Socialization Externalization
Combination Internalization
Face-to-face Peer-to-peer
Collaboration On-the-site
Figure 2.2. Four Types of Ba
institutionalized in the company culture. Initiators (conceptual leaders) are chal- lenged to pursue their ideas.
Systematizing ba is a place of interaction in a virtual world instead of a sharing of space and time in reality. Here, combining new explicit knowledge with existing information and knowledge generates and systematizes explicit knowledge through justifying the concept throughout the organization. Cartesian logic dominates.
Thus, the systematizing ba is associated with the combination phase.
The combination of explicit knowledge is most efficiently supported in collabo- rative environments utilizing information technology. The possibilities to construct and support systematizing ba through the use of on-line networks (intranet or internet), groupware, document tools, and databases have been growing rapidly over the last decade. This technological shift enhances the importance of this con- version mode.
Exercising ba supports internalization by facilitating the conversion of explicit knowledge to tacit knowledge. Focused training with senior mentors and colleagues consists primarily of continued exercises that stress certain patterns and the work- ing out of such patterns. Through such self-refinement, knowledge is continuously enhanced by the use of explicit knowledge in real-life or simulated applications. The interaction that takes place in exercising ba is on-the-site, which means that it shares time and space. Rather than teaching based on analysis, learning by con- tinuous self-refinement through on-the-job training or peripheral and active par- ticipation (Lave and Wenger 1991) is stressed in such a ba. Exercising ba synthe- sizes the transcendence and reflection through action, while dialoguing ba achieves this through thought.
The knowledge generated in each ba is eventually shared and forms the knowledge base of organizations. Moreover, ba exists at many ontological levels, and these levels may be connected to form a greater ba. Individuals form the ba of teams, which in turn form the ba of organizations. Then the market environment becomes the ba for the organization. The organic interactions among these different levels of ba can amplify the knowledge-creating process. The following case studies of Seven- Eleven Japan and Maekawa Seisakusho illustrate how organizations create knowl- edge by building and utilizing ba.
Case Studies: Knowledge Creation through Ba
Seven-Eleven Japan: Continuous Knowledge Creation through Four Types of Ba
Owned by Ito-Yokado, a Japanese supermarket chain, Seven-Eleven Japan is the most profitable convenience store franchiser in Japan. Its success is signified by its 1991 acquisition of Southland Corporation, the original franchiser of Seven-Eleven stores in the United States.
The success of Seven-Eleven Japan stems from its successful management of knowledge creation throughout the company. Although the success of Seven-
Eleven Japan has been often attributed to its extensive use of information technolo- gies such as a state-of-the-art point-of-sales (POS) system, such systems are only a part of the system that Seven-Eleven Japan has built to create and exploit knowl- edge. By managing various ba and by continuous hypothesis-building and testing in such ba, Seven-Eleven Japan successfully creates knowledge.
The knowledge-creating process at Seven-Eleven Japan starts on the shop floors of the seven thousand Seven-Eleven stores. Store employees (in many cases part- time employees) accumulate tacit knowledge about customers’ ever-changing needs through socialization with customers, for example, by engaging in dialogues with them. Long-term experiences in dealing with customers give store employees unique knowledge and insight in the local market and customers. They often say that they can just “see” how well certain items will sell in their stores; they cannot explain why, but say it’s just their “feel” of the market based on their experiences.
To create and exploit such tacit knowledge about the market, Seven-Eleven Japan actively utilizes its stores as originating ba. Employees receive extensive on-the-job training (OJT) on the shop floor. Every new recruit is required to work at Seven- Eleven stores in various functions for about two years so as to accumulate experi- ences in directly dealing with customers and actually managing Seven-Eleven stores. Seven-Eleven Japan says that such OJT is the only way to keep its employees focused on serving its customers and does not use documented job manuals. An- other instrument to create originating ba is the burabura shain (walking-around employee). These employees have the task of wandering around and socializing with customers in stores to discover new knowledge in the fields.
Such tacit knowledge about the customers is then converted into explicit knowl- edge through externalization. At Seven-Eleven Japan, the importance of making
“hypotheses” about market needs at the shop floor is emphasized in every possible occasion. Since local employees are the ones who holds vast tacit knowledge about their customers and the local areas around their shops, Seven-Eleven Japan lets them build their own hypotheses about the sales of particular items by giving them the responsibility to order items. The responsibility is even given to part-time work- ers. For example, a local part-time worker can order more beer, on the basis of the knowledge that the local community is having a festival and that it is going to be a hot day.
To facilitate such hypothesis-building, Seven-Eleven Japan actively builds and utilizes dialoging ba, where tacit knowledge of local employees is externalized into explicit knowledge in the form of hypotheses through dialogues with others. For example, several part-time employees are responsible for ordering merchandise instead of just one manager. Each employee is responsible for certain merchandise categories, and through dialogues with others who are responsible for other cate- gories, they can build hypotheses that fit changing market needs better.
