Knowledge Codification in Industrial Districts - Semantic Scholar

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Then, an analysis of the knowledge codification process is proposed and a methodology, based on a Process Breakdown Structure, is presented to support the.

Knowledge Codification in Industrial Districts Giovanni SCHIUMA Università della Basilicata Via della Tecnica 3, 85100 Potenza, Italy Tel.: +39 971 474651; Fax: +39 971 57104; E-mail: [email protected]

Abstract The success of the industrial districts appears fundamentally based on the development of organisational and technical know-how within a local geographic area. This know-how, resulted from both the individual empirical learning process and the historical knowledge stratification in a local area, is basically personalembodied. In the present competitive and fast-changing environment, being able to manage the organisational processes becomes more and more important to improve industrial districts’ performance. To this aim, knowledge codification seems to play a fundamental role. In this paper, an operative definition of knowledge is first provided. Then, an analysis of the knowledge codification process is proposed and a methodology, based on a Process Breakdown Structure, is presented to support the knowledge externalisation. Finally, a case study of knowledge codification in an industrial district producing leather sofas is analysed.

Key words: industrial district, knowledge management, cognitive system, codification process, process breakdown structure.

1. Introduction In the last decade, in the literature has been widely stressed that knowledge, in the actual competitive context, is a critical resource for the competitive success of firms (Barney, 1991; Leonard-Barton, 1992; Prahalad e Hamel, 1990) and learning organisation, as a knowledge creation process, can have a relevant impact on firms’ performance. In the management literature, the definition of learning organisation is based on the concept of learning as in psychology, i.e. learning organisation is considered an organisational experimentation process by means of the creative use of both direct and indirect experience of individuals. There is then a link between individual and learning organisation (Kim, 1993): while new knowledge is developed by individuals, the organisation plays the critical role of spreading and amplifying the knowledge. According to the Nonaka’s theory (1991) of knowledge-creating company, the development of new organisational knowledge is carried out by a continuous interaction of tacit and explicit knowledge. He stressed four types of interaction underpinning the organisational learning: from tacit to tacit knowledge (socialisation), from explicit to explicit knowledge (combination), from tacit to explicit knowledge (articulation), and from explicit to tacit knowledge (internalisation). The last two types of interaction are considered the most critical steps in the new knowledge creation, because they require a change in the knowledge nature and underpin the development of new knowledge. 1

In the actual competitive context, the analysis of the knowledge creation process and, in particular, of the knowledge transformation from tacit to explicit, represents a fundamental managerial policy to support and to increase the competitive success of Industrial Districts (IDs). In fact, the knowledge and the development of knowledge through empirical learning mechanisms such as learning by doing, learning by using and learning by interacting, has traditionally represented a strategic leverage for the success of IDs (Garofoli, 1989; Petroni, 1997, Rullani, 1994; Vaccà, 1983, 1995). The role of knowledge in the IDs can be identified with the specific product-embodied know-how characterising, with specific peculiarities, each ID and generally indicated as the “Italian Style”. This can be considered as the result of two main variable: on the one hand, the creativity of designer engaged in the product development process and, on the other hand, the nature of the production process based on the craftsmanship abilities, that characterise a local area in which ID is located. Both processes are strictly related to the ability of individuals which embodied a specific know-how resulted from both the individual empirical learning process and the historical knowledge stratification in a specific local geographic area. Thus, the competitive capability of ID is fundamentally based on specific technical and operative knowledge, accumulated on going the time into the individuals living in a local geographic area. This involve, as result, that organisational and productive processes characterising IDs are essential based on personal-embodied or tacit knowledge. In the present competitive changing context to be able to control and manage the organisational processes becomes more and more important to get improve IDs’ performances. To this aim the role of leader firms within IDs is fundamental. In fact, the grow of the leader firms, in particular in the international markets, determines the need of a transformation of the craftsman production process, that characterise the IDs, into an industrial one. To this aim a knowledge codification process is necessary. It can be considered as a process involving methodologies both to extract knowledge from human actor’s head, defined by Nonaka as articulation or externalisation process (1991; 1994), and to gather and systematise explicit knowledge. The knowledge codification allows organisations, operating within IDs, to deal with continuous and dynamic changes of the business environment, through a continuous assessment and improvement of their competencies. Actually the competitiveness of IDs seems to be based on their ability to perform a competence “maintenance” and “renovation” and these processes are strictly related to the virtuous cycle of knowledge transformation from tacit to explicit and vice versa. In the paper, an analysis of the role of knowledge within ID is provided (Section 2). Then starting from an interpretation of knowledge (Section 3) an analysis of knowledge as technological factor and of the ability associated with it (Section 4) is proposed. The mains knowledge nature are analysed (Section 5) and an interpretation of knowledge codification process (Section 6) is proposed. A methodology to support knowledge externalisation (Section 7) and a case study (Section 7) dealing with a project of knowledge externalisation in a specific phase of a real production system are finally discussed. 2. The role of knowledge in industrial district The examination of the literature on IDs shows that the development of this particular production model is ascribed to the accumulation, within a specific local geographic area, 2

