The Implementation of IT Business Strategy in the Construction Industry

This chapter begins by describing the common problems associated with implementing IT business strategy that are faced by companies and other organizations, resulting in business planning that is not directly aligned with IT planning and IT investments not clearly supporting business strategies. It is stressed that all organizations should pursue strategic alignment practices to improve organizational performance when using IT-based resources. Case studies specific to the construction industry are presented to illustrate practical problems that companies face. With this background, the critical success factors of implementing IT business strategy are discussed. They mainly center around the goal of enabling businesses to reduce costs while at the same time improve IT’s contribution to their overall performance in terms of overall profit or net earnings. In the discussion, research finding of organizational success in strategic IT and business alignment are used to elaborate on the factors involved, both internal and external to the organization. Overall, the essential traits of successfully aligned organizations are mentioned. This is followed by describing a proposed model that is able to successfully address the alignment of business and IT by adopting a process-driven architecture that focuses on information management. Moving on, there are several aspects of preparing an organization for successful IT business strategy implementation. The next part describes some major steps of implementation like defining the goals and linking them to the performance criterion, focusing on the strategic intentions, adopting an effective plan, quantifying the cost and benefits of IT, measuring and tracking the results, and, last but not least, managing culture. Specifically on the construction industry, the chapter covers the main advantages and disadvantages of adopting IT to increase strategic competitiveness of construction companies. The illustrations from past research focus on links that are established between competitive advantage or project success and the use of technology. As background to proposing a set of recommendations on how IT business strategies can be implemented in design and construction firms, the case of IT adoption in the construction industry of Singapore is presented to serve as an overview of developments in this area. Based on the performance criteria established for these two types of firms in Singapore, appropriate enablers of implementation are suggested, including the kind of business strategy applicable to different firm types, through a process framework. The chapter concludes with a summary of the main points covered on the implementation of IT business strategy in the construction industry.

Concepts of Strategic Alignment of IT and Business

This chapter begins by explaining the purpose of strategic information systems planning, which is followed by describing three commonly adopted methodologies. They are known as “business systems planning,” “strategic systems planning,” and “information engineering.” In addition, the six broad process dimensions that characterize the activity of strategic information systems planning are discussed. In order to provide an understanding of what is meant by alignment, the basic concepts are presented and some established principles discussed. In essence, the primary and secondary functions in alignment for a business are explained, including the purpose it serves, how optimum alignment occurs, and when. Some proposed models for strategic alignment are reviewed to provide an understanding of the different types of strategic activities that are involved, and their flow and relationships with each other for interaction. By demonstrating how each model works based on a given set of conditions, the key to achieving strategic alignment for a business is established. The strengths and limitations of each of the models are stated. In particular, the model proposed by Henderson and Venkatraman (1990), the Strategic Alignment Model (SAM), is described in detail to explain how it works. It is explained in the context of four fundamental domains of strategic choice, with each having its own underlying dimensions. In essence, SAM has been developed for conceptualizing and directing the emerging area of strategic management of IT in terms of two fundamental characteristics of strategic management. They are strategic fit (the interrelationships between external and internal components) and functional integration (integration between business and functional domains). These fundamental characteristics are defined with respect to four different perspectives of alignment. Further, three dominant domain types are introduced together with appropriate illustrations of their application. Finally, case studies are presented to show how companies with a technology vision can achieve enormous business success through applying strategic IT alignment and indeed become global players. The chapter concludes with a summary of the main points covered on the concepts of strategic alignment of IT and business.

Knowledge Management

The chapter reviews the definitions of knowledge and distinguishes it from data and information. Different perspectives of knowledge and their implications for knowledge management are also discussed. From this, the concepts of knowledge management are explained, first, in generic terms, second, as a process, and third, on its relevance to construction. The chapter also defines the basic types of knowledge, those that are tacit or explicit and those that relate to the individual or the organization in a collective form. Project knowledge is discussed in the context of construction, including barriers to knowledge management, the shortcomings of current practices, and how the industry is addressing the problems identified. Communication is key to effective knowledge management, and the chapter discusses the importance of knowledge sharing, including the main factors involved when individuals share knowledge, and knowledge communication and its barriers. Specifically, the central role of communication in organizations is emphasized as it is seen as the foundation for most organizational actions. Learning is discussed in two aspects – organizational learning and collaborative learning. The first aspect is dealt with in generic terms, while the second aspect relates mainly to construction projects. The requirements and problems of learning in construction projects is given focus. The chapter also explains the crucial link between knowledge management and innovation since the latter depends on the generation of new ideas or new knowledge that leads to the development of new products or organizational practices. For integration of knowledge among individuals or teams, the pivotal role of information systems is explained. The relevance of knowledge management to SMEs, especially its impact on small businesses, in enabling them to innovate to meet changing demands in an intense competitive environment is also explained. The chapter concludes with a summary of the main points covered on knowledge management.

