Sensemaking,KnowledgeCreation,andDecisionMaking:Organizational

KnowingasEmergentStrategy
ChunWeiChoo
FacultyofInformationStudies
UniversityofToronto
ChaptertoappearinStrategicManagementofIntellectualCapitalandOrganizational
Knowledge,eds.CWChooandNBontis,OxfordUnivPress,2001.
Thischapterintroducestheperspectiveofstrategyastheoutcomeoforganizationalsensemaking,
knowledgecreating,anddecisionmaking.Inthefirstthreesections,weexaminetheprocessesby
whichanorganizationconstructsmeaning,createsknowledge,andmakesdecisionsthatdrive
patternsofaction.Theensuingsectionsshowhowthethreeprocessesareinterconnectedtoform
cyclesoflearningandadaptation.Throughthesecycles,theorganizationtracesoutagrowth
trajectorythatdefinesitsstrategicposition.
Anorganizationprocessesinformationtomakesenseofitsenvironment,tocreatenewknowledge,
andtomakedecisions(Choo1998).Sensemakingconstructsthesharedmeaningsthatdefinethe
organization'spurposeandframetheperceptionofproblemsoropportunitiesthattheorganization
needstoworkon.Workingwithproblemsandopportunitiesbecomeoccasionsforcreating
knowledgeandmakingdecisions.Anorganizationpossessesthreetypesofknowledge:tacit
knowledgeintheexperienceandexpertiseofindividualsexplicitknowledgecodifiedasartifacts,
rulesandroutinesandculturalknowledgeheldasassumptions,beliefs,andvalues.Thecreationof
newknowledgeinvolvestheconversion,sharing,andcombinationofallthreetypesofknowledge.
Theresultsofknowledgecreationareinnovationsorextensionsoforganizationalcapabilities.
Whereasnewknowledgerepresentsapotentialforaction,decisionmakingtransformsthispotential
intoacommitmenttoact.Decisionmakingisstructuredbyrulesandroutines,andguidedby
preferencesthatarebasedoninterpretationsoforganizationalpurposeandpriorities.Wherenew
capabilitiesorinnovationsbecomeavailable,theyintroducenewalternativesaswellasnew
uncertainties.Decisionmakingthenselectscoursesofactionthatareexpectedtoperformwellgiven
theunderstandingofgoalsandtheconditionsofuncertainty.
Thus,thecapacitytodeveloporganizationalknowledgeisdistributedoveranetworkofinformation
processesandparticipants.Ratherthanbeingcentrallycontrolledandcoordinated,thecapacityto
developknowledgeemergesfromthecomplex,unpredictablepatchworkofprocessesinwhich
participantsenactandnegotiatetheirownmeaningsofwhatisgoingonstumbleuponandwrestle
withnewknowledgetomakeitworkandcreativelyimproviseandbendrulesandroutinestosolve
toughproblems.
Sensemaking
Weick(1979,1995)presentsamodeloforganizationalsensemakingthatisbasedona
conceptualizationoforganizationsaslooselycoupledsystemsinwhichindividualparticipants
havegreatlatitudeininterpretingandimplementingdirections.Hestressestheautonomyof
individualsandtheloosenessoftherelationslinkingindividualsinanorganization.Thepurposeof
organizationalinformationprocessingistoreducetheequivocalityofinformationaboutthe
environment.Weicksummarizeshisorganizingmodelasfollows:
Thecentralargumentisthatanyorganizationisthewayitrunsthroughtheprocessesof
organizing...Thismeansthatwemustdefineorganizationintermsoforganizing.
Organizingconsistsoftheresolvingofequivocalityinanenactedenvironmentby
meansofinterlockedbehaviorsembeddedinconditionallyrelatedprocesses.To
summarizethesecomponentsinalesstersemanner,organizingisdirectedtoward
informationprocessingingeneral,andmorespecifically,towardremovingequivocality

