Teambuilding for Competitive Advantage

Utilize tacit knowledge for innovation and problem-solving through effective team leadership.

1999 Volume 2 Issue 4

Organizations that utilize tacit knowledge can greatly improve productivity.

More and more organizations are focusing on teams as sources of innovation because research and experience have shown that teams are more effective than individuals at generating new answers to difficult or novel problems. Teams generate new knowledge in organizations by combining the explicit and tacit knowledge of individual team members. An understanding of tacit knowledge by team leaders can greatly enhance the effectiveness of individual interactions and improve the synergy of teams. Teambuilding techniques that improve the ability of team members to transfer, capture, and combine tacit knowledge into new knowledge may be a source of sustained competitive advantage for an organization.

The Knowledge Creation Process

In simple terms, explicit knowledge may be described as information that can be codified and communicated from one person to another. On the other hand, tacit knowledge is information that may not be easily identified or expressed. For example, an experienced swimmer’s tacit knowledge of respiration and muscle control allows the swimmer to remain buoyant, even if the swimmer is not consciously aware that she or he possesses or uses such knowledge.

Explicit and tacit knowledge exist at the individual, group, and organizational levels. At the individual level, explicit knowledge includes knowing accounting or remembering sports trivia, while tacit knowledge may include woodworking skills or how to knead bread dough to produce the best flavor. Written organizational policies and organizational charts are examples of explicit organizational knowledge. Organizational tacit knowledge includes the organization’s culture, routines, and other information-based assets.

The Role of Tacit Knowledge in Knowledge Creation

Organizations create knowledge by combining existing knowledge in new ways. Nonaka and Takeuchi describe the knowledge creation process as a cyclical process with four stages: socialization, externalization, combination, and internalization.

Path of Knowledge Creation

Path of Knowledge Creation

Both explicit knowledge and tacit knowledge are necessary to generate innovations. Group members could not speak with each other or interact with the external environment without explicit knowledge. But, if the knowledge creation process depends solely on combinations of explicit knowledge, only incremental innovation is possible. Linear combinations of explicit knowledge also are amenable to reverse engineering by competitors. Creation of novel and difficult-to-imitate innovations using both tacit and explicit knowledge are less open to imitation and more likely to produce sources of sustained competitive advantage.

The Role of Tacit Knowledge in Team Building

One reason suggested for the increased use of teams in the workplace is that teams produce more creative solutions to difficult and novel problems than individuals. Team members create new knowledge and problem solutions by combining their tacit and explicit knowledge in repeated iterations of the socialization-externalization-combination-internalization steps of the knowledge creation process. Therefore, improving how team members transfer tacit and explicit knowledge will increase the efficacy of teams in developing creative problem resolutions.

The value of sharing tacit knowledge within a team has upper and lower boundary conditions. If a team has little or no shared tacit knowledge, the team is little more than a collection of individuals and the resulting level of synergistic problem solving will be minimal. If pressures to conform to the group’s shared tacit knowledge overwhelm individuals’ willingness to express individual differences in skills, knowledge, or feelings, the synergy of the group can be diminished. The role of tacit knowledge in teambuilding can be seen as a “Goldilocks” problem, that is tacit knowledge should play a moderate role, neither too hot or too cold. Improving a team’s ability to transfer tacit knowledge within this limited range will improve a team’s problem-solving capabilities and therefore should be an important part of the teambuilding process.

Improving a Team’s Knowledge Transfer Capabilities

The four elements of the knowledge creation process proposed by Nonaka and Takeuchi offer a framework for discussing how to improve tacit knowledge transfer capabilities within a team. The skills, abilities, and techniques needed to promote the transfer of tacit knowledge vary across the stages of socialization, externalization, combination, and internalization.


Socialization is critical to knowledge transfer because tacit knowledge can only be transferred through interpersonal interaction. Additionally, tacit knowledge cannot be proven because it is rooted in experience and experiential learning. The “student” must believe in the “teacher’s” validity and the value of the knowledge being imparted. The need for interpersonal interaction also requires that the teacher be open and trust the student because tacit knowledge is held at a personal level and enmeshed with the teacher’s values and beliefs. As a result, the primary goal of the socialization quadrant of the knowledge creation process is to develop the necessary trust and rapport among team members to promote tacit knowledge transfer.

An important step is the establishment of a common purpose among team members that allows the team to have goals. A sense of purpose or mission impacts how the team manages its processes, resources, and time. However, individual goal attainment must be interdependent or individuals may sub-optimize team goals or other team members’ individual goals and still meet their individual goals. Commitment to both individual and group growth is critical to placing the socialization process within a productive context. Social interactions outside of the frame of a common goal are little more than bantering.

The successful transfer of tacit knowledge also requires that team members have the opportunity for interpersonal interaction. Brown and Duguid documented the social interaction among photocopier service technicians and its role in transferring tacit knowledge. Coffee breaks and horseplay among technicians between assignments were initially viewed as nonproductive, but further examination showed that allowing the technicians the opportunity for such interactions significantly improved the proficiency of the entire technician group. Senior technicians used these interchanges to transfer tacit knowledge to more junior colleagues through storytelling and anecdotes.

Another contextual issue important to promoting tacit knowledge transfer is that team members possess the will or enthusiasm to share tacit knowledge. The experiential nature of learning by doing in the internalization phase means failures and the routine disclosure of failures are important in generating new knowledge. Team members need to trust that discussions of failures are viewed as learning opportunities. Those telling the story need to be secure that disclosing past failures will not negatively impact their standing with other group members. Team members listening to the stories must also have the time to reflect and learn from the stories.

