The Knowledge-Creating
Company
{ “Bread Maker”
Matsushita Electric Co.
Background
• Japanese company based in Osaka
• Founded in 1918
• Focused in household appliances
No Innovation, No Growth
• Market maturity led to diminishing profits
• Over 95% of Japanese households owned vacuum
cleaners, refrigerators, washing machines, etc.
• Rise of low cost competitors
ACTION 61
What is it?
• 3-year corporate plan (1983 – 1986)
• "Action, Cost reduction, Topical products, Initiative
in marketing, Organizational reactivation, and New
management strength.“
• The number 61 stood for the sixty-first year of
Emperor Hirohito's era, or 1986.
Objectives
• To improve Matsushita’s competitiveness in its core
businesses through careful attention to cost and
marketing and
• to assemble the resources necessary to enter new
markets.
“Beyond Household
Appliances”
New Corporate Slogan
• Resulting from the new objectives.
• Shift of focus from household appliances to high-tech
and industrial products.
• Led to a restructuring of the core business
Integration of 3 divisions
• Rice-Cooker Division
• Heating Appliances Division
• Rotation Division
 Cooking Appliances Division formed
Enabling Conditions of the Home Bakery
A sense of Crisis & Chaos
• Arose from the newly formed division
• Differing backgrounds and knowledge created a
communication-based hurdle
The Retreat
• 13 middle-managers from various sections were sent
to a 3-day retreat to discuss their present situation
and future direction
• Development of organizational intention
“Easy & Rich”
• Cooking appliances should make meals simple to
prepare but make them tasty and rich in nutrition.
• Fully automated bread-making machine embodied
many qualities that were appropriate to the
division’s new objectives.
• Division head Keimei Sano formed a team of
employees from various divisions including Cooking
Appliances Division along with a mechanical
designer and a software developer.
• Project leader Masao Torikoshi developed the
product specification for the Home Bakery.
Home Bakery Schematic
First Attempt
First prototype failed miserably
• Crust was overcooked leaving the dough insided
raw
• Temperature drastically affected the end result
(temperatures ranged from 5-35°C, when 27°C was
ideal for fermentation.)
• Differing electrical ratings across Japan made the
motor run too fast or slow
The transfer of tacit knowledge
• Ikuko Tanaka & Head Baker of Osaka International
Hotel.
Tacit Knowledge
Definition: personal knowledge that is hard to
formalize and therefore difficult to articulate to others.
• Rooted in action and in an individual’s commitment
to a specific context.
 i.e. a craft or profession, a particular technology
or product market, or the activities of a work
group or team.
• the valuable and highly subjective insights and
intuitions that are difficult to capture and share
because people carry them in their heads.
• Tanaka learns the baker’s tacit skills through
observation, imitation, and practice.
From Tacit to Explicit / Second Attempt
• Being unable to articulate the kneading process,
engineers were also brought to the hotel and allowed
to knead and bake bread to improve their
understanding of the process
• “Twisting Stretch” & special rib design
• Strength and speed of the propeller during the
kneading process leading to the engineers adjusting
the machine’s specification.
• Worked with the engineers through trial and error
until the end result was satisfactory and the Home
Bakery produced fresh bread with the quality of a
baker
Commercialization Stage
• Change in project leadership occurred during this stage, but original
team members attended meetings to share their tacit knowledge.
• The biggest challenge in the commercialization stage was to reduce the
overall cost so that the retail price would become less than 40,000 yen.
• The major cost concern was over the cooler, which kept the yeast-laden
dough from overfermenting in high temperatures.
• Behind schedule
• “Chumen”
 Process of adding the yeast at a later time to prevent
overfermenting of the dough
• Decision to postpone release of the Home Bakery was extremely
difficult, but well made as it was justified by the intention of “Easy &
Rich”
Product Development Tasks
Cycles of the Home Bakery
Result
• Matsushita's Home Bakery was introduced to the market in February 1987
at 36,000 yen and sold a record-setting 536,000 units in its first year.
• Six months later, Matsushita began exporting Home Bakery to the United
States, West Germany, and Hong Kong. Shipments were later expanded to
Sweden, Thailand, Australia, and New Zealand.
• One million units of the Home Bakery was sold by the time competitors
released their version.
• Home Bakery also brought the users' voices close to the engineers, which
seemed like a breath of fresh air to the Cooking Appliances Division.
• Inspired other divisions throughout Matsushita.
Cross-Leveling the Knowledge
In 1986, the development process of the Home Bakery inspired
Matsushita’s CEO to adopt "Human Electronics" as the umbrella or
grand concept for entire company.
• Electronics would enhance
the satisfaction and
happiness of consumers by
providing "genuine" quality.
• As a result, other divisions
began following this concept
as it spread by word-ofmouth and through this type
of experience to create ideal
electronic products that were
well-suited for humans.
Successful Products
• Mill-integrated coffee brewer (1987)
 First of its kind in Japan
• Induction Heating (IH) Rice Cooker (1988)
 this new rice cooker has an induction heating system that
achieved higher temperatures and allowed for more
accurate control.
 Priced at 59,000 yen ($480), it still sold very well and
accounted for over 40% of rice cooker sales.
• Gaoh large-screen TV aka “The One” in USA (1990)
 With the knowledge gained from Home Bakery, by not
sacrificing quality regardless of the scheduled release
date, they provided products with real worth.
 Gaoh sold more than one million units within 14 months
of its introduction, which was equivalent to more than 10
percent of all domestic TV-set sales in Japan.
Conclusion
• On January 10, 2008, the company announced that it would
change its name to "Panasonic Corporation" (effective on October
1, 2008) , to reflect its global brand name "Panasonic".
• “The secret of their success is their unique approach to managing
the creation of new knowledge.”
• i.e. like Honda, Canon, Matsushita, NEC, Sharp, and Kao
• Tacit knowledge is gained through observation, immitation, and
practice.
Four patterns that exist in knowledge-creating companies:
1. Socialization: learning of tacit knowledge
2. Articulation: translating tacit into explicit knowledge
3. Combination: embodying knowledge into a product
4. Internalization: enrich one’s own tacit knowledge through the
entire experience.
Lessons Learned
• Through a truer understanding of knowledge and how it’s
transferred, its applications are endless.
• Breakthroughs in innovation are often achieved through this endless
process of reinvention
• To secure a company’s future lies heavily in their ability to innovate.
• Do not skimp on quality.
Sources
• Ikujiro Nonaka and Hirotaka Takeuchi, “Chapter 4: Creating Knowledge in
Practice,” in The Knowledge-Creating Company: How Japanese Companies Create
the Dynamics of Innovation, Oxford University Press, 1995.
• The Knowledge-Creating Company, HBR article, Nov.-Dec. 1991. (republsihed
in 2007)
• http://en.wikipedia.org/wiki/Panasonic_Corporation