frominformationalinputs.(Weick1979:9091)
Weick(1995)describeshowpeopleenactoractivelyconstructtheenvironmentthattheyattendto
bybracketingexperience,andbycreatingnewfeaturesintheenvironment.Sensemakingisinduced
bychangesintheenvironmentthatcreatediscontinuityintheflowofexperienceengagingthe
peopleandactivitiesofanorganization(Weick1979).Thesediscontinuitiesconstitutetherawdata
thathavetobemadesenseof.Thesensemakingrecipeistointerprettheenvironmentthrough
connectedsequencesofenactment,selection,andretention(Weick1979).Inenactment,people
activelyconstructtheenvironmentswhichtheyattendtobybracketing,rearranging,andlabelling
portionsoftheexperience,therebyconvertingrawdatafromtheenvironmentintoequivocaldatato
beinterpreted.Inselection,peoplechoosemeaningsthatcanbeimposedontheequivocaldataby
overlayingpastinterpretationsastemplatestothecurrentexperience.Selectionproducesanenacted
environmentthatprovidescauseeffectexplanationsofwhatisgoingon.Inretention,the
organizationstorestheproductsofsuccessfulsensemaking(enactedormeaningfulinterpretations)
sothattheymayberetrievedinthefuture.
Organizationalsensemakingcanbedrivenbybeliefsorbyactions(Weick1995).Inbeliefdriven
processes,peoplestartfromaninitialsetofbeliefsthataresufficientlyclearandplausible,anduse
themasnodestoconnectmoreandmoreinformationintolargerstructuresofmeaning.Peoplemay
usebeliefsasexpectationstoguidethechoiceofplausibleinterpretations,ortheymayargueabout
beliefsandtheirrelevancewhenthesebeliefsconflictwithcurrentinformation.Inactiondriven
processes,peoplestartfromtheiractionsandgrowtheirstructuresofmeaningaroundthem,
modifyingthestructuresinordertogivesignificancetothoseactions.Peoplemaycreatemeaningto
justifyactionsthattheyarealreadycommittedto,ortheymaycreatemeaningtoexplainactionsthat
havebeentakentomanipulatetheenvironment.

Fig.1.Sensemaking

AninterestingcorollaryofWeicksmodelisthatorganizationalactionoftenoccursfirst,andisthen
interpretedorgivenmeaning.Theconnectionbetweenactionandplanningisthustopsyturvy:
Ourviewofplanningisthatitcanbestbeunderstoodasthinkinginthefutureperfect
tense.Itisnttheplanthatgivescoherencetoactions...Itisthereflectiveglance,notthe
planperse,thatpermitstheacttobeaccomplishedinanorderlyway.Aplanworks
becauseitcanbereferredbacktoanalogousactionsinthepast,notbecauseit
accuratelyanticipatesfuturecontingencies...Actionsneverperformedcanhardlybe
mademeaningful,sinceonehasnoideawhattheyare.Theysimplyareperformedand
thenmadesensibletheythenappeartobeunderthecontroloftheplan.(Weick
1979:102)
WhileWeickemphasizesretrospectivesensemaking,GioiaandMehra(1996)havesuggestedan
importantroleforprospectivesensemaking:"Ifretrospectivesensemakingismakingsenseofthe
past,prospectivesensemakingisanattempttomakesenseforthefuture.Retrospectivesense
makingistargetedateventsthathavetranspiredprospectivesensemakingisaimedatcreating

meaningfulopportunitiesforthefuture.Inaloosesense,itisanattempttostructurethefutureby
imaginingsomedesirable(albeitilldefined)state.Itisameansofpropellingourselvesforwardone
thatweconceptualizeinthepresentbutrealizeinthefuture."Sensemakinginstrategywouldthen
includebothpropsective"sensegiving"thatarticulatesacollectivevisionfortheorganization,and
retrospective"sensediscovering"thatnoticesandselectsactionsandoutcomesthatworkwellfor
theorganization.(Mintzbergetal,reprintedinthisvolume,presentasimilarargumentwhenthey
compareWeick'sretrospectivesensemakingwiththeirnotionofstrategyasbeingpartlydeliberate,
partlyemergent.)
KnowledgeCreating
Anorganizationhasthreekindsofknowledge:tacitknowledgeintheexpertiseandexperienceof
individualsexplicitorrulebasedknowledgeinartifacts,rulesandroutinesandculturalknowledge
intheassumptionsandbeliefsusedbymemberstoassignvalueandsignificancetonewinformation
orknowledge.Knowledgecreatingisprecipitatedbytherecognitionofgapsintheorganization's
existingknowledge.Suchknowledgegapscanstandinthewayofsolvingaproblem,developinga
newproduct,ortakingadvantageofanopportunity.Organizationsthencreatenewknowledgeby
convertingbetweentacitandexplicitknowledgeintegratingandcombiningknowledgeand
acquiringortransferringknowledgeacrossboundaries.

