The Wise Company

How can you turn what people know into action that benefits both business and society? In their framework of knowledge practice, the authors argue that innovation and leadership depend not only on information or analysis but on phronesis — practical wisdom. This form of embodied, moral judgment moves individuals and organizations from mere knowledge creation to wise, value-driven practice.

At the book’s core is the SECI Spiral: Socialization, Externalization, Combination, and Internalization. These four processes convert tacit knowledge into explicit form and then back into embodied skill. Rather than a static cycle, the authors broaden SECI into a three-dimensional spiral — across epistemological modes (tacit↔explicit), ontological levels (individual→team→organization→society), and time. Each spin of the spiral amplifies what is known and embeds it within more people and contexts.

From Knowing to Doing

Knowledge becomes meaningful only when activated. Michael Polanyi’s idea that “we know more than we can tell” defines the challenge: tacit, embodied knowing underlies skilled action but cannot be codified. The book connects Polanyi’s philosophy with Aristotle’s notion of phronesis and modern embodied cognition research. Together, they show that intuition, empathy, and moral sense arise from experience, not algorithms. Organizations must therefore cultivate spaces — called ba — where people interact, observe, and practice so tacit insight can surface.

Continuous Innovation as a Moral Spiral

Cases from Honda, Shimano, and Eisai demonstrate how SECI and phronesis drive long-term renewal. Soichiro Honda’s childhood dream of flight became Michimasa Fujino’s decades-long engineering pursuit, culminating in the HondaJet. Each round of experimentation — piston rings, motorcycles, cars, aircraft — expanded the firm’s knowledge and elevated its purpose. At Shimano, successive learning loops transformed a small workshop into a global innovator in cycling technology. Eisai’s mission to improve dementia care originated from a researcher’s personal experience and grew into corporate philosophy (“human health care”) and public-health initiatives. In each case, tacit experience was shared, articulated, systematized, and enacted across levels.

Leadership as Knowledge Craft

To prevent stagnation, leaders must embody six interwoven practices: judging goodness (making moral decisions), grasping essence (seeing what matters), creating ba (shared contexts for learning), communicating essence (using metaphors and stories), exercising political power (mobilizing stakeholders), and fostering practical wisdom (developing phronesis in others). Each practice transforms personal understanding into collective action. Kazuo Inamori’s revival of Japan Airlines shows how these habits scale: he visited sites personally (socialization), articulated purpose through the JAL Philosophy booklet (externalization), organized education and compa sessions (combination), and embedded new behaviors in daily routines (internalization). The turnaround was a literal SECI Spiral from bankruptcy to profitable rebirth.

From Crisis to Human-Centered Innovation

The book closes by showing how practical wisdom operates under pressure and across technology. After Japan’s 3/11 disaster, leaders like Yakult’s Hiromi Watanabe and Yamato Transport’s Makoto Kigawa made swift, ethical decisions that prioritized human needs over rules or profit. Their actions embodied phronesis: timely, moral judgment grounded in empathy. In the era of digital innovation, the authors propose a human-centered progression (Zero→One, One→Nine, Nine→Ten): creativity begins in human imagination, scales through machine intelligence, and returns to refined human sensitivity. Even in AI and robotics, the final judgment — what is good, beautiful, or just — remains a human responsibility.

Core message

True innovation stems from valuing tacit, moral, embodied knowledge as much as technical skill. When phronesis guides SECI, organizations become not just efficient but wise — continually learning, acting, and serving the common good.

In short, knowledge creation is a living, moral process. If you cultivate tacit knowing, design spaces for dialogue and practice, and lead with practical wisdom, your organization will transform knowledge into action that uplifts people and society.

The book begins with a philosophical and scientific foundation: the most powerful knowledge cannot be fully written down. You act from tacit knowing — the feel of a situation, the skill in your hands, the moral intuition you’ve gained through experience. Michael Polanyi’s famous statement “we know more than we can tell” captures this idea, and the authors trace its lineage through Aristotle's phronesis, Heidegger's phenomenology, and modern neuroscience.

Why Tacit Knowing Matters

Tacit knowing enables perception, judgment, and learning. When you play an instrument, recognize a customer’s mood, or adjust a machine by feel, you translate years of embodied learning into immediate action. That capacity underlies innovation and leadership. Eisai’s researchers, for example, gained breakthrough empathy by spending time with dementia patients — an exercise in embodied perception rather than analytic reasoning.

The Loop of Tacit to Explicit

Polanyi describes a recurring loop: unconscious practice → focused attention → articulation → new practice. This parallels the SECI model’s socialization-to-internalization cycle. You collect experience, focus perception, express your insight through analogy or prototype, and reembed it through training and behavior. Creativity and moral judgment emerge through this loop, not through static data.

