AgileJapan2010 Keynote by Ikujiro Nonaka: Phronetic Leadership

Cultivating Leaders with Practical Wisdom

－－－－ Scrum and Ba Building －－－－

Ikujiro NonakaProfessor Emeritus, Hitotsubashi University

Xerox Distinguished Faculty Scholar, UC Berkeley

The First Distinguished Drucker Scholar,

Claremont Graduate University

Visiting Professor of Center for Knowledge and Innovation Research (CKIR), Helsinki School of Economics

March 6, 2010

Copyright © 2009 Nonaka, I

The KnowledgeThe Knowledge--Creating Creating

Company and Managing FlowCompany and Managing Flow


Cultivating Leaders with Practical Wisdom

－－－－ Scrum and Ba Building －－－－

Ikujiro NonakaProfessor Emeritus, Hitotsubashi University

Xerox Distinguished Faculty Scholar, UC Berkeley

The First Distinguished Drucker Scholar,

Claremont Graduate University

Visiting Professor of Center for Knowledge and Innovation Research (CKIR), Helsinki School of Economics

March 6, 2010

Knowledge Society

�Knowledge is the only meaningful resource today.

�How knowledge behaves as an economic resource, we do not yet fully understand; we have not had enough experience to formulate a theory and to test it. We can only say so far that we need such a theory. We need an economic theory that puts knowledge into the center of the wealth-producing process. Such a theory alone can explain the present economy. It alone can explain economic growth. It alone can explain innovation. It alone can explain how the Japanese economy works and, above all, why it works.

P. F. Drucker “Post Economist Society” (1993)

Copyright Nonaka I. 2010


Knowledge is 5

■ SubjectiveBased on belief, context-specific

■ Process-relational Created in social interactions

■ AestheticRelentless pursuit of truth, goodness, and beauty

■ Created through practice

Hence, we define Knowledge as:

“A dynamic human process of justifying

personal belief towards the truth.”


Two Types of Knowledge

Spiral up through Spiral up through dynamic interactiondynamic interaction

AnalogAnalog--Digital SynthesisDigital Synthesis

Objective and rational knowledge that can be expressed in words, sentences, numbers, or formulas (context-free)

Theoretical approachProblem solvingManualsDatabase

Subjective and experiential knowledge that can not be expressed in words, sentences, numbers, or Formulas (Context-specific)Cognitive Skills

beliefsimagesperspectivesmental models

Technical Skillscraftknow-how

Tacit Knowledge Explicit Knowledge

Tacit and Explicit Knowledge－ A metaphor： Iceberg －

Explicit

Tacit~~~~~~~~~~~

Essence of the metaphor is to understand and

experience an event/thing from the view of an

different event/thing.

(Source: Lakoff, G., & Johnson, M. (1980). Metaphors we live by. Univ. of Chicago)

Tacit – Explicit Spiral

- Toyota Way -

Source: Okuda, H & Zhu, J.R. (2007). Chikyu kigyo Toyota ha chugoku de naniwo mezasunoka; Okuda Hiroshi no

Toyota-ism [What global-company Toyota aims at in China: Toyota-ism of Hiroshi Okuda]. Tokyo: Kadokawa

Gakugei Shuppan.

(Manual can only provide explicit knowledge; at

the base, there is the invisible tacit knowledge

such as hunch or knack.)

With IT, more tacit knowledge may be

converted to explicit knowledge. While the

conversion occurs, new tacit knowledge

continue to emerge. President Watanabe

says, “with the spiral-up of tacit and explicit

knowledge, things go well.”Hiroshi Okuda, Former Chairman of Toyota

Organizational Knowledge CreationSECI Model

Sharing and creating tacit knowledge through direct experience

I = Individual, G = Group, O = Organization, E = Environment

Learning and acquiring new tacit knowledge in practice

1. Perceiving reality

as it is

2. Sensing and

Empathizing with

others and the

environment

3. Transferring of

tacit knowledge

9. Embodying explicit

knowledge through

action and reflection

10. Using simulation and

experiments

Articulating tacit knowledge through dialogue and reflection

4. Articulating tacit

knowledge using

symbolic language

5. Translating tacit

knowledge into a

concept or prototype

Systemizing and applying explicit knowledge and information

6. Gathering and

integrating explicit

knowledge

7. Breaking down the

concept and finding

relationships among

the concepts

8. Editing and

systemizing explicit

knowledge

Exp

licit

Explicit

Tacit

Tacit Tacit

Exp

licit

Explicit

Tacit

SocializationSocialization ExternalizationExternalization

InternalizationInternalization CombinationCombination

OG

E

I

Environment

Individual

I G

G

G

G

Org.