Fig.2.KnowledgeCreating

Inknowledgeconversion(NonakaandTakeuchi1995,Nonaka1994,reprintedthisvolume),the
organizationcontinuouslycreatesnewknowledgebyconvertingbetweenthepersonal,tacit
knowledgeofindividualswhodevelopcreativeinsight,andtheshared,explicitknowledgebywhich
theorganizationdevelopsnewproductsandinnovations.Tacitknowledgeissharedandexternalized
throughdialoguethatusesmetaphorsandanalogies.Newconceptsarecreated,andtheconceptsare
justifiedandevaluatedaccordingtoitsfitwithorganizationalintention.Conceptsaretestedand
elaboratedbybuildingarchetypesorprototypes.Finally,conceptswhichhavebeencreated,justified
andmodeledaremovedtootherlevelsoftheorganizatontogeneratenewcyclesofknowledge
creation.
Grant(1996,chapterthisvolume)seesorganizationalcapabilityastheoutcomeofknowledge
integrationtheresultoftheorganizationsabilitytocoordinateandintegratetheknowledgeof
manyindividualspecialists.InGrantsview,knowledgecreationisanindividualactivity,andthis
meansthattheprimaryroleoftheorganizationistoapplyknowledgeratherthantocreateit.More
specifically,theorganizationexistsasaninstitutionthat"cancreateconditionsunderwhichmultiple
individualscanintegratetheirspecialistknowledge"(Grant1996,p.112).Thefundamentaltaskof
theorganizationistointegratetheknowledgeandcoordinatetheeffortsofitsmanyspecialized
individuals.Thekeytoefficientknowledgeintegrationistoestablishmechanismsthatcombine
efficiencyinknowledgecreation(whichrequiresspecialization),andefficiencyinknowledge
deployment(whichrequiresintegratingmanytypesofknowledge).
Grantidentifiesfourmechanismsforintegratingspecializedknowledgethateconomizeon
communicationandcoordination:rulesanddirectivessequencingroutinesandgroupproblem
solvinganddecisionmaking.Rulesanddirectivesregulatetheactionsbetweenindividuals,andcan

provideameansbywhichtacitknowledgeisconvertedintoreadilycomprehensibleexplicit
knowledge.Sequencingorganizesproductionactivitiesinatimesequencesothateachspecialists
inputoccursindependentlyinapreassignedtimeslot.Routinescansupportrelativelycomplex
patternsofbehaviorsandinteractionsbetweenindividualswithouttheneedtospecifyrulesand
directives.Groupproblemsolvinganddecisionmaking,incontrastwiththeothermechanisms,rely
onhighlevelsofcommunicationandnonstandardcoordinationmethodstodealwithproblemsthat
arehighintaskcomplexityandtaskuncertainty.Allfourmechanismsdependupontheexistenceof
commonknowledgefortheiroperation.Commonknowledgemaytaketheformof:acommon
languagebetweenorganizationalmemberscommonalityintheindividualsspecializedknowledge
sharedmeaningsandunderstandingsbetweenindividualsandawarenessandrecognitionofthe
individualsknowledgedomains(Grant1996,thisvolume).
Anorganizationmaybeperceivedasarepositoryofcapabilities,capabilitiesthatare"determinedby
thesocialknowledgeembeddedinenduringindividualrelationshipsstructuredbyorganizing
principles"(KogutandZander1992,p.396).Theseorganizingprinciplesestablishacommon
languageandsetofmechanismsthroughwhichpeopleinanorganizationcooperate,shareand
transferknowledge.Theyenablesetsoffunctionalexpertisetobecommunicatedandcombinedso
thattheorganizationasawholecanexistasintegratedcommunities:
Creatingnewknowledgedoesnotoccurinabstractionfromcurrentabilities.Rather,
newlearning,suchasinnovations,areproductsofafirmscombinativecapabilitiesto
generatenewapplicationsfromexistingknowledge.Bycombinativecapabilities,we
meantheintersectionofthecapabilityofthefirmtoexploititsknowledgeandthe
unexploredpotentialofthetechnology...
(KogutandZander1992)
WhileKogutandZander(1992),Grant(1996),andothersregardorganizationsasinstitutionsfor
combiningandintegratingknowledge,Tsoukas(1996)suggeststhattheremaybelimitstotheextent
thatorganizationalknowledgemaybeintegrated.Tsoukasviewsorganizationsas"distributed
knowledgesystemsinastrongsense:theyaredecenteredsystems.Afirmsknowledgecannotbe
surveyedasawhole:itisnotselfcontaineditisinherentlyindeterminateandcontinually
reconfiguring"(Tsoukas1996,p.13).Theutilizationoforganizationalknowledgecannotbeknown
byasingleagentnosingleindividualoragentcanfullyspecifyinadvancewhatkindofknowledge
isgoingtoberelevant,whenandwhere.Thereisno"mastercontrolroom"whereknowledgemay
becentrallymanaged:
Organizationsareseenasbeinginconstantflux,outofwhichthepotentialforthe
emergenceofnovelpracticesisneverexhaustedhumanactionisinherentlycreative.
Organizationalmembersdofollowrulesbuthowtheydosoisaninescapably
contingentcumlocalmatter.Inorganizations,bothruleboundactionandnoveltyare
present,asarecontinuityandchange,regularityandcreativity.Management,therefore,
canbeseenasanopenendedprocessofcoordinatingpurposefulindividuals,whose
actionsstemfromapplyingtheiruniqueinterpretationstothelocalcircumstances
confrontingthem....Anecessaryconditionforthistohappenistoappreciatethe
characterofafirmasadiscursivepractice:aformoflife,acommunity,inwhich
individualscometoshareanunarticulatedbackgroundofcommonunderstandings.
Sustainingadiscursivepracticeisjustasimportantasfindingwaysofintegrating
distributedknowledge.(Tsoukas1996,p.2223)
Knowledgetransferacrossorganizationalboundariescaninvolvetacit,explicit,andcultural
knowledgetovaryingdegrees.Inasmallnumberofcases,thetransferislargelyaccomplished
throughamovementofexplicitknowledge(e.g.analgorithm,aproteinsequence).Transfersofsuch
welldefinedpackagesofcodifiedknowledgetypicallyrequiresasubstantialamountofcollateral
knowledgeinthereceivingorganizationtodecodeandapplythenewinformation.Inalarger
numberofcases,thetransferofexplicitknowledgeisaccompaniedandfacilitatedbyhumanexperts
fromthesourceorganization.Expertsinterpretthemeaningofthenewinformation,anddealwith
thedetailedquestionsarisingfromtryingtousethenewinformationinitsnewsetting.Thus,tacit

