About Tacit Knowledge

It's often difficult to say why one company is more successful than another. Perhaps it's just a matter of circumstances, luck, or being "in the right place at the right time". But maybe, the company does something differently. This "differently" is preserved in the minds of its employees in the form of knowledge and competencies, which manifest in various ways in the daily routine of the business.

A knowledge-based view of the company is an extension of the resource approach to strategic management, which emphasizes that knowledge is a critical source of competitive advantage. As such, an important function of the organization becomes the identification and preservation of this knowledge, and organizing the processes of knowledge transfer between employees.

Implementing this function in practice turns out to be a challenging task, as not all of the company's knowledge can be separated from its bearers, codified for preservation and transfer. Here, it's appropriate to recall Michael Polanyi, who in 1955 in his work "Personal Knowledge" introduces the concept of tacit knowledge, emphasizing that we know more than we can tell. In his book, Polanyi gives examples such as riding a bicycle. One can describe the rules a cyclist should follow to not fall, but we don't study these rules when getting on a bicycle, as reading them will not teach us to maintain balance.

The knowledge that allows you to maintain balance while riding a bicycle, as well as the knowledge that enables a business to launch product innovations or be a cost leader in its industry, includes not only explicit knowledge but also what is known as tacit knowledge.

The main difference between explicit and tacit knowledge is that the former can be codified, i.e., described and thus separated from the bearer for preservation and transmission in various forms. Tacit knowledge, on the contrary, eludes description and therefore is difficult to preserve and transmit.

"We can know more than we can tell" - these words by Michael Polanyi (Polanyi, Michael. 1966. The Tacit Dimension. Chicago: University of Chicago Press. p. 4.) served as a starting point for reflections on the peculiarities of working with tacit knowledge in various areas of human activity, including business.

In the traditions of Western management, from Frederick Taylor to Herbert Simon, the view of the organization as a machine for "processing information" has taken deep root. According to this view, the only useful knowledge is formal and systematic knowledge, quantitative data, codified procedures, universal principles. And the key indicators for measuring the value of new knowledge are also complex and subject to quantitative assessment: efficiency improvement, cost reduction, return on investment enhancement.

Since the 1990s, several notable works have appeared in the scientific literature, focusing on the importance of tacit knowledge for a company's success. J. C. Spender in the article "Competitive Advantage from Tacit Knowledge?" (1993) argues that a firm's competitive advantage stems from its specific (tacit) knowledge. The author writes about the importance of integrating tacit and explicit knowledge for effective management and use of knowledge in the organization. Tacit knowledge, being personal and context-dependent, needs to be transformed into more formalized, documented explicit knowledge for widespread distribution and use in the organization. The author notes that the interaction between different types of knowledge often occurs in a social context, for example, through communication, training, and mentoring. This means that organizations must create an environment that facilitates the exchange of knowledge, including informal meetings, seminars, and working groups.

Nonaka and Takeuchi (1995) in their work "The Knowledge-Creating Company: How Japanese Companies Create the Dynamics of Innovation" based on the analysis of successful Japanese companies showed that the role of tacit knowledge in creating a company's competitive advantage is no less than that of formal and systematic knowledge. Managers of these companies understand that creating new knowledge is not just a matter of mechanical processing of objective information. The authors considered the problem of transferring tacit knowledge, proposing 4 ways of creating new knowledge, including through the interaction of explicit and tacit knowledge. 

In the article "Exploring Internal Stickiness: Impediments to the Transfer of Best Practice Within the Firm" (1996) by Gabriel Szulanski, the author introduces the concept of "internal stickiness" to describe the difficulties encountered in the internal transfer of knowledge. Traditionally, it is believed that the main problems in knowledge transfer are related to the participants' motivation. However, the concept of internal stickiness focuses not on motivational, but on knowledge barriers. It suggests that the main obstacles are in the characteristics of the knowledge itself and the context in which it is transferred.

To overcome internal resistance in the transfer of knowledge within organizations, the author of the article, Gabriel Szulanski, suggests the following approach: 1) Focus efforts and resources on enhancing the ability to learn within organizational subdivisions. This involves improving their capacity to absorb new knowledge and apply it in practice. 2) Create and strengthen relationships among various units within the organization. This can help improve communication and collaboration, which are key to effective knowledge transfer. 3) It's important not just to develop new knowledge and skills, but also to systematically understand and communicate these practices within the organization. This ensures that knowledge is not only transferred but also adapted and embraced at all levels of the organization.

Contemporary research in the field of tacit knowledge and its role in creating a competitive advantage for business is conducted to study possible ways of transferring tacit knowledge, as well as creating conditions in which tacit knowledge is more effectively disseminated. Technological development allows for the creation of new solutions in this area.

The Tacit University works on an approach to creating a competitive advantage based on tacit knowledge. We construct AI-powered strategic ontologies that map patterns, behaviors, and contexts indicative of tacit knowledge still untapped by the organization. Building on these ontologies, we incorporate processes that deepen meaningful human interactions, creating lasting organizational environments where the natural flow of tacit knowledge enriches both the formulation and implementation of strategy.

Read more about the classics and contemporary researchers in the field of tacit knowledge in our blog.