E

I

I

I

I

I

Group

IE O


Innovation as SECI Spiral

Empathize with the reality through actual experience (Socialization), condense the essence of awareness into concepts (Externalization), relate the concepts and systemize (Combination), create value in the form of technology, products, software, services and experiences and embody the knowledge (Internalization), and at the same time stimulate the emergence of new knowledge in the organization, market and environment, and spiral up to the Socialization step.

© Nonaka, I.

The Knowledge Leadership=

Drives the dynamic process of knowledge

creation by:

–providing knowledge vision and driving objective

–developing and promoting the sharing of

knowledge assets

–creating, energizing, and connecting ba

–enabling and promoting the continuous spiral of

knowledge creation through dialogues and

practices

At the base of such leadership is phronesis


Phronesis(Prudence, Practical Wisdom)

�A virtuous habit of making decisions and

taking actions that serve the common

good.

�A capability to find a “right answer” in

particular context.

�Can acquire only through high quality

direct experiences with contemplation.


Abilities to Constitute Phronesis

1. Ability to make judgment on goodness.

2. Ability to create ba.

3. Ability to grasp the essence of particular

situations/things.

4. Ability to express the essence.

5. Ability to realize the concepts.

6. Ability to foster phronesis in others.


Phronetic Leadership1. Ability to make judgment on goodness

Every sort of expert knowledge and every inquiry, and similarly every action and undertaking, seems to seek some good.

Aristotle, Nicomachean Ethics

Example: Self-sufficient values such as happiness and self-actualization.

Internal Good: Realized in the course of trying to achieve those standards of excellence (artisanship).

MacIntyre

Copyright © 2009 Nonaka and Toyama

Knowledge Vision

Essential Questioning:

“What do we exist for?”“Why does the society need us?”

“What value can we uniquely provide?”

“What do we want to be?”

“Where should we live?”

A vision that transcends the existing boundary.

“You do it because you want to do it, not

because everyone else is doing it.”

A long-time view that goes beyond the arena of

competition. It is not a short-time view on

efficiency in knowledge utilization.


Phronetic Leadership

2. Ability to create ba

Imaginative capacity to understand and empathize with others through daily verbal and nonverbal communication, to read the situation to judge the best timing for interaction, and to elicit empathy in return.


Ba: Sharing “here-now”

relationship

Shared Context Shared Context

in Motionin Motion

Ba（場）（場）（場）（場）

Intersubjectivity

Open Close OpenClose

Individual contexts are shared at “here now” context of Ba.

Shared context becomes the base of emerging knowledge.

Copyright Nonaka I. & A.Hirose 2010

Individual

Ba: Interpenetration of environment,

structure and individual

Structure

Conventional Theory Process View

Environment

Ba

Here-now

relationships

in actionIndividual

Structure

Environment

Copyright © 2009 Nonaka, I & R. Toyama

BaBa is formed in various is formed in various

spacespace--timetime

Meeting, drinking

Informal organization

Project teams

Office, factory, shop floor

Formal organization, system

E-mail, TV conference

Real

Virtual

故

Share the “ba” for

three days and

three nights

Thorough Thorough

discussions that discussions that

break the break the

individual barriers individual barriers

(interaction)(interaction)

Leap the idea

Construct the

concept

“Waigaya” at Honda

Individual

Team

© Nonaka, I.

“Waigaya” at HondaCompany prepare the ba (good hotel and good food)

• Out of the daily work environment

Day 1: Conflict between the individuals

• Start with “bad mouth-ing” the boss; frustration and conflicts

• Thorough discussions lead to conflict but there is no escape

• As the time passes, then superficial explicit knowledge runs out and individual barrier disappears

Day 2: Mutual understanding and acceptance

• Accept the difference, understand the beliefs of the others

• Accept the opinions of the others

Day 3: Leap of the minds

• With constructive thinking, leap of the minds and concepts will happen


Inter-subjectivity of BaBa is dynamically created from the 3 steps of consciousness

3 steps of consciousnessSynthesis of senses: Like the relationship of mother and

child, sharing the vivid present before subject-object separation; state of passive inter-corporality

Synthesis of intelligence: Creating meaning in the form of “I-It relationship” from one’s intention and consciousness; state of active iner-subjectivity

Synthesis of senses and intelligence: Encountering the other as a whole “I” in the higher dimension of “I-Thou relationship”; senses are not captured to the detachment from the other, not restricted to the self, and open to the other

Source; Yamaguchi, I. (2005). From Existence to Creation

© Nonaka, I.