knowledgeisnecessarytoassimilateandapplynewexplicitknowledgeeffectively.Thereare
importantcaseswhenthemovementofexplicitknowledgeevenwhenaccompaniedbytacit
knowledgeisnotenough:culturalknowledgeisalsonecessary.Thisisespeciallysowhen
organizationsaretryingtolearnnewpracticesorsystemsofworkthatarewovenintoorganizational
networksofroles,relationships,andsharedmeanings.ConsiderToyotasproductionsystem,an
exampleofatightintegrationoftacit,explicit,andculturalknowledge:
Toyotasknowledgeofhowtomakecarsliesembeddedinhighlyspecializedsocialand
organizationalrelationshipsthathaveevolvedthroughdecadesofcommoneffort.It
restsinroutines,informationflows,waysofmakingdecisions,sharedattitudesand
expectations,andspecializedknowledgethatToyotamanagers,workers,suppliersand
purchasingagents,andothershaveaboutdifferentaspectsoftheirbusiness,abouteach
other,andabouthowtheycanallworktogether.(Badaracco1991,p.87)
WhenGeneralMotorswantedtolearntheToyotaproductionsystem,itestablishedtheNUMMI
(NewUnitedMotorManufacturing,Inc.)plantin1984asajointventurewithToyotainorderto
facilitatethelearningofintimate,embeddedknowledge.NUMMItookoveraGeneralMotors
facilityatFremont,California.WorkatNUMMIwasorganizedbasedontheToyotaslean
productionsystemthatseekstoutilizelabor,materials,andfacilitiesasefficientlyaspossible.
AlthoughmuchhasbeenpublishedaboutToyotasproductionsystem,withouttheNUMMI
experience,GMmighthavepermanentlymissedtheessenceofToyotasmanagementprocess.Co
practicetolearnthesystemwasnecessarybecausethecapabilitieswere"tacitknowhowinaction,
embeddedorganizationally,systemicininteractionandcultivatedthroughlearningbydoing"(Doz
andHamel1997,p.570).Badaracco(1991)concludedthatthroughNUMMI,GMhadthechanceto
learnfirsthandToyotascollaborativeapproachtoworkerandsupplierrelationsips,justintime
inventorymanagement,andefficientplantoperations.ForToyota,theprojecthelpeditlearnabout
managingUSworkers,suppliersandlogistics,andaboutcooperatingwiththeunionsandthestate
andlocalgovernments.
ScoresofGMmanagersandthousandsofworkershaveworkedatNUMMIoratleast
visitedtheoperation.ItwouldhavebeenmuchsimplerforGMtobuyfromToyotathe
manualHowToCreatetheToyotaProductionSystem,butthedocumentdoesnotexist
and,inafundamentalsense,couldnotbewritten.MuchofwhatToyotaknowsresides
inroutines,companyculture,andlongestablishedworkingrelationshipsintheToyota
Group.(Badaracco1991,p.100)
Manyfirmsformalliancesforthepurposeofsharingandtransferringknowledge.Onlyrecentlyhas
researchbegantoexaminetheconditionsandprocessesbywhichknowledgeisexchangedin
multifirmarrangements(Fischeretal,thisvolume).Onefindingisthatthetacitnessofthe
knowledgecaninfluenceknowledgesharingoutcomes.Acriticalfactorinafirm'sabilityto
assimilateandutilizenewknowledgeisits"absorptivecapacity"(CohenandLevinthal1990),which
isafunctionofthelevelofpriorrelatedknowledgethatthefirmalreadypossesses.Theabsorptive
capacityargumenthasbeenbroadenedtoincludenotonlytechnicalsimilarities(experieceinrelated
technicalareasandcomplementaryassets)butalsonontechnicalsimilarities(organizational
structures,compensationpractices).Theexchangeofknowledgebetweenorganizationsinvolves
bothbringinginexternalknowledgeandlettingout(intendedlyorinadvertently)internal
knowledge.Thus,Appleyard(1996,alsothisvolume)andMatusik(thisvolume)examinethecosts
andbenefitsofinterfirmknowledgesharing.Costsareincurredasaresultofpotentialknowledge
losses,protectingintellectualproperty,partnerselection,declineinprofitability,andtransaction
costsoftheknowledgetransfer.Wemaygeneralizethattherearetwocategoriesofcostsassociated
withinterfirmknowledgetransfer:thoseduetothelossofknowledgebythefocalfirm,andthose
duetomanagingtheprocessofknowledgetransfer.
DecisionMaking
Completelyrationaldecisionmakinginvolvesidentifyingalternatives,projectingtheprobabilities
andoutcomesofalternatives,andevaluatingtheoutcomesaccordingtoknownpreferences.These

