What’s in it for me? Learn how to run a successful and sustainable business in today’s unpredictable marketplace.
The only thing that’s certain these days is uncertainty.
Long gone is the time when businesses could rely on traditional methods of market research and steady revenue streams.
Yes, there’s more data to analyze than ever.
But being able to thrive in an unpredictable marketplace requires a different kind of knowledge and wisdom.
Running a wise company is about knowing your environment and customer needs on a more personal level.
It’s about trusting your experience and working to exist in harmony with society.
In short, it’s about more than just profit.
In these blinks, you’ll learn what Aristotle can teach us about wise business practices; why Machiavelli may be misunderstood; and why smart leaders distribute their power.
There are three main problems facing companies today.
In 1995, the authors released their influential book The Knowledge-Creating Company.
It explained the business practices behind some of Japan’s most successful companies.
To this day it’s still considered a classic.
But a lot has changed since 1995.
At the heart of that book was knowledge management.
It explained how companies can take advantage of both explicit knowledge, like statistics and data, and tacit knowledge, the kind of insights you gain through experience.
These days, however, knowledge has become more accessible, more abundant, more global, and more complex.
As a result, we should focus on how to harness and use that knowledge more wisely.
The key message here is: There are three main problems facing companies today.
Despite the abundance of knowledge, companies still fail.
Even once-great titans like Kodak, Circuit City, and General Motors have been brought to their knees.
There are three reasons for this.
The first is that many executives are over-reliant on explicit knowledge, such as data, numbers, and analytical formulas.
This kind of knowledge might tell an automobile company which price points a customer desires.
But it says little about the features and experience the customer desires.
More to the point, explicit knowledge won’t help companies navigate change.
For one, it lacks context.
It can also mislead executives into thinking that there are one-size-fits-all solutions.
Instead, companies must understand social phenomena, and that’s hard to do by looking only at numbers.
Second, companies must think about the future they want to create.
To become both successful and sustainable, companies need to recognize what they are: social entities.
Businesses have a social impact, and this needs to be considered as part of the mission.
Take the founder of Honda Motor, Soichiro Honda.
When he was developing low-emission engines, he boasted that the mission was to beat the Big Three – Ford, GM, and Chevy.
But then he heard that his engineers had a different mission – to develop engines that would make the world a better place for their children.
Honda knew his engineers were right.
He felt so ashamed that he announced his retirement.
This leads us to the final reason, the need for wise leaders.
Wise leaders are the ones who can contextualize what is happening in the here and now and take the right action without hesitating.
Above all, wise leaders can offer superior value to their customers while also leading a morally responsible business – one that exists in harmony with society.
Looking at past philosophers can show us what knowledge practice entails.
Rather than just obtaining valuable knowledge, we should focus on knowledge practice.
What’s the right thing to do with the knowledge once you have it?
For the answer to this question, let’s get a little philosophical.
What’s the point of having knowledge if you don’t put it to good use?
And what kind of knowledge leads to good decisions?
These questions have always been on the minds of great thinkers.
In fact, it was ancient Greek philosopher Aristotle who first developed the idea of phronesis, which the authors see as the backbone of knowledge practice.
The key message here is: Looking at past philosophers can show us what knowledge practice entails.
Phronesis is generally defined as practical wisdom or the kind of wisdom that serves as the basis for practical action.
As Aristotle described in his book Nicomachean Ethics, phronesis requires a careful understanding of the current situation or present context in order to make sound ethical decisions.
These decisions should serve the betterment of society.
This is why phronesis is a perfect basis for the cultivation of wise leadership.
Phronesis is about action, context, goodness, and purpose – the very same qualities we were talking about in the first blink.
While many of Aristotle’s ideas on ethics have remained popular over the years, the concept of phronesis has not.
Yet, if we look carefully, we can track it through time and see how it continued to persist in later philosophies, especially in the traditions of phenomenology and pragmatism.
Phenomenology emerged in Europe in the early twentieth century, where it was championed by German philosopher Martin Heidegger.
He believed that the actions we take now directly shape the future.
He said these actions are dictated by tacit knowledge or subjective experiences.
So in order to make the most of our future, we must live in the present and gain personal, contextual knowledge from the here and now.
Likewise, pragmatists like the preeminent American philosopher John Dewey also emphasized the connection between tacit knowledge and action.
