The Knowledge-creating Company

The Knowledge-creating Company

“When markets shift, technologies proliferate, competitors multiply, and products become obsolete almost overnight, successful companies are those that consistently create new knowledge, disseminate it widely throughout the organization, and quickly embody it in new technologies and products.”

This quote is from the article “The Knowledge-Creating Company” by Ikujiro Nonaka. The article was written in 1991. Even back then he stated that one core task of every organization is continuous innovation. Today, 25 years later, the pace of technological progress is higher than ever. And it will accelerate rather than slowing down.

We already experienced how Nokia went from market-leader to irrelevant in the mobile phone market within a few years. The latest technological changes include, autonomous mobility, 3D Printing, Blockchain, Virtual Reality, Augmented Reality, Artificial Intelligence, Synthetic Biology and so on. Every technology on its own will create new markets and disrupt our status quo.

That is, to be successful in the future, a critical skill of today’s organizations is to master knowledge management as the “process of creating, sharing, using and managing […] knowledge and information”.

This post sums up Nonaka’s original article about the knowledge-creating company. I extend it with examples from a contemporary software company and my own graphical illustrations.

The Knowledge-creating Company

Nonaka says that the knowledge-creating company “is as much about ideals as it is about ideas.” He describes it as a company where the activity of knowledge creation is nothing that is only limited to a small group of people (like the R&D department). In the knowledge-creating company creating knowledge “is a way of behaving, indeed a way of being, in which everyone is a knowledge worker […].”

When your work is more about using your mental rather than your physical capacities you are either part of a knowledge-creating company or a company that should be a knowledge-creating company. To understand how every company can benefit from knowledge-creation we need to examine what knowledge is and the different types of knowledge.

Types of Knowledge: Explicit and Tacit Knowledge

There are more than two types of knowledge but within knowledge management you can break it down into explicit and tacit knowledge.

Everything that you can read (manuals, documents, how-to videos) is explicit knowledge. It is accessible and can be easily transmitted to or shared with others because it was codified. The opposite of explicit knowledge is tacit knowledge. Tacit knowledge is hard to codify because it contains ideas, experiences and skills. Thus, tacit knowledge is gained by observation and practice rather than by reading. It is based on intuition and creativity rather than facts. All knowledge is rooted in tacit knowledge and needs to be codified to become explicit knowledge.

“Making personal knowledge available to others is the central activity of the knowledge-creating company.”

Four Ways of Transferring Knowledge

Since we only consider two types of knowledge there are four ways of transferring knowledge.

Socialization: From tacit to tacit

This is mostly happening when you work closely together with another person. One person can learn from another person through observation, imitation and practice.

Example: When a junior developer works together with a senior developer he gets to know how the senior developer uses different tools to solve certain problems. Over time the junior developer recognizes patterns that he can adapt in his workflow.

Combination: From explicit to explicit

This is a combination of existing knowledge into a new form.

Example: When you write a company newsletter you use information from different places and combine it into a new, more digestible form.

Articulation: From tacit to explicit

This is the most difficult part of knowledge transfer. Tacit knowledge becomes explicit when you codify it. Codifying knowledge happens when you write things down (e.g. in a manual or wiki) or when creating a product.


1.) A designer chooses colors because of his taste and experience (tacit knowledge) but when creating a mobile app colors need to be codified into color codes (explicit knowledge).

2.) A QA Tester who is testing a new mobile app discovers a bug. This bug needs to be transferred into a bug report. That is, the QA Tester needs to describe the bug as his observation during the test.

Internalization: From explicit to tacit

After transferring tacit knowledge into explicit knowledge, the explicit knowledge can be shared throughout the organization. Others can consume and understand (internalize) the knowledge. Afterwards, they can combine it with other explicit knowledge, their own experiences and creativity (tacit knowledge). This is how they create new tacit knowledge about a topic.

The Spiral of Knowledge

The process from Socialization, over Combination, Articulation to Internalization is the Spiral of Knowledge. After creating new tacit knowledge the spiral starts all over again but this time on a higher level. The biggest challenge is the transfer from tacit to explicit knowledge. Nonaka describes it “with finding a way to express the inexpressible”. He explains how metaphors, analogies and models help you to get from tacit to explicit knowledge but I will skip this part in this post.

Redundancy—Good or Bad?

At first glance, redundancy might seem as something to avoid. When programming, it is generally good practice to not duplicate code as fixes and improvements for one instance of duplication might not reach the other. Whereas in a knowledge-creating company redundancy is something to aim for in terms of knowledge distribution. It is a state where everyone in the organization has the same knowledge.

“The fundamental principle of organizational design at the Japanese companies I have studied is redundancy — the conscious overlapping of company information, business activities, and managerial responsibilities.”

Since it is not possible that everybody has the same knowledge internalized they should at least have access to all the explicit knowledge within an organization. This will foster the internalization of that (explicit) knowledge which leads to new (tacit) knowledge as described in the spiral of knowledge.

You can achieve redundancy through Socialization. This is why nowadays companies are keen on topics like mentoring, collaboration, social gatherings, strategic rotation of positions, and so on. Another way to achieve redundancy is free access to company information. To achieve the latter you need to encourage the articulation of knowledge and make sure that it can be shared and accessed by everyone in your organization. This happens when you write down your processes and company information and make it accessible to everyone.

Managers are responsible to challenge their teams to share their knowledge. They can do so by asking questions like “What are we trying to learn?”, “What do we need to know?”, “Where should we be going?”. Nevertheless, when it comes to knowledge management everybody is responsible to create, codify and share their knowledge as well as finding ways to do so.