Tacit Knowledge

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EDITION: 04-2023

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CEO-CODE PAPER: TACIT KNOWLEDGE

„In an economy where the only certainty is uncertainty, the only sure source of sustained competitive advantage is knowledge.“

Ikujiro Nonaka

© CEO-CODE®

THE DIFFERENT TYPES OF KNOWLEDGE

To effectively manage knowledge, it‘s crucial to recognize the various forms it can take. This includes the ability to differentiate between types of knowledge, a fundamental step towards effective knowledge management.

For businesses, knowledge is a highly prized asset. But how do you determine whether your organization has an optimal amount of it? There are numerous metrics available, but one commonly used approach is to distinguish between explicit and tacit knowledge. The former refers to information learned through training, while the latter is knowledge gained organically over time.

Nonaka introduced a concept in the 1990s that remains essential to our discipline today: knowledge is acquired through the interaction and relationships between two knowledge types.

„You can‘t create knowledge without real exchange.“

Ikujiro Nonaka

Explicit knowledge (KNOW)

Formalized and codified knowledge, also known as explicit knowledge, is efficiently identified, stored, and retrieved. Knowledge management systems (KMS) excel at managing this type of knowledge, making document and text storage, retrieval, and modification seamless.

From a management standpoint, the main challenge of explicit knowledge aligns with managing information. The goal is to ensure people can access necessary knowledge, prioritize important information for storage, and periodically review, update, or dispose of irrelevant knowledge.

„Implicit knowledge is personal, contextual, and therefore difficult to formalize and communicate. On the other hand, explicit or „codified“ knowledge refers to knowledge that is formally transferable, systematic language.“

Ikujiro Nonaka

While experience-based know-how may be favored over explicit knowledge by many, it‘s important to recognize that the latter plays a crucial role in industries prone to technological shifts. Explicit knowledge may lack in-depth insights, but it offers straightforward guidance. However, companies that rely solely on explicit knowledge may face challenges in adapting to changing trends.

In today‘s digital age, knowledge management initiatives that solely focus on explicit information are not enough. Understanding the deeper aspects of implementation knowledge is necessary. As technology advances, the nature of knowledge changes, and it‘s crucial to keep up.

The integration of artificial intelligence and machine learning in decision-making processes is underway. However, it‘s essential to note that these technologies aren‘t ideal yet. Certain AI systems prioritize data exclusively while overlooking other key factors such as relevance and credibility.

Tacit knowledge (CAN)

Know-how, a type of knowledge that has existed for decades, is often difficult to define. It encompasses intuitive skills that can be gained through experience or observation. This observational process, known as implementation, involves watching someone else perform a task before attempting it yourself.

While the traditional view of knowledge may prioritize formal, explicit information, Nonaka‘s research reveals that this perspective falls short in many types of situa-

The different types of knowledge

tions. Tacit knowledge, which is often overlooked, can significantly improve the efficiency and effectiveness of achieving goals. To truly succeed, one needs more than just factual information. Knowledge is a powerful tool that can result in organizational breakthroughs. In fact, studies consistently show that tacit knowledge is more valuable than merely declarative (oral or written) information when it comes to driving corporate innovation and technological changes within companies.

The challenge of codifying tacit knowledge is a significant issue for KMS. Technical systems rely on codification, which can prove difficult for individuals who possess implicit knowledge. This type of knowledge is rooted in experience and intuition, rather than facts and figures, and therefore difficult to express in words. For instance, an IT expert resolves issues based on their experience and intuition, making it difficult to convey their expertise in a way that a novice could understand. Implicit knowledge reflects an individual‘s cultural beliefs, values, and attitudes toward their work environment, often without their awareness.

Defining this particular skill can prove challenging, yet it typically involves a guiding framework, such as „the customer is always right,“ that shapes individuals‘ interactions with colleagues while carrying out their responsibilities within the organization.

„In an economy where the only certainty is uncertainty, the only sure source of sustainable competitive advantage is knowledge.“

Ikujiro Nonaka

EMOTIONS MAKE KNOWLEDGE ACCESSIBLE

The advancements made in brain research have captivated many, as significant progress has been achieved in this field. Through this research, we have gained a deeper comprehension of how knowledge is formed. It is important to note that knowledge becomes a meaningful experience only when it is fused with emotion.

Studies indicate that combining knowledge with strong feelings greatly enhances learning and retention. By experiencing knowledge with emotions, it becomes embedded in our memory and can be easily recollected at any given time.

The brain operates similarly to a computer in its ability to compress lengthy algorithms into concise keywords that are stored in specific regions. Emotion plays a crucial role in this process, allowing us to quickly recall these keywords when needed. However, if such information were constantly accessible, it would significantly hinder daily activities. This appears to be the case for individuals with autism, who require a tightly controlled routine to deal with the constant influx of information.

It‘s pivotal to comprehend that our brain acquires knowledge through our emotions as part of the survival process. Our brain exhibits a vast capacity to store all this information. When we need to access this information, our emotions come into play. Emotions and knowledge are intertwined. The significance of emotions is further reinforced by brain research.

Emotions make knowledge accessible

According to neurologist Donald Caine, the main distinction between emotion and reason is that emotion motivates action, and reason motivates judgment. Therefore, when action is required, it is emotions that are essential.

