104 European J. International Management, Vol. 1, Nos.

1/2, 2007

A made-in-Japan theory with help from Aristotle:

Nigel Holden interviews Ikujiro Nonaka

Ikujiro Nonaka
Hitotsubashi University ICS, Japan

Nigel Holden*
Lancashire Business School,
The University of Central Lancashire,
Preston PR1 2HE, UK
E-mail: njholden@uclan.ac.uk
*Corresponding author

Keywords: knowledge creation; experiential knowledge; knowledge

management.

Reference to this paper should be made as follows: Nonaka, I. and Holden, N.

(2007) ‘A made-in-Japan theory with help from Aristotle: Nigel Holden
interviews Ikujiro Nonaka’, European J. International Management, Vol. 1,
Nos. 1/2, pp.104–110.

Biographical notes: Ikujiro Nonaka is a Professor Emeritus of the Graduate

School of International Corporate Strategy, Hitotsubashi University, and also
Xerox Distinguished Faculty Scholar, University of California, Berkeley. He
received his BA in Political Science from Waseda University, and his MBA
and PhD Degrees from the University of California, Berkeley. His main
research interest is in building a new theory of organisational knowledge
creation. He has been conducting comparative research on knowledge creating
processes in companies around the world. He has also been conducting research
on the characteristics of strategic and of innovative activities in Japanese
companies. He has published many books and contributed many papers to
management journals and newspapers, both in Japanese and in English.

Nigel Holden is Professor of Cross-Cultural Management at the Lancashire

Business School, UK. He has previously held professorial appointments in
Denmark and Germany and is a Visiting Professor at the Vienna University of
Economics and Business Administration and the Danube University in Krems,
Austria. His publications embrace cross-cultural management, knowledge
management, international marketing, management change in Russia,
marketing in Japan, and intercultural business communication. He has
co-edited special issues of several journals, including Academy of Management
Executive and Journal of Managerial Psychology and given more than
100 guest lectures and keynote addresses in several European countries as well
as the USA, Japan and Taiwan.

Copyright © 2007 Inderscience Enterprises Ltd.

 A made-in-Japan theory with help from Aristotle 105

Vienna, 3 November 2006

Holden: Professor Nonaka, do you recall your very first ambition?

Nonaka: Most vividly. I grew up in wartime Japan, and my first ambition arose from that
experience: I wanted to defeat America! I remember, as a young boy, running down a
road and being shot at by a Grumman F6F Hellcat. It swooped so close that I could see
the pilot. He was grinning. I was sure that I was going to die. When you survive
something like that, you feel you can accomplish anything in later life.
Holden: And one day America would of course come to play a major role in your life.
Nonaka: Yes, that’s right. After the war Japan was completely under American influence.
After I graduated in 1958, I worked for Fuji Electric for seven years. I had jobs in
personnel, marketing, the company union, and corporate university. Finally I was in
corporate planning with responsibility for subsidiaries. During this time I became very
interested in management and issues of organisation. At the age of 32 I decided to leave
Fuji Electric and study in the USA because that was where most theories and ideas about
management came from. I knew I wanted to develop a new theory that could be accepted
all over the world, a made-in-Japan theory.
Holden: At that time it must have been highly unusual for you to leave a big corporation
like Fuji Electric.
Nonaka: Most unusual. But luckily I had the support of the head of personnel who
became one of the top management team.
Holden: Why did you choose Berkeley?
Nonaka: It was an accident in a way. I applied to several US schools. Berkeley was the
first to offer me a place, so I went there. It took just about all the savings of my wife and
myself to get us to the USA and live there. My wife worked as a waitress and a
housekeeper, whilst I did gardening jobs, to make ends meet.
Holden: Yet you managed to complete your MBA and PhD there. So I imagine that
Berkeley made a great impression on you.
Nonaka: Berkeley had a reputation for its theoretical approach in management; at the
time its sociology department was held to be the best in the USA. I really took to the
emphasis on theory. There is no doubt in my mind that my training in sociology as a
second major at Berkeley has had a massive impact on my thinking ever since. All my
subsequent know-how of theory construction comes from several famous professors of
sociology at Berkeley such as Neil Smelser and Arthur Stinchcomb. It was there that I
became very interested in information processing and contingency theory based on the
concept of requisite variety. My major was marketing. I studied consumer decision
processes under F. Nicosia who conceptualised them from the perspective of information
processing. I was also strongly influenced by the ideas of Herbert Simon, who had been a
professor at Berkeley. His book ‘Administrative Behavior’ made a lasting impact on me.
I was the first Japanese to obtain a PhD at Berkeley and I also persuaded my future
collaborator, Hirotaka Takeuchi, to do his PhD there too. After that he joined Harvard
Business School.
106 I. Nonaka and N. Holden

