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 / Fourth Quarter 2001 / Issue 25(originally published by Booz & Company)


Best Business Books: Knowledge

Through theory and practical examples, Brown and Duguid breathe life into Handy’s sketch of the knowledge-intensive world. They give us a theory that adeptly links knowledge, information, and learning, while keeping humans squarely in the middle. They show us the pitfalls of unraveling the theory. Realism. No hype.

Knowledge Creation and Innovation
In The Knowledge-Creating Company, Nonaka and Takeuchi give us an in-depth view into organizational knowledge creation in innovation. Organizational knowledge creation, the authors explain, occurs in a spiral, moving between tacit and explicit knowledge, “starting at the individual level and moving up through expanding communities of interaction that cross sectional, departmental, divisional, and organizational boundaries.”

Matsushita’s development of a bread machine in 1987 illustrates the spiral. First, a team of people knowledgeable about bread making and technology created a prototype machine based on their tacit and their explicit knowledge about markets, technologies, and baking. The first output, the authors relate, didn’t pass as bread; it was raw on the inside and hard on the outside. After an unsuccessful attempt to learn from a master baker, one team member worked in a bakery to develop tacit understanding about kneading dough. The next prototype incorporated this understanding and delivered a good loaf. Finally, the team reflected on ways to enhance the consumer value proposition, ultimately reducing the machine’s cost by eliminating an expensive yeast cooler.

The Knowledge-Creating Company complements Brown and Duguid’s arguments for context and work practice with an understanding of innovation that is consistent with Handy’s wheel of learning. However, the organizational vision offered by Nonaka and Takeuchi differs significantly from that of the other authors; it is much more institutional, less focused on individual learning and decisions. “The role of the organization is to provide the proper context for facilitating group activities as well as the creation and accumulation of knowledge at the individual level,” they tell us. It is a model especially suited to Japanese companies. Together with Nonaka’s subsequent research about ba (the context or place for creation, available in working papers through the University of California, Berkeley), The Knowledge-Creating Company provides a cross-cultural leavening of our thinking about knowledge.

Real-Time Decision Makers
In a knowledge-intensive world, clever people deliver better results by making better decisions. In Sources of Power, Klein challenges conventional decision theory by concentrating “not on the limits of decision makers, but on the human strengths and capabilities that have typically been downplayed or ignored.” Klein studies high-pressure “naturalistic decision-making settings” where information is inadequate, time is of the essence, and change is constant: firefighters battling flames; doctors saving babies’ lives; chess masters staying cool.

Skilled decision makers are experts who recognize patterns and run rapid mental simulations to test alternatives and make judgments, Klein tells us. For example, a doctor, unable to find an air passage through a newborn’s tumor-choked throat, remembers another doctor’s story of locating a passage in an adult’s crushed chest by looking for bubbles. As the child turns blue, the doctor looks for bubbles. He finds the passage. The baby lives.

People become experts through the experience of successfully confronting difficult situations. “Skilled problem solvers and decision makers are themselves scientists and experimenters,” writes Klein. “They are actively searching for and using stories and analogs, personal as well as borrowed from others, to learn about important causal factors.”

Klein offers two paths to better decision making: Develop experts and get them in front of important problems, or equip people with tools that enable them to make expert-quality decisions (like Handy’s vision of smart people using smart tools). For example, in a project for the U.S. Air Force, Klein and his team developed a decision-support tool that improved the performance of weapons directors who fly in the AWACS (Airborne Warning And Control System) airplane, achieving a 36 percent decrease in missiles fired that missed their target; 9 percent increase in the overall kill ratio; and 15 percent reduction in friendly aircraft shot down.

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