of knowledge developed in the operative praxis (Becattini, 1987; Bellandi, 1987, 1989; Bellandi and Russo, 1994). In fact, the competitive success of IDs seems to be the result of an improvement process of the knowledge located into a specific territorial context. This characteristic has been stressed by some authors, who have proposed an interpretation of ID as a “cognitive laboratory” (Becattini and Rullani, 1993). The development of knowledge within IDs appears based on two main processes. On the one hand, the development of the production processes in accordance with the principles of flexible specialisation (Piore e Sabel, 1984). And on the other hand, the deep link between the production processes and the social and cultural characteristics of a specific local territorial context. This, in particular, has involved the formation and diffusion of a business culture or industrial district’s atmosphere (Becattini, 1994; Casson, 1997). The knowledge as a strategic resource represents an important interpretation factor of the IDs’ evolution processes (Albino et al., 1998; Rullani, 1994). In the first phase of the evolution, IDs were characterised by craftsmanlike firms and the knowledge was predominantly of tacit nature. Subsequently, when IDs had acquired a connotation of integrated system area with the development of a relationships system between firms (Unioncamere, 1995), the knowledge from a craftsman nature got to a “relational” nature, but it was still characterised by a low level of codification (Albino et al., 1996). In fact, in this new context knowledge was generated prevalently through learning mechanisms based on experience, such as learning by doing and learning by using. Recently, the increasing competitiveness of the markets has pushed a lot of IDs towards different evolution trajectories. In particular, those which appear more interesting are characterised by industrialisation, decentralisation and integration process (Unioncamere, 1995). In these cases, it is possible to find an intense effort in codifying knowledge and in particular technical knowledge, which have a direct influence on production capabilities of districts. The objective of the codification process appears, mainly, to make knowledge easily transferable from the generation context to other different context and/or to allow an increasing both of the coordination capabilities of the client-supplier relationships (Albino et al., 1997) and of the innovative ability of the product quality. However, although it seems intense the effort in IDs of codifying organisational and productive knowledge, the tacit knowledge remains a strategic resource within the districts. In fact, they can be considered as the main resource upon which the development of innovative process is based (Bellandi, 1989; Carbonara and Schiuma, 1998). So the codification process in IDs, in accordance with the knowledge creation cycle between tacit and explicit knowledge of Nonaka and Takeuchi (1995), has to be considered as a means through which both new knowledge is generated and specific organisational or productive problems are solved.

3. An interpretation of knowledge Davenport and Prusak have commented, “Knowledge is neither data nor information, though it is related to both, and the differences between these terms are often a matter of degree” (1998, p. 1). So data, information and knowledge are distinct entities and not interchangeable concepts too.


Understanding what knowledge means and what are the difference between data, information and knowledge is at the basis of any knowledge management process. The distinction between these concepts is not a theoretical matter. In fact, organisational investments success or failure both on knowledge management processes and technology initiatives for managing knowledge, can depend on understanding what are the specific characteristics of them and on how organisation can get from one to another. In the actual era defined as “Information age” (Bohn, 1994) in which the knowledge is stressed as a strategic resource for the firms’ competitiveness, several technology vendors are offering new technologies such as dataminig, intranets, videoconferencing, etc., as instruments to realise knowledge management processes. These technologies could be particularly useful in the IDs to improve organisations’ abilities in managing knowledge creation process. However to understand how these new information systems can be effectively and efficiency used in organisation operating in IDs, it is important to know what they manage -data, information or knowledge-. Often the confusion between these entities have generated misunderstanding, about the organisational role of new information technologies instruments, which usually consider knowledge as a collection of information or a set of relationships of data. Knowledge has been analysed from different point of view by diverse scientific disciplines. So it is possible to find multiple definition of knowledge stressing different aspects of knowledge itself. We are interested in knowledge from management point of view, so that a conceptual interpretation of knowledge, useful for practical application, is provided as well as the relationship between knowledge and the cognitive system’ ability to perform a task or an activity is also presented. From the analysis of economic literature, it is possible to stress two main approaches to the conceptualization of knowledge: “techno-centric” and “human resource” approach (Malhotra, 1997; 1998). The first, is based on the interpretation of knowledge in accordance with information theory, so that it considers the knowledge as information and the human actor merely as an information processor. Instead the second, follows the human resource oriented tack, it considers the knowledge strictly related to human behaviour. According to a systemic approach both these views can be considered together involving them in a more effective and efficiency definition of knowledge based on cognitive science. In our view, the knowledge can be defined as an abstract entity that is consciously or unconsciously built by the interpretation of an information set acquired through both experience and meditation on the experience itself, and that is able to give its owner a mental and/or physical ability in an “art” (Polanyi, 1962; 1966; Huber, 1991; Kim, 1993; Kolb, 1984; Johnson-Laird, 1993). According to this definition, the knowledge has three peculiar characteristics: the structural, the process and the functional characteristic, that are tightly interconnected. Structural characteristic of knowledge From a structural point of view, knowledge is formed by information. However it is not a simple aggregate of information. To understand the difference between knowledge and information a preliminary distinction between data and information have to be analysed. 4

