An organization processes information to make sense of its environment, to create new knowledge, and to make decisions. Sense making is induced by changes in the environment that create discontinuity in the flow of experience engaging the people and activities of an organization. People enact or actively construct the environment that they attend to by bracketing experience, and by creating new features in the environment. Organizational sense making can be driven by beliefs or by actions (Weick, 1995). In belief-driven processes, people start from an initial set of beliefs that are sufficiently clear and plausible, and use them as nodes to connect more and more information into larger structures of meaning. People may use beliefs as expectations to guide the choice of plausible interpretations, or they may argue about beliefs and their relevance when these beliefs conflict with current information. In action-driven processes, people start from their actions and grow their structures of meaning around them, modifying the structures in order to give significance to those actions. People may create meaning to justify actions that they are already committed to, or they may create meaning to explain actions that have been taken to manipulate the environment.
An organization possesses three kinds of knowledge: tacit knowledge, explicit knowledge and cultural knowledge. Tacit knowledge is the personal knowledge that is learned through extended periods of experiencing and doing a task, during which the individual develops a feel for and a capacity to make intuitive judgments about the successful execution of the activity. 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). Explicit knowledge is rule-based when the knowledge is codified into rules, routines, or operating procedures. 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?’ 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).