Indeed, many modern philosophers believe that the only way to gain the kind of informed knowledge that leads to wise action is through being embedded in the world around you.
For wise leaders, this means being present.
It means trying to see the world through the eyes of your customers.
This is how you learn what society is going through now, and where it should be in the future.
To be sustainable, wise companies need to look at what’s best for society.
There’s another important name from the past that deserves mention, the Austrian economist Karl Polanyi.
He brought together psychology and economics when he emphasized the importance of tacit knowledge in informing our actions.
He focused on the impact of our actions on the world around us.
Polanyi recognized that companies are social institutions.
Their actions influence society, just as changes in society will affect a business.
The key message here is: To be sustainable, wise companies need to look at what’s best for society.
These days, it’s common for capitalist-minded leaders to focus their attention on shareholders.
Of course, being profitable and creating value for shareholders is important.
But this must be done alongside a central mission of doing what’s best for humankind.
With a focus on shareholders, it’s easy to slip into short-term thinking.
You start to make decisions that can quickly result in shareholder value.
But if these actions aren’t aligned with helping society as a whole, they may be harmful in the long-term.
One of today’s wise companies is Fast Retailing.
It owns the clothing brand UNIQLO and is led by founder and CEO Tadashi Yanai.
As a wise leader, Yanai knows that companies that only chase profits don’t last.
Enduring companies are the ones that live in harmony with society and consider the common good.
Fast Retailing has a number of practices designed to be both efficient and sustainable, like the All-Product Recycling Initiative.
Part of this initiative is a program called the 10 Million Ways to HELP Project.
It began in 2015 and donates 10 million pieces of secondhand clothing every year to displaced refugee families.
Still, given that there are 60 million refugees, Yanai hopes to do even more in the future.
After all, it’s society, not shareholders who ultimately decide the fate of a company.
If a company doesn’t benefit society, it’s highly likely that that company won’t be able to thrive.
But if the company has an obvious benefit to offer, then society is likely to embrace it.
Grasping the essence requires personal experience and attention to detail.
Part of being a wise leader and utilizing knowledge practice is knowing how to grasp the essence.
What is happening right now?
What are the future consequences of plan A or plan B?
These are the kinds of questions that wise leaders need to be able to quickly assess, articulate, and act upon.
Especially now, when changes in the marketplace can happen fast, and responses need to be devised as soon as possible.
The key message here is: Grasping the essence requires personal experience and attention to detail.
What are your thoughts on toast?
For many people, having a slice or two of toasted bread is a daily ritual.
Yet you probably don’t give much thought to what makes a perfect piece of toast.
But Gen Terao, founder of the Balmuda product design company, knew first-hand the power of a simple piece of bread.
And he drew on these personal experiences to develop a new toaster.
It became a worldwide sensation.
The first experience was in Spain when Terao was traveling alone as a teenager.
One day, while feeling particularly tired and lonely, he slipped into a bakery where he had a piece of bread.
It was so perfect that it brought tears to his eyes.
Years later, he’d started a gadget manufacturing company.
It was struggling to stay afloat after the 2008 financial crisis.
One day, he gathered his employees together for a barbecue, and someone gave him a slice of bread that had been toasted on the charcoal grill.
Suddenly, Terao was back in Spain and all five of his senses were activated.
That day, he had all 50 of his employees agree they’d create the world’s greatest toaster.
The slogan for this project was, “Creating the best toast, not the best toaster.
” Terao wanted other people to experience how a slice of bread could be a full sensory experience.
He wouldn’t settle for anything less.
At first, duplicating the grilled bread proved elusive.
But then someone pointed out that it had rained during the party.
So, a little compartment for adding water was added.
Then it was a matter of figuring out the temperature variables, moisture levels, and accounting for different voltages.
Finally, after months of testing and retesting, and thousands of slices of bread, Balmuda The Toaster was introduced in 2015.
Terao’s attention to detail paid off.
He wanted others to experience the perfect toast, and even though the toaster cost over $200, people were willing to pay extra for that experience.
Human interaction is crucial for wise leaders to generate new ideas.
Central to the success of the Balmuda toaster project was ba.
Ba is a Japanese word that, roughly translated, means space or place.
It refers to an area where people meet and ideas and information are exchanged.
