Project-based business models in the construction industry – key success factors for sustainable timber extension projects

Abstract

Building construction has significant negative impacts on the environment. However, various measures can mitigate these impacts, including using wood as a building material and improving the building and construction process. The need to renovate and extend existing buildings increases with urbanization and a growing population. Wood is an attractive option for adding new floors to existing structures because of its superior strength-to-weight ratio, allowing for the potential to “build on top” of existing buildings. In order to achieve higher levels of sustainability in wood extension building projects, this study aimed to highlight the benefits of adopting a project-based business model approach by studying the technical, economic, social, and environmental attributes associated with timber building extension projects. Unlike the common firm-level business model approach, a project-based business model allows for a comprehensive view of the value creation, delivery, proposition, and capture of all the key actors involved in a construction project. The study results emphasize the success factors of an extension building project and conclude with critical factors related to the business model’s resources, activities, and actors, which would enhance the outcomes of a wood extension project. Such factors relate to knowledge and experience derived from wood construction, and to a holistic perspective on planning, and involvement of all relevant actors from the design phase to project completion.

Keywords:

• Project-based business model
• sustainability
• construction industry
• building extension projects
• wood building system

Introduction

The construction industry is globally responsible for 30–40% of energy consumption and more than 30% of carbon dioxide (CO₂) emissions per year (United Nations Environment Programme 2021). These negative environmental impacts are the consequences of various activities throughout the life cycle of buildings including, but not limited to, the extraction, processing, and transportation of building raw materials (Morel et al. 2001), building maintenance, and heating and lighting consumption (González & García Navarro 2006). Building materials, however, are single-handedly one of the significant contributors to these negative impacts (Nußholz et al. 2019). Studies have shown that a careful selection of lower-impact or bio-based materials in construction can significantly reduce the negative environmental impacts of the building construction industry (Amiri et al. 2020, Churkina et al. 2020). Wood, a lower-impact, and bio-based material, is a known environmental-friendly champion in the building industry (Erlandsson et al. 2018). Further, prefabricated wood construction reduces construction costs considerably (Stehn and Jimenez 2021).

There is a growing trend in urbanization, which means an increased density of cities and pressure on society to allow for further development of buildings and other infrastructure (Mishra et al. 2022). It is also known that human beings need to lower their impact on climate change (Bruntland 1987), and for this transition process, business eco-system actors need to take a more active part (Schaltegger et al. 2012, Loorbach and Wijsman 2013, Schaltegger et al. 2016) and consider a shared value perspective in what businesses are about (Porter & Kramer 2011). This calls for a deeper understanding of all activities involved in building processes to meet challenges associated with the need for more housing due to increased urbanization. In addition, a need for the lower environmental impact of the construction of new buildings, and a need for lower utilization of land for buildings, mean that the land can have another use, for example, to produce food and other bio-based products instead of being used in construction.

Sweden has a long history of constructing one- or two-story buildings made of wood. This is partly due to the easy access to wood as a natural resource in Sweden, as 70% of the country is covered in forest land, with 80% actively utilized (Swedish Forest Industries 2023). The availability and use of wood products in construction has created a dominant design (Utterback and Abernathy 1975), further enhancing market share in single-family housing and innovations. The improved use of wood bonding technologies, in the form of cross laminated- and glued laminated timber (CLT & glulam), opened the door to the broader applicability of wood in the construction industry. As a result, it was after the mid-1990s that these technological advances, coupled with changes in building regulations, allowed for the construction of multi-story timber buildings in Sweden (Boverket 2014, Landel 2018). The urbanization trends and the need to renovate/extend the existing concrete buildings create a unique opportunity for incorporating wood and tall timber in building extension projects. Besides the positive environmental impacts of using wood as a natural and renewable raw material in construction, building with CLT is also associated with potential technical, social, and economic benefits (Jaillon and Poon 2008). CLT is strong yet light and breathable. CLT is almost one-fifth as heavy as concrete, providing an excellent strength-to-weight ratio when building on top of existing concrete buildings (Leigh 2021). In addition, the higher degree of industrialization through off-site production of prefabricated timber constructs increases product quality and reduces production and transportation time and expenditures (Jaillon and Poon 2008, Johnsson and Meiling 2009, Meiling et al. 2012). A shorter time required for on-site construction is also another positive outcome (Brege et al. 2014). This is ideal for building projects in city centers, where the density of buildings and traffic do not allow for extended on-site construction times (Jaillon and Poon 2008, Leigh 2021). Performing wood building projects over existing buildings makes a fascinating case for studying more sustainable construction solutions. This is due to their unique characteristics, as they are neither a traditional construction project nor a tall timber construct entirely made of wood.

