The Wise Leader Presentation

The Wise Leader
-Communitarian Theory of Sustainable Innovation
Ikujiro Nonaka
Professor Emeritus, Hitotsubashi University Xerox Distinguished Faculty Scholar, UC Berkeley The First Distinguished Drucker Scholar, Claremont Graduate University Chairman, Economic Research Center, FRI
August 30, 2012
Copyright. Nonaka, I. 2012
Knowledge-based View of Strategic Leadership
Drucker: We Need Innovation, and We Need a New Theory

Knowledge is the only meaningful resource today. How knowledge behaves as an economic resource, we do not yet fully understand [] We need an economic theory that puts knowledge into the center of the wealth-producing process. It alone can explain innovation.
P. F. Drucker. (1993) Post Capitalist Society p.183
P.F. Drucker
(1993)
3 Copyright. Nonaka, I. 2012
Schumpeters Innovation
The Theory of Economic Development (1912) Creative Destruction: Innovation is merely the destruction of an equilibrium.
No dynamic equilibrium exists and innovation is essentially a disturbance of the existing static equilibrium.
New Combinations: Innovation is a commercial or industrial application of something new.

A new product, process, or method of production; a new market or source of supply; new form of commercial, business, or financial organization.
Mutation: Innovation incessantly revolutionizes the economic structure from within.

An essential feature of innovation that it is something that is carried into practice.
Knowledge Needs to be Discovered

H.A. Hayek
Importance of context-specific knowledge

there is beyond question a body of very important but unorganized knowledge which cannot possibly be called scientific in the sense of knowledge of general rules: the knowledge of the particular circumstances of time and space (p.214).
SourceHayek, F.A. Use of Knowledge in Society. In C.Nishiyama and K.R. Leube (Eds.). The Essence of Hayek. Stanford, CA: Hoover Press.
Competition as a discovery procedure

Economist usually ascribe the order which competition produces as equilibrium a somewhat unfortunate term, because such an equilibrium presupposes that the facts have already all been discovered and competition therefore has ceased (p.259).
Heyek. F.A. (1978). Competition as a discovery procedure. In The essence of Hayek. C.Nishiyama, K.R. Leube (Eds.). The Essence of Hayek. Stanford, CA: Hoover Press. 5 Copyright. Nonaka, I. 2012
Process Philosophy of Whitehead

Process is Reality
There is no such thing as substance. World is made up of occasions, particular and concrete events. Events flows in relationship with other various events. Substance is the state of a noun, cut from the continuum of events in the state of a verb.
Process towards creativity

It is the becoming rather than being. Present is a state which stand on the past and is opened to the future.
Propositions of The Knowledge-Creating Company and Managing Flow

A firm is a knowledge creating entity (1995).
A firm is a relentless process of converting knowledge to wisdom (2008) A firm is a prudent community for sustainable innovation (2012)
Strategy is About Creating the Future

The most significant characteristics of knowledge is that Knowledge is created by people in their interactions with each other and the environment.
Knowledge is: A dynamic social process of justifying personal belief towards the truth.
Innovation itself is a knowledge creating process. Strategy is an intelligent capability to interpret the current situation and continuously create future in the social context.
Leading Business Creating Model of Sustainable Innovation

Pursuance for Common Good
Vision -Common Good

Existential
Value Proposition
Institutional
Net work with Partner (re-source)
Knowledge creation (SECI) Ba-plattforming
Net work with Community (customer)
Organizational
Cost
Financial
Profit
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Market Value
Value Proposition
An Organization has to Offer a Unique Value - Apple

Not a thing (mono), but an event (koto)
Not iPod, but multimedia experience (easy to download, easy to manage, easy to carry, can listen, view, and take video/photo)
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Business Model of iPod

Organization al Base
Hardware Software Development
Contents Production Hardware Production

Product Software Design
Offering
Lifestyle Brand
Customer
iPod
Apple Store Dealer Network iTunes
e-Commerce
Copyright Management of Multimedia
Multimedia Download
High-end Customer
Brand Management Hardware Sales Contents Delivery
Contents
Music Anywhere
Profit Cost Structure

