6 Skills That Wise Companies Harness for World-Changing Innovation – Harvard Business School Working Knowledge

As a boy, Soichiro Honda, the eventual founder of Honda Motor Co., was infatuated with airplanes. At age 10 he biked 20 kilometers to see American pilots performing aerobatics near his home in Japan, climbing a tree to watch the show.

It would take about 70 more years, but Hondas namesake company eventually evolved from manufacturing motorcycles to inventing a revolutionary light business jetfulfilling a lifelong dream to improve mobility and exemplifying the longevity and continuous innovation that characterizes so many Japanese businesses today.

What is the secret recipe that has sustained the roughly 700 Japanese companies that are still in business after more than 300 years? How do they survive and adapt?

These are the questions Harvard Business School Professor Hirotaka Takeuchi and coauthor Ikujiro Nonaka set out to answer with their classic 1995 management tome, The Knowledge-Creating Company. Now, the books recently published sequel, The Wise Company: How Companies Create Continuous Innovation, elevates their original ideas, outlining six practices that enable leaders to steer their companies through the ceaseless process of creating and applying knowledge in pursuit of innovation.

When you peel back the layers of these companies, you find that these six qualities are practiced, and often they have family edicts that are passed down from one generation to the next, says Takeuchi, a professor of management practice in the Strategy Unit.

The book expandson the authors original theory that companies build organizational knowledge by turning tacit knowledge, which people learn through personal experience, into explicit knowledge that companies can document and codify, and vice versa. They describe this as a process of socialization, externalization, combination, and internalization (SECI) that takes place in progressive phases to generate innovations over time.

Published in October by Oxford University Press, The Wise Company offers a framework for knowledge practiceapplying SECI more dynamically. The book also presents the concept of phronesis, a kind of practical wisdom that benefits not only the organization, but also society at large.

From ancient Greek, phronesis is translated as practical knowledge, so its a higher level of tacit knowledge, Takeuchi explains. It has two components, one of which is doing things for the common good. The other is the here and nowmaking judgment calls and taking action here and now.

Based on the authors study of more than 20 Japanese companies, the following six practices can help business leaders get unstuck during the SECI process and broaden their leadership and purpose beyond traditional business borders. Takeuchi uses Hondas founder as an example to explain how each practice can be applied toward the goal of continuous innovation.

1. Learn to judge goodness, not only for the company but for society.

Hondas purpose was always to improve mobility, and he did so through his companys engine innovations. After coming up with the companys trademarked CVCC engine, Honda declared that his company had pulled ahead of the top three car companies, but his engineers said, 'We didnt do it to beat the competition; we did it for our children,' Takeuchi says. When he heard this, thats when Honda himself decided it was time for him to retire.

2. Rely on intuition tograsp the essence of people, things, and events.

3. Create informal andformal shared contextcalled ba in Japanconstantly in order to construct new meaning through human interactions.

Takeuchi likens the Japanese concept of ba to a pub in the United Kingdom. Its open and interactive, he says. Leaders should be conscious about creating these contexts to foster a wise company. Honda knew how to create this kind of buzz. In the old days, Takeuchi says, it was OKto have drinks after work, and he would create ba everywhere he would go and let people fight with each other verbally over sake At Honda, they called this waigaya.

4. Use metaphors and stories to helppeoplewith different experiencesunderstandthe essence of thebusiness strategy.

5. Use all possible means, including Machiavellian ones, if necessary, to bring together people with conflicting goals and spur them into action.

6. Encourage the development of practical wisdom in others, especially employees on the front line, through apprenticeship and mentoring.

Takeuchi and Nonaka use many other examples to illustrate the application of these practices in The Wise Company. They conclude the book by examining the future of innovation, in light of their contentions about the importance of knowledge creation and practice.

Takeuchi says hes hopeful that Japanese firms will start to take advantage of machine learning and other technologies that Western companies are embracing. But as large companies begin to take greater social responsibility, he also sees a place for the practical, human wisdom that has enabled Japanese firms to endure.

In this day and age, people are so in love with machines and thinking that machines are going to take over the world, he says. The fundamental message here is that humans are still at the center of innovation. Humans have tacit knowledge and the higher order of tacit knowledge, which is wisdom. Lets dont forget mothers wisdom and use it to our advantage.

Kristen Senz is a writer and social media editor for Harvard Business School Working Knowledge.[Image: iStockphoto]

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6 Skills That Wise Companies Harness for World-Changing Innovation - Harvard Business School Working Knowledge