Holden: In what way did your PhD help pave the way for the development of your theory
of knowledge creation?
Nonaka: My PhD was concerned with the relationship between marketing and
organisation. Among my informant firms were corporations like Hewlett-Packard, Levi
Strauss, Clorox and Kaiser Aluminum. I was aware that these corporations were making
use of knowledge that, today, we would call tacit. But it was only some years later that
I came to study Japanese corporations such as Honda, Canon, and Fuji-Xerox and to
formulate ideas about innovation, tacit knowledge and knowledge creation. I was struck
by the fact that the top management as well as middle management in these companies
was aspiring to envision the future based on a dream which they were also crystallising.
These companies were going beyond their existing boundaries by endeavouring to realise
their dreams. They created teams and they created ba (Nonaka and Konno, 1998)1
to do so. I realised that all this process was more than mere information processing.
These firms were engaged in knowledge creation. The first time I began to articulate
these ideas was at a conference in 1983 to mark the 75th anniversary of the founding of
Harvard Business School.
Holden: Please explain how you moved from innovation to knowledge creation.
Nonaka: I was originally interested in the innovation process of the firm. At first, I
studied the innovation process using the information processing model. As Simon said,
there is a limitation to our capacity in processing information, and we organise ourselves
to overcome our bounded rationality. Innovation processes, especially the ones in large
firms, require us to process huge amount of information, and it seemed suitable to use the
information process model to analyse how firms carry out their innovation efficiently.
So I started to research the innovation processes of Japanese companies, together with
Hirokata Takeuchi and Ken-ichi Imai. However, as our research progressed, I realised
that we could not explain the innovation process solely by the information processing
model, which is a model to explain how a firm adapts itself to the complexity of the
environment. So I proposed the concept of ‘information creation’, in which a firm is
viewed as an entity to intentionally evolve through information creation, not just
adapting to the environment. However, I was not entirely satisfied with the concept.
Human factors such as commitment, will, emotion, and strong belief all make a
difference in innovation processes. It seemed necessary to take into account people’s
value system – something that Herbert Simon insisted that we researchers should
carefully remove from our research. Then I went to a workshop at Berkeley, and someone
mentioned that it was all about knowledge, not just information. That was when I realised
that we need the theory of knowledge creation, not just information creation. I realised
too that we needed another model to explain innovation processes and related activities in
firms. That’s how I started doing research in knowledge creation. And my ambition today
is to establish a theory to explain a firm’s activities from the viewpoint of knowledge.
I believe that the reason to exist for a firm is to create knowledge which only it can
create, and to explain the knowledge-creating process of a firm, we need to look deeper
into the human factors.
Holden: And all this would lead to the SECI model (Nonaka, 1994; Nonaka and
Takeuchi, 1995)2 one day.
 A made-in-Japan theory with help from Aristotle 107

