The Managerial approach

2.1.1 Background

The Managerial approach of knowledge claim evaluation originates from Nonaka and Takeuchi’s (1995) influential work in innovation and knowledge management:

“The Knowledge-creating Company: How Japanese Companies Create the Dynamics of Innovation”. The Managerial approach is complemented by follow-up publications of Nonaka, Takeuchi and colleagues, e.g., Nonaka and Tansley (1999), Von Krogh and Grand (2000), Von Krogh et al. (2000), Nonaka et al. (2000; 2006), and Nonaka and Toyama (2005).

Nonaka and Takeuchi (1995) build their contribution on a comparison between Western and Japanese business practices in relation to knowledge creation and innovation. They conducted “in-depth interviews” with approximately 130 managers in “successful” Japanese companies: Canon, Honda, Matsushita, NEC, Nissan, Kao, Sharp, Mazda, Fuji, Xerox, Shin Caterpillar, Mitsubishi, Fujitsu. Also three US companies have been used as case studies: 3M, GE and the US Marines. However, Nonaka and Takeuchi (1995) do not provide any further methodological information, neither about the overall research design nor of the design of each individual case study. The studies have resulted in the identification of knowledge-related factors that have contributed to the innovation successes of Japanese businesses in the late 80s and early 90s. The findings have been translated to a general theory on knowledge creation.

The best-known model from Nonaka and Takeuchi (1995) is the SECI model of knowledge creation. Based on Polanyi’s distinction of tacit knowledge and explicit knowledge, the SECI model describes four modes of knowledge conversion:

Socialization (tacit knowledge to tacit knowledge), Externalization (tacit knowledge to explicit knowledge), Combination (explicit knowledge to explicit knowledge) and Internalization (explicit knowledge to tacit knowledge). The SECI model does not

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address knowledge claim evaluation. Nonaka and Takeuchi (1995) address knowledge claim evaluation in their “five-phase model of the organizational knowledge creation process” (p. 84). Figure 2.1 depicts the five-phase model.

Nonaka and Takeuchi (1995) relate the four types of knowledge conversion of the SECI model and the distinction of tacit knowledge and explicit knowledge to the five phases. The five-phase model can be regarded as an instantiation of the integrated knowledge management cycle we presented in Chapter 1. Nonaka and Takeuchi’s (1995) theory is a second-generation knowledge management, because they address all stages of the integrated knowledge management cycle.

What we call knowledge claim evaluation can be found in the “Justifying concepts”

phase. The central aspect of this phase is justification, which is the backbone of the Managerial approach: “created concepts have to be justified […] in which the organization determines if the new concepts are truly worth for pursuit” (p. 84).

We interpret a concept as a (network of) knowledge claim(s).

Figure 2.1. Nonaka and Takeuchi's (1995) five-phase model of the organizational knowledge creation process

2.1.2 The Managerial approach of knowledge claim evaluation: justification Nonaka and Takeuchi (1995) refer to the oldest definition of knowledge coined by Plato (circa 400 BC) in explaining how organizations should evaluate knowledge:

knowledge is justified true belief. Although this definition has been criticized by Gettier (1963), it is widely-used and accepted in the fields of epistemology and knowledge management. From Plato's definition, three conditions of knowledge can be extracted.

Sharing tacit

knowledge Creating concepts Justifying concepts Building an

archetype Cross-leveling

knowledge

Socialization Externalization Combination

Internalization Tacit knowledge in

organization

Explicit knowledge in organization

A person X has knowledge of Y if and only if (adapted from Steup, 2006):

• Y is true (the truth condition);

• X believes that Y is true (the belief condition);

• it is justified that X's knowledge of Y is true (the justification condition);

Nonaka and Takeuchi (1995) argue that the traditional Western epistemology emphasizes the truth condition following the Correspondence theory of truth.

Consequently, Western businesses emphasize the absolute, static and nonhuman nature of knowledge, typically expressed in propositions and formal logic. Japanese epistemology and Japanese businesses, however, adopt a Pragmatist theory of truth (Nonaka and Von Krogh, 2009). Nonaka et al. argue that knowledge claims (i.e., beliefs) become true if they are justifiable useful to the relevant adoption unit, and enable the organization to act. In contrast to Western epistemology, Nonaka and Von Krogh (2009) argue that knowledge claim evaluation is “fragile and fraught with uncertainty, conflicts of interest, and differences in mindset” (p. 640). Japanese epistemology accounts for the successful innovation practices of Japanese companies.