Data. About “data”, Davenport and Prusak have stressed that “Data is a set of discrete, objective facts about events” (1998, p. 2). Data describes something in a specific time, that is what happened about a particular event. Bohn (1994) commented that “Data is what come directly from sensors, reporting on the measured level of some variable” (p. 64). In organisation data is represented by record measure of a specific things, i.e. accounting records (costs, prices, etc.), marketing records (number of competitors, clients, similar products on the market, advertisements produced, etc.), production records (product’s time to market, number of model producing, raw material used, etc.), and so on. All organisations used and produced data, stored in specific technology system, for carrying out their activities. Data can be characterised from quantitative and qualitative point of view (Davenport and Prusak, 1998). Quantitatively, companies usually evaluate data management in terms of cost (How much it cost to retrieve a piece of data?), of acquisition speed (How quickly can company get data into their system or call data up?) and of record capacity (How much can company record data over time?). Qualitatively, companies can evaluate the data in terms of availability, when and where it is necessary (Do we have access to data when we need it?), of relevance (Is it what we need?) and clarity ( Is data necessary to make sense?). Based on above considerations all measures carried out in a company about an organisational and/or productive variable can be considered data. It is important to stress that data does not endowed meaning. It provides only a part of the description of what happened, but data “is essential raw material for the creation of information” (Davenport and Prusak, 1998, p. 3). Information. According to Drucker information is “data endowed with relevance and purpose”. The information has been mainly studied and analysed like message (Drucker, 1990; Glazer, 1991; Davemport, Prusak, 1998). According to these researches the information can be defined as a structured data set endowed of meaning by a cognitive system, which wants to communicate a message to another cognitive system. An important result of this conceptualisation is that unlike data, information embodied a meaning. But, in our opinion, it has also contributed to generate confusion about information and knowledge since it involves an ambiguous interpretation of cognitive system. In fact data can be transform into information either by a cognitive system or by a computer/information system; both can add meaning to data through a structuring process of data in such way to reach some purpose. So information is a structured set of data organised by an information processor -cognitive or computer system- to reach a specific purpose. Generally the information is generated to communicate a message. Then the concept of information is strictly related to communication process or information processing, in which it is always possible to distinguish a sender and a receiver of a message. Both could be computer or cognitive system. The sender organises a data set in the form of a document or an audible or visible communication and the receiver selects pieces of data deciding which part of the message he gets is really information for him/her. According to Davenport and Prusak (1998) it is mainly possible to distinguish five methods to transform data into information, these are:


• • • • •

Contextualisation: data is gathered with a precise purpose that depends on the context in which we operate; Categorisation: data is classified on the based of some units of analysis or key components of data; Calculation: data is analysed mathematically or statistically; Correction: data is cleaned by errors or by not useful elements; Condensation: data is summarised in a more concise form.