This is important because for knowledge practice to work within a company, ideas need to be generated.
Knowledge has to spiral outward through the company and touch everyone involved.
This happens through the use of ba, by bringing people together.
The key message here is: Human interaction is crucial for wise leaders to generate new ideas.
For the Balmuda toaster, the spark of inspiration happened at the employee barbecue.
This is a great example of a ba.
People are mixing and interacting, there are drinks and food.
People can relax and perhaps share ideas that they wouldn’t under normal workplace circumstances.
But formal settings for interaction are necessary, too.
It’s important for executives to stay in tune with one another, understand each other’s values, and be made aware of when these values may need to change due to contextual changes.
Sometimes, a virtual ba can serve this purpose as well.
After the 2013 meltdown at Japan’s Fukushima Daiichi Nuclear Power Plant, it quickly became apparent that people were needed to take radiation level readings in the area.
Within days, a group of people had come together to form the volunteer Safecast organization.
The group included Ray Ozzie, a former software designer at Microsoft.
They coordinated their efforts online and built a collaborative system that published radiation data in the public domain.
The success of their efforts required flexibility in dealing with a complex problem that was changing day by day.
It also required being open to reaching out to experts, publishing data, and relying on the internet to keep everyone connected.
Creating ba in your organization will likely depend on some simple practices.
For example, you can maintain an open-door policy so that people don’t feel shut off from critical information.
It’s also important to practice brutal honesty and to establish a shared purpose that absolutely everyone in the company commits to.
A ba can be formal or informal, large like a convention or small like a private meeting, face-to-face or virtual.
What’s important is that knowledge is flowing.
Wise leaders communicate their purpose through stories and metaphors.
Having a strong sense of purpose won’t get you very far if you can’t communicate it properly.
Likewise, you can set up all the meetings and group outings you want, but your company will only be successful if everyone is on the same page.
For that to happen, a wise leader needs to communicate the essence.
Fortunately, there are some proven ways in which leaders can effectively share their vision and get everyone on board with the same purpose.
The key message here is: Wise leaders communicate their purpose through stories and metaphors.
Rhetoric has long been a powerful tool for getting people motivated.
Every leader can benefit from mastering rhetoric.
But key to this tool isn’t only knowing yourself and the message you want to deliver, but knowing what your audience wants to hear.
To begin with, people love stories.
In particular, they respond well to stories that appeal to three things: logic, emotions, and ethics.
And when you tell a story, your message need not be long.
Consider the explorer Ernest Shackleton.
He needed to recruit people on a dangerous voyage to the South Pole.
His message was all of two sentences.
It promised recruits endless danger, very little money, and no guarantee of safety, but honor and recognition if they succeeded.
Shackleton got thousands of responses.
That’s because he appealed to people’s sense of logic by being direct and honest about what to expect.
He also appealed to people’s emotions and ethics by promising honor and recognition if they successfully completed the mission.
Metaphors are another great tool for compelling rhetoric.
One of the great wise leaders in Japan is Michimasa Fujino, the CEO of the Honda Aircraft Company.
Honda Motors has long had the ambition of creating aircraft.
It’s been a long journey from inception to profitability.
After starting out as a research and development project in 1986, it took the company 30 years to turn a profit.
To keep his team motivated, Fujino used a sports metaphor.
He told a story about his passion for running marathons.
He explained that when he’s running, he keeps his eyes on the telephone poles along the side of the street.
He tells himself, just keep running to the next pole, then the next pole, and the next.
These short distances seem doable.
Eventually, Fujino finds himself crossing the finish line.
Sometimes the wise leader needs to use politics to rally and motivate the company.
What do you think of when you hear the term Machiavellian?
Perhaps you think of evil, power-hungry schemers.
In fact, that may not be entirely accurate if you take an honest look at Machiavelli’s best-known work The Prince.
As the scholar Richard Samuels points out, the wise prince isn’t necessarily evil.
He isn’t even opposed to a higher good.
He’s also willing to adapt and conform to whatever the current situation may require.
Yes, he believes that the end justifies the means.
But as long as you’re always standing on solid moral grounds, he may be right.
The key message here is: Sometimes the wise leader needs to use politics to rally and motivate the company.
It may be necessary to act Machiavellian and be cunning to manage a situation.
