Leveraging Implicit Knowledge to Gain Business Benefits

Exploring implicit knowledge can lead to early warning of risks, a quicker decision-making cycle, and innovative ideas.

In a rapidly shifting environment, businesses need an early warning system to discover potential issues that will affect the bottom line quickly. Decisions must be made quickly and under uncertainty. Traditional business concepts quickly become obsolete, so businesses must continue to innovate to stay ahead of the competition. To confront these challenges, executives can learn from and leverage recent findings on implicit knowledge. 

What is Implicit Knowledge?

Ancient philosophers as well as current-day scientists have known that mind and body are one. Our body reacts to external stimuli first, and then our brain creates explanation for the reaction after the fact. Here is an example: 

Imagine yourself kicking back in front of a camp fire after a long day of outdoor activity. You turn your body around to reach out for a drink behind you. Then you suddenly feel a lump in your stomach, your breath becomes short, you begin to perspire, and adrenalin begins to flow throughout your system. You then notice that you just stepped on something long and winding. You jump up and then see that what lies under your foot is a piece of rope that you earlier disposed of. You let out a sigh of relief, but your hands are very sweaty.  

Our body and brain are always at work so that we can cope with the external changes whenever needed. Awareness is an end result of most active functions supported by implicit, unconscious bodily functions.

Implicit knowledge helps tackle three business challenges:

1. Implicit knowledge as an early warning system: The successful investor George Soros has said that he initiates his most fundamental investment strategy change on his back pain. When the market moves against his view, he feels physically uncomfortable, so he listens very carefully to the music behind the physical message to change his portfolio. This approach has brought unconventional and dramatic returns to his funds. His ability and willingness to listen to the inner voice has enabled him to draw upon his unconscious mind and see opportunities that other investors have missed, and to take action before the competitors do. So the implicit part of our mind can act as an early warning system. It may not provide an accurate, pinpoint analysis of the situation we are in or give us clear direction for action, but it can help us prepare to react in a timely fashion. We are always influenced by the unconscious, but we are not aware of its power. Those sensitive to it will derive much benefit by listening to its signals.

2. A faster decision-making cycle through negative selection: Studies conducted on Yoshiharu Habu, a champion of Japanese chess or shogi, showed that he spends most of the playing time deselecting undesirable moves among the available set of moves, narrowing the search space quickly to only those worthy of evaluation, thereby avoiding a combinatorial explosion in the number of possible options. This is sometimes referred to as “negative expertise” to avoid wasteful exploration. We all use this negative selection capability daily. We can carry on a conversation with friends even when we are surrounded by loud noises. We focus on what we are interested in, not by amplifying what we are engaged in, but by filtering out what we are not interested in. The de-selection process occurs unconsciously, appearing as if this process is automatic. The time and resource saved through negative selection can be allocated to other productive activities. Less is definitely more in this case.

3. Implicit knowledge drives innovation: French mathematician Poincaré described the process of innovation/discovery in four stages: preparation, incubation, revelation and verification. The initial intensive brainstorming session is followed by an "aha!" moment. Negative selection will automatically progress behind the scenes during the incubation period until optimal solutions emerge. Then logical explanations are generated for the choice made. Innovation is a result of a new combination of idea elements from explicit knowledge and exponentially larger number of implicit knowledge, resulting in a fundamental departure from legacy thinking. 

Five Tips on Leveraging Implicit Knowledge in Business

Where can implicit knowledge be found, and how can it be collected and leveraged in the business context? 

1. Accommodate multiple forms of media in the IT infrastructure: Business always requires street-smarts and a “sense of smell.” Non-verbal, non-textual, contextual information, which drives instinct, is often omitted in the traditional IT infrastructure. Accommodating multimodal information, including sensory information such as video and audio, into the traditional IT infrastructure will go a long way in enabling the incorporation of implicit knowledge. Use of video conferencing, for example, allows the meeting participants to communicate rich nuances that are missed in regular email exchanges. Corporate wisdom has a better chance of being communicated in such a setting.

2. Draw on experts and other stakeholders: Corporations invest heavily in employee education and training. Focus should also be placed on the best method for capturing and sharing, recycling, and redeploying their accumulated knowledge. The same applies to knowledge held by other stakeholders such as suppliers, customers and professional service providers. The implicit knowledge gained from these sources may come in the form of social media or other non-traditional IT platforms. Messages exchanged over social media often provide honest and unfiltered views of the participants. Such non-verbal information is lost unless learned in a hands-on setting. Casual conversations over coffee, for example, may contain critical early warning information on corporate risk, but are not captured by formal business mechanism and disappears unutilized. Implementing channels to capture such information will alleviate risks. The skills and wisdom of experts may not be valued accurately in financial terms, but is a critical part of intellectual property. Being on-site enables exposure to both explicit and implicit knowledge. Management by walking around the office is another way to pick up such lost information on a first-hand basis.

3. Shadow documents: Records of negative information such as failure case analysis and lost deal records are very important sources of implicit knowledge. It is worth implementing a formal policy to collect “shadow documents” such as initial design drawings on a napkin, sales proposals for lost deals, and even records of drinking fountain conversations. Japan actually has a formal and publicly funded project to collect failure cases. Building up a warehouse of failure cases, lost deals and negative business history contributes to providing the context for decision making, accelerating the process of de-selection of options and improving the quality of the final decision.

4. Change of work environment for innovation: In order to mobilize the power of unconscious to promote innovation, businesses should schedule an off-site event.

One needs to first collect all the necessary ingredients in generating ideas. The steps to take are to immerse oneself in the exploration of existing ideas and stretch imagination as much as possible, until one feels that all the possibilities are exhausted. Then, consciously move to a different environment to shake loose, and to break away from the fixed viewpoint. A sense of humor may be called for to free oneself of fixed viewpoints. It is important to allow time for the ideas to gestate. Let the unconscious get to work behind the scenes to create combinations of idea elements and to eliminate unfeasible combinations.

A good example of this is the Japanese tea ceremony. It is called sado or the way of tea, and is performed in a bare, serene environment, allowing one to break away from the day-to-day bustle of business. Tea not only refreshes one’s mood, but also can provide valuable time for the unconscious to work. Companies known for innovation provide extraordinary environments, such as a tea room at headquarters, by design.

5. Use reverse logic to test strategy: Using a devil’s-advocate strategy can strengthen an argument. Potential holes in the logic can be identified through this process. Similarly, using reverse logic — going backward from the potential target result to the preceding conditions — can reveal implicit knowledge that would not be found otherwise. This alleviates the risk of a hypothesis shadowing the hidden causes of problems. It also reduces the risk of starting with a wrong hypothesis and running into groupthink.

Executives, when they feel a lump in the stomach, may be well advised to change the mode of thinking and listen to the message from the body. Time spent exploring implicit knowledge can reward one with early warning of risks, a quicker decision-making cycle, and innovative ideas.

 

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Qunio Takashima is director of Industry Strategy and Insight at Oracle. He can be reached at qunio.takashima@oracle.com for comments and questions.