Industrial operation model for the construction industry

Abstract

For decades, the construction industry has been searching for avenues to improve productivity. One potential direction for improvement is industrialisation, which involves repetitive and modular products and standardised processes to achieve economies of scale. This article describes an industrial operation model (IOM) based on the literature and uses empirical studies to find the emerging elements of the IOM in the construction industry. We employed qualitative and inductive approaches to build the general IOM framework. We determined the main challenges for the IOM through semi-structured interviews with 11 companies. The current state of the analysed IOM elements was perceived as inconstant and generally weak. In any case, we were able to describe several challenges in the main areas of the IOM. In this study, six preconditions for the IOM were defined as critical: defined target markets and products, effective product portfolio management, product and process data availability, efficient operative business processes, systematic continuous improvement, and governance and owners of the main IOM elements. The IOM framework and the proposed preconditions can be used as bases for future productivity development in the construction industry.

Keywords:

• Industrial operation model
• Lean
• construction industry
• business model
• operative business processes
• continuous improvement

Introduction

The construction industry has been suffering from poor productivity for decades (Jarkas et al. 2012; Dixit et al. 2019). Some reasons for the modest development in this industry include project fragmentation and poor cooperation due to common short-term contracts (Khoshgoftar et al. 2010; Alashwai and Fong 2015; Grenzfurtner and Gronalt 2021). Moreover, the construction industry has been blamed for its slow adoption of the new practices or operational methods that have been implemented in other industries, such as product modularisation or centralised data management (Alaloul et al. 2020). The creation of modular product offerings and the use of product platforms have been agreed upon to systematise product offerings and to standardise processes, leading to industrialisation (Jansson et al. 2014; Lessing 2015).

Lean, which was initially developed for the car industry, has been targeted to promote efficiency through process standardisation (Ohno 1998). Koskela (1992) introduced a new Lean production philosophy in the construction industry in the early 1990s. Since then, Lean-based tool and method development has been employed in the construction industry (Meiling et al. 2012), albeit with slim results. It has been found that process standardisation and management of unique projects using a repetitive process are key in achieving efficiency and industrialisation in the construction industry (Höök 2008; Andersson and Lessing 2020; Stehn et al. 2021).

The starting point for industrialisation is systematism at the business model (BM) level, which establishes the foundation for the development of standardised products and processes (Belova and Sbitneva 2018; Uusitalo and Lavikka 2020). However, Pekuri et al. (2015), who studied BMs and project selection principles in the construction industry, noticed that BMs are not always defined or strictly followed. Also, Abeynayake et al. (2021) found that the BM concept is quite new and surprisingly scarcely studied in the construction industry.

An operation model is a representation of how an organisation delivers value to its customers and how an organization actually runs itself, that is, how an organisation operationalises its BM at a more detailed level (Pekuri et al. 2015). Industrialisation serves as the basis for repetitive product development and standardisation of processes (Liker and Morgan 2006). However, the elements of the possible operation model itself as part of industrialisation have not yet been analysed as a whole (Brege et al. 2014; Das et al. 2021). An industrial operation model (IOM), which serves as backbone, is needed to effectively integrate and fully gain the benefits of all the current developments in processes and methods (Liker and Morgan 2006). In this operation model, processes and their continuous development are the fundamental elements, likewise in many widely accepted excellence criteria (Fonseca 2021).

Given the lack of research on the IOM for the construction industry, this study aims to outline the IOM and the comprehensive and continuous role of the main IOM elements in the industrialisation of construction. The presumption for our study is, that the IOM is required to enable the productivity improvement in the construction business, supporting the better costs control, quality assurance and schedule accuracy in projects. The history has shown that these targets are very difficult to reach with prevalent delivery models allowing uniqueness to drive the project models. The research objectives are presented as research questions (RQs), as follows:

RQ1: What are the generic key elements of the IOM?

RQ2: How do IOM elements emerge and what are the respective challenges in the construction industry?

RQ3: What are the preconditions for the IOM implementation in the construction industry?

Our study is qualitative in nature, aiming to describe the IOM and its elements. This study began with a literature review on BMs, operative business processes, and continuous improvement (CI); the findings were synthesised to determine the main elements of the IOM (RQ1). After the literature review, a detailed research method is presented. In the results section, we summarise the semi-structured interview findings and describe the key IOM-related challenges faced by the construction industry (RQ2). In the same chapter, we present the preconditions for the IOM implementation in the construction industry (RQ3), along with our discussion. Finally, we present our conclusions.

