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An organization possesses three kinds of knowledge that are essential for its performance and innovation: tacit knowledge, explicit knowledge and cultural knowledge. Tacit knowledge is the personal knowledge that is acquired through extended periods of experiencing and doing a task, during which the individual develops a feel for and a capacity to make intuitive judgements about the successful execution of the activity. Tacit knowledge is often difficult to articulate or transfer to others, as it is embedded in the individual's skills, habits, and perceptions. Explicit knowledge is knowledge that is expressed formally using a system of symbols, and may be object-based or rule-based. Knowledge is object-based when it is represented using strings of symbols (documents, software code), or is embodied in physical entities (equipment, substances). Object-based knowledge can be easily stored, transmitted, and accessed by others. Explicit knowledge is rule-based when the knowledge is codified into rules, routines, or operating procedures that guide the actions and decisions of the organization. Rule-based knowledge can be standardized, replicated, and enforced across the organization. Cultural knowledge consists of the beliefs an organization holds to be true based on experience, observation, reflection about itself and its environment. Over time, an organization develops shared beliefs about the nature of its main business, core capabilities, markets, competitors, and so on. These beliefs then form the criteria for judging and selecting alternatives and new ideas, and for evaluating projects and proposals. In this way an organization uses its cultural knowledge to answer questions such as 'What kind of an organization are we?' 'What knowledge would be valuable to the organization?' and 'What knowledge would be worth pursuing?' Cultural knowledge reflects the identity, values, and vision of the organization. Organizations continuously create new knowledge by converting between the personal, tacit knowledge of individuals who develop creative insight, and the shared, explicit knowledge by which the organization develops new products and innovations (Nonaka & Takeuchi, 1995).

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The process of creating new knowledge involves four modes of conversion between tacit and explicit knowledge: socialization, externalization, combination, and internalization. Socialization is the process of sharing tacit knowledge among individuals through observation, imitation, and practice. Socialization enables individuals to acquire tacit knowledge from others without using language or symbols. Externalization is the process of articulating tacit knowledge into explicit knowledge using metaphors, analogies, concepts, or models. Externalization enables individuals to communicate their tacit knowledge to others and make it available for collective use. Combination is the process of integrating different pieces of explicit knowledge into a new system of explicit knowledge. Combination enables individuals to reconfigure existing explicit knowledge and create new knowledge. Internalization is the process of embodying explicit knowledge into tacit knowledge through reflection and action. Internalization enables individuals to learn from explicit knowledge and apply it to their own contexts.

The four modes of knowledge conversion interact with each other in a continuous spiral of knowledge creation. The spiral starts from the socialization of tacit knowledge among individuals who share a common field of experience. Through externalization, the shared tacit knowledge is converted into explicit knowledge that can be disseminated and accumulated by the organization. Through combination, the explicit knowledge is reorganized and synthesized into more complex and systematic explicit knowledge that can be applied to various situations. Through internalization, the explicit knowledge is assimilated and incorporated into the tacit knowledge of individuals who can use it to generate new insights and innovations. The spiral then moves to a higher level of abstraction and complexity as the new tacit knowledge is shared and converted again through socialization. The spiral of knowledge creation expands as it involves more individuals, groups, and organizations across different contexts and domains. e0e6b7cb5c