Improving sustainability in construction solutions would mean taking a step back from the traditional sole focus on the economic benefits of construction projects, by instead ensuring more sustainable approaches in the economic, technical, social, and environmental aspects of projects (Jaillon and Poon 2008, Zabihi et al. 2012). Further, using more sustainable building methods would help in achieving Sustainable Development Goal 12 (SDG 12) – ensuring sustainable consumption and production patterns, and also SDG 11 – make cities and human settlements inclusive, safe resilient and sustainable (United Nations 2015), which requires cooperation between actors involved in multiple SDG targets on a general level to reach the overall United Nations’ Sustainable Development Goals (Henderson and Loreau 2023). Achieving increased sustainability in construction projects would significantly change the construction industry’s business models (Mokhlesian and Holmén 2012). This is because the traditional approach to innovating firm-level business models by focusing on each individual firm’s value creation and capture does not guarantee improved sustainability for the entire construction project. This shift is not an easy one and is associated with certain barriers and challenges. It necessitates close collaboration between all relevant stakeholders in the construction projects’ value chain (Bilal et al. 2020). To address this need to shift the focus from firm-level business model innovations, this study argues for the applicability of project-based business models (BM) when studying construction projects to increase the sustainability of construction solutions. The project-based BM enables a more comprehensive view of the actors, resources, and activities involved and incorporates a more inclusive definition of the construction project’s value proposition (Brege et al. 2014, Bocken et al. 2018, Das et al. 2020).

This paper studies six Swedish cases of tall timber building extension projects and discusses the challenges and success factors associated with this specific type of construction project. Business model constructs have the characteristic of systematically structuring and depicting intricate phenomena, such as how organizations organize to run their business or, as in this study illustrated by a construction project, how the construction is carried out in the light of a business model lens. This attribute renders BMs valuable analytical tools for visualizing and comprehending the interrelationships among various key components (Hacklin and Wallnöfer 2012). Consequently, they can facilitate a better understanding of how to enhance sustainability in these studied construction projects. Therefore, the conceptualized project-based BM is applied to provide a more nuanced picture of findings from the case studies. This study opens discussions on the significance of improved knowledge and experience in working with wood in construction, on the involvement of the key actors from the early phases of projects, and on the meticulous planning of the project’s timeline of activities in delivering more sustainable construction solutions.

Theoretical background

Business models are commonly considered as conceptual tools used for an abstract and simplified representation of a company’s value logic, architecture, or structure (Zott et al. 2011, Wirtz et al. 2016). In the past decades, BMs have emerged as one of the most used concepts in academia and business settings (Baden-Fuller and Morgan 2010, Massa et al. 2017). Generally, a company can be described as a system that takes input from its environment and carries out a series of processing and transformations based on this input to deliver its output (Tushman and Nadler 1980). Business models follow the same logic. They are perceived as “open systems with varying levels of combinatorial complexity among subsystems” (Morris et al. 2005, p. 729) that are influenced by their environment. Saebi et al. (2017, p. 567) summarize the previous scholarly contributions (c.f. Linder and Cantrell 2000, Magretta 2002, Morris et al. 2005, Teece 2010, Saebi and Foss 2015, Wirtz et al. 2016), and define BM as “the firm’s value proposition and market segments, the structure of value chain for realising the value proposition, the mechanisms of value capture that the firm deploys, and how these elements are linked together in an architecture”. This is a comprehensive definition highlighting the main underlying assumptions of the business model, agreed upon by many of the scholars in this field. That is, the central focus on value in business models and how it is mirrored in the firm’s value proposition, value creation, value delivery, and value capture dimensions (e.g. Teece 2010, Aversa et al. 2015, Clauss 2017).

The different examples of scholarly works in the business model field show varying degrees of abstraction or granularity in BM conceptualizations (Massa and Tucci 2013). The level of abstraction for describing a business model can be anything from a business model being perceived as a complex system of interdependent activities in the company (Amit and Zott 2001) to more abstract descriptions, such as when the business model is considered to be a narrative (Magretta 2002). However, despite this varying degree of depth, all BM conceptualizations seem consistent in representing the interrelatedness of the constituent elements (Aversa et al. 2015). BMs are also known for their boundary-spanning characteristics, which make the concept both “attractive and slippery” (Spieth et al. 2014, p. 242). BMs can be strictly firm-centric or cover a broader scope by being network-embedded (Bankvall et al. 2017), making communication between actors important (Peltokorpi et al. 2019). From the early 2000s, and in line with the increase in sustainability considerations of business activities, the defined boundaries of BMs have also started to take new meanings: for example, sustainable BMs where sustainability notions are the main driving force in business decision making (Stubbs and Cocklin 2008), business models for sustainability (Schaltegger et al. 2012), sustainable business model archetypes (Bocken et al. 2014), innovation ecosystem designing (Talmar et al. 2020), and business ecosystem thinking (Viholainen et al. 2021).

Sustainability considerations in business models

Increasing sustainability in business models brings a more extended meaning to the concept of value. Sustainable business models take a broader perspective and highlight the importance of creating economic value in companies without neglecting the delivery of social and environmental values to a broader range of stakeholders (Bocken et al. 2013, Schaltegger et al. 2016, Geissdoerfer et al. 2018). Viholainen et al. (2021) emphasize that value creation in a business ecosystem is co-evolutionary, which means that producers, users, and other relevant ecosystem members contribute with their expertise and knowledge to create value beyond a single actor’s focus by including participants from production, an extended network, and users. Further, there are strong drivers for implementing policies to increase building solutions built on economic, social, and environmental sustainability (Viholainen et al. 2021).