Literature review

Lean construction (Innella et al. 2019) and industrial construction (Uusitalo and Lavikka 2020) based methods have been increasingly used in the construction industry. Both aim the same target, that is, to increase productivity (Li et al. 2019).

Lean covers four key areas: setting the purpose of a company, managing the processes of a company, valuing organisation and people, and CI (Liker 2014). These four fundamentals of Lean are widely used as the operation model in industries (Puram et al. 2021). In addition, Dave et al. (2008) consider people, processes and information systems as the three core elements of Lean to be studied in the construction industry. Womack and Jones (2003) have identified the following Lean principles: 1) specify value, 2) identify the value stream, 3) flow, 4) pull and 5) pursue perfection. Basically, what is important to customers (product) must be first defined, and then the processes must be optimised by removing wastes and by establishing the pull, and finally improve continuously.

Osterwalder (2004) presented a commonly used definition of a systematic and efficient business. There are three layers of business sustainability: strategy (planning), business model (architecture) and processes (implementation). The strategy layer encompasses vision, goals and objectives; the business model layer involves the money earning logic; and the process layer involves organisation and flow. The basis for the industrialisation of construction cannot be built upon a fundamentally different setup (Brege et al. 2014; Pekuri et al. 2014).

Business model

The BM defines the revenue logic of a company, and it is important as a concrete and effective management method to describe and communicate the logic of a company (Osterwalder 2004; Johnson et al. 2008). A simplified BM should include three key elements: the offering, the value creation system and the revenue model (Suikki et al. 2006; Pekuri et al. 2013; Brege et al. 2014). Offerings may refer to pre-defined products and services, which create value for customers. Offerings require efficient and defined research and development processes. A value creation system includes all processes and resources needed for project execution, from order placement to delivery. The revenue model describes how a company obtains value from a project and how it actually creates money.

Porter (1987) noted that companies can succeed if they have a competitive advantage through their BM and core competencies. Economics of scale are built upon systematisms and repetition in products and processes (Chandler 1993; Liker 2014). If a product portfolio, the starting point of systematic processes, is built upon the strengths and competencies of a company, it also maximises the competitiveness of the company (Tolonen et al. 2015b). With modular and repeatable product architecture, it also supports industrialisation (Lessing 2015). BM is also needed in digitalising operations, that is, the implementation of Industry 4.0 (Das et al. 2021).

According to Belova and Sbitneva (2018) business model is needed in construction in order to adapt companies to modern industrial and economic sphere, bolster innovations and develop business processes. Pekuri et al. (2013) and Brege et al. (2014) have stated that the BM in the construction industry cannot be fundamentally different from that in other industries. However, Pekuri et al. (2015) have found that products are not usually defined, and the product selection of a company is not systematic, which is required in the BM. A typical revenue logic in a construction project is rooted in cost-based pricing. To work efficiently, construction companies should choose only the projects that fit their BM if they are aiming for the benefits of scale. Generally, construction companies have had severe difficulties defining their BM logic (Abeynayake et al. 2021). Höök et al. (2015) agrees that construction companies that are unaware of the intent of their actions lead to the unintended use of resources and integration mechanisms, which negatively affect their overall performance.

Operative business processes

Key operative processes should implement and operationalise a BM (Becker et al. 2003; Osterwalder 2004). The main areas or operations of a typical company can be logically conducted based on the BM: product process (creating an offering) and order–delivery process (delivering value to customers) (Pekuri et al. 2014). The order–delivery process should be further broken down into operative business processes according to the nature of a business (e.g. customer process, supply chain process and maintenance process) (Tolonen et al. 2015a).

Processes play a major role in Lean thinking: the right process will produce the right results (Ohno 1998). Processes must be systematically managed and developed. To enable development, processes must be repeatable. Dave (2017) highlights the importance of managing key operational processes, wherein process creation is not a one-time exercise, as processes should be maintained and improved continuously. Additionally, Uusitalo and Lavikka (2020) emphasise the importance of concentrating on processes that lead to industrialisation and Abad-Segura et al. (2020) present the growing research interest in industrial processes management for a sustainable society.

