Executive Summary
The process of acknowledgment management involves utilizing the employee’s experiences and their understanding of the business process, combining with the external resources to innovatively create a new process or improve the already existing ones. The theory underlying knowledge management dates back to early scholars, and this paper aims to explore the work of two of these, namely Polanyi and Nonaka. It will compare the literature that has been referencing to their works and ultimately, using Nonaka’s SECI model of knowledge creation and conversion will explore the transfer of knowledge and its application to innovativeness in the business process. Through the case study of its application in the banking industry, we discover that transferring knowledge within an organization and combining with the external sources leads to better understanding of the industry giving companies an opportunity for innovativeness in the industry.
1.0 Introduction
Knowledge management is different from organizational learning in that it works as one of the strategy tools aimed to pass this knowledge which may otherwise be hard to share in that cannot always be explicitly expressed by experienced experts. This type of knowledge was first described as ‘tacit knowledge’ by Michael Polanyi in 1958, who later asserted that there exists a possibility of knowing more that we can sufficiently articulate and claimed that all knowledge ultimately has tacit roots (Polanyi, 1967). However, according to Ikujiro Nonaka (1991), the tactit knowledge created in an organization is convertible to explicit knowledge in a process known as codification (Schmidt and Hunter, 1993) through Socialization, Externalization, Combination and Internalization (Nonaka, 1991). The following table compares the theories of these two scholars and contrasts them in terms of their strength and weaknesses.
| Polanyi | Nonaka |
| Polanyi’s work on individual based knowledge set grounds for the context of tacit knowledge (Polanyi, 1969) whose conversion into explicit knowledge has been a theorized and probably applied in their work over time. Strength: Expanded the context of tacit knowledge Weakness: did not mention much about explicit knowledge or how tacit knowledge can be converted | Based on Polanyi’s Work, postulated a model for knowledge conversion and transfer (Nonaka and Takeuchi, 1995). Strength: Showed practical steps that could be taken to transfer knowledge in an organization Weakness: May is not universally adaptable as it was based on research on Japanese companies of the time |
| Hippel (1993) introduced the context “sticky information” which is an expression referring to the hard to transfer information. Strength: Expounded more on the value of tacit information Weakness: Did not offer a solution on how to transfer sticky information | The stickiness concept was applied as the difficulty of knowledge transference in the context of an organization (Szulanski, 1996). Strength: Links transfer of tacit organizational knowledge to success and innovation Weakness: the publication failed to propose any model of transferring this knowledge. |
| Nonaka, Toyama, and Konno (2000) reiterated the importance of passing on tacit knowledge from one person to another in an organization. Strength: Placed the importance of knowledge management in the context of a business success Weakness: The model suggested was too generic and leaves much interpretation on implementers | In recognition of the importance of Socialization as a means of transferring tacit knowledge, Brown, and Duguid (2001) expanded the Nonaka’s SECI model.
Strength: Acknowledged the role of Socialization implemented in the SECI model. Weakness: The publication limited its scope to socialization as a means of knowledge transfer. |
| Earl (2001) asserted that knowledge codification (converting it from tacit to explicit) forms the core of knowledge management and that it can be implemented by information systems.
Strength: Explained how codification of tacit knowledge enhances its implementation using information systems Weakness: This publication was limited to using information systems as tools for knowledge management without exploring other means of codification. | Similar to personal knowledge, organizational knowledge regards the explicit knowledge as a conceptualization of and based on tacit knowledge (Hildreth and Kimble, 2002).
Strength: Explained the process of conceptualizing tacit knowledge and transferring it through lingual relationships Weakness: It was not specific to the steps of transferring this knowledge at the company’s context |
| Polanyi’s view of knowledge as being a blend of both explicit and tacit has limitation since, at one extreme, all knowledge becomes tacit, for instance, as noted by Wilson (2002).