informationgatheringandinformationprocessingrequirementsarebeyondthecapabilitiesofany
organization.Inpractice,organizationaldecisionmakingdepartsfromtherationalidealinimportant
waysdependingonthecontingenciesofthedecisioncontext.Atleasttwofeaturesofthe
environmentofdecisionmakingwillbesignificant:(1)thestructureandclarityoforganizational
goalsthatimpingeonpreferencesandchoices,and(2)theuncertaintyoramountofinformation
aboutthemethodsandprocessesbywhichthegoalsaretobeattained.Inaspecificdecision
situation,goalsmaybefuzzy,andorganizationalgroupsmaydisagreeabouttheirrelative
importance.Thereisthengoalambiguityorconflictaboutwhatorganizationalgoalstopursue.
Moreover,uncertaintymayarisebecausethespecificproblemiscomplex,andthereisnotenough
informationaboutcauseeffectrelationshipsorappropriateapproachestobeconsidered.Methods
availabletoaccomplishataskarenotimmediatelyevident,andthesearchspaceforsolutionsisill
defined.Thereisthereforetechnicalorproceduraluncertaintyabouthowgoalsaretobeachieved.

Fig.3FourModesofOrganizationalDecisionMaking

Figure3positionsfourmodesofdecisionmakingalongthetwodimensionsofgoal
ambiguity/conflictandtechnical/proceduraluncertaintythatcharacterizeadecisionsituation.Inthe
boundedlyrationalmode,whengoalandproceduralclarityarebothhigh,choiceisguidedby
performanceprograms(MarchandSimon1993/1958).Thus,peopleinorganizationsadopta
numberofreductioniststrategieswhichallowthemtosimplifytheirrepresentationoftheproblem
situationbyselectivelyincludingthemostsalientfeaturesratherthanattemptingtomodelthe
objectiverealityinallitscomplexity(MarchandSimon1993/1958).Duringsearch,theysatisfice
ratherthanmaximize,thatis,theychooseanalternativethatexceedssomecriteriaratherthanthe
bestalternativeandtheyfollowactionprogramsorroutinesthatsimplifythedecisionmaking
processbyreducingtheneedforsearch,problemsolvingorchoice.
Intheprocessmode(Mintzberg,RaisinghaniandThort1976),whenstrategicgoalsareclearbut
themethodstoattainthemarenot,decisionmakingbecomesaprocessdividedintothreephases.
TheIdentificationphaserecognizestheneedfordecisionanddevelopsanunderstandingofthe
decisionissues.TheDevelopmentphaseactivatessearchanddesignroutinestodeveloponeormore
solutionstoaddressaproblem,crisis,oropportunity.TheSelectionphaseevaluatesthealternatives
andchoosesasolutionforcommitmenttoaction.Theentireprocessishighlydynamic,withmany
factorschangingthetempoanddirectionofthedecisionprocess:"Theydelayit,stopit,restartit.
Theycauseittospeedup,tobranchtoanewphase,tocyclewithinoneorbetweentwophases,and
torecyclebacktoanearlierpointintheprocess...theprocessisdynamic,operatinginanopen
systemwhereitissubjectedtointerferences,feedbackloops,deadends,andotherfactors."
(Mintzbergetal1976,263).
Inthepoliticalmode(Allison1971,AllisonandZelikow1999),goalsarecontestedbyinterest
groupsbutproceduralcertaintyishighwithinthegroups:eachgroupbelievesthatitspreferred
alternativeisbestfortheorganization.Decisionsandactionsaretheresultsofthebargainingamong
playerspursuingtheirowninterestsandmanipulatingtheiravailableinstrumentsofinfluence.
Politicaldecisionmakingmaythenbelikenedtogameplaying.Playerstakeuppositions,stands,

