Summary of The Knowledge-Creating Company, Chapter 7 by Ikujiro Nonaka & Hirotaka Takeuchi

1. A symbol with many meanings

2. Gl bal
Organization Knowledge Creation
Summary of “The Knowledge-Creating Company”, Chapter 7
by Ikujiro Nonaka & Hirotaka Takeuchi
Presenters: Dwi Arti Anugrah, Endro Catur Nugroho, Marlisa Kurniati, Tri Kuncoro Wati
Faculty of Psychology, Universitas Indonesia, 2013
Information in this document is intended for academic purposes only.

3. What We Will Learn...
For product development, the Japanese companies’
approach to organizational knowledge creation (OKC) can be
applied, with some adjustments, both in the context of
overseas business development and global joint operation.

4. Reminder...
Last presentations Question
OKC by Japanese How OKC takes place on a
companies: global scale?
1. Management process: 1. Can these OKCs work
middle-up-down outside Japan?
management 2. What adjustments
2. Organizational structure: needed for partnership
hypertext organization with non-Japanese
counterparts outside
Japan?

5. Organizational Knowledge Creation
Companies
Western
Japanese and
Companies
Interaction between tacit and Emphasize on knowledge Enabling organizational condition
explicit creation

6. OKC: Differences Between
Japanese and Western Companies
Japanese Western
Interaction between Group level Individual level
tacit and explicit (usually middle managers) (usually top leaders)
Emphasize on Tacit knowledge Explicit knowledge
knowledge creation • intuition, figurative language and • paralysis by analysis
bodily experience • oral and visual
• quick internalization
• groupthink
• overadaptation to past success
Enabling • Ambiguous organizational intentions • Clear organizational intention
organizational • High redundancy of information and • Individual autonomy
condition tasks • Creative chaos through individual
• Frequent fluctuation from top differences
management • Less fluctuation from top management
• High autonomy at the group level • Less redundancy of information
• High requisite variety through cross- • Requisite variety through individual
functional project teams differences

7. Case Study:
Nissan Primera Project
What we learn:
A new product development approach that
combines the best of Japanese "rugby style"
and European "relay style" for shorter lead
time yet high performance cars.

8. Nissan Primera Project
high
performance
image, image,
plush, plush,
options options
Grand Concept

9. Nissan Primera Project
$ $ $
80
%
Criteria*
*by top management, first time in Nissan

10. Nissan Primera Project
Grand Concept:
Nissan Primera (1986): global car that fits to:
• European market: high performance
• US and Japan market: images, plushy and
options
Criteria:
1. Be manufactured in Japan and Britain
2. Have 80% of components made in Europe
3. Be sold primarily in European market and additionally US and
Japanese market
(by top management, first time in Nissan)

11. Product Development
1.Product Strategy Division: planning, design,
testing, production and marketing
2.Development Team: eight Japanese
managers

12. Product Development
Product Strategy Division
Model 1 Model 2 Model 3
Planning Planning Planning
Body design
Chassis design
Engine design
Exterior design
Interior design
Testing
Production
Marketing

13. Product Development
1.Product Concept:
• “Comfortable Functionality” -> "Sure, Fast, and
Comfortable on the Autobahn"
• Comfort 10
• 50-page catalog that included many sketches
externalizing mental model or image of Primera

14. Product Development
Communicating the Gathering Information
product concept and in Europe: European
building wider support: Liaison Technology
Autobahn! Office

15. Product Development
1.Communicating the Product Concept and
Building Wider Support: Sending 1500 people
to Europe to drive on the Autobahn and
acquire tacit knowledge about European
automobile market, motoring culture and
road conditions
2.Gathering Information in Europe: European
Technology Liaison Office in Brussels was
established

16. Nissan Primera
Product Development

17. Nissan Primera
Product Development
• Develop 1/4 clay models and design review
• Develop full scale clay model and interior review
• Develop prototype and 180,000km test (exceeded the
norm)
• Develop interior and 800km test
• Develop new engine and multilink suspension

18. Product Development
Designing Primera: to “outengineer” Benz and
BMW (and lead the world)
Process:
• Develop 1/4 clay models and design review
• Develop full scale clay model and interior review
• Develop prototype and 180,000km test (exceeded the norm)
• Develop interior and 800km test
• Develop new engine and multilink suspension
Forming the Yazaki Group: a group of selected
development engineers and skilled test drivers

19. Product Development
Quality
issues
Cost ?
design
$$$$
production

20. Product Development
factory
tacit knowledge
Issues
Solutions
Result suppliers factory

21. Product Development
Production people was directly involved in the
early stage of design
Primera production constraint:
1. Quality of Japanese cars
2. Cost-constraint (remember: mid-range)
Issues, solutions and result:
1. Production is in Japan and Britain (NMUK), (tacit) production
knowledge is in Japan.
2. British suppliers were not familiar to Nissan production.

