The Knowledge Creating Company By Ikujiro Nonaka (1991)

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(Single) Academic Paper Review: The knowledge Creating Company by Ikujiro Nonaka (1991)
Purposes of this article
This article was written by Ikujiro Nonaka who was ranked by number 20 in the Wall Street Journal’s “most influential business thinker” in 2008. He is called “behind the screen” professor who explains Japanese business behaviours to the rest of the world and most famous for his knowledge-based management view. (The Economist, 2009)
This article was his early publication that described the knowledge creating process in Japanese business. Dr. Nonaka wrote this article in 1991 at that time Japanese corporate management theory was seldom really understood by the western countries and rest of the world. “To the western manager, the Japanese approaches often seem odd or even incomprehensible.” (Nonaka, 1991 p.97) Before Japanese property market collapsed, its economy reached peak at 1991. Within the context of expanding economy, the successful Japanese business management methods have attracted worldwide attention. In general, he offers a guide about Japanese organisational roles, structures and practices in terms of knowledge creating area.

Dr. Nonaka believes knowledge creating company in the modern business environment can make success. However, Nonaka pointed out there were only a few of western managers and scholars understand the nature of knowledge creating process. Simon (1982) argued knowledge is equal quantifiable data and information, and organisation develops knowledge by gathering information. The useful data are those that can help corporate increasing efficiency or decreasing cost. Nonaka disagree with this argument and presenting his view that knowledge creating is managing creation of new knowledge. He came to this conclusion based on study numerous successful Japanese organisations.

“Information processing” view deeply influenced western corporate management in managerial roles and responsibilities, organisational design and practices aspects. Nonaka tried to clarify what is Knowledge creating company and identify core business issues in a knowledge creating company. Knowledge creating process is not only about R&D activities, or a marketing plan. No one single individual or department is exclusive for creating new knowledge in a knowledge creating company. “The knowledge-creating company is as much about ideals about ideas.” (Nonaka, 1991 p.97) Dr. Nonaka affirmed the contribution of each individual, regardless of their hierarchy position in knowledge creating company. People in knowledge creating company shared common vision on knowledge creating. Business tasks are also designed based on knowledge creating, besides pursuing financial performance. In summary, the whole organisation is embedded knowledge creating gene.

Most useful Japanese managing knowledge creating tools were ignored by western managers. Dr. Nonaka categorized knowledge into tacit knowledge and explicit knowledge. He addressed the importance of using tacit knowledge as powerful tool to generate new knowledge. According to surveys (Ramirez et al., 1991, Trahan and Gitman, 1995, Davies, 1996) indicated western managers were more likely to adopted value based management approach. Koller (1994) argued value is created only when companies investment have return. Anthony et al. (1980) concluded management task is to increase efficiency through managing control framework to achieve business objectives. In this context, explicit knowledge is more valuable than tacit knowledge. However, numerous Japanese managers are good at exploit tacit knowledge, using tacit knowledge to boost knowledge creation in organisation.

The Contribution of the article to the subject areas
Ikujiro Nonaka a Japanese corporate theorist and professor who has published many books and also written many articles to journals; some of his theories have made great influence to latter academic work and also affected on business operation. One of his most
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