Another instrument that facilitates hypotheses-building is the use of field coun- selors, who provide information and advice to store owners and employees to help them build their own hypotheses. Seven-Eleven Japan employs about fifteen hun- dred field counselors. Each is responsible for eight stores on average, each of which they have to visit at least twice a week. During these visits, field counselors engage in dialogues with owners and employees of local stores and give them advice in plac-
ing orders and managing stores, as well as collecting information on each store. If a field counselor notices a unique hypothesis, such as new way to display merchan- dises at one store, he or she takes a note and shares that hypothesis with other stores.
The hypotheses built at the shop floor are disseminated throughout the company through various dialoguing ba. Field counselors report on the knowledge built at the stores they are responsible for to their zone managers, who then disseminate knowledge acquired from a field counselor to other field counselors. Zone manag- ers from across Japan meet at the headquarters in Tokyo every week, where suc- cess stories and problems at local stores are shared with Seven-Eleven’s top man- agement and other zone managers. Field counselors also have meetings every week, where one thousand five hundred field counselors and five hundred staff members from the headquarters, including the top management, meet to share knowledge and information.
The cost to maintain such ba is not small. To hold such meetings in Tokyo every week, it has been estimated that Seven-Eleven Japan spends about 18 million dol- lars per year for traveling, lodging, and so on. However, Seven-Eleven Japan em- phasizes the importance of face-to-face communication. Certain types of knowledge can be created and communicated only through sharing time and space together.
The hypotheses built at dialoging ba on market needs are then tested by the ac- tual sales figures of the items. Successful and unsuccessful hypotheses are compiled at systematizing ba. Seven-Eleven Japan has built a state-of-the-art information system to collect, analyze, and utilize sales data, the company compiles systemic explicit knowledge about the market through the vast amount of data collected through its POS system.
Such explicit knowledge is immediately fed back to stores so that they can built new hypotheses that suit the reality of the market better. Graphic order terminals (GOTs), terminals that display the sales data analysis graphically and that place orders, are used at stores to help store employees to build hypotheses and to sim- plify and speed up the order process and delivery.
Compiled explicit knowledge is then internalized in store employees, field coun- selors, zone managers, and staff and managers at the headquarters. Utilizing POS data and its analysis, store employees test their hypotheses about the market ev- ery day at their local stores, which work as exercising ba. The organizational culture of Seven-Eleven Japan, which emphasizes the importance of serving the ever-changing needs of customers, is embedded in the mindsets and actions of the store employees through such continuous hypothesis-building and testing. The sales data and the stories of success and failures at shop floors are also shared among man- agers and field counselors through the meetings every week. Top management re- peatedly emphasizes the importance of everyday efforts to make improvements and to adapt to market changes at such meetings. In such exercising ba, knowledge cre- ated in systematizing ba is justified by being compared to the reality of the world, and the gap between the knowledge and the reality then triggers new cycles of knowledge creation.
The internalization thus starts a new spiral of the SECI process. New hypotheses are built based on new tacit knowledge embodied in employees and managers.
Hypotheses are then tested, and the results are fed back to the organization to be
internalized again. This is a continuous process, as Toshifumi Suzuki, the CEO of Seven-Eleven Japan, affirms. “Day after day, week after week, I’ve been doing the same thing for twenty-five years—asking the employees what is wrong about our shops and how we can fix it.” Such continuous knowledge creation through a well- laid system base on four types of ba is what created the success of Seven-Eleven Japan.
Maekawa Seisakusho: Organic Cohesion of Self-transcending Ba
Maekawa Seisakusho is a leading company that holds a 50 percent world market share in industrial freezers. Since its foundation in 1924, it has focused on special- ized knowhow in basic, applied, and production technologies in industries that in- volve food and thermal technology.
Maekawa has a unique structure that can be described as a collective of many small “independent companies.” Each of these independent companies is quite small, with twenty-five employees on average, while Maekawa in total employs two thousand five hundred people. Each of these small companies is established and classified by its product and/or market. Maekawa now consists of eighty such corporations in Japan and twenty-three outside of Japan. Each company either serves its local area or focuses on a specific market, for example, food, industrial freezers, or energy-related services. The purpose of this structure is to empower local organizations to cater to the specific needs of customers in niche markets as autonomous organizations. Each company is completely responsible for its own business and is self-sufficient, with a complete set of the functions it needs, from design to marketing.
However, Maekawa is not simply a holding company of many subsidiaries.
Rather, its independent companies are ba where the self-transcending process is fostered in order to create knowledge, and the various ba are organically interre- lated to each other to form Maekawa as a whole. Employees of Maekawa transcend the boundaries of self and organization when they participate in such ba to create knowledge.
At Maekawa, the importance of working with customers to satisfy their needs is always emphasized. Employees of Maekawa transcend the boundary between the organization and the market by “indwelling” in the customer’s world. Instead of sitting at Maekawa’s office, they often go out to customers to spend long hours with them. Masao Maekawa, the president of Maekawa Seisakusho, explains that this
“getting out in the real world” is a way of “seamless co-experiencing” with custom- ers (from a speech delivered at the Maekawa Sougou Kenkyuujo and Ba to Soshiki no Forum, 1996). He points out that it is vital “to indwell in the world of the customers to achieve oneness of subject and object” since it “helps to understand the needs of customers.” Customers’ needs and the knowledge necessary to solve their problems are often tacit, and customers cannot communicate them well to Maekawa’s employees. Only by actually experiencing what customers are experi- encing can one accumulate the knowledge needed to solve the customers’ problems effectively.