It is important to stress that information is neutral, that is independent from the system who generated it. In other words, defined the rules of the transformation methods to get from data to information, any system, according to these rules, generates always the same information. Instead, knowledge is strictly connected to a cognitive system (individual or organisation). Knowledge. According to our interpretation, knowledge resides in the action of a cognitive system and not merely in an information set. This point has been stressed effectively by Churchman (1971), who claimed: “To conceive of knowledge as a collection of information seems to rob the concept of all of its life… Knowledge resides in the users and not in the collection. It is how the user reacts to a collection of information that matters." (p. 10). This assertion underscores the importance of humans in the process of knowledge creation. Unlike information, knowledge can be generate only by cognitive system. Only human beings can take the central role in knowledge creation and the computers are merely tools, however great their information-processing capabilities may be (Nonaka, 1994). Knowledge can be seen as both stock and process. Following this idea Davenport and Prusak (1998) provide the following working definition of knowledge: “Knowledge is a fluid mix of framed experience, values, contextual information, and expert insight that provides a framework for evaluating and incorporating new experiences and information. It originates and is applied in the minds of knowers. In organisations, it often becomes embedded not only in documents or repositories but also in organisational routines, processes, practices, and norms.” (p. 5). This definition tends to characterise the knowledge from management point of view, stressing its stock and process characteristics. According to our interpretation of knowledge, the most important thing stressed from this definition is the role of knower in the knowledge creation process. So the knowledge has to be considered as the result of an information process interpretation performed by a cognitive system. Process characteristic of knowledge From a process point of view, knowledge derives from information as information derives from data. In particular, knowledge is an information set associated to a meaning by an individual or organisational interpretation process (Huber, 1991; Weick, 1979). This aspect is the process characteristic of the knowledge. The interpretation process concerns new or existing information by which both individuals and organisations develop new knowledge (Daft and Weick, 1984). Davenport and Prusak (1998) identify four main knowledge-creating activities which take place within and between humans:


• • • •

Comparison: is the activity of comparing information about new situation it is living to other situations it has known; Consequences: is the activity of understanding the implications that some new information can have on specific decisions or actions; Connections: is the activity of connecting new information to other existing information; Conversation: is the activity of exchanging information during faceto-face relationships between individuals.

Each of them can be considered as a specific way to associate meaning with an information set acquired by a cognitive system. The importance of knowledge for any cognitive system is that it allows to make sense of world in which system lives and provides ability both to carry out activities and to resolve problem. This aspect represent the functional characteristic of knowledge. Functional characteristic of knowledge From a functional point of view, all the knowledge owned by a cognitive system human actor or organisation- defines their skills and competencies and enable it to carry out some tasks. In fact, every skill makes always reference to specific task defined as a goal that can be achieved in given conditions (Leplat, 1990). The ability, involved by the ownership of a knowledge, represents the functional characteristic of the knowledge itself. So we assume, for a cognitive system, that the knowledge ownership corresponds to an ability ownership. The knowledge definition provided can be represented according to a logicmathematics view. Showing with an=1,....,∞ a data, resulted from a recording of the value takes by a specific variable, it is possible to define the information as one of the possible j =1 structured combination of data: X n=1,...,∞ = U∞ a j . So showing with X1......Xn an information vector, the knowledge “C” associated with it can be defined as the result of a transformation function g(X): g(X1....Xn)= C Then, adopting a systemic representation, showing with X a generic information vector, the knowledge associated with it can be defined as the result of a transformation function g(X), which defines a specific ability Y, in Figure 1 these properties are graphically represented. In the Figure the information vector represents the structural characteristic of knowledge, the transformation function characterises the process aspect, which correspond to the interpretation of the information input, and finally the output, as product result of the information interpretation process, represents the functional characteristic of the knowledge, i.e. physical or mental ability to perform a specific activity or task.


Figure 1. Systemic representation of knowledge characteristics

4. Knowledge as technological factor: a process interpretation of ability From an operational point of view knowledge, for a cognitive system, can be interpreted as technological factor, that is an entity which involves an ability to carry out a specific production process, whose product can be a material or immaterial asset. Adopting a systemic and process approach it is possible to define the ability as a production process which allows, for given constrains and input factors set, to perform a prearranged objective. Then applying a symbolic representation, the production process characterising an ability can be represented as in Figure 2. Showing with Z the vector of the input factor, or with Z1 the vector of productive factors and with Z2 the vector of the environmental constraints, it is possible to define the ability as a function: the “ability function” Y=y(Z). It is a transformation function, which define the necessary activities to carry out a prearrange objective “O” adopting a vector “Z”.


Z1= productive factors

Z2= environmental constraints

Ability function




Production process: Ability

Goal of the production process

Context: Vector of input factors

Figure 2 . Systemic and process representation of the ability and of its characteristic components.

From a practical point of view, the ability function corresponds to a rules and procedures set which are at the basis of a specific production process aiming to perform a goal. Then for each ability it is always possible to associate a production process and a “recipe”, that is a transformation, combination and association rules set of the input factors. This recipe can reside within human actor’s head, in the individuals relationships or to be codified through appropriate symbolic artifact. Each ability of a cognitive system is the result of a know-how developed over time through a continual experimentation and interpretation process. It is important to stress that the knowledge creation process of cognitive system is both continuous and dynamic. So the implementation of an ability is the result of the use of cognitive system’s knowhow but is meantime a time for generating new knowledge. In fact, the input factors set (Z) of the production process associated with ability, is at the same time an information vector (X) for the cognitive system and then the means to update its knowledge base system. These observation are represented in Figure 3. The Figure, shows -dotted linethe link between know-how and characteristic properties of the production process’ result. Then knowledge allows to understand the effects involved on the output process 8

by different production process methodologies.