andinfluence,andmaketheirmovesaccordingtorulesandtheirbargainingstrengths.Inthe
politicalmodel,actionsanddecisionsareproducedaspoliticalresultantspoliticalbecause
decisionsandactionsemergefromthebargainingbyindividualmembersalongregularizedaction
channelsandresultantsbecausedecisionsandactionsareoutcomesofthecompromise,conflict,
andconfusionoftheplayerswithdiverseinterestsandunequalinfluence(Allison1971,Allisonand
Zelikow1999).
Intheanarchicmode(Cohen,MarchandOlsen1972),whengoalandproceduraluncertaintyare
bothhigh,decisionsituationsconsistofrelativelyindependentstreamsofproblems,solutions,
participants,andchoiceopportunitiesarrivingandleaving.Adecisionthenhappenswhenproblems,
solutions,participants,andchoicescoincide.Whentheydo,solutionsareattachedtoproblems,and
problemstochoicesbyparticipantswhohappentohavethetimeandenergytodoit.Which
solutionsareattachedtowhichproblemsisamatterofchanceandtiming,dependingonwhich
participantswithwhatgoalshappentobeonthescene,whenthesolutionsandproblemsareentered,
aswellas"themixofchoicesavailableatanyonetime,themixofproblemsthathaveaccesstothe
organization,themixofsolutionslookingforproblems,andoutsidedemandsonthedecision
makers."(Cohen,MarchandOlsen1972,p.16)

Fig.4DecisionMaking

Tobeeffective,organizationsneedtolearnthefullrepertoireofdecisionmakingmodes.Different
choicesituationscallfordifferentdecisionapproaches.The(boundedly)rationalmodewould
economizetimeandeffortbyinvokingstoredrulesandroutinesforfamiliar,wellstructured
situations.Thedynamismanditerativenessoftheprocessmodewouldhelpsearchesordesignsfor
newsolutionsinunfamiliarbutconsequentialsituations.Thepoliticalmodeallowsalternativepoints
ofviewtobeheardandmaypreventcomplacencyorparochialism.Theanarchicmodeisnot
dysfunctional,butawayfororganizationstodiscovergoalsandfindsolutionsinunfamiliar,unclear
situations.
TheOrganizationalKnowingCycle
Informationflowscontinuouslybetweensensemaking,knowledgecreating,anddecisionmaking,so
thattheoutcomeofinformationuseinonemodeprovidestheelaboratedcontextandtheexpanded
resourcesforinformationuseintheothermodes,asshowninFigure5.
Throughsensemaking,organizationalmembersenactandnegotiatebeliefsandinterpretationsto
constructsharedmeaningsandcommongoals.Sharedmeaningsandpurpose(Fig.5)arethe
outcomeofsensemaking,andtheysettheframeworkforexplainingobservedreality,andfor
determiningsaliencyandappropriateness.Sharedmeaningsandpurposehelptoarticulateashared
organizationalagenda,asetofissuesthatpeopleintheorganizationagreeonasbeingimportantto
thewellbeingoftheorganization.Whiletheymaynotagreeaboutthecontentofaparticularissue,
andmayadoptdiversepositionsonhowitshouldberesolved,neverthelessthereiscollective
recognitionthattheseissuesaresalienttotheorganization.Sharedmeaningsandpurposealsohelp
todefineacollectiveorganizationalidentity.Defininganorganizationalidentityestablishesnorms
andexpectationsaboutthepropriety,accountability,andlegitimacyoftheorganizationschoicesand
behaviors.Aframeworkofsharedmeaningsandpurposeisthereforeusedbyorganizational
memberstoassessconsequentialityandappropriateness,andtoreduceinformationambiguityand
uncertaintytoalevelthatenablesdialogue,choiceandactionmaking.Wheremessagesfromthe