Which Hand is Touching?Merleau-Ponty

When I press my two hands together, it is not a matter of

two sensations felt together as one perceives two objects

placed side by side, but of an ambiguous set-up in which

both hands can alternate the roles of “touching” and “being

touched”5. in this bundle of bones and muscles which my

right hand presents to my left, I can anticipate for an instant

the integument or incarnation of that other right hand, alive

and mobile, which I thrust towards things in order to

explore them. The body catches itself from the outside

engaged in a cognitive process; it tries to touch itself while

being touched.

Phenomenology of Perception, trans. Colin Smith, p.93


Discovery of “Mirror Neurons”– Socialization in the Neuroscience -

“Mirror neurons” are particular type of neurons that activate

when we see an individual performs an action. Discovery

was that when we see someone performing an action or

showing a feeling, part of our motor system becomes active

‘as if’ we were executing that very same action or the

feeling that we are observing. Various actions are coded in

mirror-neuron system, so when we see other’s action, we

can instantly understand and imitate it and even understand

it’s intention.Source: Iacoboni, et al. (2005), Rizzolatti (2005)



Founder Vincenzo

Founder’s son Andrea

Copyright © 2009 Nonaka, I & R. Toyama

Good Ba for Knowledge Emergence

1. Self-organizing with self-transcending goal

2. Direct sharing of senses, feelings and emotions (inter-corporeality) Sense of social Capital –care, love, trust, and safety

3. Shared objectives and commitment, not on-lookers

4. Self-awareness in the relationship with others (meta-recognition)

5. Permeating boundary with moving centers

6. Metaphor of sphere: Diversity of knowledge and efficient interactions (requisite variety)

Scrum Approach“The New New Product Development Game”

Source: Takeuchi, H. & Nonaka, I. (1986). The New New Product Development, Harvard Business Review January-February, 1986.

Sequential (A) vs. Overlapping (B and C) phases of development

1 2 3 4 5 6

1 2 3 4 5 6

1 2 3 4 5 6

A

B

C

Phase

Phase

Phase

Scrum ApproachMoving the Scrum downfield

1. Built-in instability

Members are given a wide measure of freedom with extremely challenging goal

2. Self-organizing project teams

Start from “zero information” as in the start-up company; members share

autonomy, self-transcendence, and cross-fertilization

3. Overlapping development phases

Development phases overlap and create “shared division of labor” where each

member feels responsible for the whole project

4. “Multilearning”

Learning occurs in two dimensions; multi-level and multi-functional

5. Subtle control

Emphasize on self-control, control by peer pressure and control by love

6. Organizational transfer of learning

Learn and unlearn the past successes and failures through osmosis

Source: Takeuchi, H. & Nonaka, I. (1986). The New New Product Development, Harvard Business Review January-February, 1986.

© Nonaka・Toyama

Small World Network

The network of human

social interactions connect

us all by six degrees of

separation.

SIX DEGREES

We are a happy family

and we all are six degrees

away from an Albanian farmer.

TIPPING POINT

Connected people are

able to get information

and control networks.

I want to be in the middle

of the network because it

provides me information

and power. I can make big

changes by small things.

© Nonaka, I

Small World Networking

“Asakai ”

（（（（Executive Early Morning Meeting））））

Management Strategy

Committee

Executive Management

Meeting

President

Luncheon MeetingOverseas Sales Subsidiary

President Meetin

g

Domestic Manufacturing Subsidiary

President Meeting

Executive

Advisory

Committee

Management

Reformation

Committee

Annual briefing to President

by business/functional divisionGeneral M

anagers

Meeting

New Year Presidential Address

New Year

President Visits to

Domestic Facilities

Presidents Award

President

home page

“Asakai ”Rewiring the multilayered Ba

Creating a Big Story: Toyota Prius

Zi (G21)

(Planning)

Calty Design Research

(Exterior Design)

BR-VF

(Hybrid System)

2nd Vehicle Tech Div.(Brakes)

Drive-train Tech Div.