Sustainability considerations in business models and business model innovation rely on the three dimensions of sustainability: economic, environmental, and social (Bruntland 1987, Evans et al. 2017). Economic values are generated from earnings measured as shareholder value, economic growth, profitability (Geissdoerfer et al. 2018), economic output, or economic logic (Magretta 2002). This means realizing economic value (Chesbrough and Rosenbloom 2002) and how benefits and costs are distributed between the involved actors and stakeholders (Boons and Lüdeke-Freund 2013). In a classic capitalistic view, a “… business contributes to society by making profit, which supports employment, wages, purchases, investments and taxes” (Porter & Kramer 2011 p. 66), long-term viability, business stability, and financial resilience (Evans et al. 2017). Going beyond this classic view by taking a sustainability perspective, the economic values are integrated with and considered part of companies’ quest to achieve increased sustainability in their business models.

Social value creation means an increased focus on shared value (Porter and Kramer 2011). Social value addresses a need for incorporating societal issues in business models, i.e. to: “… create social value and maximise social profit […] to act as a market device that helps in creating and further developing markets for innovations with a social purpose” (Boons and Lüdeke-Freund 2013, p. 16). This means adding values other than purely economic value to the business model by integrating social and business activities (Schaltegger et al. 2012). Evans et al. (2017) list a few key factors of sustainable value (Evans et al. 2017, p. 600): equality and diversity, well-being, community development, secure livelihood, labor standards, health, and safety.

The business model’s environmental values rely on using renewable resources, and on low emissions, low waste, biodiversity, and the prevention of pollutive activities (Evans et al. 2017). Achieving environmental values can be realized through several initiatives. For example, technology innovation increases efficiency by replacing old technologies (Geissdoerfer et al. 2017), and they can act as technical value in a BM with sustainability considerations. Furthermore, lowering carbon emissions from building and construction can be made by choosing sustainable materials: for example, wooden building constructions on top of existing buildings (Viholainen et al. 2021). Moreover, even if lower waste and prevention of pollutive activities are in focus when building an extension with wooden constructions, such building extensions have more of a production-oriented process and project planning in focus rather than a radical innovation for achieving sustainability. Prefabricated wood construction building materials have a lower weight than concrete, which reduces pollutive activities through a lower need for transportation and through a lower environmental impact of the use of wood compared to concrete (Mishra et al. 2022). Biodiversity, as a part of environmental sustainability considerations when constructing on top of existing buildings, is an increased utilization of existing land already exploited for buildings, creating the possibility of leaving unused lands for activities such as the production of food and other bio-based products.

Sustainability incorporated into BM and BM innovation includes values and issues of both monetary and non-monetary character over short- and long-term periods (Geissdorfer et al. 2018). This means that a business model considering sustainability must translate the non-monetary values into an appropriate estimate of what this value is worth in monetary terms as an integrated unit of both measures. In other words, sustainable value is a combined measure of integrated environmental, social, and economic values (cf. Evans et al. 2017).

Project-based business models in the wood construction industry

The construction industry, in general, is a mature and conservative sector with a slow rate of technology adoption (Szentes and Eriksson 2013), which partly stems from the fact that companies’ business models in this industry are created based on short-term objectives, inefficient communication between actors, and traditionally static procurement contracts (Vennström and Eriksson 2010, Akintoye et al. 2012). However, Sweden has always positively perceived wood-framed housing and has a robust domestic timber supply (Mahapatra et al. 2012). Furthermore, over the past 15 years, there has been an ever-increasing trend in modularized wood production in prefabricated (prefab) construction (Brege et al. 2014).

Several examples of proposed BM frameworks for the wood construction industry exist in the literature (for example, Brege et al. 2014, Wang et al. 2014, Das et al. 2020). Most of these frameworks are inspired by Osterwalder and Pigneur (2010) BM Canvas and have a firm-level focus. However, as argued by Mokhlesian and Holmén (2012), as a consequence of increasing sustainability in construction, most of the BM elements need to change substantially. There is, therefore, a need for better alignment of both business and social/environmental objectives through having “result-oriented” BMs supported by the key actors in the construction’s value chain, for example, equipment manufacturers/suppliers, architects, building contractors, property owners, and regulators (Sanne et al. 2019).

This study aims to adapt the BM concept for better applicability to the context of sustainable construction solutions. Casadesus-Masanell and Ricart (2010) highlight the importance of choosing the proper distance and decomposition to assess a business model, or alternatively, as others describe it, of choosing the level of granularity (Aversa et al. 2015) or level of abstraction (Massa and Tucci 2013). This means making certain decisions regarding choosing the BM’s boundary/scope and level of abstraction when adapting the BM concept to a specific context. An increased focus on sustainability in construction solutions would naturally indicate a significantly broader scope in the view of the business model compared to the traditional firm-specific business models. This research intends to keep the scope of the business model at an empirically manageable level. Therefore, the choice has been made to focus on the business models of construction projects. One way to increase the sustainability considerations in the construction sector is to adopt a project view when studying the industry’s business models. Having the project-level BM as a starting point, this study will mainly be oriented toward the key actors involved in the construction projects’ value chain (Sanne et al. 2019). In order to understand the entire construction project, the business model needs to be conceptualized at a higher abstraction level than the previous models, which are mainly at the firm level.