Continuation between processes is essential; Goulding et al. (2015) highlight the importance of the interaction between design and manufacturing processes. The performance of a company and its processes must be unambiguously measured against the set goals. Importantly, processes and key performance indicators (KPIs) must have nominated owners and explicit development responsibilities (Tolonen et al. 2015a). Process development must be a part of a company’s typical development cycle. Product data management (PDM) relates heavily to process management, as all process data must be accessible to all stakeholders in real time (Li et al. 2018). Successful PDM work supports promotes efficient operational process management in companies (Silvola et al. 2011).

One of the problems in the construction industry has been that due to the project-based setup, basically all processes are built anew for each project (Pekuri et al. 2015). Repetition is lacking, resulting in difficulties in measuring the status of the processes, in setting development targets, and in measuring the effect of development actions. It is also difficult to optimise and systematically develop the processes should they change depending on the demands of a project (Lessing 2015). In other words, economies of scale are impossible to achieve.

Continuous improvement

Lean thinking aims at perfection, and perfection can be achieved through CI. Products and processes (value streams) are elements wherein Lean aims to minimise variations. Lean considers people and CI as the most important elements of a company (Liker 2014). Liker and Morgan (2006) have proposed the PPT model (process, people and tools & technologies) for organising operations in an organisation. PPT is guided by the following statement: Tools and technologies are used to entice people to follow a process. In Lean, people include leaders, teams, employees and the network of suppliers and partners of a company. It is important to start by defining the organisational structure and roles of employees in their areas of responsibility to avoid misunderstandings and in order to concentrate on appropriate topics. Also, the process ownership and the training of the process owners should not be neglected. Developing people with personal and company-level development plans is essential. This does not happen without a systematic leadership and management of people (Ohno 1998).

The key elements of a successful CI are as follows: a performance management system with a set target for KPIs, an actual shop floor management system, an improvement process (e.g. plan-do-check-act or PDCA), and a supportive culture that promotes learning from failures (Liker 2014). Some companies even have their own CI organisations, and some use more advanced methods, such as the Lean Six Sigma toolset.

Even if CI is one of the most important elements in each company, it is not always systematically utilised, and the benefits of CI are not maximised. In the construction industry, problems such as fragmented processes, project orientation and short-term agreements cause problems in the CI work (Grenzfurtner and Gronalt 2021). Systematic process models and systematic CI usage are thus beneficial in the construction industry (Dave 2017). Even if CI tools are used, systematic CI and competence development should be improved, indicating that there is room for development in the construction industry in the coming years (Goulding et al. 2015; Mansour et al. 2021).

Synthesis

Osterwalder (2004) presented three layers of business sustainability: strategy, BM and processes; the BM serves as the starting point for the IOM. Pekuri et al. (2013) describe BM to consist of the following: 1) the offering, that is, pre-defined products and services, 2) a value creation system with key operational processes and 3) a revenue model that defines how a company captures the value of the deliverables provided to customers or clients. However, according to studies (Pekuri et al. 2015; Abeynayake et al. 2021), BM remains quite rarely used in the construction industry.

Industrialisation requires clear product platforms that benefit from modularisation and from effective and standardised processes (Höök 2008; Jansson et al. 2014; Andersson and Lessing 2020; Stehn et al. 2021). Moreover, cooperation between operational processes is essential (Goulding et al. 2015). For an efficient process improvement, all product and process data must be managed systematically (Li et al. 2018). As mentioned above, the key elements of CI are as follows: a performance management system with a set target for KPIs, an actual shop floor management system, an improvement process, and a supportive culture (Liker 2014). Wuni and Shen (2020) studied critical success factors (CSF) from 55 articles published in the years 1993–2019. The key CSFs in the construction industry include effective product and process management, as well as CI practices (Figure 1).

Figure 1. Generic key elements of the industrial operation model: product and data, operative business processes and continuous improvement.

Research process and method

This study applies an inductive approach and a quantitative method (Bryman and Bell 2011). The relevant IOM, BM, operational processes, CI, Lean and construction-related literature were analysed and used as bases in understanding the pertinent areas, and this analysis initiated the research process. Semi-structured interviews (Kallio et al. 2016) were conducted to cover the most important information related to IOM status and future development potential and to allow for free discussion around the key themes (Figure 2).

Figure 2. The research process.

