The grand father of Scrum talks about a new type of Leadership found in Japanese management. "Phronesis" is the third knowledge of Aristotle, combines action and thinking to create knowledge flow "Ba"(place).

1. Cultivating Leaders with
Practical Wisdom
－ Scrum and Ba Building －
Ikujiro Nonaka
Professor 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

2. Copyright © 2009 Nonaka, I

3. The Knowledge-Creating
Company and Managing Flow
Copyright © 2010 Nonaka, I

4. Cultivating Leaders with
Practical Wisdom
－ Scrum and Ba Building －
Ikujiro Nonaka
Professor 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

5. 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

6. Knowledge is
■ Subjective
Based on belief, context-specific
■ Process-relational
Created in social interactions
■ Aesthetic
Relentless 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.”
Copyright © 2009 Nonaka, I

7. Two Types of Knowledge
Tacit Knowledge Explicit Knowledge
Subjective and experiential
knowledge that can not
Objective and rational knowledge
be expressed in words,
that can be expressed in words,
sentences, numbers, or
sentences, numbers, or formulas
Formulas (Context-specific)
(context-free)
Cognitive Skills
beliefs
images Theoretical approach
Problem solving
perspectives Manuals
mental models Database
Technical Skills
craft
know-how
Spiral up through
dynamic interaction
Analog-Digital Synthesis Copyright Nonaka I. 2010

8. 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)

9. Tacit – Explicit Spiral
- Toyota Way -
(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
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.

10. Organizational Knowledge Creation
SECI Model
Sharing and creating Tacit Tacit Articulating tacit
tacit knowledge knowledge through
through direct Socialization Externalization dialogue and
experience reflection
4. Articulating tacit
Explicit
1. Perceiving reality Environment E O I
Tacit
as it is knowledge using
I I symbolic language
2. Sensing and Group
Empathizing with I Individual 5. Translating tacit
I I knowledge into a
others and the
I concept or prototype
environment
3. Transferring of Systemizing and
tacit knowledge applying explicit
Internalization Combination knowledge and
Tacit
information
Explicit
Learning and E G
O
acquiring new tacit G 6. Gathering and
knowledge in integrating explicit
practice I G Org. G
knowledge
G 7. Breaking down the
E
9. Embodying explicit concept and finding
knowledge through relationships among
action and reflection the concepts
10. Using simulation and Explicit Explicit 8. Editing and
experiments systemizing explicit
I = Individual, G = Group, O = Organization, E = Environment
knowledge

11. 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.
Copyright Nonaka I. 2010

12. 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
© Nonaka, I.

13. 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.
Copyright Nonaka I. 2010

14. 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.
Copyright © 2009 Nonaka, I

15. Phronetic Leadership
1. 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 Nonaka I. 2010

16. 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.
Copyright © 2009 Nonaka and Toyama

17. 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.
Copyright Nonaka I. 2010

18. Ba: Sharing “here-now”
relationship
Intersubjectivity
Shared Context Close Open
Open Close
in Motion
（場）
Ba（場）
Individual contexts are shared at “here now” context of Ba.
Shared context becomes the base of emerging knowledge.
Copyright Nonaka I. 2010

19. Ba: Interpenetration of environment,
structure and individual
Conventional Theory Process View
Environment
Environment
Ba
Structure
Individual
Structure Here-now
relationships
in action
Individual
Copyright Nonaka I. & A.Hirose 2010

20. Ba is formed in various
space-time
Real
Meeting, drinking
Informal organization
Project teams
Office, factory, shop floor
Formal organization, system
E-mail, TV conference
Virtual
Copyright © 2009 Nonaka, I & R. Toyama

21. “Waigaya” at Honda
Share the “ba” for
three days and
three nights
Team
Leap the idea
Individual 故 Thorough Construct the
discussions that concept
break the
individual barriers
© Nonaka, I.
(interaction)

22. “Waigaya” at Honda
Company 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
Copyright Nonaka I. 2010

23. Inter-subjectivity of Ba
Ba is dynamically created from the 3 steps of consciousness
3 steps of consciousness
Synthesis 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.

24. 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” . 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
Copyright © 2010 Nonaka, I

25. 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)

26. Copyright © 2010 Nonaka, I

27. Founder’s son Andrea
Founder Vincenzo
Copyright Nonaka I. 2010

28. 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)
Copyright © 2009 Nonaka, I & R. Toyama

29. Scrum Approach
“The New New Product Development Game”
Sequential (A) vs. Overlapping (B and C) phases of development
A
Phase 1 2 3 4 5 6
B
Phase 1 2 3 4 5 6
C
Phase 1 2 3 4 5 6
Source: Takeuchi, H. & Nonaka, I. (1986). The New New Product Development, Harvard Business Review January-February, 1986.

