote a book (Essence of Failure) analyzing why Japan had lost the war. In 1981, he joined the faculty at Hitotsubashi University. In 1984, Takeuchi (who was also teaching there) invited him to participate at a symposium on innovation at Harvard Business School.

The research for that symposium proved to be a turning point for Nonaka. It brought him onto a team that studied such ventures as Canon’s Canonet (a 35mm film camera released in the early 1960s) and Honda’s hatchback sedans. He soon noticed that people who were inventing new products did not function like software programs or like ants, metaphors cherished by Simon and his followers. “If you look at the trail ants leave on a beach,” says Nonaka, “it is not complex. It is the result of many simple decisions repeated over and over to form a complex pattern. In other words, it is your basic information-processing model. Simon be­lieved that people in organizations made decisions using a similar model. His point of view was very influential, but here I was seeing with my own eyes that it wasn’t true. People creating things did not repeat simple patterns. Their decision making was neither rational nor predictable. It was intuitive and shaped by context.”

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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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