Reconfiguring the construction value chain: analysing key sources of friction in the business model archetypes of AEC companies in strategic partnerships

Abstract

Lack of innovation and productivity in the construction industry compared to other industries is often explained by the institutionalized roles and fragmented nature of the construction value chain. Closer connections and collaboration (such as strategic partnerships) among architecture, engineering and construction (AEC) companies and across the values chain is often prescribed as a strategy to improve the performance of the construction industry. However, the institutional roles of AEC companies serve as important reference points for the sector. They have over time been translated into business practices in companies giving rise to a number of archetypical business models. How these business models interact, and the friction created when they come in close contact is not well researched and understood. This paper identifies business models archetypes for architect, engineer, contractor and materials supplier based on workshops and interviews with practitioners. Friction is identified in and between the business models of AEC companies engaging in strategic partnerships. The analysis shows that architect archetypes face friction with regard to their profit formula and could benefit from profit sharing. The engineering archetypes face friction in their processes since they have to coordinate with specialists from other companies.Contractor and supplier archetypes face friction in their profit formula since the open books force them to alter business practices.

A Systematic Review of the Business Contingencies Influencing Broader Adoption: Modern Methods of Construction (MMC)

“…Our main assumption links the low MMC uptake in the public sector to the ability of business models to achieve internal and external fit. In that sense, this paper pinpoints the problematic and complex process of developing a business model in construction firms to influence demand [142,143]. Our findings suggest multiple indicators identified from analysing previous research, reflecting different firms with distinct business features, as it is rather rational to build upon the unequivocal successes achieved in the past [141].…”

“…Our main assumption links the low MMC uptake in the public sector to the ability of business models to achieve internal and external fit. In that sense, this paper pinpoints the problematic and complex process of developing a business model in construction firms to influence demand [142,143].…”

Can Business Models Facilitate Strategic Transformation in Construction Firms? A Systematic Review and Research Agenda

“…They recommended that firms could create value by offering niche/specialty products or services and proposed that one-stop services covering the entire value chain could be one of the possibilities. In the work of Berg, Thuesen [110], we also found evidence of reconfiguring the value chain. They used a simplified version of Christensen, Bartman [111]'s four-block business model comprising priorities (value proposition, and profit formula) and capabilities (resources, and processes) to identify points of friction between the four main actors of the construction value chain: the architect, engineer, contractor and material supplier as they enter into new cross-value-chain interactions.…”

“…They used a simplified version of Christensen, Bartman [111]'s four-block business model comprising priorities (value proposition, and profit formula) and capabilities (resources, and processes) to identify points of friction between the four main actors of the construction value chain: the architect, engineer, contractor and material supplier as they enter into new cross-value-chain interactions. Berg, Thuesen [110] highlighted a scenario when the architect's profit formula is impacted due to the involvement of engineers, contractors and material suppliers in design decisions and recommended that a form of profit sharing could be introduced in strategic partnerships to remedy this.…”

Developing an Impact Model in Construction Companies During Pandemics

“…They specified four decision categories of an operations strategy, including 1. organization, quality, human resources, and planning; 2. capacity and vertical integration; 3. process technology, product development, and performance measurement; and 4. facilities. Berg et al (2019) mapped out archetypical business models in construction in which value proposition, profit formula, resources, and processes were addressed for different construction individuals, including architects, engineers, contractors, and suppliers. Carbon Pricing Leadership Coalition (CPLC) and International Finance Corporation (IFC) (2018) produced a construction value chain model, with actors and interactions that consisted of local authorities, financiers, developers, owners, users, architects and engineers, contractors, material and equipment suppliers, manufactured products, and raw materials.…”