30. Scrum Approach
Moving 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.

31. Small World Network
SIX DEGREES TIPPING POINT
We are a happy family Connected people are
and we all are six degrees able to get information
away from an Albanian farmer. and control networks.
The network of human I want to be in the middle
social interactions connect of the network because it
us all by six degrees of provides me information
separation. and power. I can make big
changes by small things.
© Nonaka・Toyama

32. Small World Networking
Rewiring the multilayered Ba “Asakai ”
ident Pre New Y
Pres page side e
e ntia ar
hom l Ad
dre
ss
Presidents Award
rs
ge Pr Ne
ana Do eside w Ye
l M ing Annual briefing to President me nt ar
era eet
n M
stic Vis
Fac its t
Ge by business/functional division iliti o
ary Do es
idi me
bs g sti
Su n cM
les eti Pre anu
s Sa t Me President sid fac
n
sea ide Luncheon Meeting en turi
Over Pres t M ng
ee Su
tin bs
g idi
ar y
Management Strategy
Committee Ma
e Re nage
tiv f m
Co orma ent
cu y
xe isor e
E v mm tio
te Executive Management itte n
Ad mit Meeting e
C om
“Asakai ”
）
（Executive Early Morning Meeting）
© Nonaka, I

33. Creating a Big Story: Toyota Prius
2nd & 4th
Calty Design Research Electronics Tech Div.
(Exterior Design) (Inverter)
Zi (G21) BR-VF
(Planning) (Hybrid System)
1st Vehicle
Tech Div.
(Suspension) 2nd Engine EV Development
2nd Vehicle
Tech Div. Tech Div. (Motor, Battery)
(Engine) (Brakes)
Drive-train Panasonic EV
Tech Div. Energy
(Hybrid transaxel)
© Nonaka, I.

34. Knowledge Ecosystem: Organic
Configuration of Ba
University Government
Customer
Local
Communities
Supplier
Firm Competitor

35. Phronetic Leadership
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
Copyright Nonaka I. 2010

36. Reality and Actuality
Reality Actuality
Substance: an existing Action: a situation in
substance or object that progress
could be observed. Can only be grasped by
Can be recognized and those committed to and
managed by logic. 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).
Copyright Nonaka I. 2010

37. 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)
Copyright Nonaka I. 2009
2010

38. Phronetic Leadership
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.
Copyright Nonaka I. 2010

39. Concept Building: Dialoguing on the Spot
Soichiro Honda
Words and
actions
By articulating into
language, we
clearly understand
what we are
thinking
Drawing on
the floor
Source: Honda Motor Corporation
Automobile Hall of Fame (Detroit)
Copyright Nonaka I. 2010

40. Phronetic Leadership
5. 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.
Copyright Nonaka I. 2010

41. 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.

42. Phronetic Leadership
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.
Copyright Nonaka I. 2010

43. System to distribute phronesis
- LPL and PL to nurture Honda DNA -
LPL
In charge of
development
Engineering
Test PL Design PL
PL
●Engine ●Engine ● Layout
●Body ●Wind-tunnel ● Exterior
●Suspension ●Crash ● Interior
●Rigging ●Emission ● Color
etc ●Durability ● Design data
etc ● Design model
etc
Source: Honda Motor Company internal material Copyright Nonaka I. 2010

44. Middle-up-down Knowledge-creation
Process
Grand Theory (What ought to be)
(Top)
Solving
contradiction Mid-range theory
(Middle)
Contradiction
Cross-leveling
Reality (What is)
of Knowledge
(Front-line)
Copyright Nonaka I. 2010

45. Phronetic Leadership
Explicit Knowledge
Objectivity Common
Language
Universal
Sensitivity Good
Idealism
Ba
ac ti c e
Pr
and
Mu
gue
Kata
lti-la
Dialo (Creative Routine)
yer
ed
Neto
Subjectivity
wor
Experience
k
Particular
Pragmatism
Tacit Knowledge Copyright Nonaka I. & T. Hirata 2010

46. Idealistic Pragmatist:
Contemplation in Action
Brain Brawn
Deep Thinker Doer
in One Person
“Intellectual Muscle”
Relentless Pursuit of Common Good