externalenvironmentarehighlyequivocal,sharedmeaningsreduceambiguitybyhelpingmembers
toselectplausibleinterpretations.Wheremessagesfromtheexternalenvironmentarehighly
incomplete,sharedmeaningsreduceuncertaintybysupplyingassumptionsandexpectationstofillin
thevoids.Sharedmeaningsneedtobecontinuouslyupdatedagainstneweventsandconditions.By
allowingambiguityanddiversityininterpretations,anorganizationcanconstantlymonitorits
sharedmeaningsagainsttheenvironmenttoensurethattheyarestillvalid.
Withintheframeworkofitsconstructedmeaning,agenda,andidentity,theorganizationexploits
currentspecializationsordevelopsnewcapabilitiesinordertomovetowardsitsvisionandgoals.
Movementmaybeblockedbygapsintheknowledgeneededtobridgemeaningandaction.When
theorganizationexperiencesgapsinitsexistingknowledgeorlimitationsinitscurrentcapabilities,
itinitiatesknowledgeseekingandcreating,setwithinparametersderivedfromaninterpretationof
theorganizationsgoals,agendas,andpriorities.Organizationalmembersindividuallyand
collectivelyfabricatenewknowledgebyconverting,sharingandsynthesizingtheirtacitandexplicit
knowledge,aswellasbycrosslinkingknowledgefromexternalindividuals,groupsandinstitutions.
Theoutcomeofknowledgecreatingarenewcapabilitiesandinnovations(Fig.5)thatenhance
existingcompetenciesorbuildnewonesgeneratenewproducts,services,orprocessesorexpand
therepertoryofviableorganizationalresponses.Thevalueofnewknowledgeisassessedlocallyby
itsabilitytosolvetheproblemathand,aswellasgenerallybyitsabilitytoenhancethe
organizationscapabilitiesinthelongrun.Newknowledgeenablesnewformsofactionbutalso
introducesnewformsofuncertainty.Therisksandbenefitsofuntestedinnovationsandunpractised
capabilitiesarecomparedandevaluatedbyinvokingrulesandpreferencesintheprocessof
organizationaldecisionmaking.

Fig.5.TheOrganizationalKnowingCycle

Sharedmeaningsandpurposes,aswellasnewknowledgeandcapabilitiesconvergeondecision
makingastheactivityleadingtotheselectionandinitiationofaction.Sharedmeanings,agendasand
identitiesselectthepremises,rules,androutinesthatstructuredecisionmaking.Newknowledgeand
capabilitiesmakepossiblenewalternativesandoutcomes,expandingtherangeofavailable
organizationalresponses.Bystructuringchoicebehaviorthroughrolesandscripts,rulesand
routines,theorganizationsimplifiesdecisionmaking,codifiesandtransmitspastlearning,and
proclaimscompetenceandaccountability.Rulesandroutinesspecifyrationalcriteriaforthe
evaluationofalternatives,legitimatemethodsfortheallocationofresources,andobjective
conditionsfordistinguishingbetweennormalstatesandnovelsituationsthatmaynecessitatethe
searchfornewrules.
Overtime,theorganizationhaslearnedandcodifiedalargenumberofrulesandroutines,sothat