The unit of analysis in this study is the entire planning, design and construction process until maintenance, and it does not specifically depend on the contract model or number of stakeholders involved in the process. A total of 11 construction-related stakeholders (Table 1) were included in this study to gain sufficient knowledge on the topics. All of the participating stakeholders were also interested in the development of industrial elements in their work. Large contractors and building service providers, as well as smaller technology providers and architects, were also involved in order for us to gain a wide and inclusive view of the construction industry. Due to the nature of this research, the respondents were mainly those holding the highest management positions, as they possess the competencies to discuss a wide array of topics pertaining to their respective organisations. In some organisations, two or three key persons participated to sufficiently provide information on relevant topics. The participating organisations were mainly based in northern Finland, but most of them have customers across the country, and some are also expanding their operations globally.

Table 1. Description of the companies and interviewees.

Company	Size^*	Type of business in the construction industry	Roles of the interviewees
A	large	main contractor, services	area director
B	large	main contractor	chief development officer
C	medium	main contractor	chief executive officer business manager
D	small	consultant	chief executive officer
E	large	main contractor	chief executive officer project manager
F	medium	building technology provider	head of R&D vice president
G	small	architect	shareholder, architect
H	micro	architect	chief executive officer
I	small	building services	director of development
J	large	building services	director of design
K	medium	building services	head of business area project director commercial director

* According to the definition of the European Commission

The interview structure was built upon the key elements of the IOM reviewed in Chapter 2. We utilised open-ended questions to allow the respondents to provide more details regarding their experiences as they respond to the questions. The questions were built on three key areas of the synthesised IOM model: product and data, operative business processes and CI. In total, 22 questions were asked to assess the status of the companies and to lead the discussion to other interesting matters. Product-related topics included customers, target markets, products, product management, data management and competitiveness factors. The questions pertaining to the process-related area were geared toward understanding how processes are used, knowing whether an organisation operates based on the processes, and determining the importance of the processes in the organisation. The CI topics covered personal development, development structures (e.g. academe), role of CI in an organisation, and systemic CI tools and methods. In all areas, it was determined how issues are measured and managed. Moreover, roles and responsibilities were covered in all of the studied key areas.

All interviews were conducted via Teams or Zoom meetings and were recorded to allow for a thorough analysis and to ensure the reliability of the information when utilised for further analysis. Also, the interviewers took additional notes during the interview sessions. Two researchers independently interpreted the interview results to increase the validity of the analysis. In the first analysis, the findings were flagged and coded according to the method employed in qualitative content analyses (Duriau et al. 2007). Pattern detection was driven by the four key dimensions (product, data, key processes and CI) of the IOM. To avoid researcher bias, the coded findings were discussed between the authors. The findings with similar codes were combined with the main-level elements by using inductive logic (Bryman and Bell 2011), revealing the key challenges faced by the participating companies. In the second phase of the analysis, we systematically combined the empirical data, extant theory, and the parallel development of the IOM preconditions for the construction industry (Dubois and Gadde 2002).

Results

Key findings in the interviews

Products and data

The first part of the interviews was aimed at gaining an understanding of the products and data management practices in the studied companies, as well as determining whether they defined the products and services offered to customers and whether they defined the target customers and market segments. Moreover, we analysed whether products or product portfolios, including PDM and related systems, are managed properly.

Most of the companies defined their products and market segments, although their definitions were not detailed. For example, Company A targets large businesses, which are the company’s regular customers mainly in collaborative projects. A loose definition of target customers was seen in the respondents’ description of the types of deliveries they make; Companies A, B, C, F, I and J provided an estimate of the number of deliveries they make, and less than 50% of the deliveries were similar among these companies.

Product portfolio-related definitions also vary. For example, one main contractor (Company C) has not defined its product portfolio, and the product management of certain products is missing. Another example is Company E, the representative of which stated the following:

We are aiming to standardise our products and services during next strategy period, but it is not yet decided how far the productization will be taken. We already have some modularisation in place with certain subcontractors and suppliers with best collaboration.

Regarding the systems used, some of the small and medium-sized companies, such as Companies F and G, had their product data stored in Excel. The representative of Company E, which is a large company, stated the following:

Our product-related information is often in Excel or in separate systems, which are not efficiently connected with each other. This is not serving needed stakeholders and not enabling efficient management with the data.