LIFTING TACIT KNOWLEDGE FROM THE DEPTHS

Do you ever stop to think about the many things we do on a daily basis without even realizing it? From tying our shoes to driving a car, our brains recall these skills effortlessly. Neurobiologist Manfred Spitzer explains that a majority of what we learn, we don‘t even realize we‘re learning.

The same can be said for experienced entrepreneurs who have seen it all in the business world. With years of experience under their belts, they have an innate ability to assess situations with clarity and draw accurate conclusions. This is a distinct advantage over younger entrepreneurs who may lack the same level of experience. Don‘t discount the value of experience in the competitive world of business.

The key to navigating rough waters in business is experience. It‘s a treasure trove of knowledge that can guide a company to success. However, some Gen Y representatives argue that experiences no longer hold value in the digital age. While they may be right when it comes to digital events and market reaction times, lived experiences still hold immense worth in the business world.

Lifting tacit knowledge from the depths

Despite the evolution of many processes in the economy, the impact on people remains minimal. This is particularly relevant when it comes to customers, as a significant proportion of them are aged over 40. While the digital world is rapidly expanding, it is crucial to acknowledge that experiences gained outside of it remain valuable over time. It‘s essential to preserve these experiences, as they form an invaluable resource for the future. Additionally, people of all ages continue to gain new experiences each day, which augment their existing knowledge base.

Experience is not something to be treated like useless clutter that can only be sold for a quick profit on a television show. Rather, it is akin to the act of tying our shoes - a skill that allows us to access important knowledge when we need it most. At our consulting firm, we excel at unearthing these valuable experiences, which we refer to as ‚tacit knowledge‘, and bringing them to the surface for everyone to benefit from. So don‘t underestimate the power of experience - it could be the key to unlocking your next big breakthrough. After analyzing the entrepreneur‘s substantial experience, we determine which experiences will be most beneficial in a leadership role. We venture to the basement not for organization purposes, but to identify which boxes contain valuable items that can aid in day-to-day business operations. It‘s comparable to a joyful family gathering.

During festive occasions, the good china and crystal glasses are brought out of storage for a glamorous table setting. Once the celebration ends, they are carefully repacked and returned to the basement. Similarly, as winter clothes are retrieved from the cellar after a snowfall, tacit knowledge must also be unearthed from the depths of our memory. It is crucial to make such knowledge explicit, so that it may be utilized effectively.

We want to use an example from a movie to show you how important it is to bring implicit knowledge into consciousness.

THE TACIT CORPORATE KNOWLEDGE

In any given company, a wealth of knowledge and ideas exist beyond the CEO‘s expertise. Referred to as ‚tacit knowledge‘, much of it remains unshared and lost forever. This type of knowledge goes beyond what is required to complete tasks; it encompasses the untapped intellectual resources of employees.

In some companies, conformity dampens the pursuit of novel ideas. However, in Silicon Valley, there is a thirst for the innovative ideas of their workforce. Companies like Google and Facebook explicitly encourage their employees‘ creativity to fuel their work. Dianna Yau, a product manager at Facebook, offers a testimony to this culture: „When I started my first project at Facebook, [...]“

During a conversation with a tech manager, I mentioned my project and was met with immediate enthusiasm and a willingness to assist. This experience is not uncommon on Facebook, where individuals are eager to offer their aid, connections, and resources. This culture of collaboration is fairly distinctive and differs from my past experiences in other companies, where employees tended to work in isolation.

In many situations, a problem can elicit a diverse range of solutions from five or ten individuals. However, in larger corporations, a uniform approach is often enforced,

The tacit corporate knowledge

resulting in limited innovation and unconventional problem solving. Facebook, on the other hand, prizes a culture of resourceful ingenuity, often referred to as a „hacking culture,“ which sets it apart. This exceptional attribute fosters creativity and outside-the-box thinking in order to arrive at effective solutions.

At Facebook, the concept of „hacking“ involves enabling individuals to tackle problems, whereas other firms emphasize executing set solutions. The process of tapping into tacit expertise for business benefit can be relatively straightforward. However, transforming a company‘s culture is no easy feat. Nonetheless, setting up small avenues for creative input can prove helpful, and there‘s no need to fully adopt Facebook‘s „hacking culture“.

The impact of heavily entrenched hierarchical thinking on German companies is staggering. This tacit knowledge, however, plays a vital role in shaping their corporate identity. A company‘s identity comprises not just its principles and values, but also the entirety of its institutional knowledge. Achieving balance between past and future, with employees‘ implicit knowledge playing a crucial role, is crucial for any company‘s corporate identity, particularly in the digital age. Too often this goes overlooked.

Today, many only elicit a weary smile when people talk about the ‚tradition‘ of a company, believing these days that all you have to do to stay in the game is head for tomorrow.

If you‘re leading an established company, attempting to build an identity without considering your roots will result in failure. In order to succeed, you must understand where you come from, as this knowledge will guide you into the future. Consider the historical Zollverein coal mine, a museum and event venue in Essen that was a crucial part of the Pott region‘s industry for over a century. This UNESCO World Heritage Site is valued precisely because of its rich history and deep roots.

What impact would this have on the city‘s character? It would mean a definitive shift, without erasing the site‘s history. Although the coal mine is no longer operational, its legacy is omnipresent. This is a valuable lesson for businesses too. Preserving identity while modernizing is essential.

As the Dalai Lama famously stated, „Embrace change, but don‘t lose sight of your values.“

The tacit corporate knowledge

CEO-CODE PAPER: TACIT KNOWLEDGE