As previously mentioned, representing the key aspects of value proposition, creation, delivery, and capture is a central point of departure in business model studies (Teece 2010, Bocken et al. 2014). By focusing on delivering more sustainable construction solutions, the concept of value will have a broader scope and is no longer limited to the immediate technical and economic benefits of a focal company and its direct customers (Teece 2010, Evans et al. 2017), but also includes social and environmental value for multiple stakeholders. In a previous scholarly work on sustainable business models by Bocken et al. (2018), a business model construct was proposed, including four main elements: value creation, value offering, value capture, and value delivery. This framework (Bocken et al. 2018) adapts Osterwalder and Pigneur (2010) business model canvas on sustainability, where each of the four main elements has been broken down into two to three sub-components. Inspired by Bocken et al. (2018), earlier BM frameworks (Brege et al. 2014) and ecosystem thinking (Viholainen et al. 2021) in the wood construction industry, this study proposes a project-level BM for construction projects consisting of three main elements: (i) value creation and delivery, (ii) value proposition, and (iii) value capture. This study aims to adapt the business model to the specific context of a construction project. This assumes that, in the case of construction projects involving multiple key actors, value creation and delivery occur simultaneously, or parallel. Because the project’s key actors are all part of a value chain, where value created and delivered by one is used as the resources needed to create value by the next actor. In other words, each actor is, to some degree, dependent on the success of the other actors in the project (Talmar et al. 2020). This makes it difficult to distinguish between these two elements. It, therefore, seems more appropriate to group value creation and delivery into one element in the business model. The study’s proposed project-based business model for construction projects is shown in Figure 1.

Figure 1. A project-based business model for wood construction projects.

Research methods

This multiple-case study originated from a research project focusing on extending the life cycle of existing buildings with the help of prefabricated wood materials. A multiple-case study offers the opportunity to gain insight into a particular context by finding similarities and differences between seemingly similar cases (Eisenhardt 1989, Yin 2018). This results in a more sophisticated understanding of a phenomenon (Eisenhardt 1989).

The context of the study is a multiple-case study from the wood construction industry illustrating key success factors in extending existing buildings with a wood construction on top of an existing building. The data were mainly collected through 19 semi-structured interviews with representatives from construction projects’ involved actors. Figure 2 illustrates the building process with involved actors. Through the six different building projects, the study covers, from a business perspective, all significant phases of the construction project: design, program, planning, construction, and administration. The respondents each represented one of the key partners in the construction value chain (Sanne et al. 2019). The semi-structured interviews followed an inquiry guide covering overarching themes (Yin 2018): introduction and general information about the building project, conditions, the construction phase, finance, building administration phase, risks, and business model.

Figure 2. Traditional building process steps with relevant actors involved.

The six cases, briefly presented in Table 1, are representative examples to illustrate the main activities and challenges in constructing wood extension projects. All the studied construction projects consist of an already existing building, which after a thorough investigation of the stability and strength of the original building, has been cleared for an extension on top. Such extensions are predominantly made from a wooden frame. The interviews were complemented with data collected through other sources, including three construction site visits to Case A and two study visits to Case B and Case D. Other materials, such as available online sources and project documents, further assisted in developing an understanding of these six case studies.

Table 1. Brief description of the six case studies.

Description:	Case A	Case B	Case C	Case D	Case E	Case F
Building type: Extension/Existing	Office/Office	Office/Office	Residential/Residential	Residential/Office	Office/Office	Office/Office
Construction solution/system	CLT, joists walls & steel frame	CLT & glulam	CLT	CLT & steel frame	Both concrete & CLT frames	CLT & glulam
Construction period	2019–2021	2012–2014	2008–2009	2017–2019	2016–2018	2020–2022
Construction size (approximate)	5600 sqm. (Renovation of 2 floors & addition of 3 floors)	6500 sqm. extensions	1000 sqm. (3 floors + 1 attic)	4700 sqm. extensions	16,000 sqm. total	10,600 sqm. total (incl. 1250 sqm extension)
Construction cost	11 M€	12.5 M€	1.5–2 M€	20 M€	30 M€	18.5 M€. (estimate)
Actors interviewed	Architect, building contractor Building system supplier	Property owner, building contractor	Building contractor, building system supplier	Architect, property owner, building system supplier	Property owner, building contractor, building system supplier	Property owner, building contractor

The interviews were recorded to ensure better facilitation of the review and analysis process (Gibbert et al. 2008). First, an initial understanding of the studied cases and their context was acquired with the help of all the collected data. The analysis process then gave structure to the patterns observed in the empirical material, both in each case and through cross-case comparisons (Yin 1989). The analytical approach was iterative, continuously combining theory with the empirical setting (Dubois and Gadde 2002). The observed patterns, which were structured and inspired by both theory and data, will be touched upon in the upcoming sections of this paper. The analytical framework is based on the literature on business models, business model innovation, and value creation in general, and more specifically, related to the building and wood construction industry.

