Tacit Knowledge and Why It’s Important

There is a mining CEO in Australia who often says in private conversation something like:

When it comes to new ideas, we’re anxious to be second

They want to use a fast follower strategy.  And there’s some sense to this approach.  After all, trying to be first is risky.  And there’s a fair bit of research that shows that the winner in a new market is often not the first to market.  So you can make a sound argument for being a fast follower.

The big problem with trying to be a fast follower is this: tacit knowledge.

Tacit knowledge is stuff that we know, but we can’t explain how to do it.  Think of it this way: have someone throw something at you, and try to catch it.  Now, describe exactly how you figured out where to put your hand to catch the flying car keys (or whatever).  You can’t.  There are calculations of speed, and trajectories, and muscle movements, and all of that goes on inside your brain and you can’t explain any of it.  That’s tacit knowledge.

When it comes to innovation, most of the important knowledge is tacit. Paul Hobcraft makes a strong case for the importance of tacit knowledge in innovation.   In his excellent post The Tacit-Knowledge Economy, Ricardo Hausmann says:

To make stuff, you need to know how to make it, and this knowledge is, to a large extent, latent – not available in books, but stored in the brains of those who need to use it.

Getting it there is really tough. Tacit knowledge is acquired mostly through learning by doing. That is how we train musicians, barbers, doctors, and scientists. Consider how long it takes an adult to learn to speak a language or a musician to master the violin.

Tacit knowledge is important for innovation for several reasons: it means that the best way to innovate is to learn by doing, it means that you can’t quantify the knowledge you need to do this, and it means that you can’t explain what works to others, even within your own firm.

Tacit Knowledge Problems

One-time CEO of HP Lew Platt once said: “I wish we knew what we know at HP.”  That’s describing a tacit knowledge problem – but we often deal with this as an information storage problem instead.  My first PhD student Sam MacAulay shares a great case study that reveals the problems of knowledge sharing.  In their book The Knowing-Doing Gap (a must-read), Jeffrey Pfeffer and Bob Sutton say this:

The fact that knowledge is acquired through experience and is often intangible and tacit produces a third problem in turning knowledge into action. One important reason we uncovered for the knowing-doing gap is that companies overestimate the importance of the tangible, specific, programmatic aspects of what competitors, for instance, do, and underestimate the importance of the underlying philosophy that guides what they do and why they do it. Although specific practices are obviously important, such practices evolve and make sense only as part of some system that is often organized according to some philosophy or meta-theory of performance. As such, there is a knowing-doing gap in part because firms have misconstrued what they should be knowing or seeking to know in the first place.

When knowledge is tacit, we don’t know what to copy.  Can you see how this makes it hard to be a fast follower?  Pfeffer and Sutton go on to discuss why so many automotive firms found it really hard to be fast (or even slow) followers of Toyota:

Why has it been so difficult for other automobile manufacturers to copy the Toyota Production System (TPS), even though the details have been described in books and Toyota actually gives tours of its manufacturing facilities? Because “the TPS techniques that visitors see on their tours—the kanban cards, andon cords, and quality circles—represent the surface of TPS but not its soul.” The Toyota Production System is about philosophy and perspective, about such things as people, processes, quality, and continuous improvement. It is not just a set of techniques or practices: On the surface, TPS appears simple…. Mike DaPrile, who runs Toyota’s assembly facilities in Kentucky, describes it as having three levels: techniques, systems, and philosophy. Says he: Many plants have put in an andon cord that you pull to stop the assembly line if there is a problem. A 5-year-old can pull the cord. But it takes a lot of effort to drive the right philosophies down to the plant floor.

This is an important point.

You build up tacit knowledge when you learn by doing.   This means that if you want to be a fast follower, you still have to be an innovator yourself.  It’s almost impossible to just sit back, wait for everyone else to come up with good ideas, and then copy them.  You need to be innovating yourself, because that’s the only way that you’ll have enough tacit knowledge to be able to apply the innovations that others come up with.

Let’s go back to that mining CEO.  His firm actually does have quite a bit of innovation capability.  So they may well be able to be an effective fast follower.  But it’s a tough game to play.  Scott Anthony correctly says that you must avoid using this strategy as an excuse to not innovate:

But make sure that when you say that you want to be a fast follower you aren’t really saying, “Can’t I just go back to running my core business?” Too often people find that when it is a strategic imperative to respond, it is too late. Sometimes the resources aren’t there. Sometimes the corporate innovation muscles just aren’t strong enough to respond appropriately. The need to respond can force a “Hail Mary” acquisition that has little chance of sticking.

Start building your innovation capability now.  It’s ironic, but the only way to be a fast follower is to be an innovator.  That’s how you build the tacit knowledge that you need to succeed.

(the cartoon is from Hugh MacLeod’s Daily Newsletter – subscribing to it is worthwhile.)

Related articles

• The Tacit-Knowledge Economy
• How (not) to transfer innovation in complex organizations
• Tacit Knowing by Michael Polanyi