In The Wise Company, Ikujiro Nonaka and Hirotaka Takeuchi emphasize—through relatable case studies of successful business leaders and entrepreneurs—that the world needs a new type of wise leader who prioritizes long-term sustainability in pursuit of the common good for society over short-term results and balances his or her reliance on explicit, easily codifiable, measurable, and general knowledge with tacit, personal, and contextual knowledge. The novelty of this book lies in the importance of the moral dimension underlying knowledge practice, innovation, and sustainability. In what follows, I try to describe the main arguments of the book, and in the final part of this review, I focus on the book’s relationships with the pursuit of goodness and ethical leadership, as readers of Business Ethics Quarterly are likely to expect.

With The Wise Company, the authors complete a sequel to The Knowledge-Creating Company (Reference Nonaka and Takeuchi1995). In their first volume, Nonaka and Takeuchi focused on the question of knowledge creation (e.g., obtaining, accessing, codifying, accumulating), the distinction between explicit and tacit knowledge, and the SECI (for socialization, externalization, combination, and internalization) model as a foundation for knowledge creation and innovation. In their second volume, they introduce knowledge practice (e.g., applying, disseminating, or putting knowledge into action) as the missing link between knowledge creation and the capacity of companies to take wise actions. As a result, they build on previous work to develop the first modern model of knowledge creation and practice, the SECI Spiral Model, which conceptualizes how organizational knowledge practice is facilitated, sustained, and expanded and how knowledge practice is the driving force that brings about continuous innovation and sustainability. The Wise Company contains, according to the authors, a practical guide for young leaders to overcome the corporate and system failures of the last two decades (e.g., Lehman Brothers, Kodak, General Motors) caused by an overreliance on explicit knowledge, which prevents companies from coping with change; futures envisioned by management that disregarded the common good while focusing on the narrow interests of the company; and a lack of wise leaders capable of seeing what was good, right, and just for society.

In its first part, The Wise Company focuses on the art of knowledge practice and presents the reasons behind its association with the concept of phronesis—an ancient Greek term that connotes wisdom devoted to practical purposes. Practical wisdom is a higher-order tacit knowledge that enables us to grasp the essence. Unlike the Platonic concept of knowledge based on rational reasoning, phronesis, or knowledge practice, is “the experiential knowledge that enables people to make prudent judgments in a timely fashion, and to take actions guided by values, principles, and morals” (25). Explaining Aristotle’s knowledge triangle—episteme (scientific knowledge), techne (technical know-how), and phronesis (practical wisdom)—the authors assert that, if the first two are about “know-why” and “know-how,” then the third is knowing “what-should” be done. In addition to Greek philosophy, this part of the book explores how knowledge practice is a central concern for phenomenologist and pragmatist philosophers in the West, as well as how it is related to other fields, ranging from neuroscience to corporate social responsibility (CSR). Next, the authors lay the theoretical foundations of the SECI Spiral Model and provide a detailed explanation of the key role phronesis plays in it.

In the second half of the book, Nonaka and Takeuchi explain that wise companies are companies with wise leaders and propose six leadership practices that are critical to the creation of a wise company. First, wise leaders do good not only for the company but also for society. Second, wise leaders need to grasp the essence to see the true nature of events and people. Third, wise leaders must create shared contexts, or ba (Japanese concept for place, space, or field), using the “here and now,” which leads to a shared sense of purpose for human interaction. Fourth, wise leaders must cultivate a practice of communicating the essence of all situations—complicated ones in particular—with the help of metaphors and stories so that people can grasp things quickly and intuitively. Fifth, wise leaders should be willing to exercise “political” power to bring people together and spur them into action. Sixth, wise leaders foster practical wisdom in others; therefore wise leaders must distribute phronesis throughout the organization through apprenticeship and mentoring programs.

The Wise Company can be useful in helping business ethicists deepen our thinking on what it means to pursue the common good in opposition to the narrow interests of the company. In other words, the idea of the common good will link to how leaders decide what kind of future they want their companies to create for society at large. According to Nonaka and Takeuchi, making judgment calls on the common good is possible through, for example, a company mission that clearly benefits society, a mechanism to share the company’s benefits among stakeholders, development of CSR programs, or contributions to aid responses to natural disasters or social emergencies (e.g., the “triple disaster” in Japan in 2011). The book presents the common good as aims that are beneficial for companies and society at the same time and as something apparently achievable for leaders and companies through a basic willingness and “idealistic-pragmatist” solutions (23), leaving the complexity of competing interests and the potential lack of consensus among stakeholders aside.

However, when one carefully examines two of the case studies the authors provide, one sees that their solutions to pursue the common good are rather idealistic and support a clear, practical preeminence of company interests over those of society and other stakeholders. The first case is the initiative of the YKK Corporation to share the benefits with the “three”: customers, partners, and employees. In practice, the company encourages employees to invest part of their salaries and bonuses in purchasing company stock, which contributes to a virtuous cycle in the flow of cash between company and employees. While the idea is noble and would benefit employees in an ideal world, it also limits the agency of employees and their capacity to diversify investments, as well as increasing their dependence on the fate of the company. The second example is about the great innovation of creating HondaJet. Providing CEOs and executives with smaller and more efficient planes enabled those busy customers to spend more time with their families. Despite the success story of HondaJet in terms of innovation and helping customers, it seems disputable to affirm that the enterprise pursued the common good in a full sense, including taking the environment into consideration. Smaller, more frequent planes inevitably pollute more than CEOs and executives using existing commercial flights.

The Wise Company can also be useful to business ethicists to the degree that it leads us to engage in a reflective examination of the meaning of ethical leaders and whether we can equate them with “wise leaders.” Unlike a deontological view on ethical leadership, in which leaders need to be moral persons and moral managers by complying with a certain set of rules, wise leaders are closer to a utilitarian and Machiavellian view of ethical leadership. On one hand, the emphasis for wise leaders on creating a common good can be interpreted as utilitarian in the sense of creating value for society, which can easily relate to other recent models of ethical leadership and value maximization (Bazerman Reference Bazerman2020) or pragmatism (Pfeffer Reference Pfeffer2015). On the other hand, one of the six leadership practices encourages wise leaders to exert political power to achieve their objectives, even Machiavellian ones. Nonaka and Takeuchi strongly defend that “duplicity, manipulation, ruthlessness, and opportunism” are also characteristics of transformational leaders and that, for example, “distorting reality more often than not would have a favorable impact on others” (212). The example of Steve Jobs is telling: Would you consider wise leaders to be those who distort reality to achieve stellar products, but at the expense of ignoring their own children and health? The authors do.

Overall, Nonaka and Takeuchi propose a practical understanding of ethical leadership. Not only do they consider wise leaders at all levels as fundamental to company survival; they also examine how the six leadership practices play out at creating knowledge and continuous innovation. Similar to new conceptualizations about moral entrepreneurship (e.g., Kaptein Reference Kaptein2019), Nonaka and Takeuchi’s novel approach helps us make another important link between ethical leadership and innovation, which contributes to the timely debate on what we as a society should expect from future corporate leaders.