The unit of analysis in this study is based on construction projects with an existing building developed with an extension on top of the existing building. Centered around a specific building, these kinds of construction projects give a coherent picture of the complexity of this type of development project, i.e. an extension on top of the existing building. A further reason to see the construction project as the unit of analysis is that these construction projects, through their outcome – buildings in the operational phase – create value from different aspects. Therefore, the focus will be on resources, relationships, knowledge, and processes to create and capture value through the lenses of a project-based business model.

All the projects described in Table 1 share similarities by being existing buildings in mid-to-large-sized cities in Sweden and appropriate as a basis for extension projects with a wooden frame on top of the existing building. Actors interviewed in the different building projects reflect various aspects of the project process, and in comparison, between the projects, add relevant information to the analysis of our development of a project-based business model for timber extension projects.

Results

In this study, all studied building projects are constructed extensions on buildings with concrete frames. The extensions are primarily made of different forms of CLT frames and with predominantly wooden interiors. In analyzing the studied cases, challenges are identified with building projects, including using wood in the building extension. The challenges identified differ from those typically faced in other building construction projects.

All identified challenges are related to the value delivery/value creation dimension of the business model framework. This is expected since this dimension includes activities, resources, and actors involved in the construction project. Some of the challenges identified also relate to the other dimensions, value proposition, and value capture. For example, the degree of prefabrication relates to value capture, and the degree of prefabrication affects which actor captures value due to the degree of prefabrication of the building material. All challenges identified specifically in wood extension construction projects can be found in Table 2.

Table 2. Challenges in wood extension projects.

Project challenges with wood extension constructions	Key actors affected
Not enough understanding, knowledge, and expertise in utilizing wood for building purposes.		CT	SU		CS	RG
The friction between involved actors regarding the level of prefabrication.		CT	SU	AT
The requirement for a flexible supplier of wooden products, owing to the customized demands of projects.		CT	SU
Conflicts in regulations when it comes to approving detailed development plans – for instance, due to the taller height of wooden constructions.		CT		AT	CS	RG
The dynamics of collaboration among key actors.	PO	CT	SU	AT	CS	RG
Challenges in meticulous planning and maintaining a smooth progression of tasks and costs in the project.	PO	CT	SU	AT	CS
The challenges with logistics in ensuring the proper sequencing of loading prefabricated modules at the factory.		CT	SU
Technical challenges in maintaining water, heating, and sewage connections between the existing building and the wood extension structure.		CT			CS
Challenges related to the frame structure include differences in technical and material properties between concrete and wood.		CT	SU	AT	CS
Difficulties in building extension on top of buildings with high historical significance.	PO	CT		AT	CS	RG
Issues related to fire safety, moisture retention, and sound transmission in wood building constructions.		CT	SU		CS

Key actors: Property owners (PO), Contractors (CT), Suppliers (SU), Architects (AT), Consultants (CS), and Regulators (RG).

As seen in Table 2, the involved actors have various knowledge of the characteristics of the wood building system, and the table shows the insecurity connected to the interface between the wood building system and other building systems. Property owners and some building contractors highlight mainly this type of insecurity. Their concern relates to a great extent to the attributes of the building material and its potential to be used in larger building constructions, rather than it being related to building extensions per se. The consultant does not find this type of insecurity to the same extent, as they have worked with wood constructions previously. Most interviews discuss challenges related to the interface between the existing building and the new extension on top. When choosing wood for construction, the challenges mentioned concern technical issues related to fire, sound, and a moisture-proof building.

The study also shows that there exists an imbalance between actors and activities. Choosing a wooden frame for the building extension creates additional complexity for the building project. This uncertainty must be managed via collaboration strategies between involved actors. Already established relationships between the actors mitigate the risk, while new actors may create some uncertainty. There is an awareness among involved actors that extension projects can be more complex. There is a desire for early involvement and collaboration between different actors to reduce the complexity. A need for collaboration between different actors also relates to the technical systems of the building at a detailed level, such as which wooden building system can be used and what degree of prefabrication is desired or possible. Another reason for increased collaboration in an early phase relates to how the wood building system can interact with other subsystems in the entire building structure. Further, collaboration efforts are needed to reduce uncertainty about how the construction and assembly process will occur in practice. The novelty and newness of wood construction on top of the existing building make the need for such collaboration efforts even more vital because of the lack of previous experience of the involved actors in such projects.

Further, the study identifies an imbalance in value creation and delivery, which in turn affects the value proposition and capture. A stronger value proposition through the following: additional rentable space, the environmental benefits of using wood materials, and a high degree of prefabrication that reduces disturbances of existing activities in the buildings, have been highlighted for extension projects. Though these opportunities also create challenges. For example, existing tenants need temporary housing, or the construction project must be carried out with as little interference to existing operations as possible. Also, this applies to surrounding properties and businesses affected by a construction project, usually carried out in already densely populated areas. This is especially true for building extension projects, since these are made on existing buildings. Therefore, accessibility, to and on the construction site, is a significant challenge, not specifically for wood frame structures, but in a positive way as a solution to the problem of site access and minimizing surrounding disturbance. A wood building system is lighter than concrete frames, so less transport is needed for the same building volume. Every transport vehicle can carry more materials because the materials strength/weight ratio lowers the number of deliveries. In the long run, this indicates shorter construction time and removes the necessity to occupy the construction site and, thereby, shorter time for disturbing actors in the existing building and surrounding neighbours.