Company B had a similar situation: data are found in several systems, and it is difficult to have these systems working seamlessly together.

Companies’ competitive edge and competitiveness are built mainly upon their competitive products or upon personnel competencies. Company A is one of the leading companies in terms of building information model (BIM)utilisation, and its representatives stated the following:

We are guiding the design through BIM. We can make several BIM’s work with each other and combine all the data from different construction companies in one BIM. Competencies to work in collaborative projects are also part of the competitive edge of our company.

Company B has a competitive edge with its prefabricated modules, which are customised according to their customers’ needs. As for Company C, one of its key competitive edges is its sound relationship with several industries. Company D offers a unique product, and Company F boasts about its competitive product portfolio.

In summary, management in this area considerably varied. For example, depending on the company and business type, the construction companies had their products and target customers defined better compared with engineering/service companies. We noted that product-related issues are overall better managed in larger companies, although the big players also have severe weaknesses in this area.

Key processes

The companies were interviewed regarding the six key processes, along with additional five processes from the main constructors. Table 2 presents the status of the companies. The most notable finding is that none of the companies had defined their technology/product development process. Only Company B had defined its technology and R&D processes, but such processes were quite new and not yet operational.

Table 2. Processes in the studied companies. Shading (grey) indicates that a company was not asked due to the nature of its business.

Company	A	B	C	D	E	F	G	H	I	J	K
Production or design process		x	x		x	x				x
-Manufacturing process (factory)		x	x
-Site assembly process		x	(x)
Logistics process		x	x		x
Maintenance process		x			x
Construction project development		x	(x)		x
Sourcing and procurement process	x	x	x		x					x
Project management process	x	x	x		x	(x)				x	x
Sales and marketing process	x	x	x	x	x					x	x
Technology and R&D process		(x)
Product design process for customer-specific tailoring	x	(x)	x		x	x				x	x
Process owners	(x)	(x)	x	x	x	x			x	x	x
Process KPIs		(x)	(x)	(x)	(x)					x	x

x = exist, (x) = partially exist

The companies considerably varied in terms of having the process owners named, in terms of the KPIs for the key processes, and in terms of the systems that manage processes. For example, Company B has named the process owners, but ownership does not yet work as it should because the work setup has just been established.

The situation in Company A reflects the status of several companies participating in this study:

We have most of the key processes defined, excluding technology and R&D process due to missing own products. The key problem in process development is that processes are not measured, which causes a lot of non-efficient work. Company measures only projects, which makes process development more difficult. Another key problem related to processes is that processes do not have ownerships clearly defined.

Company C’s representatives defined an effective manufacturing process as follows:

We have process phases defined and in use to enable efficient production and supply chain, and to improve communication between the factories and production phases. Our key aim of the company is to make as much as possible construction work at the factories to increase our productivity.

Company C partially outsources its site assembly, but it is now planning to establish its own site assembly process. The company is also doing some quick R&D for its products, even if the process is not defined. The company has developed the processes well, but the ownerships of these processes are too centralised, involving the same key people, resulting in ineffectiveness. Currently, the company is developing its system to include all the data from processes and projects as early as possible to be able to manage these processes efficiently.

Company E described the processes according to function. In the future, processes will be defined according to business area to establish more detailed and working methods and to enable the standardisation of processes, given that the key processes each business area do not considerably differ.

Company F described its processes in Excel, a method that is quite common in SMEs. It is easier to start defining processes with simple tools, which are not intended for process modelling.

Process KPIs were in quite a bad shape. Companies F, G, H and I did not have KPIs at all, and Company D had only one KPI in use. As for Company C, even if there are some KPIs, it does not have any system to follow them up.

Some of the studied companies, such as Company J, are worth emulating, as can be seen below:

We have all the key processes globally in place. Even if most of our products are services. Anyhow, we also have some gaps, such as responsibilities in quality management processes, which is really important related to the continuous improvement.

Even if processes have owners, those individuals sometimes hold key positions (e.g. CEO or other high management positions), such as in Companies C and I. In Company A, the development team oversees the processes, but such a responsibility has not been clearly agreed upon.

Also, it can be seen that the bigger the company, the more important the processes are. As Company C’s representative stated, the need for defined processes increases as the company grows.

In summary, it is evident that companies measure projects rather than processes. Factory manufacturing processes are slowly being taken into use by main contractors. One important observation is that the R&D process is not defined because companies are working on development projects, wherein they do not offer their own products but rather do their work mainly to satisfy their customers’ requests.