choosingwhichrulestoactivateforaspecificdecisionsituationisitselfproblematic.Shared
meaningsandunderstandingsaboutthenatureandneedsofaparticularsituationareusedtoguide
ruleactivation.Sharedinterpretationshelpselectwhichrulestoapplybyansweringthequestions
"Whatkindofsituationisthis?"and"Whatrulesdowehavefordealingwiththistypeofsituation?"
Sharedinterpretationsmayalsoselectrulesaccordingtothecriterionofappropriateness"What
kindoforganizationarewe?Whatwouldbeappropriatebehaviorforanorganizationlikeoursina
situationlikethisone?"(Marchetal2000)Sometimessharedinterpretationsindicatethatthe
situationisnovel,wherenoneofthelearnedrulesseemtoapply.Whenrulesbreakdown,the
organizationattemptstomakenewmeaningintimetoinitiateaction,effectivelyprototypingnew
rulestopromptchoicemaking.Theendresultofthisinteractionbetweensharedmeaning(in
interpretationsandunderstandings)andsharedlearning(inrulesandroutines)istheexecutionofa
patternofactionsthatallowstheorganizationtomovetowardscurrentgoals,whileatthesametime
adaptingtochangedconditionsintheenvironment.Inthissense,theoutcomeofdecisionmakingis
behaviorthatisbothgoaldirectedandadaptive.
Whileeachorganizationadjustsitsbehaviortoperceivedchangesintheenvironment,itsresponses
aredeflectedanddiffractedbytheconcurrentactionsofotheractorsthatparticipateinthesame
arena.Thuseachorganizationisreactingtotheactionsofotherorganizationsthatarealsoreacting
toit.Theresultantmeshworkofinteractionsconfigurenewpatternsandnewconditionsthatpose
freshambiguitiesanduncertainties.Acontinuousstreamofneweventsandequivocalcues
necessitatesiterativecyclesofinformationprocessing.Wheremeaningsorpurposechangeasa
resultofreinterpretingtheenvironment,orwhererulesorroutinesarealteredasaresultofacquiring
knowledgeandunderstanding,theorganizationisadaptingtovariationandfeedbackinits
environment.
OrganizationalKnowingasStrategyFinding
Cyclesoforganizationalknowingleadtotheiterativedevelopmentoforganizationalstrategy.
Strategiesarepatternsofactionsthatoftenappeartoberationalorgoaldirectedafterthefact,with
thebenefitofhindsight.Anorganizationalknowingviewofstrategysuggeststhatanorganizational
"strategy"doesnotemergefullyformed.Rather,thestrategyistracedoutthroughcumulativecycles
ofsensemaking,knowledgecreation,decisionmaking.Asdescribedinthelastsection,the
organization'sinitialbeliefsprimetheorganizationtonoticeandbracketeventsandsignals.They
alsopredisposetheorganizationtobedrawntoandconsidercertainactions.Thepursuanceof
patternsofactioninvolvecreatingknowledgetofillknowledgeandcapabilitygaps,aswellas
makingoperationalandstrategicdecisionstocommitresourcesandeffort.Theoutcomesof
organizationalactiongeneratenewcyclesofsense,knowledge,anddecisionmaking.
Theimplicationfororganizationsthrivingindynamicenvironmentsisthattheorganizationwould
needtomanageeachofthethreeinformationprocesseseffectively.Insensemaking,theorganization
wouldscanbroadly(sensing),developplausibleinterpretationsquicklythatenableaction(sense
making),andcommunicatepurposeandvisiontomembers(sensegiving).Inknowledgecreation,
tacit,explicit,andculturalknowledgeareengagedsimultaneouslyinthegenerationandutilization
ofknowledge.Themoretightlyintegratedthethreeformsofknowledge,themorevaluable,unique,
andinimitabletheorganizationaladvantage.Indecisionmaking,rulesandroutinesencodelearning
andeconomizeeffort,andaddtotheorganization'stradablestocksofknowledge.Atthesametime,
theorganizationmustbeabletorecognizesituationswhenexistingrulesareinadequateor
irrelevant,andbepreparedtoabandonthemwhileinventingnewrules.
Themodelalsoimpliesthatthegreatertheinterplaybetweentheprocessesofsensemaking,
knowledgecreating,anddecisionmaking,thegreatertheorganization'scapacitytodetectthreats
andopportunities,createvaluableknowledge,andactonnewknowledge.Thisinterplayis
necessarilyfluidandopenended,butitisnotentirelyrandomorwithoutstructure.Theinterplayis
givencoherenceanddirectionthroughstrongleadership(CrossanandHulland,McKelvey,this
volume),sharedunderstandingsaboutidentityandpurpose(Grant,SoleandEdmondson,this
volume),andcommunitynormsandvalues(Adler2001,NahapietandGhoshal1998,reprintedthis
volume).Whatdrivesthecyclesofstrategiclearningisaninnerlogicanddisciplinethatestablishes

acultureandasetofpracticesforrevisingandupdatingassumptionsandbeliefs,andfornoticing,
figuring,andtryingthingsout.

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