Strength: Showed limitations of Polanyi’s theory of knowledge Weakness: the publication was limited to empirical analysis only with no further research. | In contrast to the spectrum view of knowledge as both explicit and implicit to a level, Nonaka’s model was used by Nissen (2006) to develop another organizational knowledge flow model. This model explained how knowledge moves within an organization adding time which it takes for knowledge to move from one person, place, time or organization to another.
Strength: Developed a new way to model the flow of knowledge in an organization. Weaknesses: Added two more dimensions to transfer of knowledge thus complicating the process. |
| Acquiring the two types of knowledge requires different approaches, with the explicit knowledge having tacit roots. (Tsoukas, 2002).
Strength: Compared transfer of tacit and explicit knowledge to find common roots Weakness: Only criticized previous theories based on previous literature | Dubberly and Evenson (2011) also contributed to showing the significance of social interaction in knowledge management in an organization.
Strength: similar to Brown and Duguid (2001), the authors linked social interactions with ability to transfer tacit knowledge in an organization Weakness: did not completely explain how socialization links with other phases of the set model. |
| Tacit knowledge was linked to the culture of a company which cannot be expressed explicitly (Andreeva and Ikhilchik, 2010)
Strength: Identified a specific form of tacit knowledge, that is the culture. Weakness: made little recommendation on the means of passing this cultural knowledge among individuals.
| Li et al. (2014) pointed out the limits of Nonaka’s model of knowledge creation.
Strength: Identified the limits of applying Nonaka’s model as it was based on study of Japanese companies Weakness: did not offer any alternative model of knowledge creation and transfer. |
| spreading Lievre and Tang (2015) explored the various dynamics of knowledge management and the challenges of transfer Strength: proposed probable models of transferring knowledge among individuals Weakness: did not suggest how this transfer can be used within an organizational context
| Nonaka’s SECI model was shown to include integration of knowledge from external sources to gain a new perspective (Agostini, Nosella, and Soranzo, 2015).
Strength: Elaborated on the Externalization step of the SECI model and its integration with the already existing knowledge to gain a new knowledge Weakness: The scope of the external sources was not set, and the publication does not offer a limit to the amount of empirical studies necessary to complete the step |
| Using technology to overcome the difficulties in the codification of knowledge as Trincade and Candido (2016) recommended. Strength: Suggested using automated means of knowledge codification by taking advantage of new technology Weakness: The tacit knowledge held by each individual was too diversified to automate its codification | Lievre and Tang (2015) incorporated knowledge dynamism into Nonaka’s theory that tacit knowledge can, in fact, be codified. Strength: Established that tacit knowledge can be better learned by socialization as individuals try to codify using their own words Weakness: broadly looked at the socialization as a method of knowledge transfer without giving specific context. |
| Gloet and Samson (2016) looked at the tacit knowledge an individual holds as a systematic innovation strategy.
Strength: Explained the potential that the combined knowledge individuals hold has on the innovative capabilities of these individuals. Weakness: While the knowledge is valuable to foster innovation, it requires to be codified and shares, an aspect of knowledge management that the authors did not address to a full extent. | The importance of utilizing knowledge management systems to create company advantage is emphasized by Sekaran and Bougie (2016). Strength: the authors pointed out the benefits of efficient conversion and transfer of knowledge to an organization Strength Identifies the necessity of flow of knowledge within an organization as a key to innovation. Weakness: did not engage into in depth details of how knowledge should be transferred to be beneficial |
2.0 Literature Review
2.1 Introduction to Nonaka’s SECI Model
The SECI model is a knowledge creation process that was proposed by Nonaka and Takeuchi (1995) that was aimed at understanding how to manage the knowledge creation process within an organization. They proposed a set of four phases of knowledge creation process that leads to a codification of tacit knowledge to explicit knowledge within an organization, thus fostering its utility in innovativeness and application. The four phases in this model are Socialization, Externalization, Combination, and Internalization.