Source: De Kluyver, C.A. (2009)
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Revenues from Hardware Revenues from Multimedia

Methodology for Transforming a Thing (Mono) to an Event (Koto)

Event (Koto) starts from changing noun to verb. One phenomenon appears out of combining multiple
factors. See the phenomena not by itself, but see as XX-zation, a process to become XX. Search for a subject that caused XX.
Source: Based on Kariya, T. (1996). Fukuganteki shikouhou (Think multifaceted ). Tokyo, Koudansha.
Commodity (Mono) is one form of a social relationship. Marx perceived a commodity as not a visible thing
but a social relationship between capitalists exploiting workers. By so doing, he captured reality as not a fixed object but as an active subject.
Source: Based on Maki, Y. (2003). Kiryu no naru oto (Sound of air current). Tokyo, Chikuma Gakugei Bunko.
Capital
is not a thing but a process in which money is perpetually sent in search of more money.
Source: Harvey,D.(2010 The Enigma of Capital and the Crisis of Capitalism,Oxford,P.40
SECI Model
14
Plato (left) & Aristotle (right)

School of Athens: Raphael
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Attention to Practical Wisdom is Increasing Synthesis of Idealism and Pragmatism

Practical Wisdom, a contradiction?
Plato: Wisdom is theoretical, abstract and for the few elites; it has nothing to do with practice.
Truth is, only practical wisdom can solve daily issues.

Aristotle: Wisdom is to make judgment in everyday life with deliberation and emotion, and take the right action. Wisdom is embedded in practice.
(2010)
Source: Schwartz, B. & Sharpe, K. (2010). Practical Wisdom. New York: NY. Riverhead Books.
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Copyright Nonaka, I. 2011
Why Tacit Knowledge?

We can know more than we can tell. All knowledge is either tacit or rooted in tacit knowledge. M. Polanyi Unless you believe, you will not understand.
St. Augustine
Belief precedes knowing.

To free ourselves from the prejudice of considering only objective, scientific, and explicit knowledge as the knowledge, we need to restore the perspective on knowledge which will balance belief and rational, and art and science, by admitting that knowing requires the commitment of the individual.
17 17 Copyright. Nonaka, I. 2012 Copyright 2012 Nonaka, I.
Two Dimensions of Knowledge

Tacit Knowledge
Subjective and experiential knowledge that can not be expressed in words, sentences, numbers, or formulas (context-specific) Cognitive Skills
beliefs images perspectives mental models
Explicit Knowledge
Objective and rational knowledge that can be expressed in words, sentences, numbers, or formulas (context-free)
Theoretical approach Problem-solving Manuals Database
Technical Skills
craft, know-how
Spiral up through dynamic interaction Analog-Digital Synthesis

18 18 Copyright. Nonaka, I. 2012 Copyright 2012 Nonaka, I.
Organizational Knowledge Creation Process

SECI Model
Sharing and creating tacit knowledge through direct experience (Empathizing)
Socialization Tacit
Environment I
Externalization Explicit
E I O I I Group I I
Articulating tacit knowledge through dialogue and reflection (Conceptualizing)

4. Articulating tacit knowledge using symbolic language 5. Translating tacit knowledge into a concept or prototype
1. Perceiving reality as it is from activities 2. Empathizing, resonating, recognizing and foreseeing 3. Transferring tacit knowledge
Individual
Learning and acquiring new tacit knowledge in practice (Practicing)

9. Embodying explicit knowledge through experimenting, hypothesis testing and reflection 10. Contemplation in action
Internalization Tacit
G I E O
Combination Explicit
E
G G Org. G G
Systemizing and applying explicit knowledge and information (Modeling)

6. Creating relationship and hypothesis among concepts; modeling, prototyping 7. Communicating and sharing explicit knowledge 8. Editing and systemizing explicit knowledge
Copyright 2012 Nonaka, I.
Explicit
Explicit
I = Individual, G = Group, O = Organization, E = Environment