22. Result and Implication
Quantity Quality
exceeding target multiple award-winning

23. Result and Implication
Primera as Global Car
1. Annual production target in Europe
(100,000) exceeded (124,000)
2. Annual production target in Japan (3,000)
exceeded (6,260)
3. Winning 19 best car prizes throughout
Europe

24. Result and Implication
Socialization & Externalization
!!!
factory
explicit knowledge
tacit
Issues
Solutions
Result suppliers factory

25. Result and Implication
Primera case emphasizes importance of
socialization and externalization:
1. Socialization of Europe market by sending
Japanese engineers to Europe
2. Externalization (in the form of manuals) and
socialization of Japanese (tacit) car
manufacturing knowledge by sending British
engineers to Japan

26. Result and Implication
New product development approach:
American football

27. Result and Implication
CONCEPT
CONCEPT
CONCEPT
New product development approach:
American football

28. Result and Implication
New product development approach: American
football
1. Rugby Style: shorten product development lead time (for
even shorter than already short compared to European) by
overlapping design and manufacturing cycle.
2. Relay Style: phased production cycle.
3. American football (the new style): combination of Rugby
Style and Phase Style, which leads to short lead time and
higher performance level

30. European and Japanese Style CONCEPT
CONCEPT
European Style Japanese Style
Objective Superior performance Adaptation to changing needs
Product Appeal Function Image and quality
Product concept Clear cut decision at the initial stage, adhered to Vague at initial stage. Modified and alltered in
creation throughout the ensuing stages ensuing stages in accordance with change in needs
Flow of activities Sequential approach Overlapping approach
Ensuing process Specific design targets fixed at the initial stage Close cooperaton among all departments conserned
are pursued under strict division of labor during the development
Organization According to function and often under a project Matrix or project team-type organization under a
leader with limited authority project leader with authority over the entire process
from planning to production to sales
Strength Conducive to a relentless pursuit of superior Shorter lead time (3-4 years), high quality, and
performance, function and quality attuned to needs in the market
Weakness Longer lead time (7-8 years), high development Risk of compromise on a low level; not conducive to
costs an all-out pursuit of superior performance

31. CONCEPT
New Product
Development Approach
American Football Style:
1. Early stage (grand concept -> technical concept -> product
concept): determined and clarified by a small number of
project leaders, instead of long and continuous interaction
among project members (Japanese rugby style).
2. Division of labor is established: teams are specialized for
certain functions that move simultaneously (as in rugby
style) running together to meet target: cost, performance
level, launch date.

32. CONCEPT
New Product
Development Approach
The key to American Football Style:
1. Comprehensive plan early in the game
2. Tactics decided by few leaders

33. Case Study:
Shin Caterpillar Mitsubishi (SCM)
1963 : MHI Ltd + Caterpillar formed SCM

34. SCM background
• Caterpillar was a limited produce company
for hydraulic shovels.
• MHI eager to eliminate unnecessary
duplication between Hydraulic Shouvel
• KOMATSU entered market in 1982

35. Clash on SCM
Concern Items Japanese European-American
Approach Cost-quality-performance- safety-performance-quality-
safety cost
Whose Lead the Concept Research & Development Marketing Development
Creation Process Department
Project Carried-out 1. concept making 1. Sequentially process
Development 2. pararel on prototyping- on concept making-
pilot running-preparing for prototyping-pilot
mass production running-mass
3. product development 3-4 production
years 2. product development
5-10 years
Standardized Design Need to standarized

36. How organizeREGA PRoject
• Matriks organization
a. Planning division :large, medium, small
b. Design divison: structure, hydraulic mechanism, electric system, other
equipment
• Relationships between leader
a. good communication
b. located next to each other
c. spent much time together (private and business)
• Standardizing for global market
a. interplant meeting to enhance socialization for 3 different plants
b. standard design drawing
c. common product-decided by team each component
d. multiselection concept - tested the idea with dealers - produce main selling
point.

37. Knowledge Creation
on REGA Project
1. Japanese externalize their tacit knowledge
into explicit through socializations (interplant
meeting, self organizing team)
2. American rest on externalization through
a. standardized operation manuals
b. through cost monitoring system

38. Key Success Factor
on applied organization knowledge
outside of Japan
1. Strong participation commiment from top
management
2. Middle managers are assigned as global
knowledge engineer
3. Sufficient level of trust among participants
shoud develop
4. Strong ocialization and externalization

39. Summary
1.The Japanese approach to OKC can be
applied outside of Japan.
2.The key is a prolonged phase of socialization
and externalization due to different culture
3.Organizations needs to identify their cultural
barriers to speed up knowledge sharing