EUAD and Core Capabilities

application for usage in their work. The first process, the explicit knowledge in manuals and other documents, is used as a tool to create new tacit skills to the software. In the second process, the tacit knowledge about the working practices is used as a tool to produce explicit, fixed, procedural knowledge about the working practice.

The creation of knowledge should be internalised as an inseparable part of daily business processes. The role of the EUAD is still quite important. It is mostly active experimentation at individual level. The EUADers also raise new ideas from their intuitions and, if they trust on the availability of it, implement them into real appli- cations. In this sense, they act as key agents for the success of innovations. The early pioneers play a key role in this process as knowledge creators. As the end-users adopt new technology and exploit it into practice, they are also creating new knowledge and practices in the organisation. Anyway, the EUAD activity is also risky. The pioneers act in an uncertain situation where the benefits of the adoption are not always clear. The probability of adoption depends on uncertain profitability estimated in terms of the value of the innovation (Heikkilä 1995, p. 142). The role of the management is to provide a safe and supporting environment to reduce the uncertainty.

potential they will be transformed into core capabilities. As the firm's competitive success lies in its daily practices and usage of knowledge, IT becomes an active component embedded in its core capabilities.

The strategic aim of the firm is to develop core capabilities from its resources (Andreu & Ciborra 1996, Barncy 1991). That directs us to focus on the characteristics of these resources in order to identify if they have strategic potential to become one of the core capabilities. In this sense the capability must be:

1) valuable: it exploits opportunities and/or neutralises threats

2) rare: the number of firms possessing this capability is smaller than needed for perfect competition

3) imperfectly imitable: the others cannot imitate it perfectly

4) with no strategically equivalent substitutes: there is no alternative way of achieving this advantage

The organisational transformation process starts from bottom up with the resources available. The resources are combined and used in daily work routines or use process.

The firm learns from these routines and becomes also dependent on them (path- or acquisition-dependency). The output of this process is a new or refined capability. Those capabilities that meet the specifications listed above become core capabilities. The firm can acquire new capabilities only through its own transformation process. The path dependency makes the capabilities difficult to imitate.

The creation of new capabilities is a learning process. The inimitability and path-dependency make it useful in the business competition. The process constitutes a triple loop learning process (see Figure 5.6).

1) In the routinisation loop, one learns to master the standard resources and creates efficient work practices.

2) In the capability learning loop one learns to combine work practices and generalise them by putting them into a new context. In this loop, new and refined capabilities are generated.

3) In the strategic learning loop one creates new core capabilities. In the light of competitive environment and business mission, the firm realises that some capabilities have strategic potential and learn to take the advantage of it. In this framework, the capabilities get their meaning. In other words, people understand not only what and how, but also why they do certain things.

Figure 5.6 Learning of Capabilities

and Core Capability Development Process (Andreu & Ciborra 1996)

The capabilities are rationalised work practices in which the knowledge has a central role.

Three of the features (rare, imperfectly imitable, with no strategically equivalent substitutes) of the core capabilities are of such a nature that they cannot be copied from others. They have to be created in the company's own process of knowledge creation. To show the contribution of the EUAD to Core Capability Development, we should show that the resources generated in the EUAD process have strategic potential, in other words, they are valuable, rare, imperfectly imitable, and with no strategically equivalent substitutes.

Core capabilities

STRATEGIC LOOP

Capabilities

CAPABILITY LOOP

Work

ROUTINILISATION LOOP

Resources Competitive

environment Business

mission

New org. routines Organizational

routines Valuable, rare, ...

Excellence Standards

Core

Enable different

Need for Need for

Fundamental for Faced to

To develop

Need for

Use

Use

Need for new

Need for new

The triple loop learning process of core capability development from resources, through capabilities to core capabilities seems to take many EUADers a long time. In our data, most of the EUADers prepared applications for own use and they did not work on with appli- cations having wide organisational importance. The majority of the EUAs were small and created specifically for use in their own work. Some of the EUAs were used, and some of them were also originally designed for the use of the whole organisation. Especially the applications solving specific technical problems were widely used in organisations. These applications can be considered rare and valuable in the sense that they were not available in market. Still we cannot state that these applications alone constitute a capability that is also imperfectly imitable and does not have any strategically equivalent substitutes. Instead of that we can conclude that these applications together with the expertise of these persons in the application area, especially in persons D and H constitute a capability that can have strategic potential. They developed applications that needed a lot of expertise in the application area. Maybe these applications would not have been invented without their intrinsic interest in application development. Also the administrative EUAs had strategic potential at the organisational level. The new stock- control system made by person H was certainly an improvement. The system for historical archives, made by person C, originally started from a small idea about how the customers inside the premises of the archives could search archive documents. Later on, the idea was expanded into a project that resulted in an application that enabled the usage of archive documents via Internet.

In order to gain strategic business value from IT, the firm has to focus, in addition to competitive environment and IT acquisition and deployment, also on the use process. Impacts occur when people and organisational units use IT assets (technology and skills) appropriately (Soh & Markus 1995). The adoption process leading to compe- titive advance has to start early enough before the competitors. In order to aim strategic advantage, the end-user should also participate in 'capability loop' by developing new organisational routines. These routines can later be transformed into capabilities and, if they have strategic potential, also into core capabilities. The earlier the right resources are exploited, the more they have strategic potential. In the case of early adoption the management policy plays a significant role. In the case of the EUAD the user has to take a risk by investing his or her time. The learning and information gathering is costly in relation to the benefits for the individual adopter. Anyway, the adoption may be useful for the organisation. In this case, allocating resources to the EUAD can reduce the risks of the individual end user. The situation becomes more complicated in organisations of experts. In these kinds of organisations the innovator is usually the only one who knows the expected value of the innovation. The intrinsic motivation is a good driving force to ensure early adoption that sustains the activity.

The commercial applications offer solutions that are based on business practices used in a wide rage of companies. The rare solutions that do not have a market have to be deve- loped as in-house applications, that the EUAs also represent. In that sense these appli- cations developed by end-users are rare. Moreover, the applications made by experts in that application area usually embed task specific knowledge. The EUAD is a way to store the experts’ knowledge for more powerful use by him or her self and other fellow workers. In this sense, the applications can store rare knowledge and also embed rare business practices. A rare application together with embedded knowledge in it is imper- fectly imitable, too. The companies applying new practises have to implement the needed applications in-house.

The EUAD activity also has a general effect on the flexibility of the firm to react to environmental changes. The flexibility effect accounts for the relative costs in order to incorporate learning or unexpected opportunities arising during the course of work (Conner & Prahaland 1996). The flexibility effect of the EUAD activity works at its best in the cases where the IT can be of good use but no ready-made application is available.

A motivation to develop an in-house EUA can solve the problem at hand. Even if the problem is temporary by nature or a commercial business application may replace the EUA later, the EUAD activity still fosters the learning process and solves the problem at hand. In our case, the application made by person G to organise the students of different options into groups solved one, although temporary but still apparent problem at hand.