The discussion above has highlighted significant challenges and an interplay between and within the business model dimensions. However, the various extension projects studied point to some indicators potentially bridging these challenges, which can be considered success factors for the studied wood extension projects. These success factors will be discussed in the next section.

Important elements contributing to success in wood extension projects

The identified success factors can be divided into three different groups, illustrated in Table 3. Each of these main groups is also clearly linked to the three business model dimensions:

Table 3. Important elements for success in wood extension building projects.

Important elements for success in wood extension building projects	Key actors involved
Value creation & delivery: cooperation, documentation, and recurring relationships – knowledge and long-term learning
Engage in early dialogue with the local municipality regarding the detailed plan and local regulations.	PO			AT
Contact the frame supplier early to acquire knowledge about the wood building system.	PO	ET	BS
Establish contact with a key supplier to create a knowledge advantage.	PO		BS
Collaborate with architects and designers who possess expertise in wood construction.	PO			AT
Formulate collaboration agreements to ensure access to and effective coordination of specialist knowledge.	PO	ET		AT
Initiate early contact and establish manuals related to wood construction.		ET	BS
Document that the work continues to facilitate organizational learning.	PO	ET	BS
Establish and accept cost and schedule requirements at an early stage.		ET	BS
Establish internal standards for climate and environmental aspects.	PO	ET
Active client with own project management competence.	PO
Active client with own organization for implementation.	PO	ET
Value proposition: properties of the wood material
Own expertise in a wooden construction system facilitates efficient implementation	PO	ET
The wood construction system has an excellent strength-to-weight ratio.			BS
Leverage the challenges associated with the wooden building system (extra focus on moisture resulted in a more even workload over the project timeline).		ET	BS
Utilize tent solutions to enable moisture-proof construction and quick installation.		ET
Adjust the level of pre-manufacturing depending on schedule and internal competence.		ET	BS
Value capture: value added for sound project finances
Optimize prefabrication degree for fast assembly and minimize on-site costs.		ET	BS
Explore the possibility of a high level of prefabrication (including transportation) of complex parts such as the frame and bathrooms.		ET	BS
Implement incentive structures for environmental certification and reuse.	PO	ET
Wood building systems yield a high leasable area, thereby enhancing good property owner economy.	PO

Key actors: Property owners (PO), Entrepreneurs (ET), Building system suppliers (BS), and Architects (AT).

• Cooperation, documentation, and recurring relationships – knowledge and long-term learning – link to BM dimension value creation and value delivery.

• Properties of the wood material. This links to the BM dimension value proposition.

• Value added for sound project finances. This links to BM dimension value capture.

Cooperation, documentation, and recurring relationships – knowledge and long-term learning – link BM dimensions of value creation and value delivery

The extension projects show success factors emerging from the relationship between critical actors and sub-construction systems, i.e. key activities of the projects. Activities in collaboration enable value creation to solve challenges in construction projects and create learning for future extension projects.

Reducing technical and organizational complexity challenges in an extension project requires the acquisition of relevant resources, for example: competencies, for early collaboration, and the ability to identify problems in the extension project and find solutions to them. Early collaboration highlighted uncertainties over the wood building system’s properties, which could be reduced. For example, the risk of wood material exposure to long-term moisture was reduced by a higher degree of prefabrication, which means faster assembly. Covering the building with tent solutions created a good construction site on the roof. Using a tent solution to cover the building construction improved the working environment, and reduced the risk of moisture in the building. Further development of risk reduction could be more solutions developed and delivered by the building system supplier for some construction engineering challenges, such as nodes and transitions between and to other building systems, degree of fabrication, and assembly instructions.

In sum, early collaboration between key resources concerning technical knowledge about general wood construction and extension projects creates an essential link between an extension project’s challenges and its potential for success. A necessary explanation is a collaboration between key actors and an increased focus on long-term learning, solid time and resource planning, ongoing documentation, and agreements.

Properties of the wood material

The value proposition in wood extension projects is built up by the social, environmental, and financial benefits of building with wood. This is rooted in early participation, which means that a degree of fabrication of the wood construction material creates synergy for other parts within the construction project. It can, for example, mean that the transportation efficiency is high, and a smooth flow of materials is adapted to the assembly organization, leading to a quick assembly of the frame on the extension building. A quick assembly of the frame structure also leads to other entrepreneurs starting their work earlier, for example, in relation to electrical work, water, and ventilation. The challenge with moisture has been solved differently in the studied projects, but all led to minimizing this potential problem and uncertainty risk. This relates to Tushman and Nadler’s (1986) argument that synergy can be reached within the system if knowledge about the various innovations is spread and accepted within the organization.

Further, the properties of wood as a building material are relevant. To be able to utilize these properties’ knowledge in wood construction is important. It is also important to understand how the properties of wood as a building material contribute to a unique value proposition. The studied extension projects were made from a column-beam system with solid wood joists or flat building elements of solid wood boards. One success factor emphasized in all studied extension projects is that the building system supplier has been involved early in the project. The reasons mentioned for this are to gain increased knowledge of the potential advantages of a wood construction system, to see if its properties can solve construction challenges in an extension building project, and to see if other added value can be created by choosing wood as a construction material.

