January 31, 2022


Cloud-based BIM Business Models: Driving Innovation in the Construction industry


Introduction

What is your BIM business model? Is your organization rethinking business strategy? How do you create value for clients? These are some of the questions posed to the digitally evolving enterprises in the Built environment. This post will provide a fascinating answer to these questions by discussing the business model for Cloud-based BIM.

The construction industry (CI) is a driver for economic growth. It comprises more than 3.1 million construction enterprises, around 12.7 million jobs [1] and represents 9% of the European Union Gross Domestic Product [2]. Despite this, it is faced with multiple hindrances to productivity. The main challenges of the CI are in the areas of innovation, energy efficiency and climate change [3]. With particular emphasis on innovation, the traditional business model does not seem adequate to deliver value to meet the current demands of the CI. One promising shift has been towards collaborative BIM technologies and processes. BIM is described as a strategic tool to achieve cost savings, value for money, productivity and operations efficiencies, improved infrastructure quality, better environmental performance while delivering infrastructure [2]. Cloud technologies such as Software as a Service (SaaS), Platform as a Service (PaaS) and Central web-hosted Data Environments have changed the way collaboration is achieved by BIM-enabled companies, taking collaboration from a closed network to over the web. Therefore, it is pertinent that outdated business models in the CI are replaced by progressive models which are conducive to the collaborative environments required to support the BIM methodology.

Frameworks for Business Models

It is vital for a BIM-enabled enterprise to select a business model which suits their business needs. This can be done by creating a strategic plan and building up an appropriate business model. Zott et al., [4] described the business model as a unit of analysis, a holistic approach to describe how business is done, and how value is captured and created. Fielt [5] equally defines it as how an organization represents its value logic. Therefore, it is the ways by which organizations create, organize, and deliver value for their customers/clients while also having some form of returns. The design of a business model should be simple and easily understood by all concerned stakeholders. There are several frameworks that a business model and strategy can harness. For example, Gassmann et al.,[6]  describe that the St. Gallen navigator is used for analyzing the current business model by answering the questions:

  • Who is a target customer?
  • What do we offer to our customers?
  • How are products and services made?
  • How do we create value?

St. Gallen Business Model (figure 1) below further explains that if you change your business model, at least two of these criteria above must change. For instance, existing enterprises can decide to reinvent their business model due to technological disruptions like BIM. A good example of this fundamental shift can be seen in the case of government projects, the UKs Government Soft Landings an example of requiring all stakeholders to engage in design from the earliest RIBA Plan of Work stages [7].

fig1

Another prominent business model framework is the Business Model Canvas (BMC). It is a pictorial representation of key principles needed for a business to function. It is a swift way to test, evaluate, and further develop ideas for business development. It visualises the ideas for a business start-up and tests the viability of the ideas without immediately replacing a business plan.

Osterwalder’s business model is comprised of nine building blocks as shown in figure 2 below. The business model canvas has two sides. The right block and the left block. The right side of the canvas concerns all stakeholders (Customer Relationships, Customer Segments and Channels) while the left side describes what is going on backstage (Key Partners, Activities, Resources and Value Proposition). The nine building blocks are summarized below:

1. Customer Segments: This refers to the various groups of people, organizations, or businesses the model aims to serve. The category of customer segment could either be one large group of stakeholders in the market with similar needs, specific groups with peculiar needs or some groups with slightly different needs. In summary, the goal of the customer segment is to carefully select good and profitable customers. So, who are the likely customers for CBIM innovations? Some examples are Facility Management Stakeholders; Academia/ scholarly institutions; SMEs /Start-ups (Software vendors, Construction companies, Service Companies), the Government etc.

fig2

 

2. Value Proposition: These are the reasons why a customer would choose a company over numerous competitors. Value propositions are a bundle of products, services, and benefits to the customer segment. Wiersema and Treacy [9] described that product leadership, operational excellence and customer intimacy are value proposition strategies. Value propositions can be further developed into a value proposition canvas. This canvas views the value proposition from the lenses of customer jobs, pains and gain, pain relievers, gain creators, products, and services. For instance, for CBIM innovations, the value propositions could be described as:

  • customer jobs: the creation of jobs and applications through CBIM for the Architecture, Engineering, Construction and Operations (AECO) sector
  • Customer pains: A concern that the ideas do not appeal to the market.
  • Customer gains: An assurance that the ideas brought to market will benefit all stakeholders.
  • Pain relievers: Perhaps the CBIM innovations can be tested over and over until it is validated.
  • Gain Creators: A guarantee that academic research and industrial training on CBIM innovations will continue.
  • Products and services: Create CBIM business models to deploy CBIM innovations.

3. Channels: These are the mediums by which the value propositions are communicated and conveyed to viable customers. The goals are to ensure that customers are retained and satisfied.  Computer software and gaming applications are viable channels for CBIM innovations.

4. Customer Relationship: This block is intertwined with channels. It is the way entrepreneurs create rapport for customer satisfaction and retention. The strategies needed are mostly dependent on the customer segment.

5. Revenue Stream: This building block specifies how much monetary price or value the customer segment is willing to pay for the product or service. The revenue stream could be recurring or transactional. Revenue strategies for CBIM innovations could be subscription fee, licensing fee, usage fee, among others.