Nonaka I., H. Takeuchi & N. Konno
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Innovation as SECI Spiral

Empathize with reality through actual experience (Socialization), condense the essence of awareness into concepts (Externalization), relate the concepts and systemize (Combination), create value in the form of technology, products, software, services and experiences, and embody the knowledge (Internalization) and, at the same time, stimulate the emergence of new knowledge in the organization, market and environment, and spiral up to the Socialization step. Through continuous and fast spinning of the SECI spiral, a firm can build its synthesizing capability of knowledge to pursue both creativity and efficiency.
20 20 Copyright Nonaka, Copyright. Nonaka,I. I. 2012 2012
Ba
-Platforming for Knowledge Emergence-
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Knowledge is Created in Ba
Shared Context in Motion
Co-Creating Meaning
Open
Close
Intersubjectivity BaPlatforming
Close
Open
Individual contexts are shared at here now context of Ba. Shared context becomes the base of emerging knowledge. Intersubjectivity is established when people accept others as a whole being, resonate and empathize with others, then it becomes our subjectivity.
22 22 Copyright. Nonaka,I. I. 2012 2012 Copyright Nonaka,
Humans Create Meaning in Ba

Essence of Analog Thinking
Meaning
resides in the whole: Digital thinking diminishes the meaning.

Holistic Thinking The whole is unified and coordinated by fluctuations and functions of the parts.
Analytic Thinking Break the whole into parts; when a part is affected, partial action can be taken.
The Power of Tacit Knowing When on a bicycle, we can instantly synthesize the handlebars, force on the pedals, angle of the body and the bicycle, response of the muscle, and the view in front.
23 23 Copyright. Nonaka, I. 2012 Copyright Nonaka, I. (2012)
Tacit Knowing: From Particular to Comprehensive Entity

Michael Polanyi
A process of changing perspective from the lower particular to the upper whole. A whole can become the part. A whole is determined by the purpose.
Greece in EU
The Parthenon
Greek Crisis
Crocus at the Parthenon

Anti-Government Demonstration Greek Culture Greek Philosophy
24 24
Copyright. Nonaka, I. 2012 Copyright 2012 Nonaka, I.
Ba Promotes Socialization
Through Physical and Mental Touching
Interpenetration of the body senses: Intercorporeality (Merleau-Ponty) Embodied Mind (Francisco Valera) Socialization occurs in the brain by copying the actions of others: discovery of the mirror-neurons. Through mirror neurons, we can understand the intentions of othersThe interdependence between self and other that mirror neurons allow shapes the social interactions between people, where the concrete encounter between self and other becomes the shared existential meaning that connects deeply. (Iacoboni, et
al:2005, Rizzolatti:2005)
Boundary Object
Ba for Connecting Ba
A boundary object is a symbol, metaphor, concept, organization, system, culture, and ICT, that resides in the boundary of different communities or systems; it is an object that connects communities by creating a new community.
community community
Boundary Object
community community community community
Source: Nonaka, I. and Konno, N. (Forthcoming). Kenryo no keiei (Prudence-based Management)

26 26 Copyright. Nonaka, I. 2012 Copyright Nonaka, I. 2012
Knowledge Ecosystem
Organic Configuration of Ba
Knowledge is created in relationships. Knowledge ecosystem dynamically interacts and evolves the relationships between the stakeholders in the multi-layers of ba; stakeholders compete, collaborate and transcend the organizational boundaries.
Customer Firms Universities Government
Ba Ba
Supplier Firms Community
Ba
Firm
27 27
Competitor
Copyright. Nonaka,I. I. 2012 2012 Copyright Nonaka,
Phronetic Leadership
-Prudence /Practical Wisdom-
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Wise Leader
See Through the Context and Realize the Value
Source: Nonaka, I., & Takeuchi, H. (2011). The Wise Leader, Harvard Business Review, May, 2011 Nonaka, I., & Takeuchi, H. (2011). Kenryo no Leader [Wise Leader]. Diamond Harvard Business Review, Sep, 2011 29 Nonaka, I., & Konno, N., (2007). Bitoku no Keiei [Virtue-based Management]. NTT Shuppan.
Copyright Nonaka, I. 2012 Copyright. Nonaka, I. 2012
Phronesis by Aristotle
Prudence, Practical Wisdom
Phronesis is practical wisdom for exercising the best judgment for the common good in a particular context.
Ability to find the right response in a particular context Ability to synthesize the particular and universal, contemplated rationale and improvisation on the spot Contemplation in action Contextual judgment and timely balancing
Six Abilities of Phronesis