Figure 3. Links between the characteristic of the knowledge and characteristic factor of the ability implementation. This point has been effectively analysed by Bohn (1994), who provides a “technological knowledge” definition. In particular, starting from a definition of process as: “any repetitive system for producing a product or service, including the people, machines, procedures, and software, in that system”, he claims: “I define technological knowledge as understanding the effects of the input variables on the output. Mathematically, the process output, “O”, is an unknown function y of the inputs, Z: O=y(Z); Z is always a vector (of indeterminate dimension). Then technological knowledge is knowledge about the arguments and behaviour of function y(Z)” (Bohn, 1994, p. 62 -the symbolic notation has been adapted to previous representation). This definition stresses that a better understanding of ability function allows to improve the capability of controlling the characteristic properties of production process’ output.

5. The knowledge nature In the literature, the knowledge nature is prevalently classified as bivalent (Spender 1996). In fact, studies concerning the knowledge nature have adopted a dichotomous classification which distinguishes between tacit and explicit knowledge. This distinction has its origins in a Polany’s work (1962; 1966), where the attribute tacit was first adopted to indicate a knowledge rooted in the individual’s action. Starting from this classification, two main types of knowledge have been defined in production systems. The tacit knowledge has been associated to both individuals, according to a psychological-cognitive approach (Nonaka and Takeuchi, 1995), and organisational routines, according to a sociological-evolutionary approach (Nelson e Winter, 1982). The concept of tacit knowledge has been originally introduced in the literature by the evolutionary theory of the firm by Nelson e Winter (1982), and subsequently by the “knowledge-creating company” concept by Nonaka (1991). In the first approach, it is pointed out that firms evolve through the adaptation of a knowledge set -the organisational routines- shared by their members, and that this process takes place mainly at a tacit level. With the second approach, the modelization of the knowledge development process is based on a continuous transformation carried out by individuals from the knowledge tacit dimension to the knowledge explicit one, following a spiral 9

structure. In both the approaches, the authors adopted a binary distinction of the knowledge nature, consisting in the two aspects of tacit and explicit knowledge. This classification has been considered as a reference for all the authors that afterwards have dealt with the knowledge role in the firm activities. To define and analyse the knowledge codification process, it is considered important first to provide a definition of the tacit, explict and codified nature of knowledge. Every tacit knowledge is rooted in the action of an individual, so that it is observable only through the ability that it allows (Polanyi, 1962; 1966; Nonaka, 1991; 1994). The tacit knowledge is recognisable only by the functional point of view, that is by the individual’s ability. The tacit knowledge cannot be described by its owner and can be transferred only by socialisation processes. Instead a knowledge can be considered explicit when the structural, the process and the functional characteristic of the knowledge are defined. In such a state, knowledge can be very accurately described by its owner and can be transferred by a verbal communication processes. The explicit knowledge when resides into individual’s head but is not represented through an information codes can be defined informal knowledge. In our point of view it is considered “informal” each knowledge which can be potentially describe by its owner but it resides in individual’s head. This kind of knowledge is owned in aware way, so that can be formalised by its owner through descriptions based on, e.g. statements set, narrative stories, flow chart diagrams, ecc.. Finally, the codified knowledge has been associated to the set of management and technological procedures which are defined and formalised in the firm’s organisation. A codified knowledge is a knowledge which has been represented through an appropriate symbolic formality. Then all or some knowledge characteristics are known and described through specific information codes.

6. The knowledge codification process Following the cognitive approach an interpretation of knowledge which considers the knowledge as the result of cognitive organism’s empirical process has been provided. In particular, into organisations, knowledge can be generated as the result either of individual cognitive process or social construction process based on relationships between individuals operating within a specific context (Giere, 1996). When knowledge is generated, it generally presents an idiosyncratic nature: it is strictly related to generation context, such it is rooted in the individual’s actions as well as in the relationships between individuals. This characteristic makes difficult to manage knowledge since it can be controlled and manipulated only through human resource management. To make knowledge manageable independently from human actor a representation by a symbolic artifact is necessary. It has already stressed that, according to a dichotomous approach, knowledge can be classified as tacit or explicit. This knowledge to be represented in a specific symbolic artifact needs to be formalised. The process that aims to formalise, i.e. to describe and represent, a knowledge (tacit or explicit) into appropriate codes is a “knowledge codification process”. From a semantic point of view, to codify a knowledge means to put knowledge into a code. Within an organisation the knowledge codification process has two main meanings: to change the knowledge nature from tacit to explicit and to put knowledge, which is 10