If we go again to the South Pole and look at how Shackelton managed to get his crew back alive, we can see a man who didn’t always reveal his true motivations.
Shackleton kept a close eye on everyone in his crew.
If he saw that one person was feeling particularly unwell, he’d order an extra round of hot milk for everyone.
That way, the sick person might feel better, and their sickness wouldn’t lower the team’s morale.
Steve Jobs was particularly famous for using unusual tactics for motivating people.
In the words of his biographer Walter Isaacson, Jobs had a “reality distortion field.
” He could be so dismissive of what others saw as reality that he could convince people of the seemingly impossible.
A good example of this is when he was looking for a very specific type of glass for the iPhone.
His search led him to cross paths with Wendell Weeks, the CEO of Corning.
Weeks explained that back in the 1960s they’d developed something called Gorilla Glass, but since there wasn’t a market for it, the project didn’t go anywhere.
Jobs trusted his intuition.
The moment he heard about this glass, he knew this was the solution.
So he gave Corning six months to come up with as much Gorilla Glass as they could.
Weeks thought this was absurd.
This wasn’t something they were currently producing.
The task of converting an entire factory to make this product in six months was ridiculous.
But Jobs was unmoved.
“Get your mind around it.
You can do it,” was his response.
And sure enough, they did.
Wise companies practice distributed leadership.
For a company to be a success, practical wisdom can’t be limited to CEOs and executives.
Wise leaders need to share their passions, their inspirations, and, most of all, their knowledge.
Wise companies practice mentorship and apprenticeship, and encourage leadership distribution.
One of the central principles of practical wisdom is the sharing of that wisdom.
It’s important for wise leaders not to think that this wisdom should only be shared with other executives or managers.
In wise companies, everyone should know what needs to be done.
Practical wisdom must be cultivated at every level.
The key message here is: Wise companies practice distributed leadership.
Remember the example of Soichiro Honda from the first blink?
His engineers explained to him that they were working on low-emissions engines to create a better future for their children.
When Honda heard that, he knew that they were ready to be the company’s leaders.
He’d clearly taught them well, and now they’d surpassed him.
Honda could retire and rest easy, knowing his company was in good hands.
This is the kind of future that wise leaders hope for.
They aim for sustainability by being in harmony with society.
And when they practice distributed leadership, they know that their successors will be wise leaders, too.
Toyota is another car manufacturer that’s distributing leadership to safeguard its future.
Responsibility for quality is put in the hands of team members.
Rather than a chain of command, they have what they call a “ring of power.
” Titles and ranks are irrelevant.
Everyone can question their superior or ignore advice and find a solution of their own.
Toyota’s CEO, Akio Toyoda, explained how having multiple leaders is essential to its ability to keep up in a changing world.
With just one person making decisions, there’s no way the company would be able to consider the myriad factors that go into making good decisions.
Or, as another wise leader, Toshifumo Suzuki, puts it, a company needs more than just one pair of eyes and one mind.
When thousands of people are empowered to make their own judgment calls, he says, “we will have quite a few more eyes and minds.
” Wise leaders share tacit knowledge and distribute leadership.
This helps them forge wise companies that are well-positioned to thrive, even in an unpredictable future.
Final summary
The key message in these blinks: To face today’s chaotic and ever-changing marketplace, wise companies must focus more on tacit knowledge, rather than relying on explicit knowledge.
Leaders can do this by understanding their own experiences, as well as placing themselves in the shoes of their customers and understanding their company’s relationship with society.
To ensure sustainability, companies should make the betterment of society a primary concern, in addition to making a profit.
Finally, it’s important to practice distributed leadership in order to groom future leaders and better navigate an ever-changing marketplace.
Actionable advice: Restate your mission, vision, and values.
Every company should start out by asking these three questions.
First, to understand your mission, or purpose ask, Why does your company exist?
Second, to understand your vision, or dream, ask, What sort of future do you and your team hope to create?
Third, to understand your values, or beliefs, ask, What values and beliefs are you and your team passionate about?
Answering these questions will help inform future decisions and keep you on the right path even in the midst of chaos.
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What to read next: Jugaad Innovation, by Navi Radjou, Jaideep Prabhu, and Simone Ahuja.
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Jugaad is an Indian word for innovation.
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