Continuous improvement

Organisational chart, responsibilities of the organisations, and individual job descriptions are mostly defined in seven out of the eleven companies. Moreover, most of the companies had personal development practices for employees in place.

The procedure for systematic CI (including ownership and CI measurement) was either lacking or partly lacking in several companies. If any CI was in place, it was not managed systematically.

As example, the representative of Company A stated the following:

We do have own academy for employees aiming to personal development. And we aim to continuous improvement in company level, but it is not systematic.

Companies C and E have the same status than Company A, and their representatives used almost the same words that are related to employee development and CI. Smaller companies, such as Companies G and H, do not offer personnel development programmes that are at least managed or coordinated by these companies. Company B pointed out that they have much to do in terms of CI, even if they have established a development steering group to manage these topics company-wide.

Regarding personal development, some more advanced practices have been in place: Company C has defined values and procedures in their personnel manual. The company intends to improve employee competencies through, for example, personal training and aims to support employees in developing themselves at their own time by providing flexible working schedule and by paying for their study materials.

In Company K, CI tightly aligns with the key values of the company, and the company acts accordingly:

We have targeted that we have, for example, a certain amount of new business plans or new services developed in a year so that it would encourage our employees to agile working or to develop new services efficiently.

Company K also invests on their personnel in order to increase their competitiveness:

In our eyes, we see our clear competitiveness to be how we are focusing on people and investing in our personnel. And we think that is quite new in our business field since [the] construction field is very, very traditional.

Overall, all of the investigated companies recognised the importance of CI, but systematic CI practices are lacking, either fully or partially, in most of the companies.

Analysis of challenges

The key topics in the interviews can be listed under three main IOM elements: product and data, operational business processes and CI. The research group identified a total of 21 challenges found in at least one but usually in several companies (Table 3).

Table 3. IOM elements in the construction industry and the relevant challenges.

Main IOM elements	Key challenge	Details of the challenge
Product and data	Product definitions	A company’s own products and services not always defined
	Product portfolio management	No systematic management of product portfolio; no reproducible products and services; no clear development targets
	Product architecture	Product architecture does not support modular product development for instance
	Target markets	Products do not have clearly defined customer segments
	PDM principles	PDM principles not defined; data are found in different systems; data not readily available
	Role of NPD	NPD not a key part of the company; it plays a minor role
Operative business processes	Defined key processes	Product, customer, supply chain and maintenance processes are not always defined
	Process ownership	No unambiguous ownerships and development responsibility; sometimes the ownership belongs to the management, which has no time to develop processes
	Governance and structure	Process governance within the management and between organisations is not defined
	Process development	No explicitly measurable processes; no KPIs or development targets; process development not systematic
	Process integration	Process integration to other processes and information flow between these processes usually not defined
	Standardisation	Processes not standardised, rendering the process development difficult
	Process management	Milestones or stage-gate model that support process-based management is not in use
	Focus on processes	Companies focus mainly on projects
Continuous improvement	Organisation and responsibilities	Organisation chart indicating one’s responsibilities not always available
	Job descriptions	Job descriptions not always available
	Systematic competence development	Competence development usually exists and supports company targets but not done systematically; competence mapping not usually done
	Employee involvement	Employees not usually involved in development
	Defined development targets	Development plans partly done; KPIs and targets for CI are lacking in many companies
	Development tools and methods (e.g. Lean)	Tools and methods either lacking or not systematically used
	CI ownership	Responsibilities related to CI not always agreed upon

In summary, IOM-related items were generally better established in bigger companies, with exceptions especially in sub-areas. For example, none of the described processes were in place in the small Companies G and H. However, even small companies work on large projects and have a great amount of data, as well as possess competencies and the other investigated elements and which should be managed systematically. Meanwhile, even the largest companies in this study did not have all the key elements in place. For example, an efficient product development process is lacking in all companies, even if some recognise the need for one. It is evident that the development of new products was not a key endeavour of any company. Nevertheless, Company K had all the CI-related key principles in place.