already codified, into a new representative format. Both processes aim to make knowledge as usable, accessible and applicable as possible within the organisation. The idea that a better representation of knowledge involves a more effective and efficiency management of knowledge, is at the basis of the knowledge codification process. In fact, to represent knowledge through codes makes possible the implementation of the control, transformation and transfer processes of the knowledge itself. From a conceptual point of view, the knowledge codification process can be defined as the actions set aims to give a structure and to represent into an appropriate informative code the structural (X), the process and the functional (Y) characteristic of knowledge. Instead, from a practical point of view, starting from the proposition that a biunivoc relationship between knowledge and ability, associated to knowledge itself, exists, the knowledge codification process correspond to a formalisation process of the ability. Through knowledge codification process an organisation can achieve one or more of the following goals: •

to improve knowledge transfer process between organisations or organisation’s units;

to make easier knowledge diffusion process within organisation;

to allow a knowledge combination with other knowledge;

to increase the control abilities on organisational knowledge, so that to improve the organisation’s performances;

to make knowledge an organisation property and allow its memorisation;

to make knowledge more accessible;

to improve coordination process;

to support the engineering processes of the organisation;

to allow the definition of intelligence artificial system;

to support the learning organisation;

to improve the product development process.

Then to be worthwhile a knowledge codification process has to be focalised on a specific goal than just making knowledge generally usable, accessible and applicable (Davenport and Prusak, 1998). So the codification process in organisation has to be based on a specific project which has to be defined by organisation’s management. The knowledge codification process involves methodologies both to extract knowledge from human actor’s head, defined by Nonaka as articulation or externalization process (1991; 1994), and to gather and systematise explicit knowledge. Then it is possible to define four main codification processes involving knowledge with different characteristics: externalisation, formalization, systematazation and contextualization. 11

Externalization process. It is the process through which individual’s tacit knowledge, rooted in his/her actions, are extracted. The knowledge nature transformation, from tacit to explicit, is the result of this process. The implementation of this codification process starts from assumption that the human actor owns a specific tacit expertise, is not able to describe his/her knowledge. In fact the tacit knowledge is personal-embodied and its owner is unaware of it. However this kind of knowledge can be examine by means the ability associated to it. So that tacit knowledge, although is not describing by its owner, can be observe by an analyst or group of analysts who can study the ability related to knowledge itself. The development of externalisation process is basically based on two practical phases: a preliminary description of the ability, through the study of the analyst, and a successive analysis of the ability, through a collaboration between the analyst and the owner of the tacit knowledge. The mains objects of the first phase is to provide a preliminary description of knowledge and to make the expert aware of his/her knowledge. During the second phase the description of knowledge is completed. In this phase the analyst can guide the expert by means the use of metaphors and conceptual maps. The externalisation process covers a fundamental role in the improvement of IDs’ performances. In fact, the majority of the organisational and productive process in IDs are based on tacit knowledge. To externalise these knowledge is at the basis of development of innovation and of industrialisation which appear strategic leverages to support the future competitive success of IDs. Formalisation process. It is a representation process of explicit knowledge into appropriate information codes. This process involves all organisational and productive knowledge which are explicit but resides in individuals as informal knowledge. The description of explicit knowledge can be fixed into different documents, e.g. write documents, audio recorded and video clip. The choice of the information codes and of the communication channel is strictly related to the goal of codification process and has to be defined according to the characteristics and objectives of codification project. In the IDs, although most knowledge are tacit, there are also numerous explicit knowledge reside as informal knowledge in the head of skilled worker and, in particular, in technicians and engineers. To formalise these knowledge allow a better understanding of IDs’ processes and to activate improvements of them. Systematisation process. It is a process aiming to gather and organise codified knowledge set. In the organisation it is possible to find a lot of codified knowledge recorded in different kinds of documents, reports, database, projects, graphics, paper notes, etc., but often is difficult to access or retrieve them. The systematisation process allows to give structure, according to specific rules, to this knowledge and to increase their utilisation value. In the firms operating in IDs, it is possible to find codified knowledge but these in most cases are not organised so that it is difficult to access to them. For instance, often skilled workers have a lot of paper notes about their job which could be useful to improve production processes but these knowledge remain into a drawer. So, to systematise codified knowledge within ID firms means, fist of all, to map the existing codified knowledge and subsequently to collect them in an appropriate organised structure, such as a database.