Specific Teambuilding Needs in the Socialization Phase

The socialization phase establishes the “container” necessary for learning. Openness and trust must be encouraged among team members so that they have the opportunity to share and accept tacit knowledge that is highly personal in nature. This requires sufficient time in an environment free from distractions.


In the externalization stage, individuals are placed in the container created during the socialization process. Then, tacit knowledge can be externalized and communicated to others. The externalization stage provides a stage for individuals to share knowledge that is not transferred easily.

Key teambuilding elements in the externalization stage center around four important concepts: Share, show, tell, and do. Individual team members need to share ideas and feelings openly. Failing to share by not disclosing information or feelings reduces the team’s ability to develop synergies because non-disclosing team members are only partially present. Team members also need to show their interest in the ideas others are expressing, tell how these ideas and actions impact them, and act (do) based on their personal interpretation and identity.

The lack of any external mechanism to validate expressions of tacit knowledge means that individual evaluations cannot be ratified or denied. Individuals must trust that other members of their team will evaluate the knowledge they share without applying hidden agendas and that they will provide valuable feedback. As a result, mutual regard for the knowledge, skills, and abilities of fellow team members is critical for individual team members. Another equally important point for ensuring trust among members is a need for team members to be authentic in their thoughts, feelings, and wants. The difference between being authentic and being truthful is that truthfulness suggests that an objective reality exists while no such assumption of objective verification exists for individual wants, feelings, and thoughts. This difference between the two concepts becomes more critical, and the need for being authentic becomes more important, when dealing with the sharing of tacit knowledge.

Specific Teambuilding Needs in the Externalization Stage

Individuals need to be comfortable and willing to share tacit knowledge that they may not know they have, and to receive tacit knowledge that is embedded within others’ feelings and thoughts. Trust exercises, interventions that promote mutual respect, and the development of authentic communication skills are critical to improving externalization skills.


Knowledge creation occurs in the combination stage where tacit and explicit knowledge are combined across individual team members. An important issue for teams in the combination stage is that conflict naturally ensues when individuals exchange closely-held personal ideas. Conflict management becomes a key skill to promote tacit knowledge transfer.

Compromise may initially appear as an effective conflict management technique because both parties have some needs met. However, compromise requires each party to sacrifice some needs whereas collaboration allows all parties to satisfy their needs. However, collaboration is more time consuming and requires recognizing conflicts openly. Effective collaboration requires opening up to others, opening up to one’s self, and possessing self-insight.

Specific Teambuilding Needs in the Combination Stage

Success in the combination stage relies on the interpersonal and intrapersonal skills discussed in the socialization and externalization phases. An important realization at this stage is that the individual team member and their self-insights constitute important instruments in resolving conflicts and team building. The concept of self-as-instrument is not new (Rogers, 1961), but its importance to the sharing of tacit knowledge is critical in the combination phase because of the conflicts inherent in creating new knowledge through combining tacit knowledge that is highly-embedded in the individual persons that comprise a team.


Once individuals have combined tacit and explicit knowledge and created new knowledge, the individual team member must then integrate the newly created explicit knowledge with previously existing tacit and explicit knowledge. Learning by doing is critical to the internalization phase because it allows individuals to compile explicit knowledge into tacitly-held automatic routines. Explicit knowledge becomes embedded within the personal and contextual environment and is transformed into tacit knowledge.

Individuals need the time to practice applying new knowledge and to internalize its meaning. They also require the latitude to make the errors and mistakes requisite to mastering new knowledge. Learning how to do something correctly may be best defined as avoiding the multitude ways of doing it incorrectly. Understanding what constitutes incorrect performance is, therefore, an important step in knowing what constitutes correct performance.

Specific Recommendations for Teambuilding in the Internalization Phase

Organizations may need to establish “practice fields” that give individuals and teams opportunities to simulate real world experiences and promote internalization. The practice needs to be as realistic as possible. It is important for team members to feel they are within a safety zone where mistakes are tolerated and that they will not adversely impact organizational objectives or individual careers. Practice fields do not necessarily need to be elaborate. Realistic experiential exercises are all that is required. These should be followed by opportunities for debriefing and individual reflection.

The knowledge creation process builds upon itself as team interactions are repeated and layer upon layer of tacit and explicit knowledge are explored. As the process is repeated, it generates what has been termed a knowledge spiral that can eventually permeate an organization. The presence of a knowledge spiral will likely be reflected by greater productivity, innovation, and ability to solve problems. This can, indeed, be a source of sustained competitive advantage for a firm.

About the Author(s)

W. Scott Sherman, PhD, earned his doctorate in Business from Texas A&M University after working for more than 20 years in the newspaper industry. Dr. Sherman has taught at Texas A&M University, Pepperdine University, and Texas A&M-Corpus Christi. Sherman has published in the Journal of Business Entrepreneurship, The Academy of Management Review, and as a contributing author to several books on leadership in the 21st Century sponsored by the U.S. Army. He is also the founding editor of the Graziadio Business Review. Sherman now lives in his native Texas, teaches strategy and organizational change at Texas A&M University-Corpus Christi, does research and consulting with a variety of organizations and follows his avocational passion of landscape photography.

Miriam Y. Lacey, PhD


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