Nonaka: Yes, but before I come to that, let me say this. As a Japanese I was strongly
influenced by Zen Buddhism which sees experience as an active shaper of the mind
and feelings, but without any necessary logic. But this philosophy did not further my
understanding of experience in corporate processes. I began to conceive of experience not
just as something which happens but also as a variable in its right. I was struck by two
features of Japanese companies which were major enhancers of experience as an
organisational resource: OJT (on-the-job training) and the job rotation system. Both these
activities generated vast amounts of tacit knowledge, of which I was as a researcher all
too subjectively aware. My task then was to objectify this knowledge and see it from a
totally different perspective in order to create a new theory. This was a turning point in
my endeavours and it led directly to the creation of the SECI model.
Holden: Let me change the subject now. In an interview in 1995 (Sloan Management
Review, 1995)3 you stated that US firms did not seem to appreciate the value of tacit
knowledge. Do you still stand by that?
Nonaka: Yes, but when I look back at my early days in America in the 1960s, I think that
US corporations were quite different then. They were more open to new ideas and more
idealistic. HP, Levi Strauss, and later 3M, come to mind. They were excellent
companies – well before the term Peters and Waterman coined ‘excellent’, and they
reminded me of Japanese companies in many respects. Today I am a little pessimistic
about US companies. It is as if something of the spirit in US corporations has
disappeared. Of course, many vibrant new companies have been constantly created, and I
think that is the strength of the US economy. However, existing firms seem to be more
interested in exploitation of knowledge, rather than exploration of knowledge, to meet the
expectation from the shareholders.
Holden: That is a very sober judgement. How do you account for it?
Nonaka: I can answer without hesitation: the analysis/paralysis mindset of the kind that
MBA programmes produce.
Holden: You are not the first person to say that, but what do you suggest is missing from
these programmes?
These programmes produce people for whom strategy is about planning to achieve
objectives. But this view of strategy neglects the fact that, as it evolves, a strategy is also
creating knowledge and making use of it. Therefore the understanding of strategy
must embrace its knowledge-creating aspects, which involve human subjectivity,
such as beliefs, dreams, and values. This calls for practical wisdom of a special kind.
Aristotle first identified this kind of wisdom …
Holden: And is known as phronesis.
Nonaka: Exactly. Aristotle identified three kinds of wisdom: episteme, which corresponds
to our notion of scientific, universal and hence explicit knowledge; techne, which is
practical and context-specific know-how, which corresponds to tacit knowledge; and
phronesis, which refers to the experiential knowledge which is needed to make decisions
and act for common good based on one’s own values or ethical codes. This might be
termed high-quality tacit knowledge, which equates closely with notions of prudence or
practical wisdom for the common good.
108 I. Nonaka and N. Holden

Holden: You seem to be suggesting that knowledge creation is essential for the fostering
of phronesis and that, in turn, phronesis is a very important aspect of leadership.
Nonaka: That is correct. Indeed, I wish to advance the notion of phronetic leadership,
whereby firms make decisions and act for the wider good, create conditions for the
sharing of contexts and engendering ba, grasp the true essence of situations and
reconstruct that special essence in language, concepts and narratives that transcend
organisational boundaries. I have now come to see strategy as distributed phronesis
(Nonaka and Toyama, 2006).4 Strategy is not just a beautifully drawn plan. It has to be
practiced in a particular context and has to create a unique future that is envisioned by a
firm. To realise such strategy, phronesis, the practical wisdom, has to be distributed
throughout the organisation.
Holden: Few people would disagree with the soundness of these principles. So what you
are saying is that phronesis is a kind of antidote to paralysis by analysis.
Nonaka: Yes.
Holden: Are you also saying that for cultural reasons phronetic leadership is more
prevalent in Japanese companies than in US companies?
Nonaka: Phronesis is not widely known in the management literature. It is certainly a
more familiar concept in fields such as political science and education. However, I do not
want to give the impression that phronetic approaches are totally absent in the USA.
Just think how philanthropic many US companies actually are. I think that those
companies which survived for a long time such as Du Pont, P&G and 3M did survive
because of their phronesis. The difference between the USA and Japan might be the
direction of phronetic action. In the USA, it is certainly projected more to the outside
world. In Japan, phronetic action is more directed within the company and is by its nature
discreet. In Japanese we have the word intoku5 which refers to a contribution that we
make without broadcasting it.
Holden: If I may say so, it is very gratifying to hear a professor from Japan talk with such
enthusiasm about Ancient Greek philosophy.
Nonaka: If you study knowledge, you cannot avoid studying Ancient Greek philosophy.
In the western world it was Plato, with his idealism, and Aristotle, with his pragmatism,
who laid the foundations of epistemology. In the theory of knowledge-creation, you need
both of their perspectives, idealism and pragmatism.
Holden: This interview is going to be published in the European Journal of International
Management, so I would like to ask you what strikes you about European firms.
Nonaka: I confess that I am very weak when it comes to European firms, so I can only
share some very general impressions with you. It has been said on many occasions that
European firms stand midway between US and Japanese firms, but I sense that there has
been a shift towards American methods. Unfortunately, the trend is the same in Japan.
Uppermost in my mind is the American approach to restructuring organisations
drastically, which often leads to letting the people go without even realising that these
people are a very important source of knowledge.
 A made-in-Japan theory with help from Aristotle 109

