Knowledge creation always begins with an individual or a group of individuals, who individually or as a group come up with new ideas, concepts, product or process innovations, etc. Knowledge creation may occur through research, innovation projects, experimentation, observations, etc. Firestone et al. [2] suggest that knowledge production starts with knowledge claim formulation, followed by individual and group learning, information acquisition, knowledge claim evaluation and finally, the building of organizational knowledge.

According to Nonaka et al. [4], the organizational knowledge creation / conversion process is based on a simple framework that contains two dimensions. The first dimension shows that only individuals create knowledge while the other dimension relates to the interaction between tacit and explicit knowledge. These two dimensions constitute the base for defining the four Knowledge Creation / Conversion Processes – Socialization, Externalization, Combination and Internalization.

 Socialization – tacit knowledge is converted into tacit knowledge during discussions, communications, meetings, etc.
 Externalization – tacit knowledge is converted into explicit knowledge, and embodied in documents, manuals, etc.
 Combination – explicit knowledge is converted into another form of explicit knowledge
 Internalization – explicit knowledge is converted by individuals into tacit knowledge.

Figure 1.3 (2) Knowledge Conversion. Source: Nonaka at all (1995)

The 4 different modes of knowledge conversion build a knowledge spiral without a start or an end. This continuous and dynamic process has its roots in the behaviour of the main knowledge creation agent – the human being. For example, when people are trying to combine explicit knowledge (i.e. when someone uses mathematics and physics formulas to solve a complicated problem) they might, at the same time, discuss it with their peers (other students or teachers), thus exchanging tacit knowledge with them. Moreover, they might visit a student discussion forum looking for solutions where they will have to externalize or explain their problem (related knowledge) when asking for more help.

Nonaka et al. also consider a five-phase model of the organizational knowledge creation process consisting of the following phases:

 Sharing tacit knowledge – corresponds to socialization;
 Creating concepts – the shared knowledge is converted to explicit knowledge building a new concept;
 Justifying concepts – the justification of new concepts allows organizations to determine if they are really worthy of pursuit;
 Building an archetype – the worthy concept is converted to a model, prototype or an operating mechanism, etc.
 Cross-leveling knowledge – here the knowledge created is expanded across the organization.

Fig 1.3 (3): Five-phase model of the organizational knowledge-creation process. Source: Nonaka at all (1995)



Knowledge capture could span the whole set of activities performed by an organization, starting with the organization of customers and market information, to the collection of examples of best practice or lessons learned or the development of a mentoring programme. It is important to capture both explicit and tacit knowledge even though the latter creates more difficulties. Tacit knowledge is contained in rumorus, legends, storytelling, norms, beliefs, etc., while explicit knowledge is stored in books, documents, databases, webs, e-mail, etc. The capture of explicit knowledge is the systematic approach of capturing, organizing, and refining information in a way that makes information easy to find, while also facilitating learning and problem solving. Tacit knowledge management is the process of capturing the experience and expertise of the individual in an organization and making it available to anyone who needs it.

During knowledge creation, capturing and codification processes, new concepts or knowledge claims are developed which need, in general, to be tested or validated at a later stage in order to determine their veracity and value. This implies that the new concepts are of greater value than the existing ones. It should not be forgotten, however, that the majority of companies and employees accumulate and capture knowledge unconsciously through several methods, practices and situations. Some of them are systematically managed by company management while others are not as they occur during daily work and practice (e.g. learning by doing, informal meetings, observing or listening to others, lessons learned, etc).

The evaluation of new concepts could be made against the company goals and vision, and its value assessed in terms of improved organisational effectiveness and competitiveness. The balanced scorecard is a perfect instrument which relates the knowledge perspective of the company with its financial situation, customers, business processes and learning/growth perspectives. However, in the evaluation of new concepts SMEs should be careful not to enter into time consuming and costly procedures with little obvious value for the company. Research on the balanced scorecard method shows its added value for larger companies, therefore, it is not developed further in this Handbook.

If new knowledge is coming from experiments or observations, it needs to be analyzed, explained and verified. There is a need to generate hypothesis, for example, in order to explain experimentation or observation results, as well as to establish conformance between new and existing knowledge. The total knowledge pool is also updated by incorporating the new knowledge [10].

Generally, knowledge acquisition from individuals or groups can be characterized as the transfer and transformation of valuable expertise from a knowledge source (e.g., human expert, documents) to a knowledge repository (e.g., organizational memory, intranet, documents, etc.) [10].

Organizational memory constitutes all knowledge elements from tacit knowledge elements (based on the experience of employees), to tangible data and information, which could be stored in the organization archives. Unless knowledge is embedded into such tangible systems or indirectly accessed through effective involvement of people in knowledge intensive tasks, the organization cannot leverage the knowledge held by its individual members. Organizational knowledge acquisition is the ‘amplification and articulation of individual knowledge at the organisational level so that it is internalized into the firm's knowledge base’.