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Identifying Business Threats and Opportunities: Harnessing the Tacit Knowledge of Stakeholders for Strategic Decision-Making

ResearchMon Feb 17 2020Written by Carina A. Hallin7 minute read

Early detection of environmental threats and opportunities is essential for strategic decision-making (Ansoff, 1980; Bettis and Hitt, 1995; Eisenhardt, 1989; Teece, 2007). Since multinationals operate in different parts of the world, it is important to access the unique knowledge from local stakeholders operating under different institutional and cultural conditions to identify new challenges and opportunities (e.g., Li and Qian, 2013; Wang and Qian, 2011; Zaheer, 1995). The ability to harvest stakeholders’ tacit knowledge about future conditions is a promising way to deal with global market uncertainties to enable faster and better responses to emerging changes.

Tacit knowledge is an important human resource

The acknowledgment of tacit knowledge as an important source of insight has a long tradition dating back to the early philosophers. Aristotle (384-322 BC) acknowledged that human knowledge has uncertain elements and consists of different types of knowledge. One is technical knowledge (techne), which is a technical and inarticulable knowledge about how to artificially produce things such as craftsmen that build houses. Another type of knowledge is scientific knowledge (episteme), which refers to scientific knowledge that is the effect of logical reasoning. A third type is a practical knowledge (phronesis), which concerns the ability to reason about the best means to achieve goals, i.e. the knowledge of how to make good considerations, judgments and choices in concrete situations or the virtue of moral thoughts (Capurro, 2004; Flyvbjerg, 2001).

In 1962, Polanyi introduced the term tacit dimension in his book Personal Knowledge, where he treats the problem of human knowledge by setting forth the dynamics through which an individual becomes a skillful, responsible and knowing person. Polanyi argues that as human beings become a part of an interactive community with shared norms, talents, meanings, and purposes, they also become agents with interests and capabilities (Adams and Mullins, 1984).

In 1966, Polanyi elaborated on his idea of knowledge by differentiating between explicit and tacit knowledge. He recognized that individuals acquire knowledge by dynamically creating and organizing their own experiences;

thus, the human ability to express facts (explicit knowledge) represents only the tip of the iceberg.

He referred to tacit knowledge by stating, “We know more than we can tell” (Polanyi, 1966, p. 4) and argued that all knowledge exists on a continuum of which explicit knowledge is on one of the extreme and tacit knowledge on the other. Yet, most knowledge would exist between the two. To Polanyi, tacit knowledge is personal, context-specific, and therefore hard to formalize and communicate, while explicit knowledge or codified knowledge can be transmitted in a formal and systematic language.

Nonaka (1991) and Nonaka and Takeuchi (1995) brought the concept of tacit knowledge into the realm of organizations in association with their research on corporate innovation of Japanese companies. Their motivation for these studies was to fill the gaps in Western management, organizational and economic theories of knowledge, which have emphasized knowledge processes of acquisition, accumulation, and utilization of existing knowledge and neglected the perspective of knowledge creation in the development of new products, new methods, and new organizational forms.

They argued that Japanese companies had been talented at turning inarticulable individual tacit knowledge into a collective asset, which is embedded in a common set of beliefs and assumptions of employees and subsequently are drivers for successful business performance.

In a related vein, Varela, Thompson, and Rosch (1991) and Shirley and Langan-Fox (1996) also see tacit knowledge as a justification of beliefs that are embedded in the human body and mind leading to such characteristics as “gut feelings” and intuitions.

Tacit knowledge is an asset for strategic decision-making

Tacit knowledge in organizations includes intuition, perspectives, assumptions, beliefs, and values resulting from people’s experiences and the tacit knowledge tends to guide employees’ behavior and confidence towards their workplace. Saint-Onge (1996) focuses on the importance of the collective tacit mindset of the organization or the implicit, unspoken, and taken for granted “ways of doing things here” as an asset for strategic decision-making. As he notes a firm’s collective tacit knowledge springs from its organizational culture (1996 p. 225). He suggests that the collective tacit knowledge guides the perceptions and behaviors of organizational members and shape the way organizational members perceive their industry and the competitiveness of their firm.

Scholars and practitioners widely accept that tacit knowledge produces insight, intuition, and decisions based on “gut feeling” that can be used as a vehicle to operationalize tacit knowledge (Leonard and Sensiper, 1998; Parikh, Neubauer and Lank, 1994). Albert and Whetten (1985) propose that reputation by employees perceived organizational identity mirrors the collective beliefs of organizational members. Hence, members’ perceptions of organizational identity as well as their perceptions of outsiders’ beliefs of the organizational identity are likely to be an overall reflection of the collective tacit knowledge of employees and can affect firm performance.

Crowdsourcing tacit knowledge for strategic decision-making

According to the strategic management literature, the identification of threats and opportunities have traditionally been carried out using Strategic Issue Management (SIM) systems to aggregate ‘weak signals’ (e.g., Ansoff, 1980).