So European firms may have lost some of their people orientation, but that statement may
not apply so strongly to Nordic firms like Ericsson or Nokia. I think, too, that European
firms may, in general, take a longer term view of their business development. They may
not be quite so concerned with short-term shareholder value as in the USA. Here I am
thinking of firms like Shell and some of the other big energy companies. But what strikes
me most about European firms is that there are medium-sized one in cars – Porsche is a
good example – or fashion goods which use productive competences based on aesthetic
craftsmanship. I very much like the idea of the artisan company.
Holden: I know that you are a student of history and, indeed, wrote a book on the failure
of Japanese military management in the Second World War. Can you make a case for
history as important knowledge for managers?
Nonaka: Most definitely. As it happens, the leaders of Honda, Seven-Eleven and
Canon all love history. I would say that the historical imagination is a key component
of phronetic principles for creating scenarios in which people can immerse their
knowledge and feelings. My study, while teaching at the National Defense Academy, of
Japan’s military failure showed that the enemy often takes over elements of your success
and so success becomes an element of your own failure (Nonaka et al., 1984, 2005;
Nonaka, 1985).6
Later, I studied the cases of turnaround and conceptualised the essence of strategy as
dynamic capability of overcoming the success-cause-failure syndrome. You will find
examples of this by studying the Battle of Stalingrad and the Battle of Britain during the
Second World War or the Yom Kippur War of 1973 as well as the battles between Mao
Tse-tung and Chang Kai-Chek for the mastery of China during the 1930s and 1940s.
In fact, when I studied these conflicts, I specifically noted the role of leaders.
Without any doubt, leaders like Mao – at least until the Cultural Revolution – and
Churchill, operated on phronetic principles. Indeed it was through studying men like that
that I was attracted to the concept of phronesis.
Holden: Professor Nonaka, thank you most warmly for this interview.

References
Nonaka, I. (1985) Can Japanese Business Evolve?, Pacific Northwest Executive, October,
pp.2–4.
Nonaka, I. (1994) ‘A dynamic theory of organizational knowledge creation’, Organization Science,
Vol. 5, No. 1, pp.14–37.
Nonaka, I. and Konno, N. (1998) ‘The concept of ‘ba’: building a foundation for knowledge
creation’, California Management Review, Vol. 40, No. 3, pp.1–15.
Nonaka, I. and Takeuchi, H. (1995) The Knowledge-creating Company, Oxford University Press,
New York.
Nonaka, I. and Toyama, R. (2006) Strategy as Distributed Phronesis, Working Paper IMIO-14,
University of California, Berkeley, March.
Nonaka, I. et al. (1984) The Essence of Failure: Organizational Study of the Japanese Armed
Forces During World War II (in Japanese), Diamond-sha, Tokyo.
Nonaka, I. et al. (2005) The Essence of Strategy, Nikkei Shimbun-sha (in Japanese).
Sloan Management Review (1995) An Interview with Ikujiro Nonaka, Vol. 36, No. 3, p.5.
110 I. Nonaka and N. Holden

Notes
1
The concept of ba was originally proposed by Japanese philosopher Nishida and developed by
Nonaka and Konno (1998) to refer to forms of shared space, physical or metaphysical, for creating
relationships conducive to knowledge creation.
2
The influential SECI model, developed by Nonaka (1994) and Nonaka and Takeuchi (1995), refers
to four key organisational processes essential to knowledge creation: socialisation, externalisation,
combination and internalisation.
3
See Sloan Management Review (1995).
4
This was the subject of a guest lecture given by Professor Nonaka at the Vienna University of
Economics and Business Administration on 3 November 2006 and refered in particular to
phronetic practices within Honda, Canon and Seven-Eleven based on Nonaka and Toyama (2006).
In this lecture he stated that leadership in the knowledge-creating company is “a dynamic process
of synthesising the vision, ba, dialogue, practice, knowledge assets, and the ecosystem of
knowledge to create knowledge. At the basis of such leadership is phronesis”.
5
The word in intoku is translated in the authorative Kenkyusha Japanese-English dictionary of 1974
as ‘a stealthy benefaction’, ‘good done by stealth’ and ‘secret act of charity’.
6
Nonaka et al. (1984) and, for a short discussion in English, Nonaka (1985).