Phronesis is a virtuous habit of making judgments and taking actions that serve the common good.
6. Ability to foster phronesis in others.
1. Ability to make judgment on goodness.
5. Ability to exercise political power.
2. Ability to create ba.
4. Ability to articulate the essence.

Source: Nonaka & Takeuchi, HBR May 2011
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3. Ability to see the reality as it is.
Phronetic Leaders:
Soichiro Honda, Steve Jobs, and Konosuke Matsushita
Soichiro Honda (1906-1991)

Founder of Honda Motor Corporation
Steve Jobs (1955-2011)

Co-founder of Apple Computer
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1. Ability to make a judgment on goodness
Every sort of expert knowledge and every inquiry, and similarly every action and undertaking, seems to seek some good.
Aristotle, Nicomachean Ethics Example: Self-sufficient values such as happiness and self-actualization.
Internal Good: Realized in the course of trying to achieve those standards of excellence (artisanship).
MacIntyre
Humans are Purposeful Beings

Optimal results are claimed to be attainable only by trying for too much by reaching beyond the limits of the possible. Humans are living the worlds of the reality and the possibility. (Rescher, 1990)
Rescher, N. (1990). Human interests: Reflections on philosophical anthropology. Stanford University Press, Palo Alto: CA.
Ideal can never be achieved, but because we challenge to achieve, we can go beyond our limits, that is the source of creativity. What motivate us is the wish and will for the ideal.
Technology Married with Liberal Arts and Humanity: Steve Jobs

Apples DNA: Technology alone is not enough. Its technology married with the liberal arts, married with the humanities, that yields the results that makes our hearts sing. Steve Jobs, Apple
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Need for a Good Theory: Soichiro Honda

Respect for Sound Theory: Action without philosophy is a lethal weapon; philosophy without action is meaningless. Just to be hard working has no value. The good theory is the necessary premise for working hard. Joy of buying determines the value of the product in a most fair way. The person who knows the value of the product and gives final evaluation is not the manufacturer or the dealer, but the buyer who will be using the product in daily basis []
Source Honda Top Talks Passing down the basics
2. Ability to create ba
Imaginative capacity to understand and empathize with others through daily verbal and nonverbal communication, to read the situation to judge the best timing for interaction, and to elicit empathy in return.
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Joking is Difficult Soichiro Honda

Joking is very difficult. You have to grasp the atmosphere of the occasion and the opportunity. It exists only for that particular moment, and not anywhere else. The joke is in the timing and it doesnt work at any other moment ... to joke is to understand human emotion. Soichiro Honda
Waigaya at Honda
The company prepares the ba (good hotel, good food, good spa) away from the daily work environment. Day 1: Conflict between the individuals
Start with bad mouthing the boss; frustrations and conflicts. Thorough discussions lead to conflicts but there is no escape. As time passes, superficial explicit knowledge runs out and individual barriers disappear.
Day 2: Mutual understanding and acceptance

Accept the differences; understand the beliefs of others. Accept the opinions of others.
Day 3: Leap of the minds

With constructive thinking, a leap of the minds and concepts happen.
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Magnetic Pull Steve Jobs