The transcendence between organizational boundaries also occurs withinMaekawa Seisakusho. Although Maekawa’s independent companies are basically autonomous and self-sufficient, they are not isolated from each other. Some of the independent companies share the same office space. Members from different independent compa- nies often spend time together to form informal relationships. Sometimes a new project or even a new independent company is created out of such relationships. When they encounter problems too large to deal with alone, a group of several independent com- panies are formed to find a solution together. The key in such interactions among independent companies is that they are created voluntarily, not by a plan or order from the headquarters. Maekawa Seisakusho as a whole is a coherent organization with various parts organically interacting each other.
This organic structure of Maekawa Seisakusho is modeled after a living organ- ism, and it can be depicted as an “autopoietic system” (Maturana and Varela, 1980).
Living organic systems are composed of various organs, which are again made up of numerous cells. Relationships between system and organs, and between organ and cells, are neither dominate-subordinate nor whole-part. Each unit, like an au- tonomous cell, controls all changes occurring continuously within itself, and each unit determines its boundary through self-reproduction. At Maekawa, autonomous individuals and independent companies set their task boundaries by themselves to pursue the ultimate goal expressed in the higher intention of the organization, that is, to serve customers.
Managing the Knowledge-Creating Process:
Beyond “Management”
To manage the dynamic knowledge-creating process just described, managers are required to play different roles from those in traditional “management,” which centers around controlling the information flow (von Krogh, Ichijo, and Nonaka, 1997; Nonaka and Takeuchi, 1995). To manage knowledge creation, leaders must manage ba by providing knowledge vision and by building and energizing ba, as follows.
Especially crucial to this management is the role of knowledge producers, the middle managers who actively participate in the process. The role of knowledge producers is similar to the role of key players in soccer a game in which “managing the space” is the key. In the game field, space is a strategic concept. Players have to “find” a space in the field and exploit such a space effectively to make a play. Players not only find such a space but also actively create one. A coach (top management) creates and exploits such a space based on a holistic view of the game as an “outsider.” On the other hand, a key player has to play as an insider while sharing this holistic view with the coach. Such a space is unstable and quickly changes its shape throughout the game. The existence of such ba is not apparent to everyone. Only capable coaches and players can understand such ba and exploit it. Knowledge producers have to grasp such ba intuitively and exploit it so that the organizational members can interact dynamically with each other and/or with the environment to create knowledge.
Providing Knowledge Vision
For various ba in an organization to be effective platforms for organizational knowl- edge creation, they have to be strategically coherent under the “knowledge vision”
of the organization. Knowledge vision defines what kind of knowledge the company should create and in what domain and synchronizes the entire organization. It also facilitates spontaneous commitments of the individuals and groups that are involved in knowledge creation. Knowledge vision also defines the value system that evalu- ates, justifies, and determines the quality of knowledge the company creates. In short, knowledge vision gives a direction to the knowledge-creating process and the knowledge created by it.
It is top management’s role to articulate such knowledge vision and communi- cate it throughout and outside the company. Since knowledge is boundaryless, any form of new knowledge can be created regardless of the existing business structure of the company. Therefore, it is important for top management to articulate a knowl- edge vision that transcends the boundaries of existing products, divisions, organi- zations, and markets. It is then middle managers’ role to break down the values and visions into concepts and images to guide the knowledge-creating process with vi- tality and direction. Middle managers remake reality, or “produce new knowledge,”
according to the company’s vision.
Building and Energizing Ba
Ba can be spontaneously created, and it can be built intentionally. Leaders can fa- cilitate knowledge creation by providing physical space, such as meeting rooms, or cyberspace, such as a computer network, or by promoting interactions among organizational members by using such means as task forces. It is also important for managers to “find” and utilize spontaneously formed ba, which changes or disap- pears very quickly.
However, building or finding ba is not enough for a firm to manage the dynamic knowledge-creating process. Ba should be “energized” so that the individuals or the organization can create and amplify knowledge through the SECI process. For that, the management has to supply necessary conditions to energize ba, such as au- tonomy; creative chaos; redundancy; requisite variety; and love, care, trust, and commitment.
Autonomy increases the chances of finding valuable information and motivat- ing organizational members to create new knowledge. Not only does the self- organizing quality increase the commitment of the individuals, but also it can be a source of unexpected knowledge. By allowing members of the organization to act autonomously, the organization may increase the chance of introducing unex- pected opportunities.
Creative chaos stimulates the interaction between the organization and the ex- ternal environment. When chaos is introduced into an organization, its members face a “breakdown” of routines, habits, or cognitive frameworks. Winograd and Flores (1986) emphasize the importance of such periodic breakdowns as an oppor- tunity to reconsider one’s fundamental thinking and perspective. The continuous