Contextualisation process. It is a process aiming to make contextual codified knowledge exportable into new different context. Often information code used to codify knowledge are strictly related to a specific context. So the codified knowledge are comprehensible and usable only within the context in which have been generated. This kind of codified knowledge is defined contextual knowledge. It is very common in IDs, since it is the result of local learning mechanisms which involve the production of knowledge strictly related to the context where it is generated. The contextualisation process has a great importance in IDs both to support the internationalisation based on the localisation of production units in other geographic area and to allow the combination between specific ID knowledge and other knowledge coming from external environment. Although each codification process presents peculiar characteristics, strictly related to the knowledge properties, they have fundamentally the same goal: to put knowledge in a specific information code useful to perform the business object of the codification process. The codification process can involve abilities of different nature: manufacturing, problem solving, creativity or product development individual abilities. In particular, in ID the manufacturing and product development abilities seems to be the most important. About them, generally in each ID, it is possible to recognise specific “best practice” strictly related to the typology of the product and/or service produced. They are implemented by human actors, who have developed them through different learning mechanisms based in general on trial-and-error process and apprenticeships. Moreover human actors are engaged in an active process of sense making to continuously assess the effectiveness of “best practices” and to improve them. The codification of these best practices is of fundamental importance for IDs’ performances. In fact, it allows a continuous construction and reconstruction maintenance, renovation and improvement- of such practices and also their dissemination -internalisation- in the organisational context and combination with other codified knowledge -industrialisation-.

7. A methodology to support knowledge externalisation While formalisation, systematisation and contextualisation process operate with explicit or already codified knowledge, the externalisation process has to dealt with tacit knowledge. In the following, a methodology to carry out this process is proposed. It has been observed that, from practical point of view, knowledge codification process correspond to a formalisation of the ability associated to knowledge itself. Besides, adopting a process approach any ability can be analysed as a production process characterised by an input variables set, a transformation function and an output product. Starting from these assumptions, the knowledge externalisation process can be decomposed in two conceptual processes. The first correspond to a “scientific analysis” of the ability or production process related to knowledge. The goal of this analysis is to recognise all knowledge’s components and to understand both their intrinsic properties and the relationships between them. The analysis is carried out schematising the ability like a process. So the properties and characteristics both of the input factors vector and of product output have to be analysed as well as the rules set to carry out the process have to be discovered. 13

The second process of knowledge externalisation is a “representation” and a “description” of knowledge/ability’s components. This involve both a schematic representation of the production process of the ability and a detailed description of all its components. The description of the ability’s components can be performed adopting information codes of different nature. Thus, for example, it is possible to use: verbal statements set codified into natural language, axiomatic statements set translatable in artificial language, mathematics algorithms, conceptual maps, pictures, photographs, video clip, etc.. The choice of the information code depends on the goal of the codification process so that it has to be analysed and defined from time to time coherently to organisational needs. An effective and efficiency methodology to support the knowledge externalisation can be the Process Breakdown Structure (PBS). It is based on a decomposition of the production process associated with the ability into sub-processes and elementary activities. It is both a guide to support, according to a top-down approach, the scientific analysis and a schematic way to represent the ability. From practical point of view the PBS is a structured map which represents, as an hierarchical tree, the production process of the ability and provides a detailed description of the ability’s activities. It is constructed by an analyst who observes the production process associated with the ability and provides for it a description. In the next paragraph a case study of knowledge codification in the ID is presented. In particular the use of the PBS is showed as means to carry out the externalisation of some best practices of skilled worker.

8. A case study: knowledge externalisation into sofa industrial district In this section a case example of knowledge externalisation referred to an ID producing leather sofas located in the south-east of Italy, near the towns Bari and Matera, is considered. In particular, the case deals with a specific working phase of the leather sofa production: the sofa assembly. The evolution of the considered district is characterised by some fundamental events. From a typical craftsman phase the ID has grown and has developed competitive capabilities by its better control of specific and specialise production knowledge. This evolution has taken place mostly due to a firm “Natuzzi S.p.a.”, that at present is world leader in leather sofa production. The growth of the leader firm in the international markets raised the need of a transformation of its craftsman production process of sofas into an industrial one, achievable by a knowledge codification. One specific example of knowledge externalisation related to manufacturing process, recently developed by the leader firm is a knowledge codification project focalised on sofa assembly: “The codification of the best practices underpinning the sofa assembly process”. The objective of this process was to codify the know-how of expert upholsterer involved in sofa assembly production. The sofa assembly production process consists in a technical and practical activities set, carried out by a skilled worker, of assembling a set of working in progress. From this production process results the finished product: a specific model of sofa. Thus, for fixed quality characteristics of the working in progress, the quality of the product and in particular of the aesthetic quality of the sofa depends directly on the correct execution of


