Feature

posted 29 Jun 2001 in Volume 4 Issue 10

Knowledge creation

The power of tacit knowledge

A critical component of any KM initiative is the actual creation of knowledge a process that can be achieved through the synthesis of tacit and explicit knowledge. So say Ikujiro Nonaka Keigo Sasaki and Mohi Ahmed who describe the experiences of Nippon Roche in implementing the SST project an attempt to capture and transfer the tacit knowledge of the company’s best performing medical representatives. How the case relates to the theory of knowledge creation is also briefly discussed.

While most companies around the world are still trying to manage the explicit dimension of knowledge using various tools and techniques Nippon Roche has succeeded in creating knowledge through capturing high-quality tacit knowledge (HQTK) synthesising tacit and explicit knowledge and incorporating synthesised knowledge into organisational activities.

Nippon Roche is a part of Roche Group a multinational health-care company based in Switzerland. The group focuses on discovering manufacturing and marketing products and services aimed at addressing the prevention diagnosis and treatment of diseases. Nippon Roche established in 1924 and now employing more than 1 600 workers in Japan went through a difficult time in the late 1990s primarily due to low market growth fierce competition and institutional changes in the healthcare industry.

To deal with the situation the company developed a concept in early 1998 called ‘consulting promotion’. This replaced the ‘push sales’ concept previously dominating the healthcare industry. Through this new concept Nippon Roche made efforts to realise the needs of its customers and offer timely solutions. To learn about customer needs and create better solutions Nippon Roche initiated the ‘Super Skill Transfer’ (SST) project in 1998 which focused on people the creators of knowledge. In naming the project Nippon Roche considered ‘supersonic transport’ an appropriate metaphor as the company needed to increase sales productivity at supersonic speed.

The medical representatives (MRs) – the key sales people at Nippon Roche – often contribute to product innovation as they work in the frontline and improvise with key customers (medical doctors) in the sales process. To succeed in such a competitive marketplace the MRs need to be able to provide the latest information about healthcare products to their key customers. To deal with the diverse needs of its customers the development of different levels of MRs was deemed crucial for the company.

Before initiating the SST project Nippon Roche made efforts to enhance its sales productivity several times by executing conventional training programmes but to no avail. In the past the company had primarily used different forms of media for communicating best practice together with role playing at individual branches but realised that existing tools and techniques were inadequate to facilitate the sharing of the tacit knowledge embedded in individuals.

Nippon Roche initiated and executed the SST project to encourage sales process innovation. In categorising the sales processes of MRs the company found that high-performing MRs employed unique sales processes and developed their skills through their experiences over time. These skills and experiences were embedded within themselves. Recognising the importance of this tacit knowledge Nippon Roche initiated and executed the project in an attempt to transfer such skills to those MRs who were performing less effectively. The passionate efforts of the company have not only contributed to sales process innovation but also to continuous innovation in the company as a whole. In this article we will introduce the practices developed at Nippon Roche. We will also briefly discuss how the Nippon Roche case relates to and explains the theory of knowledge creation.

The SST Project

Nippon Roche executed the SST project in an attempt to capture and transfer the HQTK of high-performing MRs the key sales force of the company to other MRs within the company. Hiroaki Shigeta the president of Nippon Roche championed the project and his leadership role was critical to its success. At the beginning of the SST project the company made efforts to analyse the skill gaps between the higher-performing MRs and the average MRs (see figure 1). In this process it categorised the required knowledge and skills along with the selling processes of the MRs as follows:

Product and medical knowledge;
Targeting the right customers;
Process of accessing the potential customers;
Detailing skills.

From the in-depth analyses it became clear that the high-performing MRs generally relied on experience (leaning by doing) while the average MRs relied on existing information (learning by manual). The critical differences between the high-performing MRs and the average MRs were in terms of ‘access’ to potential customers. The high-performing MRs generally employed the most effective timing to access potential customers and the access skills of the high-performing MRs were considered as HQTK. Furthermore the high-performing MRs proved to be very good at contextual practice and improvisation with their customers and they continuously developed such skills through their personal experiences.

