New Business Models for Industrialized Construction

Abstract

The past few years have seen new entrants into the construction sector backed with unprecedented levels of funding from venture capital funds or other large investment firms. These entrants seek to leverage industry 4.0 principles for the digitalization and industrialization of construction. In addition to new technologies, these firms also bring new business models that depart from the project-based tendering system found in traditional construction. The first new business model is vertical integration. These firms are structured as integrated hierarchical firms, keeping control of product architecture and processes in-house. These firms control production by developing their own off-site factories. The second new business model is digital systems integration. These firms leverage an integrated cloud-based product configurator to enable mass customization. Using principles of capital-light industry 4.0 supply chains, digital system integrators can manufacture parts from periphery supply chain partners suppliers, including new sectors such as automotive, aerospace, manufacturing or industrial. The third new business model is the transformation of an existing project-based business toward industrialized construction through the creation of a spinoff factories. The chapter includes examples of the three business models and concludes with a discussion of how new business models may be catalysts for potential disruption of the established construction sector.