No Guts, No Glory

Hirotaka Takeushi at The Masters Forum

by Michael Finley


Session Summary

The morning session at Ted Mann Concert Hall June 25 was one of the fullest in memory. Late arrivals drifted to the mezzanine level to find seats. The reason was soon apparent. The speaker, Hirotaka Takeuchi, was engaging, articulate, and funny. And his message, that the vital task of knowledge creation requires a new way of thinking about what we know and how we know it, struck a chord with everyone.

Knowledge has been a big business buzzword since Peter Drucker began using it, around 1960, to describe the role of the modern worker. Instead of making objects out of raw materials, as the worker of the industrial era did, the knowledge worker works with information, combining and recombining it in ways that are valuable to customers. Half the books on the organizational bookshelf today seem to have the word knowledge somewhere in their titles.

One thing that sets apart the ideas of Takeuchi and Ikujiro Nonaka, co-author of The Knowledge-Creating Company, is that they are about knowledge creation. Knowledge creation includes the kind of product and process innovation we are familiar with, but it goes farther than that. Their book details the successes Japanese companies have had in leveraging knowledge that American readers may not even be aware exists.

Tekeushi divided knowledge into two classes, explicit and tacit. Explicit knowledge is the kind we are familiar with information that is easily stored and shared. When you listen to a lecture, read a newspaper, watch the evening news, or review your phone messages, you are encountering explicit knowledge. Takeuchi praised the American capacity for generating high-quality explicit knowledge with our computers and networks and databases and communication systems we are the world champions of explicit knowledge.

But we're not as attuned to the other kind of knowledge. Tacit knowledge is fuzzier, more subjective, and historically it has been less manipulatable. It is knowledge that arises less from the mind than from human experience. It includes emotional experience, dreams, belief systems, sudden insights, and flashing intuition. In Takeuchi's classification, tacit knowledge is gained in just about every experience, from tasting ice cream to witnessing a sunset.

American managers, discovering there is a universe of knowledge other than the one they are accustomed to managing, may shrug. What do ice cream and sunsets have to do with profit and production?

Plenty. Takeuchi's presentation was loaded with examples of how Japanese companies found ways to use tacit knowledge to strengthen work groups, generate new ideas, and better market these ideas to end customers.

Like a child who touches a hot stove and is forever afterward careful about stoves, whether they are hot or cold, organizations that find a way to convert experience into usable knowledge have a powerful competitive advantage over those that do not.

Softening the Rice: Tacit Teambuilding

Knowledge creation as practiced in Japan may not be applicable in some U.S. companies. The concept is designed for a team-oriented organization, not one driven by a single superstar genius as some American companies (Microsoft, Netscape, Dell Computer) are. Takeuchi said few Japanese firms have that kind of leader. But ordinary people can do extraordinary things when they pool their knowledge.

American baseball players are by all accounts the best in the world. Only a few Japanese players have made it to our big leagues. But Takeuchi assured us that nine randomly chosen, average Japanese males would probably beat any nine randomly chosen American counterparts. Reason: every Japanese plays baseball, and their team approach finds ways to overcome individual shortcomings. Without a star slugger or hurler, American teams (like our current crop of Twins) struggle.

The Japanese style of knowledge creation combining experience and more formal learning is so natural to them that they can have trouble with the American style. Takeuchi just finished a teaching residency at Harvard's Advanced Management Program, and he saw firsthand how some Japanese balked at the reading-intensive regimen. The approach at AMP is much like the approach at Harvard Business School: students read and analyze one case study after another, with the emphasis fixed on explicit "book" knowledge, on loading the mind with the latest knowledge from the world's top professors. The problem goes beyond language difficulties; Japanese students seem to require that learning be from the gut as well as the neocortex.

Contrast that approach with one Takeuchi helped design for the Global Leadership Program, a regimen designed not just to pour in new knowledge but to actually change the behavior of the managers in the course.

The Global Leadership Program is a five-week course that costs $35,000 per person. People meet on Hurricane Island, off the coast of Maine. There they undergo a four-day period of rigorous physical learning situations involving outdoor adventure. Teams of 15 are assigned the task of getting the entire team through a long crack in a rock that is only 30 centimeters wide in places. Some teams, especially the skinny ones, negotiate the crack in as little as 45 minutes. Others take many hours, pushing and pulling one another through the narrow passage, helping one another get unstuck.

Having gone showerless for four days, the group then flies to Washington, D.C., using the Watergate Hotel as home base while they become involved with city problems. Participants may help the homeless, work with the police on community projects, or visit unemployment or welfare offices. Again, the learning is experience-based only this time with a strong social flavor.

The next day they visit embassies in Washington (of countries such as China, Russia, and India), to practice their negotiating skills. The program now jets them to one of these countries, where for two weeks they have a dual assignment: they must tackle a serious organizational problem (e.g., assess the telecommunications potential of Russia) and at the same time, create a 15-minute video capturing ideas and experiences about that country that they are unable to put into words.