In its journey towards finding an effective mechanism to capture and transfer these skills to other MRs Nippon Roche initiated the SST project in an attempt to capture and transfer the HQTK embedded in the high-performing MRs and make it explicit (as far as possible) and incorporate this knowledge into broader corporate activities. As President Shigeta the knowledge leader of the company says: “The tacit knowledge that a high-performing MR has should be regarded as a defining factor. Based on his experiences he knows everything about timing and has the knack of getting to know individual doctors. He approaches doctors at the right time by choosing the moment when his competitors are not around. Considering these models of behaviour and action I do not believe our established methods of training were having enough impact. It was hard to provide MRs with this kind of tacit knowledge through traditional forms of communication such as training videos. As such I decided to start up the SST project. I thought we would never be able to improve productivity unless we drastically improved the level of sales skills.”

Instead of requesting help from any of the external consulting firms providing services in the area of knowledge management Shigeta focused on the theory of knowledge creation and decided to implement hands-on efforts in the creation of knowledge. The collaborative efforts of the participants of the SST project and their distributed leadership made it possible for them to develop an original methodology for creating knowledge that ultimately contributed to continuous innovation within the company. The marketing division of Nippon Roche was assigned to manage the SST project and an executive of the company Nakajima became the co-ordinator of the project. The following section introduces what they did and how.

The first phase of the project

After analysing the skill gaps 24 high-performing MRs from different units of Nippon Roche were carefully selected and gathered at the company’s headquarters. All 24 MRs (the SST members) worked directly under the leadership of the president Shigata. They discussed their skills and shared their experiences with other MRs over the course of eight weeks. At the very beginning of the programme this process revolved around asking and responding to fundamental questions such as: what is our mission? For what do we exist? What is the ideal role of an MR? The participants were required to devote themselves to thinking about their own beliefs articulating their knowledge (particularly tacit knowledge) and sharing with others. They were authorised to review highly classified corporate documents so that they understood the background of the project and could contribute to achieving its goals.

At the end of the first phase the project members scrapped the existing sales manual and created a new one by synthesising knowledge (tacit and explicit) in their own words by using metaphors and stories. From their experiences in the past they realised that the use of metaphors and stories was critical for sharing knowledge particularly tacit knowledge as such approaches helped people to get inside their own minds and capture context.

Once they had created the new handbook they experimented with it in the Tokyo area as a part of a pilot programme aimed at improving the handbook. After the experimentation they refined the handbook further. The meaning of SST the description of an ideal MR the methodology to become one together with evaluation criteria were all clearly described in the handbook. The MRs considered the handbook to be a set of guidelines for doing the right thing rather than a manual for doing things right.

The second phase of the project

Teams of three were seconded to different branches of the company for a period of three months. In their study the SST project participants had found that a team of three was the optimal size to allow critical decisions to be made quickly. During the three-month nation-wide implementation period the major activities of the SST members included:

Gathering preliminary information;
Prioritising critical issues;
Interviewing managers;
Interviewing frontline employees;
Planning activities with average MRs;
Receiving confirmation from branch managers;
Visiting potential customers with the average MRs;
Attending meetings in which the results of the initiatives were reported;
Follow-ups after four months and six months.

The SST members also attended monthly meetings at the headquarters of the company and discussed the most desirable characteristics of an MR as well as ways to ensure the continuous improvement of the programme. It was recognised that the whole-hearted commitment of participants is critical for the creation of new knowledge.

The SST members (the selected MRs) went to different branches of the company without having any kind of legitimate power. They were not given any administrative staff to take as support extra facilities to use or any spare money to spend. All they had with them was their ‘expert power’ – the skills and experiences embedded within themselves. They helped other MRs to capture HQTK making it explicit as much as possible. The high-performing MRs transferred their tacit knowledge (skills and experiences) to other MRs by utilising a variety of different mechanisms (for example on-the-job training workshops exchange experiences meetings coaching storytelling etc.). The major purpose of their visits to the individual branches was not to temporarily improve performance but rather to transfer the HQTK they had developed through their own experience.

Tacit knowledge needs care love trust and commitment for it to be transferred. The project members shared tacit knowledge through socialising with other MRs at the branches not by forcing them to learn but by working closely with them (for example by visiting potential customers together). The creed of the SST was “you can’t move people unless you do first convince them let them try and then praise them” a well-known quote from Admiral Isoroku Yamamoto. The project members accompanied the MRs for one full week. They decided to work together full-time realising that socialisation on a full-time basis allowed the observation sharing and experiencing of realities together and such efforts were considered critical for the capturing and transferring of tacit knowledge. Also they knew that it would take time to understand the particular context in which in each MR worked; it takes time to build trust and it takes time and requires passionate effort to transfer tacit knowledge. Through working closely with the high-performing MRs the average MRs were able to capture the knowledge (particularly tacit knowledge) needed to enhance their performance.