(Hybrid transaxel)

1st VehicleTech Div.

(Suspension) 2nd EngineTech Div.(Engine)

EV Development

(Motor, Battery)

2nd & 4thElectronics Tech Div.

(Inverter)

Panasonic EV

Energy

© Nonaka, I.

Knowledge Ecosystem: Organic Configuration of Ba

CustomerGovernment

Supplier

CompetitorFirm

University

Local Communities



3. Ability to grasp the essence of particular situations/things

The ability to recognize the constantly changing situation correctly, and quickly sense what lies behind phenomena to envision the future and decide on the action to be taken.

God is in detail


Reality and ActualityRealitySubstance: an existing substance or object that could be observed.

Can be recognized and managed by logic.

Actuality

Action: a situation in

progress

Can only be grasped by those committed to and dwelling in the actual, situated experience, with the five senses and through empathy with others.

Bin Kimura, 1994

Honda 3-Gism: Be at the actual place of work (genba), know the actual product and situation (genbutsu and genjyou), be realistic (genjitsuteki).


Contemplation in Action:Indwelling in Actuality with Deep Thinking

“I can see many things

when I see a machine. How

can we maneuver through

that curve? We should do

this, we should do that....

Then I think about the next

machine. We can make a

faster machine if we think

like this, and so on. It’s a

natural progress into the

next step.”

- Soichiro Honda

Source: Honda Motor Corporation

(Picture at the Automobile Hall of Fame, Detroit)




4. Ability to express the essence

The ability to conceptualize and articulate

subjective ideas in clear language, link

these ‘micro’ concepts to a macro historical

context and convincingly articulate them as

vision and story for the future.


Concept Building: Dialoguing on the Spot

Soichiro Honda

Drawing on

the floor

Words and

actionsBy articulating into

language, we

clearly understand

what we are

thinking

Source: Honda Motor Corporation

Automobile Hall of Fame (Detroit)


Phronetic Leadership5. Ability to realize the concepts

The ability to bring people together and

spur them to action, combining and

synthesizing everyone’s knowledge and

efforts in pursuit of the goal, by choosing

and utilizing the means and rhetoric (the art

of effective or persuasive speaking or

writing) suitable to each particular situation

with shrewdness and determination.

Why Practical Wisdom is important－ Reasoning - in - Context －

Essence of Management: Making the right judgment and

taking action in the interactions of particular context (time,

space and relationship)

Center of decision making is a process of reasoning and

justifying the truth through dialogue and practice in the

competing objectivity and interpretations.

Basis of decision making is not abstract and subjective

theory or quantitative variables; but the sensitivity to the

practical context of the problem

© Nonaka I.



6. Ability to foster phronesis in others

The ability to create a system of distributed

phronesis by fostering and transferring the

existing phronetic capabilities of individuals to

others to build a resilient organization which

can respond flexibly and creatively to any

situation to pursue its own good.


System to distribute phronesis

- LPL and PL to nurture Honda DNA -

LPLIn charge of

development

Engineering

PLTest PL Design PL

●Engine

●Body

●Suspension

●Rigging

5 etc

●Engine

●Wind-tunnel

●Crash

●Emission

●Durability

5 etc

● Layout

● Exterior

● Interior

● Color

● Design data

● Design model

5 etc

Source: Honda Motor Company internal material


Middle-up-down Knowledge-creation

Process

Solving

contradiction

ContradictionCross-leveling

of KnowledgeReality (What is)

(Top)

Mid-range theory

(Middle)

Grand Theory (What ought to be)

(Front-line)

Common

Good

CommonCommon

GoodGood

Explicit KnowledgeExplicit Knowledge

Tacit KnowledgeTacit Knowledge

Dialogue and Practice


Subjectivity

Experience

Particular

Pragmatism

Objectivity

Language

Universal

Idealism

Multi-la

yere

d N

eto

work

Kata

(Creative Routine)

Sensitivity

Ba

Copyright Nonaka I. & T. Hirata 2010

Idealistic Pragmatist:

Contemplation in ActionBrain

Deep Thinker

Brawn

Doer

in One Personin One Person““Intellectual MuscleIntellectual Muscle””

Relentless Pursuit of Common GoodRelentless Pursuit of Common Good