6. Key Resources: These are the human, physical or intellectual resources needed to create value for the customer segments. CBIM innovations could leverage some of the following resources.

·         Intellectual capital

·         Branding

·         Customer database

·         Cloud/ digital twin technology

·         Blockchain technology

·         Business angels

·         Banks

·         Funding agencies

·         Researchers

·         Information and Technology developers

7. Key Activities: These are vital actions and reactions from a business organization to deliver its value propositions. Key activities are also important to achieve the intended customer relationships. The main activities are Operations and Production, Marketing and Sales, Finance, and Administration. Data and Process management, generating and updating geometry, are some key activities for CBIM innovations.

8. Key Partnership: These are the networks and relationships created with other stakeholders for the sake of the business. CBIM innovations can benefit from partnership types like strategic alliances, joint ventures, or co-creation. For example, some panaceas for key partnerships in our CBIM network, include:

  •         BIM Consultant e.g., AEC3
  •         Digital built-environment consultancy  
  •         Government Body/Agencies e.g., Deutsche Bahn
  •         Academic Institution/ Academic Scholars e.g. CBIM
  •         Digital Infrastructure companies e.g. Trimble Inc, Oracle
  •         Construction, Property and Civil Engineering company e.g. BAM, Laing O’Rourke
  •         Design and Infrastructure company e.g. Arcadis
  •         Construction IT companies e.g., Contecht

9. Cost structure: The final building block of the business model canvas describes all costs involved in delivering the value proposition. These could be fixed costs, variable costs, or economies of scale, such as employees, real estate, research & development etc.

 

Observations from ongoing owner/operator case studies

Current research activities within the CBIM network include practitioner interviews. These aim to establish the key challenges faced by building owners and operators about information management. Our initial results suggest several key considerations for effective strategic business planning in the AECO industry of the (near) future. These include:

  • The cumulative risk, observed across the sector, of traditional (predominantly manual) information management practices becoming overloaded due to sheer increase in the quantity of data (see figure 3) and the resulting administrative burden. Companies must consider where the bottlenecks will be in their administrative processes (often the IT department) and plan for digital transition accordingly. 

fig3

 

  • Reluctance to change within organizations. It is well understood that the AECO industry is considered traditional when compared to more progressive sectors such as manufacturing and information technology [11]. The tight profit-margins, highly competitive nature of contracts and great risk, due largely to decentralization of supply chains and the unique nature of building projects, creates an environment where companies are averse to risk-taking and innovation. Our initial findings suggest that often innovation is championed by key individuals rather than the organization itself (i.e., bottom up), with these individuals often employing innovative strategies such as cross-disciplinary collaboration which may have been missing before. 
  • In terms of which strategic steps can be taken by companies, we found that: enabling IT independence (through use of open standards), ensuring flexibility and scalability of IT solutions (through agile adoption) as well as redistribution of skills within organizations, are indicative success factors for sustainable business in the AECO industry of the future. 

In summary

Recent developments in cloud-based technology have changed the business landscape for those who operate in the built environment. This gives rise to the need to reimagine corporate strategies. This blog post has described two approaches which can be used to assess current, and plan new, business strategies. Furthermore, observations from ongoing research within the CBIM network point to some key success factors for digital transition within the AECO sector. Assessing your strategy through these frameworks and considering these findings may help towards digital transformation for your organization in a cloud-enabled BIM world

Reference

[1]      European Construction Industry Federation (FIEC) 2021 European Union General Economic Review Gen. Econ. Rev.

[2]      EUBIM Task Group 2016 Handbook for the introduction of Building Information Modelling by the European Public Sector EU BIM Task Gr. 84

[3]      European Commission 2012 Strategy for the sustainable competitiveness of the construction sector and its enterprises

[4]      Zott C, Amit R and Massa L 2011 The business model: Recent developments and future research J. Manage. 37 1019–42

[5]      Fielt E 2013 Conceptualising Business Models: Definitions, Frameworks and Classifications vol 1

[6]      Gassmann O, Frankenberger K and Michaela C 2020 The St. Gallen Business Model Navigator (Carl Hanser Verlag GmbH & Co. KG)

[7]      Philp D, Churcher D, Davidson S and Evans R 2019 Government Soft Landings Revised guidance for the public sector on applying BS8536 parts 1 and 2 Updated for ISO 19650 Foreword Acknowledgements

[8]      Osterwalder A and Pigneur Y 2012 Designing Business Models and Similar Strategic Objects: The Contribution of IS J. Assoc. Inf. Syst. 14

[9]      Wiersema F D and Treacy M 1993 Customer intimacy and other value disciplines Havad Bus. Rev. 78 84–93

[10]    The Economist A deluge of data is giving rise to a new economy | The Economist

[11]    McKinsey Global Institute 2017 Reinventing Construction: A Route To Higher Productivity

Tawakalitu

Tawakalitu Odubiyi
ESR 11
CBIM business models

Conor

Conor Shaw
ESR 6
Data fusion for operational optimisation and facility management

DimitrisDimitris Mavrokapnidis
ESR 7
BIM Model enrichment for Energy Performance Simulatio
< Previous post    Next post >