Evaluation of the project

The SST project ended in January 2000 and the sales performance of the branches soared after its completion. Nippon Roche concluded that the participants of the project had become “more valuable assets to the company”. The project motivated MRs and facilitated the capturing of the HQTK embedded in individuals as well as the conversion of tacit knowledge into explicit and the incorporation of synthesised knowledge into key organisational activities within the company. After coaching by the more experienced MRs the average MRs started looking within themselves with a different perspective. They started contributing to the entire organisation through the creation of new knowledge.

Another remarkable outcome of the SST project was the further development of the SST members themselves. Since they were assigned to help the average MRs to capture their skills and experiences they were also able to look at themselves from the viewpoint of others. The coaching activities helped them to redefine the knowledge (tacit) embedded within themselves. “We brought our own experiences to the discussion and created a sort of standard for our oral presentations. We collaborated and kept updating our presentations and these continued to become more effective. I think we could improve our level of skills further to the extent of fundamentally altering the entire company… I knew that the top management of the company would like to achieve this.” (SST member.)

Although the SST project was designed and executed to help average MRs to capture the HQTK of high-performing MRs for sales process innovation the power of tacit knowledge captured the attention of those at Nippon Roche. The SST project converted individual knowledge into organisational knowledge and the experience suggested the need for enhancing the management capabilities of managers in the separate branches. The project also clearly indicated the need for improving the links between corporate headquarters and the branches. Through initiating and executing the SST project people involved in the project realised the importance of changing the organisational and management infrastructure of the company.

Following the successful completion of the SST project Nippon Roche recently established the SST Academy. The goal of the academy is to develop the skills of sales managers exploiting the know-how that has emerged from SST experiences in the past. Its target is to transform managers into leaders – knowledge activists – to provide distributed leadership in knowledge-creating processes. The SST members who contributed to organisational innovation at Nippon Roche are now playing the role of key knowledge activists within the company and their next assignment is to contribute to corporate strategy innovation based on knowledge creation. Nippon Roche recently announced its ‘best value provider’ vision which places an emphasis on product innovation with customers.

To provide best value to its customers Nippon Roche is now attempting to implement information technology to extend the networks of the MRs. Along with tacit knowledge the company is now also focusing on sharing explicit knowledge via satellite TV with the ultimate goal of developing an integrated platform for creating knowledge throughout the branches across the country. Nippon Roche has also recently formed a separate department the Oncology Area Management Group (OAM) the mandate of which is not only to provide product knowledge but also knowledge about the latest trends in the relevant fields. The company has also established a team the eNR which focuses on innovation relating to the customer relationship management (CRM) systems of the organisation.

The SST Academy OAM group and the eNR team are three major initiatives executed by Nippon Roche after the remarkable success of the SST project. In our view recognising the power of tacit knowledge and making efforts to create knowledge through capturing HQTK synthesising tacit and explicit knowledge and incorporating the synthesised knowledge into corporate activities have contributed not only to sales process innovation but also to overall organisational innovation at Nippon Roche.

The theory of knowledge creation and the Nippon Roche case

To create knowledge for continuous innovation organisations need to adopt an holistic approach. The critical components of the theory of knowledge creation include:

The SECI model;
The concept of Ba;
Knowledge assets;
Leadership issues.

We know that tacit knowledge is subjective and experience-based. Tacit knowledge is highly personal and is deeply rooted in action and in an individual’s commitment to a specific context (Nonaka 1991). It is hard to express in words sentences and numbers. In the words of Michael Polyani “we can know more than we can tell” (Polyani 1966). On the other hand explicit knowledge is objective. It can be expressed in words sentences and numbers. We understand that continuous innovation is the product of new knowledge that is generated from synthesising tacit and explicit knowledge and this synthesis depends on SECI Ba knowledge assets and leadership (see figure 2).

The SECI model

The SECI model describes knowledge creation as a spiral process of interactions between explicit and tacit knowledge (Nonaka and Takeuchi 1995). In this model S stands for socialisation; E for externalisation; C for combination; and I for internalisation.