Value added for sound project finances

The extension projects all illustrate various possibilities to capture value for the involved actors. The flexibility in the level of prefabrication of the building system has made it possible to predict that the implementation is a good match with the calculations and the outcome. To utilize this flexibility to its full potential, it is crucial to have an early involvement in planning the building process. The degree of prefabrication has created good accuracy in resource planning, implementation, and calculations concerning the actual outcome.

There are also other possibilities with a wood building system seen as a success factor, not directly related to the construction but positive values related to the environmental and climate effects of using wood as a construction material instead of other construction materials. Such value-added issues are a “green” label for the projects, which is more critical when customer demand for more environmentally friendly products increases.

Discussion

Linking the characteristics of challenges and elements of success for wood extension building projects, as discussed above, with the conceptualized three dimensions of the project-based business model for wood construction projects will provide deeper insights into: (i) What recourses and activities will play a more significant role to contribute to value creation and value delivery. (ii) What are the more technical, economic, social, and environmental aspects contributing to an enhanced value proposition in wood extension projects. (iii) What are the more technical, economic, social, and environmental aspects providing enhanced value capture among the involved actors in wood extension projects. This section is divided into a discussion around the three dimensions of the project-based business model. The first area, value creation and value delivery, points to essential resources and activities identified as key success factors with a wooden frame extension project. Table 4 highlights these resources and activities.

Table 4. Value creation and value delivery in extension projects.

Value creation and value delivery in extension projects
Resources Committed property owner working on an excellent collaborative project regardless of the type of contract. Collaboration model within the chosen type of contract. Dialogue and cooperation between key actors in the project early in the planning process. Experience in large wooden construction is essential. Knowledge and competence in wood construction need to be involved early in the design phase. Wood material properties are utilized in the building process; for example, low frame weight requires much lower crane capacity for lifting construction materials. Tenants involved in the design phase reduce changes prior to occupation.
Activities Optimize the use of the detailed development plan for the most significant effect of the extension. The degree of prefabrication needs to be decided. Accurate time planning of deliveries to the project – optimization. Efficient logistical planning of frames for the construction site. Quick installation of the wooden frame results in low impact on existing tenants and the surrounding area of the project site. The detailed plan for the assembly and subsequent activities for a moisture-proof construction. Accuracy in planning the work with the existing building’s primary conditions and existing framework, and the transition to the new building reduces the risk of disturbances in the extension project.

The second area in the project-based business model is the value proposition, divided into the various types of value offered through the extension building project. The value proposition consists of technical, economic, social, and environmental value. Table 5 highlights the identified dimensions of the value proposition in extension projects.

Table 5. Value proposition in extension projects.

The value proposition in extension projects
Technical value proposition The low weight of the wooden frame material makes it possible to build more floors. The relative strength and weight ratio favors wood in comparison to other construction methods. Better accuracy in planning provides a higher level of predictability for the final delivered solution. Technically possible to make late changes without a significant impact on the project. Technical characteristics for building with wood:  ○ Results in larger flexible areas with the possibility of open floor plans.  ○ A higher degree of energy efficiency in a property developed with an extension.  ○ Constructing in wood results in quieter on-site construction.
Economic value proposition A shorter time is required for tenants’ temporary accommodations. Shorter construction time reduces the establishment cost. Fast construction gives shorter “time to market”. This means a shorter period until income is generated. Larger rentable area by utilizing the limits of the detailed development plan concerning the wood material’s advantages regarding, for example, weight. Energy efficiency has positive effects on operating economics.
Social value proposition Fewer disturbances to existing tenants. Shorter construction time on site. Less disturbance to the surrounding area. A quieter construction benefits the environment and those working on the project. The environmental profile of the construction project creates a positive value. Visible wood has positive effects on the user. Exclusive construction projects with a high profile provide value for the city, the area, the company, the project, and so on. Wood in building extension projects further strengthen the cultural heritage.
Environmental value proposition Energy optimization through building extension together with renovation. Lower carbon footprint through construction in wood compared to other construction methods. Reuse and recycling of building materials. The possibility of environmental certification is facilitated when building with wood because wooden constructions provide good values from, among other things, a climate perspective. Wood is a renewable material.

The third area in the project-based business model reflects value capture. It can, as with value proposition, be divided into the same sub-categories: (i) technical value, (ii) economic value, (iii) social value, and (iv) environmental value. Table 6 highlights the identified dimensions of value capture in extension projects.

Table 6. Value capture in extension projects.