He uses your first name very often. He looks directly in your eyes with that laser-like stare. He has these movie-star eyes that are very hypnotic. But what really gets you is the way he talks theres something about the rhythm of his speech and the incredible enthusiasm he conveys for whatever it is hes talking about that is just infectious.
Source: Gallo, C. (2009). The Presentation Secrets of Steve Jobs: How to Be Insanely Great in Front of Any Audience. McGraw-Hill Professional. P.28. 40 Copyright. Nonaka, I. 2012
3. Ability to see the reality as it is.
The ability to recognize the constantly changing situation correctly, and quickly sense what lies behind phenomena to envision the future and decide on the action to be taken. God is in the details.
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Grasp the Essence from the Actual Situations
http://images.businessweek.com/ss/09/09/0929_jobs_presentations/index.htm
Picture: Honda Motors Corporation
Soichiro: Use all five senses to sharpen the common sense; it will strengthen the power of imagination and judgment.
Reality and Actuality

Reality (Mono)
Substance: an existing object That could be observed. Can be recognized and Managed by logic.
Actuality (Koto)
Action: a situation in progress. Can only be grasped by those committed to and dwelling in The actual, situated experience. with the five senses and through empathy with others.
To convert mono term (e.g., noun) to koto term (e.g., verb), put apparent preconditions into bracket and directly sense actuality (epoch phenomenological suspension of judging reality).
4. Ability to articulate the essence
The ability to conceptualize and articulate subjective ideas in a clear language, link these micro concepts to a macro historical context, and convincingly articulate them as vision and story for the future.
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Harmonize the Concepts in Ba /Make Full Use of Metaphor
http://images.businessweek.com/ss/09/09/0929_jobs_presentations/index.htm
Source: Honda Motor Company
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5. Ability to exercise political power
The ability to bring people together and spur them to action, combining and synthesizing everyones knowledge and efforts in pursuit of the goal, by choosing and utilizing the means and rhetoric (the art of effective or persuasive speaking or writing) suitable to each particular situation with shrewdness and determination.
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Leadership to Exercise Political Power Soichiro Honda and Steve Jobs

Declaring participation in the Isle of Man Tourist Trophy Race
I address all employees!

Let us bring together the full strength of Honda Motor Co. to win through to this glorious achievement. The future of Honda Motor Co. depends on this, and the burden rests on your shoulders. I want you to turn your surging enthusiasm to this task, endure every trial, and press through with all the minute demands of work and research, making this your own chosen path. The advances made by Honda Motor Co. are the growth you achieve as human beings, and your growth is what assures our Honda Motor Co. its future.
Source Honda Top Talks Passing down the basics
Reality Distortion Field

The reality distortion field was a confounding mlange of a charismatic rhetorical style, and indomitable will, and an eagerness to bend any facts to fit the purpose at hand. In one line of argument failed to persuade, he would deftly switch to another. Sometimes, he would throw you off balance and suddenly adopting your own position as his own, without acknowledging that he ever thought differently.
Source: Karney, L. (2008). Inside Steves Brain (expanded edition). pp.162-163
6. Ability to foster phronesis in others
The ability to create a system of distributed phronesis by fostering and transferring the existing phronetic capabilities of individuals to others to build a resilient organization which can respond flexibly and creatively to any situation to pursue its own good.
48
Provide Phronetic Examples

(Apprenticeship)
Practical Wisdom = Classroom Instruction (most MBAs)PracticeFeedback & Self-Correction
Leadership can only be developed through practice.

Growth is accelerated by challenging, complex jobs and by timely and detailed evaluation and self-reflection Can expect giant leaps in learning
Charan, R. (2008). Leaders at All Levels.
49
Progression
A B C
Time
Practice as Kata
Kata (form) : Way of doing things, core of the ideal action. Good Kata functions as archetype that fosters creative routine but provides higher freedom. Shu (learn), Ha (break), and Ri (create) steps are critical in continuous selfrenewal processes.
Creative Routines
Honda 3-Gism: Be at the actual place of work (genba), know the actual product (genbutsu) and situation (genjyou), be realistic (genjitsuteki). Respect sound theory, develop fresh ideas and make the most effective use of them. A00 -What do you do this for? (Ontological) A0 - What is your concept? (Conceptual) A - What is your specification? (Operational)
Apple Simplify. Strip back, and focus. Say no When it comes to idea, everything is game. Willing to try new things Dont compromise. Hash it out, get way down in the details. Seek out the highest quality Include everyone. Work people hard. Embrace the team Engage in intellectual combat. Argument and debate foster creative thinking Find a passion in your work. Insist on the seemingly impossible. Motives make a difference.
Source: Karney, L. (2008/2009). Inside Steves Brain (expanded edition). Portfolio, New York. 51 Copyright. Nonaka, I. 2012
System to Distribute Leadership