The underlying assumption of strategic early warning systems is that discontinuities do not emerge without warning. These warning signs can be understood as weak signals (Ansoff, 1975).

The SIM is carried out manually by the sensing of decision-makers, in which they in real-time identify ongoing weak signals in the internal and external environment. In practice, this was envisioned as a team of cross-disciplinary managers that update a matrix of strategic issues on a monthly basis based on issues on an urgency scale from low to pressing, and another scale from low to major impact.

Recently, crowdsourcing has proven to be effective as a mechanism to aggregate information for strategic decisions (Howe, 2006, 2008; Jeppesen and Lakhani, 2010; Surowiecki, 2004) and to harness collective tacit knowledge through ‘the wisdom of crowds’ of organizations (Hallin, Andersen and Tveteraas, 2017).

The development of crowdsourcing platforms for different organizational and public purposes have surged due to the Internet and its vast possibilities to collect insights from a large group of people (Howe, 2006). Crowdsourcing is applied in many ways to harness insights from crowds in organizations, such as for ideation, innovation, creativity, to solve micro-tasks and to carry out predictions to harness ‘the wisdom of crowds’ (Surowiecki, 2004).

Mindpool.com harnesses the tacit knowledge for companies, communities, and governments

Many of the current online crowdsourcing platforms harness opinions and solutions to deal with ideation, creative tasks, the solution to tasks, or predictions of key performance indicators, such as the prediction of product demand. However, very few platforms harness the tacit knowledge of stakeholders to assess opportunities and threats. To harness the ‘real’ tacit knowledge, decision-makers must tap into stakeholders’ sentiments and intuitions of future performance, which include the accumulated historical, current, and future insights (Clark, 2013).

Mindpool.com is one of the first platforms in the world to harness the continuous tacit knowledge accumulation of the firms’ important stakeholders to predict important and complex organizational problems. Mindpool.com offers predictions in lead-time so organizations, communities, or societies can navigate and lead using the untapped knowledge that holds enormous potential for organizations and humanity.

References

  • Albert and Whetten (1985), "Organizational identity." Research in organizational behavior (Vol. 7)
  • Ansoff (1975), "Managing strategic surprise by response to weak signals." pp. 18: 21–33.
  • Ansoff (1980), "Strategic issue management." pp. 1: 131-148
  • Bettis and Hitt (1995), "The new competitive landscape" pp. 16(1): 7–19.
  • Capurro (2004), "Skeptical knowledge management" Knowledge Management pp. 44-57.
  • Clark (2013), "Whatever next? Predictive brains, situated agents, and the future of cognitive science. Behavioral and Brain Sciences". Jun; 36(3):181-204.
  • Eisenhardt (1989), "Making fast strategic decisions in high-velocity environments." pp 32(3): 543-576.
  • Flyvbjerg (2001), "Making social science matter. Why social inquiry fails and how it can succeed again."
  • Howe (2006), "The rise of crowdsourcing". Wired. http://www. wired.com/wired/archive/14.06/ crowds.html, accessed March 18, 2012.
  • Jeppesen and Lakhani (2010), "Marginality and problem-solving effectiveness in broadcast search." pp. 21: 1016–1033.
  • Leonard and Sensiper (1998), "The role of tacit knowledge in group innovation." pp. 40(3), 112-132.
  • Li and Qian (2013) "Principal-principal conflicts under weak institutions: A study of corporate takeovers in China" pp. 34: 498-508.
  • Nonaka (1991), "The knowledge-creating company." pp. 72(6), 104-114.
  • Nonaka and Takeuchi (1995), "The knowledge-creating company: How Japanese companies create the Dynamics of Innovation".
  • Parikh, Neubauer, and Lank (1994), "Intuition: The new frontier of management."
  • Polanyi (1962), "Personal knowledge: Towards a post-critical philosophy."
  • Polanyi (1966). "The tacit dimension."
  • Saint-Onge (1996), "Tacit knowledge: The key to the strategic alignment of intellectual capital." pp. 10-14.
  • Shirley & Langan-Fox (1996), "Intuition: A review of the literature." pp. 79, 563-584.
  • Surowiecki (2004), "The Wisdom of Crowds: Why the Many Are Smarter Than the Few and How Collective Wisdom Shapes Business Economies Societies and Nations."
  • Teece (2007), "Explicating dynamic capabilities: The nature and microfoundations of (sustainable) enterprise performance." pp. 1319–1350.
  • Varela, Thompson & Rosch (1991), "The Embodied Mind: Cognitive science and human experience."
  • Wang and Qian (2011), "Corporate philanthropy and financial performance of Chinese firms: The roles of social expectations and political access." pp. 54(6): 1159-1181
  • Zaheer (1995), "Overcoming the liabilities of foreignness." pp. 38: 341363.

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