In the final part of the program, the teams return and report on their findings. Each team is asked to draft a formal written report of the overall experience. These reports are typically both the high and low points of the program, according to Takeuchi. It is an opportunity for team members to summarize all that has happened to them, which is often quite transforming. Takeuchi recalled one Japanese manager sobbing in an utterly un-samurai way about his insight into what it means to be an underdog in today's world.

But Americans often short-circuit this last stage. Faced with a deadline for piecing together a concise report, many of us assume leadership and write the report ourselves practical, but a complete contradiction of the teambuilding experiences that had gone before. This, too, is a learning experience it shows the difficulty of converting tacit knowledge (experience) into the kind of workaday explicit knowledge we apply on the job. The Americans may have "gotten it" intuitively, but when the chips were down they failed to demonstrate it.

In our defense, it may be that freewheeling Americans have less need of formalizing experiential knowledge. Japanese social customs, many of them reaching back into antiquity, are more rigid than ours. The structure or kata-gaki is strictly hierarchical your boss is your boss, and may not be talked back to. Seniority, age, and which school you attended all tell you who you are and where you stand. The Japanese standard of ojigi or unfailing politeness further stifles spontaneous expression.

So the Japanese have built windows of free experience into their vertical social structure. One of these is the custom of a manager taking his reports out drinking, with the sole purpose of getting drunk. It is an expensive ritual, and it often takes several hours of tentative conversation before someone gets so sloppy that the social barriers snap and the truth comes tumbling out. "The trouble with you, Yamashta-san . . . " The name given this ethanol ritual is nommunication.

Just as the ancient Greeks set aside one day a year in which the slaves could beat their masters, the Japanese have created an outlet for workers to tell off their bosses. The next morning people greet one another by saying they were so drunk last night they don't remember what was said. But they do remember, and the work cycle resumes with fresh experiential knowledge driving it.

Another window for knowledge creation is golf. If Americans spend five hours negotiating 18 nearby holes, the Japanese spend another day doing it, involving a long drive, meals, the actual game of golf, followed by communal bathing multiple environments in which to get to know one another better, and to deepen one's sense of the other's identity. It is impossible to do all this and remain strangers.

Another Japanese pastime, one with which Americans are somewhat familiar, is karaoke. Japanese work groups or families rent a room at a club and take turns singing songs to a computerized soundtrack. The point is not to show what a talented singer you are. Quite the opposite: it is to shed some of the dignity that Japanese value but acknowledge can inhibit knowledge of one another. The lousier you sing, the more you let down your guard and let others see the real you.

Takeuchi, a non-drinker, takes his students on sports outings, to ski, play soccer, baseball, tennis, or to spend a day at the hot springs. At the springs they spend hours in the steamy waters. The students deferentially rub the teacher's back, and they come to know each other in a deeper, more relaxed, less formal way than they ever could in a classroom amphitheater. "What the students are saying to me is, 'Thanks for taking care of us,'" Takeuchi said.

Sounds a bit odd to us occidentals, but the intimate shared knowledge from this experience forms a bedrock on which teamwork can grow and communication and quality can flourish.

Unraveling the Mystery of the Yeast

Takeuchi is currently involved in a research project with Michael Porter that looks at the sluggards of the Japanese economy the large companies that make money but have never found a way to crack world markets. We are only dimly aware of the products and services of companies like Fujitsu (computers) and Kao and Lion (packaged goods), or the banks of Tokyo that dwarf ours in size but not in inventiveness.

Americans don't generally regard Japanese companies as innovative wizards. Our (perhaps defensive) take on them is that they are skilled at group processes, patient in implementation, and adept at improving on ideas our star-oriented corporations come up with first.

But any reasonable examination shows the untruth of this assertion. Sony's Walkman, Toshiba's laptops, Canon's copiers, and Toyota's rugged small cars are just four breakthrough ideas originating in Japan. Takeuchi claims that their advantage stems from melding the kind of tacit knowledge that comes naturally to the Japanese with the kind of explicit knowledge American innovators use creating a new kind of knowledge embodying subjective insight and objective thought.

Take Matsushita, the Japanese equivalent of General Electric, so much so that its nickname was Mateshita, or "copy-cat." A software engineer named Ikuko Tanaka decided that the best way to create an electronic bread-making machine was to interview a master baker on the topic of making bread, and apply the explicit knowledge to designing a bread-making machine. The baker, however, turned out to be a better baker than interviewee. The prototype Tanaka created from her interviews baked bread with an indifferent texture, nothing like the wonderfully chewy bread the human baker made.

Tanaka-san decided to observe the baker actually baking. She and her colleagues intently watched him in action and decided that the secret might be a "twisty-stretch" motion the baker made while kneading the dough. It was not difficult to design a milling machine that duplicated the "twisty-stretch," and the machine that resulted was the first Home Bakery, which helped change Matsushita's reputation overnight from copy-cat to eagle-eye.