Embodied Cognition and Social Brain

Modern neuroscience confirms that cognition is embodied and social. Mirror neurons show we learn by imitation and empathy. The brain’s fairness circuits prove moral sense is physiological, not abstract. Sports and craft examples illustrate this integration: Ichiro Suzuki treated his bat as an extension of his body; the craftsman and the tool become a single perceptual system. This means training, environment, and relationships are inseparable from wisdom.

How to Cultivate Tacit Knowing

• Encourage practice and immersion — learn by doing, observing, and interacting (Honda’s “waigaya” discussions and Eisai’s field immersions).
• Create shared spaces (ba) where tacit insights surface — Shimano’s factory visits, Seven-Eleven’s genba hypotheses.
• Reward empathy and social connection — systems that center customers and communities sustain tacit moral learning.

When you recognize that practical wisdom lives in the body, in social relations, and in routines, you stop trying to manage knowledge as documents and start cultivating it as living practice.

At the heart of the book lies the SECI Spiral — a dynamic model for knowledge creation and amplification. What began as Nonaka’s four-part cycle (Socialization→Externalization→Combination→Internalization) is reimagined as a multidimensional spiral that grows upward through time and organizational levels. The spiral explains how local, embodied experience turns into collective innovation and eventually societal value.

From Horizontal Cycle to Upward Spiral

In its original form, SECI described a horizontal movement between tacit and explicit knowledge. The authors expand it by adding ontology (levels of human groups) and temporality (iterations over years). Each turn incorporates more participants and deeper purpose, making SECI not just procedural but evolutionary. Shimano’s sixty-year history exemplifies this growth: repeated learning rounds in forging, racing, and design raised the company from local metal expertise to world-class innovation.

Phronesis as Vertical Motor

What makes the spiral ascend is phronesis — practical wisdom that prioritizes the common good. Phronesis distinguishes knowledge creation from pure skill. At Eisai, empathy-driven phronesis guided research beyond pharmaceuticals into social engagement. At Japan Airlines, Inamori’s moral compass (“protect employees and society”) mobilized thousands toward a shared ethical aim. Without phronesis, SECI risks turning into sterile information management; with it, knowledge becomes action for human welfare.

Design Principles for Spiraling Knowledge

• Begin socialization at the genba — learning starts where the work happens.
• Make tacit ideas explicit through metaphors, prototypes, and language.
• Combine diverse perspectives in ba to form shared understanding.
• Internalize new insights via disciplined practice so they become habit.

The SECI Spiral reminds you that innovation is not a linear process but a living rhythm, powered by moral intention and sustained by iterative learning.

To make knowledge live, you must create ba — shared contexts where people interact and co-create meaning. Ba is both space and relationship: physical, digital, or mental environments that nurture tacit-exchange and joint practice. It is where intuition becomes articulation and action becomes learning.

Understanding Ba

Ba differs from ordinary meetings. It is voluntary, purposeful, and emergent. Examples range from informal compa drinking sessions at JAL where barriers break down, to Fast Retailing’s massive FR Convention convening thousands to debate strategy. Even digital contexts — like Safecast’s online collaboration mapping radiation after Fukushima — can serve as virtual ba. What matters is shared intent and openness to interaction.

When Ba Works

Successful ba balances freedom with purpose. The Honda “waigaya” meetings foster candid debate leading to innovation; the BALMUDA company picnic inspired The Toaster product design. Timing, honesty, and commitment make these spaces fertile. Leaders set tone by joining informally and modeling humility.

How to Engineer Ba

• Keep participation voluntary but purposeful.
• Design for serendipity — collisions of diverse people and ideas.
• Use timing wisely — crisis or opportunity windows make ba potent.
• Ensure candor — friction generates understanding.

Ba allows tacit knowledge to surface and circulate. If you create open, value-driven spaces, you build adaptive organizations where knowing and doing evolve together.

The authors identify six repeatable leadership practices that convert knowledge into wise organizational action. These habits help leaders orchestrate SECI cycles and embody phronesis in daily decisions. Each practice corresponds to one dimension of knowledge creation and ethical leadership.

1. Judge Goodness

Choose actions for both company and society. Kazuo Inamori prioritized human dignity in JAL’s bankruptcy recovery; Tadashi Yanai framed his retail mission as “democratize clothing.” Moral clarity precedes strategic success.

2. Grasp and Communicate Essence

Learn to see what truly matters. This means balancing analysis and experience—head and hands. Seven-Eleven Japan clerks test hypotheses on the floor, then articulate insights through POS data. Leaders like Honda or BALMUDA founder Terao communicate essential meaning using metaphor and emotion. Aristotle’s trio—logos, pathos, ethos—anchors lasting persuasion.