LPL and PL to nurture Honda DNA
Hondas exemplar is Soichiro Honda.
Honda is not a company in which only top management plays an important part. Every one at the frontline is very important. Every worker should be Soichiro Honda. It is important for Honda to create many Soichiro Honda. -Takeo Fukui, CEO of Honda LPL
In charge of development
Engineering PL
Engine Body Suspension Rigging etc
Source: Honda Motor Company internal material
Test PL
Engine Wind-tunnel Crash Emission Durability etc
52
Design PL
Layout Exterior Interior Color Design data Design model Copyright. Nonaka, I. 2012 etc
Fractal Organization
Matrix
and Fractal organization connects multiple ba. Matrix organization cannot convert knowledge effectively, because matrix tend to coordinate between project and business layers. Business and Project layers create and accumulate knowledge on their own way. Fractal organization flexibly combines various knowledge from each layer; can maximize the use of resources and energy in a limited time. Project team reports directly to top management; reduces the organizational hierarchy, communication will be condensed, dialogue will be deepened, and promote middle-up-down spiral. The key of Knowledge Layer is the boundary object that stimulates the conversion of knowledge; symbol, concept, system, culture, ICT, etc. 53
Fractal Organization
Project Team Layer
Knowledge Layer
Business System Layer
Knowledge Ecosystem
Source: Inoue, A. (2012). Game-fication NHK Publishing. Source: Kikuzawa and Nonaka, (2012). Chishiki base kigyou no kouritsu soshiki design Copyright. Nonaka, I. 2012
DAIHATSU: Mira e:S

Polish up the Ecology Power of the Small Cars with Existing Technologies
Facing headwind, but changed to tailwind: Lehman shock and Prius shock
In 2009, concept car was presented at the Tokyo Motor Show. But due to the sudden increase of oil price and the launch of hybrid cars, expectation for small cars changed drastically. Keep the target launch timing at 2011 as scheduled, but redo everything from the product planning phase. Changed the concept e:S from energy saving to eco and Smart.
2 innovations led to launch in 17 months

Innovation in Organization: from partial to total optimization e:S optimization; set up a virtual company of 30 experts in planning, development, procurement, production, and sales. Innovation in Technology: realize 30km/l at JC08 mode, start from 7.95 million yen. Reduced 60kg from Mira, reduced parts for 15%, while improving fuel efficiency for 40%.
Reset All the Existing Processes and Minds

Questioned the Raison Dtre of a Small Car
The 3rd category of Eco-car
Small car needs to be fuel efficient, low price, and ecological Not extension of the past, but change the way of DAIHATSU Stop the matrix of vertical and horizontal organizations; transfer members to the project team, share objectives, and unite their actions
Create a sense of surprise with TV ads

Bruce Willis
http://gazoo.com/G-Blog/tampyou/488549/Article.aspx
55
Innovation at Organization and Technology: Self-contained Virtual Company

Transfer members to project teams
Set the taskforce under the top management. Create, accumulate, and utilize knowledge. Members should not represent their home division (partial optimization), but act for the benefit of the project (total optimization) in a same vector. Chief Engineer is given personnel management authority; no http://wedge.ismedia.jp/articles/print/1653 place to go back, ticket with no return for the members. Chief Engineer: Toru Ueda Make judgment on the spot based on the actual situation.
Use new terms for new activities

Synchronized designing: set an agile scrum so that design, evaluation, and production collaborate from the early stage. Budget approach: not cost down approach, but realize maximum feature within the budget. Material oriented: back to the basics of design and maximize the quality of material for all the parts.
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http://www.sankeibiz.jp/business/news/110926/bsa1109260501000-n2.htm
Project Members Copyright. Nonaka, I. 2012
Agile Scrum Innovation