Transferring of tacit knowledge from one person to another in the organization is a complex process, but its success contributes to better understanding of the organization’s business process and creates opportunities for improvement and bringing innovativeness thus giving businesses a competitive edge (Nonaka, Toyama, and Konno, 2000). Knowledge management allows companies to collect relevant information, combine and process it creating new information that can be utilized to optimize its operation. The SECI model proposes a way of transferring this knowledge by a series of conversions and assimilating external information from outside the organization to create new tacit knowledge. It also involves documentation and ease of sharing this newly created knowledge by documenting the findings, and it is through this process that a company is likely to experience innovations in its operations (Martín-de-Castro, López-Sáez, and Navas-López, 2008). Despite the advantages, the SECI model has its own limits, mainly because it was developed to help industries during that period in knowledge management (Sekaran and Bougie, 2016).
2.2 Application of the SECI model in the Banking Industry
The technology which forms the backbone of the global business environment is rapidly changing and developing today, fostered by the rapidly changing consumer needs and expectations as well as the competitive business environment (Israilidis et al., 2015). New techniques of data collection and data analysis technology have given companies advanced access to and understanding of customers and their preferences which have helped them create custom products and services that satisfy their customers more. The Bank of America, a principal financial institution, applies the SECI knowledge conversion model to transfer the already existing knowledge among its employees as well as create new knowledge thus developing new innovative business applications and processes (Williams, 2016).
The Bank enables transfer of tacit to tacit knowledge through holding discussions among the company’s workers at the workplace, during seminars and meetings as well as conducting training programs. During this step, the staff members are involved in discussion with their colleagues in a rotational process across various departments. The bank also holds employees seminars which allow further interaction with the members from different departments interact with the type of work they perform in the organization. The employees, through these interactions, share their experiences and knowledge and they understand the role each person plays in the company. Apart from these formal interactions, the bank supports informal discussions among its employees and this further encourages them to share their experiences and knowledge of the industry (Song, 2014).
The second step is implemented in the form of research conducted to understand the current technology and customer requirements. This step includes not only assessing the emerging technology in the industry and its applicability in the company but also assesses the competition to understand their level of involvement. This information is gathered and together with the information gained from interactions, used to create reports and document (Taleghani, Dizgah, and Pourkashani, 2014). These documents and reports highlight the outcomes of the seminars, training programs, research and the interaction with the customers, a process which oversees the codification of the knowledge in a form that can be efficiently transferred to other employees of the company.
From this step, the reports are analyzed, and the research on the state of technology, which is a comparison of the current business technology and the emerging trends is also assessed to understand the company’s position in the industry. This puts a perspective to compare its performance with the competitors and also helps the management understand new customer requirements. The collected information is reformulated and combined with the existing knowledge by updating the existing databases, publications, and reports, as well as circulating the information to employees (Shahriza Abdul Karim, Jalaldeen Mohamed Razi and Mohamed, 2012). This method combines the previous knowledge with the new knowledge which is easily transferable and is communicated to its staff members. The final step in the application of the SECI model involves internalization of this information. To foster innovative thinking, it is important for the employees to understand this knowledge they gain and add it to their already existing understanding, thus adding its application to their practice (Charsombut, 2011).
3.0 Reflection
The study of the literature around the theories and knowledge management models postulated by both Polanyi and Nonaka consistently strengthen the link between sharing knowledge among individuals and development of new and innovative processes. Sharing the knowledge among employees know leads to understanding the new customer expectations, current business processes, and the emerging technologies, thus giving the company an opportunity to combine this information towards innovative business processes. The model that was proposed by Nonaka, and developed over time can be applied to enhance transfer of tacit knowledge in an organization leading to new development.
However, this study is limited to empirical analysis of the publications based on this theory, and further investigations need to be conducted to determine its practical application. The theory itself may be limited by the fact that it was initially developed based on research on Japanese company who valued their employee’s tacit knowledge and often retained them in the company for life (Hornblass, 2016). Therefore, further research into possibility and effectiveness of this model in other companies with the different model may help in determining its universal adoption in meeting the needs, and thus contribute to the field of knowledge management and innovation.
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