3. Create Ba

Foster shared contexts. Inamori’s compa sessions became trust incubators. Kyocera’s “compa education” created spaces for honest debate. Ba transforms hierarchy into community.

4. Exercise Political Power

Mobilize stakeholders with wisdom and realism. Political judgment means anticipating responses and bending rules ethically for common good—like Yamato’s crisis logistics or Lawson’s emergency food distribution after 3/11. Wise leaders navigate contradictions instead of choosing sides.

5. Foster Practical Wisdom

Develop phronesis across all levels through mentoring, apprenticeship, and small teams. Amoeba Management, Toyota’s kata, and Fast Retailing’s training programs show how individuals can practice judgment within structured autonomy.

These practices form a dynamic ecosystem of leadership. They help you embed moral intention in action, continually regenerate innovation, and align people around shared purpose.

The book’s case studies reveal how phronesis operates in concrete settings. Each company exemplifies one dimension of knowledge practice. Together, they demonstrate how sustained innovation and moral leadership intertwine.

HondaJet: Dream and Pragmatism

The HondaJet project fuses imagination and engineering discipline. Soichiro Honda’s lifelong dream of flight became reality through Michimasa Fujino’s decades of pragmatic refinement. His small, agile teams and steady conviction turned tacit aspirations into tested knowledge. The result was a global breakthrough and a metaphor for how dreams spiral upward through persistent SECI cycles.

Eisai: Empathy into Enterprise

Hachiro Sugimoto’s care for his mother birthed Aricept and inspired CEO Haruo Naito’s “human health care” philosophy. By linking empathy with organizational systems—RAMs, forums, and collaborations—Eisai embedded moral knowledge into its business model. Practical wisdom turned personal sorrow into social mission.

JAL: Phronetic Turnaround

Kazuo Inamori’s visit-driven leadership and Amoeba Management restored Japan Airlines. His ethical judgment, visible presence, and structured small-group accountability converted tacit disillusionment into explicit unity. The case illustrates how phronesis catalyzes SECI at scale.

Across all examples, transformation followed a pattern: a human insight grounded in experience, articulated as shared purpose, institutionalized through practice, and scaled through culture. That pattern is the SECI Spiral in motion.

Crisis exposes leadership’s ethical core. The 2011 Tohoku disasters revealed what phronesis looks like when time and uncertainty collapse. Leaders grounded in moral clarity act fast and responsibly, creating trust and continuity.

Acting with Moral Clarity

Yakult’s Hiromi Watanabe chose people over profit, releasing cash to displaced workers and using delivery centers as shelters. Yamato Transport’s Makoto Kigawa transformed logistics into relief infrastructure, coordinating donations and shareholder support. Both demonstrated value-driven improvisation—ethical action before formal permission.

Political and Practical Judgment

In disasters and daily operations, leaders blend policy and empathy. They must mobilize networks, negotiate legitimacy, and transcend contradictions (profit vs social good, speed vs safety). Fast Retailing’s discretion about post-crisis lighting policy is an example: Yanai balanced symbolism and community comfort with historical imagination.

Embedding Lessons

Crises should feed the SECI Spiral. When you document moral stories, discuss them internally, and systematize responses, your organization internalizes phronetic behavior. Thus, the next shock finds a prepared, wise culture.

Moral learning under pressure strengthens long-term resilience. Timely, humane choice—guided by empathy and practiced wisdom—turns emergencies into enduring trust.

The final chapter reconceives innovation as a human–machine partnership across three stages: Zero→One→Nine→Ten. It reminds you that technology amplifies, but human imagination originates and perfects.

Stage 1: Zero to One

Innovation begins with human creativity. BALMUDA’s founder baked thousands of bread slices to refine The Toaster’s design—a mix of sensory exploration and purposeful iteration. At this stage, leaders ask "What should be?" not merely "What is possible?"

Stage 2: One to Nine

Digital systems scale human insights. AI, IoT, and robotics increase efficiency and reach. AlphaGo or Babolat’s connected rackets demonstrate machine-led optimization. Organizations build data platforms and algorithms to extend the Spiral into global learning.

Stage 3: Nine to Ten

Human refinement completes the cycle. Aesthetic judgment, empathy, and ethics turn utilitarian prototypes into lasting value. Lexus’s design ethos—mechanical mastery plus sensory quality—represents this fusion of digital precision and human sensibility.

Human Role Endures

Neuroscience and creativity research show that people excel in imagining counterfactuals and future ideals. Machines can process patterns, but only humans discern purpose. The authors urge leaders to blend analog heart with digital muscle—to design technology that serves, not replaces, human wisdom.

Innovation ultimately spirals back to its moral source: phronetic human imagination that aims for societal goodness. Keep people at the center, and technology becomes an amplifier of wisdom rather than a master of it.