Software Development is a Knowledge Creating Process
Agile scrum encourages team members to socialize, externalize, internalize and combine technical knowledge on an ongoing basis, thus allowing technical expertise to become community property for the community of practice [Nonaka 95]. Scrum Meetings are therefore rituals with deep cultural transcendence. Meeting at the same place at the same time and with the same people, enhances a feeling of belonging, and creates the habit of sharing knowledge.
57
A (Relay) Phase B (Sashimi)
Phase
C (Scrum)
Phase
Source: Sutherland, J. et al. Scrum: An extension pattern language for hyperproductive software development. Source: Takeuchi, H. & I. Nonaka. (1986). The new new product development, Harvard Business Review January-February, 1986.
Human Touch with IT

Key Points of Scrum Development
Pair Programming
Two developers (roles of a driver and a navigator) share one PC Change roles every 5~10 minutes. Change pairs several times a day
Task Kanban (Visualize the tasks)

Way to manage ToDo, Doing, and Done. Everybody can start working on their task autonomously without any instruction Check every morning at the 15 minutes of Scrum Meeting
Feedback (KPT:Keep/Problem/Try)
Experiment, Worked Keep Try
In a casual atmosphere, everybody share their ideas on Keep, Problem, Try. Did not Problem Solution Through the dialogue, socialize tacit knowledge work and convert to explicit knowledge (externalize and New problem combine) New Ideas
Source: Hiranabe, K. (2010). Agile development and scrum. Presentation material at Agile Japan 2010 58
Middle-up-down Knowledge-Creation Process

Grand Theory (What ought to be)
(Top) Solving contradiction
Mid-range theory
(Middle)
Contradiction
Reality (What is)
Cross-leveling of Knowledge
(Front-line)
Copyright Nonaka I. & H.Takeuchi 2010 59 Copyright. Nonaka, I. 2012
Distributed Idea Engine

-Ciscos CEO John Chambers From a top-down command-and-control company to teamwork and collaboration; connected communities of distributed leaders, a.k.a. Distributed Creative Engine.
More than 70,000 employees participated in the intracompany SNS
Create ones profile page with information on their expertise and business know-how. Search allows one to find new contacts. Remove barriers of divisions, counties, positions, etc. so that wisdom around world can instantly be shared (a ba that unifies the HR system, and enables the real-time communication) Nurture agile and proactive employees who exercise timely and just-right judgments.
Source: McGirt, E. (2008). How Ciscos CEO John Chambers is turning the tech giant socialist. Fact Company.com. Retrieved April 8, 2011 from http://www.fastcompany.com/magazine/131/revolution-in-san-jose.html Source: Fryer, B. (2008). Cisco CEO John Chambers on Teamwork and Collaboration . Harvard Business Review blog. Retrieved April 12, 20011 from http://blogs.hbr.org/hbr/hbreditors/2008/10/cisco_ceo_john_chambers_on_tea.html 60 Copyright. Nonaka, I. 2012
Cisco Japan
(Winner of Japan Management Quality Award) Organization for Continuous Innovation
Middle manager who knows top management strategy as well as whats happening at the frontline
An environment where all employees can share, empathize, and resonate with the vision and the culture, around the middle managers who are close to the frontline and who understand the management vision
Hybrid Management with the sense of frontline

Human resource system with ICT tools, Company wide strategy framework
Soccer style organization where individuals can move dynamically

An organization that makes timely judgment and balancing while utilizing the network of proactive individuals.
From an ICT company to BT company

From selling products to selling business model
Communitarian View of Management - Idealistic Pragmatism -
62
Basis of Phronesis
Humanity/Liberal Arts
Philosophy, History, Literature, Psychology, Art, * Anthropology, Biology, Design, Political Science, Urban Planning, Theology
Peak and Diverse Experience

Pure Experience (sense of awe), Shared-experience with the exemplar, Success/Failure experience, Cross-cultural experience
Practice and Tradition