the assembly process. So that the quality result of production process is strictly related to the know-how developed over time by upholsterer. The industrial district’s leader firm decided to implement a knowledge codification project involving the codification of the upholsterer’s know-how, when it observed that a deep difference of the aesthetic quality of sofas there were between the products carried out by production units and those assembled by prototype room. The difference was due to the experience of worker involved in the production process. In fact in the prototype room there are skilled worker with more then twenty years of experience. Instead in production units there are actually worker with a period of experience under five years. The object of knowledge codification project was to recognise and describe the best practices characterising the expert upholsterer. The declared goals of the project were to improve the control ability of the assembler defining the best methodologies to perform the assembly of sofa and to make easier and speeder to transfer the best practices from expert assembler to worker. Since the most of knowledge to carry out the assembly were tacit it was necessary to implement an externalisation process. To this aim the PBS was used as means to support firstly the scientific analysis of assembly process and secondly the description of the activities set. The knowledge externalisation project was conducted by an analysts team who firstly had watched the expert describing his/her assembly abilities and secondly had discussed with the expert about the first description correcting and enriching them. In the last phase metaphors, conceptual maps and semi-structured questionnaires were used as support instruments. According to a top-down approach the assembly process was decomposed in sub-processes (Figure 4) and each sub-process was further destructed into elementary activities (Figure 5) every detailed described. In particular, the description of the elementary activities was carried out through write documents, reporting a statements set in natural language, cause-effect diagrams, stressing the result of each worker’s action on the quality of the assembly process, photographs, exposing particularly important events of the upholstering process, and video clip, showing specific movement of the expert upholsterers. All these documents are, actually, considered strategic by the management of the firm because of they translate in information codes all behaviour rules necessary to produce a sofa with highest level of aesthetic quality. They are used in the organisation to control the assembly process and both to improve the worker ability in production units and to make more speed the apprenticeship process of new worker. Besides they have provided a lot of suggestions both to develop process and product innovation and to support the engineering of the assembly process. The positive results of the externalisation project have induced the leader firm to define an organisation unit focalised on knowledge management with particular reference to codification processes recognised as the main leverage to activate an organisational knowledge creating cycle.

Covering "Sofa"

Covering "Sofa arms"

Covering "Bottom base + edge"

Covering "Back"

Covering "Back + Arms"

Covering "Back + bottom base + edge"


Figure 4. PBS of the sofa assembly process.

Covering Sofa arms



Preparation of holes for assembling

Wadding positioning

First anchorage

Location holes

Leather covering preparation and control

Draught "Liste"

Predisposition holes

Definition first point to cover

Anchorage "Liste" and quilt

Star covering

Finishing anchorage

Preparation "Liste"

Finishing covering

Figure 5. PBS of the covering “Sofa arms”

9. Conclusion According to the knowledge creation cycle proposed by Nonaka and Takeuchi (1995), the knowledge codification process can be considered both a process for learning organisation and a means to facilitate unlearning process because of it allows to give a shape to knowledge and to destroying or modifying it. In the paper starting from an analysis of the knowledge resource within industrial districts, the role of codification process has been presented. Thus, it is stressed that knowledge codification process can be considered as a means to carry out industrialisation, decentralisation and integration process as well as a means to support the innovative capabilities of the firms operating in industrial districts. Starting from an interpretation of knowledge in accordance with the cognitive approach, knowledge as a technological factor has been analysed stressing the relationships between knowledge and ability associated to knowledge itself. The object of this analysis has been to make knowledge a “tangible” concept useful to understand what is knowledge codification. Then an analysis of knowledge codification has been provided stressing four main codification process. It is important to stress, from management point of view, that our observations on knowledge codification have not considered how and when to implement a codification project. So further researches have to paid attention on these aspects. The attention has been paid on externalisation process considered the more critical codification process, because of it involves a knowledge transformation from tacit to explicit/codified knowledge. A methodology, based on the use of the Process 16

Breakdown Structure, has been proposed as well as an application of it to a production phase -assembly process- of the industrial district producing leather sofas has been presented. Concluding, in our opinion the knowledge codification process, in the actual competitive context, represents a strategic leverage for the competitiveness of IDs and this paper can be considered as a preliminary step to analyse it from a theoretical and empirical point of view, other researches are necessary to better illustrate the knowledge codification characteristics and applications.

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