Change through Innovation and Customer-Orientation

This chapter begins by explaining the nature of innovation and basic models of innovation, including key stages in the process of innovation. As the construction industry is often regarded as different from other industries given its unique characteristics, innovation in construction is discussed in terms of motivation for the industry’s Small and Medium Enterprises (SME) to innovate, key organizational capabilities required for innovation, and external and internal factors critical to successful innovation. In addition, the common enablers, barriers, motivators, and outcomes of innovation in the construction industry are discussed. Understandably, as the role of clients in the construction industry is vital in many ways in driving to improve performance of projects, the chapter focuses on their role in driving innovation. The different types and categories of clients are described, as well as their roles in different types of innovations, and at different stages of innovation. The chapter also covers the role of technology in innovation and, more specifically, Computer-Aided Design (CAD) as an important technological innovation for the construction industry. At the organizational level, factors that can affect the rate of diffusion of a new technology within construction SMEs are explained. At the project level, factors that impact on innovative IT implementation and diffusion are also explained. Next, innovation and its role in enabling construction businesses to gain competitive advantages are discussed. The need to classify construction innovation and how it can encourage businesses to innovate by adopting appropriate strategies are explained through a case of Singapore’s construction industry. In addition, the need for and application of strategies, policies, and procedures to deal with IT in managing construction site processes are described in a study of UK’s leading construction companies. On achieving continuous improvement as a whole for the industry, issues relating to innovation, including reasons for the lack of it, are discussed and presented. On managing change, focus on the “people” factor of innovation, especially the need to develop capability of staff to use new technologies, is given. The chapter concludes with a summary of the main points covered on change through innovation and customer-orientation.

Strategic Planning and Strategy

This chapter provides an understanding of why strategies are important to businesses. It begins with defining strategy, what it was before and what it is now, and the steps that it consists of that can be taken to realize that future desired state for the business. The direct relationship between competition and strategy is described to emphasize to businesses how competitive forces shape strategy. An overview of strategic planning, as well as the process of managing it, is presented to explain why businesses need to plan, what stages are there in the strategic management process, and how businesses can achieve their goal through adopting a formalized strategic management process. The two main categories of strategy—business and corporate strategies—are described to explain that the actions to be taken by businesses in order to gain competitive advantages from them are different in scope and purpose. In the context of the construction industry, the nature of business activities that take place during a cycle of economic expansion and contraction is explained. The topic of strategy is discussed further, making reference to its application as business strategies, as well as corporate strategies, by construction companies. Focusing on the global construction market, the business and corporate strategies practiced by some international construction companies are described in the form of case studies. The chapter concludes with a summary of the main points covered on strategic planning and strategy.

Competitive Advantage

This chapter defines what competitive advantage means to a company and describes the traditional types of competitive advantage that a company may possess. For cost advantage, the major drivers of cost are explained to provide an understanding of how they, either individually or in combination, cause the cost of a company’s activity. Similarly, for differentiation, the principal drivers of uniqueness are explained, including how they interact to create sustainability of differentiation. The chapter also looks at how advances in Information Technology (IT) affect competition and discusses the sources of competitive advantage. In addition, it covers the strategies that a company needs to pursue to exploit the technology so as to gain an advantage and protect it from rivals. In particular, the attention is shifted to neo-classic competitive advantages, which are generated from business strategies that avoid the classic trade-offs between mass production and invention models, where IT plays a key role by allowing a company to implement improvements more quickly. On the need to sustain a competitive advantage, the chapter reviews Porter’s concept of sustainability and explains the main factors involved. In a construction context, the nature of competition is described. The key sources of competitive advantage for international contractors are reviewed with respect to their distinct abilities to operate in the global markets. It is followed by illustrating how the sources can potentially be converted into critical success factors for the companies using the five cases presented in chapter 1. The chapter concludes with a summary of the main points covered on competitive advantage.

The State of Business and IT Alignment in the Singapore Construction Industry

This chapter provides the background to why there is a general lack of strategic application of IT among SMEs. It explains how the concept of strategic alignment can be applied to enhance the competitive capability of firms in the context of Porter’s generic strategies. A brief account of Singapore’s 10-year plan for the development of the SME sector forms the basis of emphasizing the need for a strategic use of IT to help SMEs meet new challenges in the knowledge-based economy. This is followed by a brief account of the national IT plan for Singapore’s construction industry known in short as CORENET. The case of a successful implementation of CORENET is illustrated by the electronic building plans submission system. Next in the chapter, focuses on presenting a study of the state of business and IT alignment in Singapore’s construction industry conducted at the firm level. The purpose of the study, as well as its objectives, is to explain the key rationale and directions. From the World Bank’s International Finance Corporation’s classification of SMEs, three classes of SMEs have been used in the study, namely, micro enterprises, small enterprises, and medium enterprises. The chapter describes the methodology designed for the collection of data which covers the source of the questionnaire, sampling approach, reclassification of survey questions, and statistical techniques of analyzing the data. The results of the survey are presented by type of SMEs, namely, designer-SMEs and builder-SMEs, and they relate to the types of software used, extent of use of the Internet, forms of IT strategy, use of developed Singapore Standards relevant to IT, benefits gained from adopting industry IT projects, important reasons for making decisions about IT investments, and advantages and disadvantages of applying IT. The results obtained are mapped onto the four dominant alignment perspectives of the Strategic Alignment Model (SAM) to evaluate the goodness-of-fit (or goodness-of-alignment) of the designer-SMEs and builder-SMEs in four different perspectives – strategy execution, technology potential, competitive potential, and service level. The main findings are discussed in relation to the practices of micro and small enterprises, including those of medium enterprises to reveal the alignment perspectives favored by this group of SMEs for both designers and builders. Appropriate recommendations at the policy level are made to address the main issues facing SMEs in the construction industry that have resulted in the lack of use of IT. The chapter concludes with a summary of the main points covered on the state of business and IT alignment in the Singapore construction industry.