Socialisation may start in different forms. It can occur within or outside an organisational boundary. In this process through interactions between individuals tacit knowledge can be created and shared. In the externalisation process tacit knowledge is made explicit through dialogue and reflections among individuals. When tacit knowledge is made explicit knowledge is crystallised. But the successful conversion of tacit knowledge into explicit knowledge depends upon the use of metaphor analogy and model. Combination is the process of converting explicit knowledge into more complex and systematic sets of explicit knowledge through interactions. And in the internalisation process explicit knowledge is converted into tacit knowledge. In this process explicit knowledge is shared throughout the groups and organisation and converted back into tacit knowledge within individuals. This tacit knowledge becomes the valued asset of the organisation.

Knowledge creation is a continuous process of dynamic interactions between tacit and explicit knowledge. Articulating (converting tacit knowledge into explicit) in the externalisation stage of the SECI process and embodying (converting explicit knowledge into tacit) in the internalisation of the SECI process are the critical steps in the spiral of knowledge. “Knowledge creation is a craft not a science.” (von Krogh Ichijo & Nonaka 2000). In the Nippon Roche case after recognising the power of tacit knowledge the company started making hands-on efforts towards the creation of knowledge. In the knowledge-creating process knowledge conversion was carried into practice and the converted knowledge made personal skills and experiences (tacit knowledge) more rich and contributed to creating new knowledge at an organisational level.

The concept of Ba

Knowledge creation needs a context. The Japanese word Ba which roughly means a place provides a shared context for knowledge conversion (Nonaka & Konno 1998). Ba is not necessarily just a physical space; it can be equally a mental a physical or a virtual space. We understand Ba as a shared context in motion a space where knowledge emerges. The most transcendental characteristics of Ba include synchronicity resonance kinetics empathy and sharing body knowledge. These characteristics of Ba are critical for sharing HQTK embedded in individuals and creating knowledge collaboratively.

Ba exists at many levels and these levels may be connected to form a greater Ba that provides energy and quality in knowledge-creating processes. In a good Ba participants get involved with whole-hearted commitment. When they get involved with such passion they can see realities from a different perspective deeply rooted in their own beliefs. Such commitment and involvement of participants of Ba are critical for sharing HQTK and creating knowledge.

The SST project itself was considered to be a Ba in which the medical needs of customers were redefined at the beginning. Then monthly section meetings were also considered to be Ba in which the SST members shared knowledge. Ba at different levels helped to create the contexts that were shared among individuals and teams at Nippon Roche. Tacit knowledge was first shared among individuals (the MRs) and then converted into explicit knowledge in the form of the SST handbook. The project helped expand individual as well as organisational knowledge through enriching the knowledge of individuals and teams. As a part of the SST project various Ba were connected and expanded. The outcomes of the efforts went beyond knowledge creation at project level and contributed not only to sales process innovation but also to organisational innovation.

Knowledge assets

Knowledge assets are both inputs and outputs of an organisation’s knowledge-creating activities (Nonaka Toyama & Konno 2000). Different kinds of knowledge assets are continuously generated and utilised in knowledge-creating processes. Knowledge assets that are generated from Ba include: love; conviction; energy; business concepts; product concepts; design concepts; documents; manuals; specifications; intellectual property; skills; experiences; and organisational culture. Recognising the value of tacit knowledge as an asset and synthesising such knowledge (particularly skills and experiences) are critical for continuous innovation. The Nippon Roche case clearly shows the importance of recognising such knowledge assets (particularly the tacit knowledge embedded in the high-performing MRs) and of making an effort to capture and synthesise the HQTK embedded in people.

Leadership

Leadership roles that contribute to recognising capturing and transferring HQTK synthesise tacit and explicit knowledge and incorporate synthesised knowledge into organisational activities are now one of the major management issues in the knowledge-creating company. In knowledge-creating processes a single charismatic leader is not enough. A team of knowledge activists – in other words distributed leadership of knowledge activists – and their collaborative efforts are critical for creating knowledge. The team of knowledge activists includes knowledge leaders and knowledge producers.

The knowledge leaders provide vision for knowledge creation (Nonaka Toyama & Konno 2000). They promote the capture and synthesis of knowledge assets (tacit as well as explicit); promote and facilitate the knowledge spiral (SECI); and build and energise Ba. In our view the collaborative efforts of knowledge leaders and knowledge producers are critical in knowledge creating processes. In the Nippon Roche case Shigeta played the role of knowledge leader. He provided knowledge vision recognised knowledge assets built and energised Ba and promoted and facilitated SECI the knowledge spiral.