Preconditions for the IOM

The construction industry uses several tools and methods (e.g. last planner, big room and takt time) to improve processes and to aim for industrialisation. However, such a development is not systematic and does not typically involve a sound strategy as its foundation. One of the biggest challenges is fragmentation, which generates variations in deliverables and processes. Typical building construction projects can be compared to prototype production, and it is difficult to achieve the acquired level of performance in subsequent projects, which again are considered prototypes. Efficiency development is impossible and lessons are not learnt or the project type does not motivate one to learn lessons because the next project will be another prototype. To ensure a consistent growth in productivity, there is a need for IOM-based business development.

One of the main problems in construction has been that without company-specific products, it is difficult for a company to improve productivity. Once companies start to specify their own products, they need to define operational business processes, PDM principles and systematic CI.

Given the current level of implementation of the main IOM elements, improvement-related activities may need to start from the very basics. The BM itself is the foundation for the IOM; however, fundamental operational elements can be further described in greater detail. The preconditions for IOM development (Figure 3), which is partly based from the literature and partly from empirical evidence, are synthesised as follows (not necessarily in specific logical order or order of importance):

Figure 3. IOM for the construction industry as part of the BM; the preconditions 1–6 are shown.

1. Target markets and products

   A BM requires a specific offering and a revenue model based on the strategy of a company. Unless these elements are defined, the value creation system (creation does not refer to creating sales items but to order–delivery process) cannot be built. In technical terms, sales items (items that are sold and delivered to customers) can be referred as products. Products (tangible, intangible, or their combination) are the vehicles that deliver value to customers.

2. Product portfolio

   The products of a company must be managed properly by setting development targets. Decisions on owned/sourced products and modular/reproducible products support the IOM. In theory, having one type of product is the most efficient in terms of production; however, given that there are different customer segments and that their expectations vary, some amount of variation is needed; finding the optimum is called portfolio optimisation.

3. Product data and process data

   Data are the fuel in today’s business sphere; however, the importance of data governance and data management is not adequately understood by many companies. Product and process data must be maintained in one system (to secure data quality) and must be visible and continuously available to all stakeholders, enabling access to data based on their needs and roles. Processes and process-related data must be integrated to allow for the processes to be managed systematically.

4. Operative business processes

   Operative business processes form the basis for the IOM—the money-making machine. Product process, customer process, supply chain process and maintenance process at the very basic case (depending on the business context, the emphasis may vary) must be defined and standardised. In a basic sense, the customer process relates to the existing and future customer base; the supply chain process handles the inbound, in-house and outbound value chain; and the maintenance process covers the service and maintenance of existing deliveries. All processes must be measurable with milestones and must be systematically improved within a company according to the agreed upon targets while taking note of the nature of the entire supply chain (upstream suppliers and downstream customers). Note: The product development process logically takes place before a product is specified, but as an IOM element, the product development process is aligned with other business processes.

5. Continuous improvement

   Company culture must be built upon measurable CI to develop standardised processes and maintain product data and product portfolios in a changing business environment. CI involves personnel involvement and competence development. Companies, products and processes that are winners today may no longer be winners tomorrow, as the only constant feature in business is change. CI is required even to main a certain degree of excellence at its current level; without CI, the level of excellence decreases not only because of certain criteria, but also because competitors improve.

6. Governance and owners

   Without an agreed upon governance model and owners for operational business processes, products, data and CI, responsibilities are not distinct, and development of the main IOM elements is difficult to maintain. The governance model must take different organisations and job roles into account—who is responsible for what. Dedicated roles and responsibilities are required for efficient control and decision making.

Figure 3 describes the logical order and associations between the preconditions for the IOM. The order of importance of the preconditions may vary depending on business context, but the logic starts from the customer segments, with the deliverables bringing value to customers. The components of the order–delivery process form the machine that is either efficient or not. In today’s business environment, data is linked to everything, and data can be an asset when utilized optimally. IOM and/or its parts must be developed continuously in order to remain in the competition. Based on the IOM and contextual factors, the governance model defines the roles and responsibilities involved in decision making.

Discussion

IOM enables systematic management of the key challenges in construction industry. Implementing the preconditions and standardization of the main IOM elements in construction industry enables improvement in productivity, at the same time supporting to achieve the cost, quality and schedule related targets in the construction projects. This has been seen in several other manufacturing industry fields (cf. Womack and Jones 2003; Liker 2014).