Artisanship, Kata, High Standard of Excellence, Relentless Pursuit for Excellence
Justice or Good?
Prioritizing 2 Views
Libertarianism:
People have basic rights of freedom of choice, provided the choices dont violate anyones rights. Justice before good: No value judgment on good; justice as logical, universal proposition applicable to all people.
Communitarianism:
People born and live as a member of society; some freedom of choice is restricted Good before justice: Ask for way of life (value and purpose of good) of the particular context in the social relationship
With the logical, universal and standardized Justice, we cannot judge according to the differences of particular situations.
Source: Sandel, M. (2009). Justice: Whats the right thing to do? Farrar, Straus and Giroux
Communitarian View
In the pluralist societies with diversified religious, political and moral values, we must question ourselves the duties of the citizens and the common good of the society, that is, good life in a global viewpoint; by discussing in public and understanding mutually, we can establish respect and realize a fair society.
Based on Sandel, M. (2009). Justice: Whats the right thing to do? Farrar, Straus and Giroux
65
A Knowledge-Creating Firm/Organization/Community
Phronesis is to synthesize the ontology and epistemology through value and ethics in action Ontology: How to be; towards common good
For what do we live?: the vision to the future and the commitment to it.
Epistemology: How to know

What is the truth?: the SECI spiral which synthesizes objective and subjective views.
Creation: How one can transform ones self, firm and the environment Leadership promotes value-driven processes towards common good; i.e. a way of life rather than a tool to make money.

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The Wise Leader

-Communitarian Theory of Sustainable Innovation

August 30, 2012

Copyright. Nonaka, I. 2012

Knowledge-based View of Strategic Leadership

Copyright. Nonaka, I. 2012

Drucker: We Need Innovation, and We Need a New Theory

New Combinations: Innovation is a commercial or industrial application of something new.

Mutation: Innovation incessantly revolutionizes the economic structure from within.

Copyright. Nonaka, I. 2012

Knowledge Needs to be Discovered

Importance of context-specific knowledge

Competition as a discovery procedure

Process Philosophy of Whitehead

Process towards creativity

Propositions of The Knowledge-Creating Company and Managing Flow

Copyright. Nonaka, I. 2012

Strategy is About Creating the Future

Leading Business Creating Model of Sustainable Innovation

Vision -Common Good

Net work with Partner (re-source)

Knowledge creation (SECI) Ba-plattforming

Net work with Community (customer)

An Organization has to Offer a Unique Value - Apple

Copyright. Nonaka, I. 2012

Business Model of iPod

Contents Production Hardware Production

Apple Store Dealer Network iTunes

Brand Management Hardware Sales Contents Delivery

Profit Cost Structure

Revenues from Hardware Revenues from Multimedia

Methodology for Transforming a Thing (Mono) to an Event (Koto)

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Plato (left) & Aristotle (right)

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Attention to Practical Wisdom is Increasing Synthesis of Idealism and Pragmatism

Truth is, only practical wisdom can solve daily issues.

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Why Tacit Knowledge?

Belief precedes knowing.

Two Dimensions of Knowledge

Spiral up through dynamic interaction Analog-Digital Synthesis

Organizational Knowledge Creation Process

Articulating tacit knowledge through dialogue and reflection (Conceptualizing)

Learning and acquiring new tacit knowledge in practice (Practicing)

Systemizing and applying explicit knowledge and information (Modeling)

I = Individual, G = Group, O = Organization, E = Environment

Innovation as SECI Spiral

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Humans Create Meaning in Ba

resides in the whole: Digital thinking diminishes the meaning.

Tacit Knowing: From Particular to Comprehensive Entity

Crocus at the Parthenon

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Source: Nonaka, I. and Konno, N. (Forthcoming). Kenryo no keiei (Prudence-based Management)

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Six Abilities of Phronesis

1. Ability to make judgment on goodness.

5. Ability to exercise political power.

2. Ability to create ba.

4. Ability to articulate the essence.

3. Ability to see the reality as it is.