The knowledge producers – Nakajima and the SST members – also played critical roles at Nippon Roche. In the SST project Nakajima’s leadership role as co-ordinator of the project was very important. The SST members played the role of coach for other MRs. They transferred their skills and experiences to other MRs through coaching and by working closely with them. They helped the average MRs to capture HQTK and synthesise tacit and explicit knowledge for sales process innovation. In our view the distributed leadership and collaborative efforts of Shigeta Nakajima the SST members the average MRs and the members of the support team and the follow-up team made it possible for the company to create knowledge that contributed not only to sales process innovation but also to continuous innovation at Nippon Roche.

Conclusions

Knowledge is now widely acknowledged to be a source of competitive advantage and a great deal of attention surrounds knowledge management research and practice. We believe that creating knowledge through the synthesis of tacit and explicit knowledge is more important than managing knowledge (explicit knowledge). Nippon Roche has made it clear that organisations can benefit from recognising the power of tacit knowledge creating knowledge through capturing the HQTK embedded in people making it explicit and incorporating synthesised knowledge into key organisational activities.

We know that individuals create knowledge through collaborating with others in groups/teams in an organisational context. In today’s competitive and complex business environment helping individuals to achieve their full potential and contribute new knowledge is a critical management issue. Although coaching mentoring and storytelling are receiving increasing attention from KM researchers and practitioners alone these techniques are not enough to ensure the creation of knowledge.

Through introducing the SST project Nippon Roche facilitated the knowledge spiral (the SECI model) implemented the concept of Ba (the SST project) and exploited knowledge assets (skills and experiences of the high-performing MRs) to create new knowledge. The outcome of the SST project went beyond sales process innovation at the project level. It contributed to continuous innovation at an organisational level. In our view recognising the power of tacit knowledge and making efforts to create knowledge through capturing HQTK synthesising tacit and explicit knowledge and incorporating the synthesised knowledge into corporate activities distributed leadership and collaborative efforts among the people involved have contributed to continuous innovation at Nippon Roche.

The key lessons for researchers and practitioners in the field of knowledge management are quite simple: just managing knowledge (explicit knowledge) by using existing tools and techniques is not enough for continuous innovation. Organisations seeking continuous innovation must recognise the power of tacit knowledge make efforts to capture HQTK synthesise tacit and explicit knowledge and incorporate synthesised knowledge into key organisational activities. They also must nurture and facilitate knowledge activists to play distributed leadership roles for creating knowledge. In short to enhance competitive advantage in today’s rapidly changing business environment organisations must make efforts towards creating knowledge rather than just managing it.

References

Nonaka I. ‘The knowledge-creating company’ in Harvard Business Review (Nov-Dec 1991 pp.96-104)

Nonaka I. & Takeuchi H. The Knowledge-Creating Company (Oxford University Press 1995)

Nonaka I. & Konno N. ‘The concept of Ba’ in California Management Review (Vol. 40 No. 3 1998 pp.40-54)

Nonaka I. Toyama R. & Konno N. ‘SECI Ba and leadership: A unified model of dynamic knowledge creation’ in Long Range Planning (Vol. 33 2000 pp. 5-34)

Nippon (Japan) Roche Website: www.nipponroche.co.jp

Polyani M. The Tacit Dimension (Routledge & Kegan Paul 1966)

Von Krogh G Ichijo K. & Nonaka I. Enabling Knowledge Creation: How to Unlock the Mystery of Tacit Knowledge and Release the Power of Innovation (Oxford University Press 2000)

Ikujiro Nonaka is a professor at the Graduate School of International Corporate Strategy of Hitotsubashi University in Tokyo. He is also the Xerox Distinguished Professor in Knowledge at the Haas School of Business University of California at Berkeley and visiting dean and professor at the Centre for Knowledge and Innovation in Helsinki Finland.

Keigo Sasaki is an assistant professor of business administration at Yokohama City University.

Mohi Ahmed is a visiting researcher at the Graduate School of International Corporate Strategy of Hitotsubashi University Tokyo working in conjunction with Professor Nonaka.

The authors can be contacted via: mahmed@ics.hit-u.ac.jp