Therefore, Nonaka et al. define knowledge claim evaluation as a dynamic human process of justifying personal knowledge claims toward the truth (Nonaka and Takeuchi, 1995; Nonaka and Von Krogh, 2009). The Managerial approach represents this view on knowledge claim evaluation.

How does the Managerial approach work in practice? In the first place, members of an organization should provide external justification for new knowledge claims by referring to reliable causes in reality (Tell, 2004). Von Krogh et al. (2000) argue that organizational members should find as objectively verifiable evidence as possible in favor of new knowledge claims (i.e., new concepts, ideas, models, strategies, etc.):

“Members use market studies, benchmarking, customer focus groups, trend studies […] to build arguments for or against the concept” (p. 7). Secondly, organizational members should provide internal justification for new knowledge claims by verifying that the knowledge claims are in conformity with corporate justification criteria (Nonaka and Takeuchi, 1995; Tell, 2004). Justification criteria concern, for example, cost levels, profit margins and the degree to which knowledge claims associated with an innovation can contribute to organizational growth. Furthermore, abstract and qualitative criteria can be included relating to e.g., adventure, romanticism, and aesthetics.

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Justification criteria originate from organizational intentions⁴. Organizational intentions are expressed in terms of the corporate strategy, mission and vision. For instance, Dutch electronics corporation Philips intends to make simplicity the goal of their technology (e.g., their public slogan is “Sense and simplicity” Philips.com, 2011). Following the Managerial approach, Philips should derive justification criteria from this organizational intention. A fictive “simplicity” justification criterion could be the criterion that a certain class of devices should have three or less control buttons. Philips should justify competing new product concepts against “simplicity”

criteria such as these using objective verifiable arguments and evidence.

A property of the Managerial approach that contrasts with one of the properties of the Open approach (see next section) is how organizational intentions should be established in innovative firms. Nonaka and Toyama (2005) follow Schumpeter (1934) in that “innovations are brought in by leaders displaying entrepreneurship”

(p. 431). Consequently, Nonaka and Takeuchi (1995) argue:

“In a knowledge-creating company, it is primarily the role of top management to formulate the key justification criteria in the form of organizational intentions, which is expressed in terms of strategy or vision” (p. 87).

Based on the organizational intentions, middle management establishes mid-range justification criteria that can be tested empirically within the company. Thus, top and middle management set the standards for justifying the value of the knowledge that is created.

Corporate management is the self-evident source of justification in the Managerial approach (e.g., comparable to how sense experience is a self-evident source of justification in Empiricism). Management establishes organizational intentions and justification criteria. Subsequently, all other knowledge claims depend on the justification of management through the organizational intentions and justification criteria. It is up to management to assess whether the organizational intentions and justification criteria are still “justified” in the light of the Pragmatic theory of truth.

Nonaka and Takeuchi (1995) underline this by stating “The final justification of created concepts and their realized forms, i.e., products and/or services, occurs in the marketplace” (p. 94).

4 In later work by Nonaka, Takeuchi, and colleagues, the concept of ‘knowledge vision’ is used instead of organizational intentions, see e.g. Nonaka and Toyama (2005), Nonaka et al. (2000, 2006)

The Managerial approach adopts a variant of the Foundationalist theory of evaluation, known as Modest Foundationalism (Conee and Feldman, 2006). In the standard version of Foundationalism, knowledge claims are justified in the light of self-evident basic knowledge claims that do not require to be justified and are infallible (see Chapter 1). In Modest Foundationalism, the self-evident basic knowledge claims are fallible (Conee and Feldman, 2006).

This concludes the presentation of the Managerial approach. In the Managerial approach, top management ensures the quality of knowledge in innovations by formulating organizational intentions and justification criteria. Next, we discuss the Open approach, which together with the Entrepreneurial approach (section 2.3), offers an alternative way to evaluate knowledge claims.