Current and Emerging IT Tools and Applications

This chapter begins by rationalizing the need for the construction industry to embrace new technologies for information management and documentation. The perspectives are taken from within an organization and a project whereby stakeholders from different organizations are involved. The aim of better information management is to allow the adoption of collaborative working practices, which can bring about the possibility of information to be shared among staff of an organization and between project teams that exist across organizational boundaries. Next, in laying down the foundation for the current and emerging IT tools, their basic information and technical details are presented. This is followed by a review of their applications, particularly those that relate to the construction industry. The applications of Electronic Document Management Systems (EDMS) are reviewed and then systems for Enterprise Resource Planning (ERP). The types of information that are exchanged between different construction project parties within a project are described, including the flow of data. The benefits of using EDMS and ERP systems for project management and supply chain management, respectively, are discussed. The main issues and problems that companies face when using such technologies are also discussed. Besides EDMS, another commonly adopted tool for collaboration is the project extranet. On applications of this tool, the main features and functions are presented, covering also the potential benefits of applying extranets to construction projects. Moving to specific areas of applications like design, construction planning and execution, resource procurement and facility management, the current tools that enable visualization, virtualization, mobility, and sensing are described. Emphasis is placed on the methods of application for each area to highlight how technology can aid in improving work processes and outcomes. The chapter concludes with a summary of the main points covered on current and emerging construction industry IT tools and applications.

Business Process Re-Engineering

The chapter defines business Process Re-Engineering (BPR) from a few perspectives to make clear what it is, what it is not, and what it should be. Essentially, the classic definitions provided by Hammer and Champy, as well as Davenport, are used. The common themes encountered in re-engineered business processes are also mentioned, including the kinds of changes that occur when a company re-engineers its business processes. In order to better explain the concepts of BPR, a business process is defined in fundamental terms and distinguished from a function or department (i.e. work unit). The basic types of business processes are described, and those that are mainly focused on by companies in implementing BPR are highlighted. In addition, a general description of the entire spectrum of business processes typical to organizations, comprising both core and support activities, is provided as an overview. Specifically, the core and support processes that apply to the construction industry are defined. In the next part, the enabling role of IT in BPR is explained in relation to how it is crucial to process innovation for e-business, as well as process integration for supply chain management in the new information (or knowledge) economy. In essence, it stresses that new information and communications technologies enable instant communication and networking, and facilitate timely data-sharing and exchange, leading to the transformation of traditional organizations into those that are highly information-based. Examples of e-business and supply chain management are provided, as well as two case studies of Internet-based construction process innovation. In particular, the design and construction process is examined to identify areas for developing process models. Focusing on achieving design and construction process integration over the life cycle of a project, the requirements for change in the construction industry are highlighted. The applications of 3D/4D models are cited as examples, showing the different areas where they can be applied to derive benefits. Building Information Models (BIM) are introduced in the later part of the chapter as an approach that enables dramatic process improvement and innovation. The key concepts of BIM are covered, including research insights into the scope of BIM use, barriers to BIM use, and effects from BIM use. Process improvements as a result of adopting BIM for the purpose of data integration, systems integration, or collaborative working are discussed in both contexts of intra- and inter-organizational use. Illustrations are provided for the three different purposes. Recent developments in BIM are reviewed to present the current state of BIM implementation in the construction industry. The chapter concludes with a summary of the main points covered on BPR.

The Construction Industry and Standardization of Information

This chapter describes the traditional practices of the construction industry by looking at the nature of the industry in terms of its product, process, and participants. Owing to the nature of construction, issues relating to challenges and barriers to learning and managing information and knowledge gained from a construction project are highlighted. Other problems of the construction industry are mentioned to provide a complete view of its traditional practices. The chapter also covers the various types of information that are generated and exchanged at three different levels – project, firm, and industry. In order to capture, store, and manage the information and knowledge generated at each stage of the project life cycle, as well as at the firm and industry levels, there has to be a unified construction information system established through standards to provide a common language. As such, the basis of creating and adopting standards is explained from a generic perspective to lay the foundation for this subject. Following this, aspects of information standardization in the construction industry is described, covering theory and practice. On practice, examples of both international and national programs are presented. Relevant standards developed for Singapore’s construction industry on the information standardization program are used as examples to explain the scope and objectives of the national plan for creating IT standards, as well as provide an update on the progress made. The chapter concludes with a summary of the main points covered on the construction industry and the need for standardization of information.