Often the tacit knowledge that underlies an advance in explicit knowledge is a metaphor. With the Home Bakery it was, first, the notion of "human electronics"; later it became the twisty motion that made the machine bread as tasty as bread baked in a hotel. At Canon the metaphor was a beer can. The development team charged with reducing its copier costs by a third while improving reliability by the same amount was disconsolate, and had retired to a saloon to mull its disgrace. An engineer picked up the empty beer can in front of him and surmised that the can cost only a cent or so. Why couldn't Canon design a copier whose main expense item was as disposable as a beer can, thus slashing machine costs and decreasing the need for long-term reliability? Thus was the ubiquitous Canon Mini-Copier drum kit born.

It is a short hop from Mini-Copier to Mini Cooper. With Honda, the challenge was to build a sporty but comfortable car comparable with the classic Austin Mini Cooper. It had to be a small car, yet roomy enough that people would enjoy driving it. It seemed an unresolvable contradiction until Hiroo Watanabe, design team leader, found metaphors to guide the design. One was a slogan: "Man-maximum, machine-minimum." The corollary was the insight of a car as a sphere, minimizing surface area while maximizing space inside. The oxymoronic metaphor that resulted, "Tall Boy," could almost double as the car's name.

Marketing: From Mass to Mind

The most obvious impact of knowledge creation is happening in the field of marketing. In Takeuchi's view, the age of mass marketing targeting a segment of the population for a shotgun blast of advertisement and hoping 10 percent respond favorably is dead and gone, and good riddance. It was just guesswork, he said.

A classic case of knowledge creation in Japanese marketing is Yamaha, makers not just of musical keyboards and pianos but also of a broad line of furniture, leisure, and consumer electronics items. When they sell a piano, they provide free piano tuning for a period of time. The piano tuners are empowered to act as spies once they are in your home, glancing about so see if you have other products Yamaha might supply and, if so, what shape they are all in. If they observe that you do most of your music listening with an old clock radio, they will approach you about the joys of buying a Yamaha stereo.

Discussing knowledge creation in marketing also gave him an opportunity to talk about American companies. The reason is that knowledge creation in marketing is largely tied in with advances in parallel data processing, the ability of company associates anywhere to access much larger databases, containing many more fields than just name/address/telephone/VISA numbers. And the United States is by far the leader in exploiting this technology.

American Express, for instance, has for years been keeping track of how you use their card, what purchases you make, and what your interests are. So they are in a position to target you with offers that you will in all likelihood find appealing.

Takeuchi learned this firsthand when he got his brother's monthly American Express statement in the mail by mistake. His brother Yoshitaka is an artist, and has interests and consuming habits very different from Hirotaka's. The "stuffers" accompanying the statement, which he had always assumed were the same for all customers, were very different than the ones that were in his own bill, mailed the same day.

How is databased marketing an extension of Japanese-style knowledge creation? Because it is premised upon experience the fact that you enjoy scuba diving, Alaskan native art, and books about floral arrangement and converts that tacit knowledge into explicit knowledge in the form of database information.

Thus Blockbuster Video is able to keep tabs on all 28 million of its customers' viewing predilections. So if you call your neighborhood Blockbuster store, the associate locates your file while you are online, sees that you are an aficionado of action films, and unbidden, clues you in to the latest arrivals featuring Steven Seagal and Jean-Claude Van Damme.

Airlines have pushed knowledge creation to its limits. Their various frequent flier programs are really database marketing initiatives in disguise. They commandeer your loyalty with the lure of free flying, and then you are theirs. After a couple of flights, they should know if you require kosher or vegetarian food, have any special medical needs, prefer aisle to window seats, are arithmetically challenged with tallying your total number of carry-on bags, rent cars or limos, and prefer early flights or red-eye specials. All this information, which originates as simple behavior on your part, can be enlisted either to further your satisfaction with the airline or to assail you with complementary offers.

Some companies create social systems so that like-minded customers can meet with one another. Saturn has its fabled get-togethers. Harley Davidson has its Hog Club. Marlboro and other tobacco brands offer free subscriptions to magazines extolling the First Amendment-protected pleasures of lighting up.

It can be eerie when your tacit life winds up in someone else's computer. Takeuchi told how he and his wife stayed at a Ritz-Carlton hotel in Boston and ordered a 1993 Chardonnay from the wine list; some time later the same wine was suggested to them at another Ritz-Carlton in Malibu.

Should U.S. businesses renounce explicit knowledge forthwith and swear to a diet of tacit knowledge only, holding hands with workers and watching sunsets together? Takeuchi warned that such dichotomies are false. He reminded us of James Collins' advice during the February 21 Masters Forum session: Avoid the tyranny of the or, embrace the genius of the and.

The choice isn't between tacit and explicit, or between east and west, he said. It is to create a spiraling action that respects and digests knowledge wherever it comes from, and commits it to institutional memory. It is to learn to combine and convert them into one another. Tacit and explicit, east and west.


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