From the wider perspective the cost of the end-product is important, because if new features functionalities are just added for the building, the price for the end-user will exceed the customer solvency at some point. With systematic IOM, resources are not used to work in the prototyping mode solving the same problems again, but they can be used to improve the processes and product itself. If a designer can focus on designing a module for building to be used repeatedly they can invest more time on design work than they would in typical unique prototype production.

The scientific contribution of this study is that it presents the IOM as basis for industrialisation, supporting the discussions on BM in the literature (Osterwalder 2004; Suikki et al. 2006; Johnson et al. 2008; Pekuri et al. 2013; Brege et al. 2014; Das et al. 2021). This research supplements the operative process-related (Becker et al. 2003; Tolonen et al. 2015b; Dave 2017) and product data-related (Silvola et al. 2011; Li et al. 2018) findings as bases for the IOM. This research is also in line with the CI-related research in the global industry (Ohno 1998; Liker and Morgan 2006; Liker 2014) and in the construction industry (Grenzfurtner and Gronalt 2021). Studies support the evident need for process standardisation and repetitive processes (Chandler 1993; Liker 2014), also for the sustainable society (Abad-Segura et al. 2020), leading to the industrialisation of construction (Höök 2008; Andersson and Lessing 2020; Uusitalo and Lavikka 2020; Stehn et al. 2021). This study confirms the earlier findings on preconditions; surprisingly, however, a few articles have discussed these preconditions as elements of the IOM, not to mention the lack of discussion on these preconditions in the context of the construction industry. Articles on the industrialisation of construction exist, but these contributions are typically either too general, wherein details are missing (Koskela 1992; Brege et al. 2014), or too focused on a detail and consequently missing the big picture (Uusitalo and Lavikka 2020; Grenzfurtner and Gronalt 2021). In this study, linking systematic BMs to the IOM elements is seen as a significant contribution of the IOM.

The managerial implication of this study is the determination of the requirements for an industrial way of working in the construction industry. The related challenges and the six preconditions for the IOM are presented to be used by companies, supporting the IOM implementation as part of defining a BM. Each challenge and precondition that is fully defined can be used as a starting point to define company-level action plans when aiming to achieve a systematic work. Companies can potentially decrease their time-to-market, improve quality, and reduce unnecessary costs by applying the systematic IOM with the presented preconditions leading to the most important areas of development. The future calls for a shift towards industrialisation, and companies have recognised this challenge.

Conclusions

Productivity improvement has been a key challenge in the construction industry in the last few decades. This industry has had many good development aims, and it had adopted several efficient practices from other industries, perhaps with a focus on details only; however, there is still much room for improvement, especially at the systemic level. Industrialization of the industry is important for the construction, to change the work culture from prototype production to modern industrial and economic sphere, to support the innovations and improvement of the whole construction business.

This study combines the IOM fundamentals to be used in the industry in general. In the model, product and data are the key enablers for the management of operative business processes. CI complements the model to maintain and improve product, data and especially operative business processes.

The semi-structured interviews and analysis of 11 construction companies highlighted that several areas need improvement when compared with the effective IOM-based operations. A total of 21 challenges were found in some or several of the companies. It can be stated that the industry lacks a systematic way of working at the big picture, causing variations and sub-optimisation as well as preventing efficiency improvement. It is also evident that development of own products and productization, which are the bases for industrialisation, are lacking in the construction industry. Without one’s own products (tangible or intangible), it is difficult to standardise processes and to aim for systematic CI.

The preconditions for IOM implementation in the construction industry are as follows: defined products and target markets, effective product portfolio management, product and process data availability, efficient operative business processes, systematic CI, and governance and owners for the main elements in the model.

Small amount of the studied companies must be taken into account when generalising the study results. Future studies may include a detailed analysis of each main element of the IOM model: product and data, operative business processes and CI. One important area of studies is the application of IOM in wooden, concrete and steel construction. IOM utilization with different construction project types (e.g. collaborative projects), different market areas and infrastructure projects may be studied. However, the present results may be used as reference points for other studies on this area, not only in the construction industry, but also in other industries. CI-related practices and methodologies (including Lean) and PDM (including BIM) are currently studied in the construction industry. The key research areas for the future could be the four operative business processes, that is, how to start product development and build product processes and how to create and manage the customer, supply chain and maintenance processes, together with product process, during the entire lifecycle of a construction project.

Disclosure statement

No potential conflict of interest was reported by the authors.