Value capture in extension projects
Technical value Energy efficiency-related cost reductions because of wood extension projects. A wooden frame provides a higher rentable area than other building systems. Dialogue between the actors involved captures values linked to knowledge about building in wood and the possibility of extensions. Extensions face some challenges, which, if planned well, will enable clear values for the actors involved during and after the project’s implementation.
Economic value Profits for property owners are linked to a shorter time from the start of the construction of the extension to the possibility of renting new space. Owning, building, and managing the property in-house gives a long-term perspective on the various profits and cost savings that can be made over the property’s lifetime. Lower costs for property owners during the operational phase are linked to energy optimization. Shorter construction time results in lower financing costs for the property owner. For contractors, a shorter construction time means reduced labor costs and lower costs related to the construction site and workplace protection costs.
Social value A shorter time is required for tenants’ temporary solutions, of accommodation or offices. Several high-profile projects have been built with wooden frames, which capture a more market-oriented value through increased visibility and the feeling of a premium product. Dialogue and cooperation between the extension project’s actors contribute to a social value that can be linked, for example, to an opportunity to influence the design of the building or the surroundings.
Environmental value Building in wood creates the opportunity for certification, and a high environmental profile for the actors involved – for example: promoting sustainable construction through the municipality, property owners, and through the interest and commitment of the client and contractors. Reuse and recycling increase the degree of environmental impact and commitment.

In sum, project-based business models have shared characteristics for construction projects. However, in this study, specific aspects of wood extension construction projects on top of existing buildings will be emphasized in illustrating the project-based business model. Summarizing the illustrations from the tables above, it becomes clear that the different dimensions of the project-based business model need to be aligned in consideration of the potential challenges of the project. This depends on technical conditions, resources needed in the project, necessary activities to carry out the project, and the timing of when the various aspects of the project will be performed to attain a project-based fit between all elements in the project (cf. Morris et al. 2005).

The characteristics of the project-based business model presented in tables 4–6 highlight a few interesting observations. First, a shorter production time of a wood extension project results from a higher degree of prefabrication, and off-site production gives a more accurate planning of the various activities in the building process (cf. Brege et al. 2014). Second, wood as a construction material is lighter than other building materials (cf. Olsson et al. 2022). This allows for an extension project with more square meters in the extension building. From this, at least two significant benefits can be identified: (i) More square meters in the extension building have financial benefits from higher income. (ii) The need for an energy system for the extension building can include renovation of the existing energy system for the existing building, thus creating financial benefits from cost savings from energy in the entire building after completion. Further, the energy cost is also split into a larger area in the completed building. In addition to this, the hygroscopic nature of exposed massive wood beams in buildings contributes to the indoor climate. It will further positively affect the energy system (cf. Hameury and Lundström 2004). Third, coordination activities from the design phase have spill-over effects on other parts of the project. This includes shorter production time, as mentioned above, which leads to a lower cost of production; lower levels of disturbance on various stakeholders; and shorter time to market, which means both a quicker time to enter the running operation phase of the building, and lower costs to finance the construction project before potential income streams.

Conclusion

The paper aimed to discuss how increased sustainability through wood construction solutions could improve by applying a project-based business model to the process of building extension projects. The project-based business model provides a more overarching perspective on the building extension project’s key actors and activities. Thus, this model is on a higher abstraction level, as discussed by Massa and Tucci (2013) but illustrates to some extent results on an activity level in more detail, as proposed by Amit and Zott (2001), to understand the activities and their links to other activities. Wood is a flexible and environmentally friendly construction material for larger projects, such as building extension projects. As explained, the full potential of using wood requires a thorough understanding of its properties and how this can benefit the construction of the extension with a wooden frame. Efficient production methods and renewable materials are a prerequisite for meeting SDG-12 of sustainable production and consumption. Further, wood products have properties suitable for extensions, adding value to the already built environment by more efficient use of already used land for existing buildings, and contributing to meeting the SDG-11 of sustainable cities by using woos as a sustainable building material.

Further, this requires knowledge, relevant competence, and early collaboration among involved actors in utilizing the material. In all, with a process focused on dialogue, courage to try, and collaboration among stakeholders, including contractors, suppliers, consultants, architects, property owners, and regulatory authorities, there is a great potential to create a successful property development project where the goal is an increased level of sustainability in the project through the project business model. This view is supported by earlier research, for example by Viholainen et al. (2021).

The degree of prefabrication is also an essential success factor in building extension projects. This must not be mistaken for standardized prefabrication as the key factor but the competence and knowledge in adapting the degree of prefabrication. Since an extension project, in many cases, is characterized by a high degree of adaptation based on the conditions of the existing building, the construction project managers need knowledge on how to integrate the level of prefabrication of the wood building system with other building installation systems, the construction process, labor competence, existing building interface, and current tenants. This type of competence aligns with Teece et al.’s (1997) view of dynamic capabilities, as this knowledge requires a capacity among involved actors to learn and implement new and developing building techniques and innovations.

To conclude this paper, the most significant fundamental factors to capture value related to the proposed project-based business model emphasize knowledge and experience as crucial elements to succeed with using wood in extension building frames. This is particularly important since the construction industry mainly revolves around a dominant design for high-rise buildings. Further, this means that to succeed, all relevant actors need to be involved early in a holistic perspective to contribute insights into the construction project, which follows Morris et al. (2005) view of business models as open systems. To utilize this fully, an excellent collaborative environment between actors already from the project planning phase becomes an important activity for the project. Finally, this implies that all key actors should be involved in the construction project from the design phase and that the communication and meeting culture must permeate the project. Thus, there is a need to overcome structural barriers within the industry, as previously explained by other studies (cf. Vennström and Eriksson 2010; Akintoye et al. 2012; Szentes and Eriksson 2013).

Disclosure statement

No potential conflict of interest was reported by the author(s).