Strategic Management of IT
in Construction
The world was once a fairly straightforward place...
Now many businesses have sophisticated
information management systems integrating cash
management, financial accounting, marketing and
distribution
such that their menus, contents, stock,
promotions and scope can be rapidly changed to
reflect the trend, fashion, season, developments,
requirements etc..
The nature of business in all sectors has undergone
accelearting change over recent years...
The nature of relationship between participants in the
supply chain of business processes has moved from
adversarial to cooperative
Within organisations, management thinking has
evolved from considering functions and specialisms to
thinking of business processes.
Modern business have been radically influenced by
the emergence of environmental concerns and the
quality movement.
These developments in business have been
accelerated by the emergence of the information
revolution; affordable computer systems, internet and
telecommunication systems
The need to apply a strategic perspective to
business operations has been recognised for some
time.
Recently in business management, frameworks
and priorities have shifted from short-term and
tactical to long-term and strategic at both
corporate and national levels, in response to
challenges to business environments caused by the
global competition in all industries.
According to Davenport and Short (1990) the
quality movement, led organisations to start
analysing their total business process instead
of their individual tasks or units.
In conditions of rapid change, companies can
no longer rely on a strict return of investment,
ROI, evaluation of business ventures of a
tactical nature. They must explore value-added
concepts of a strategic nature.
The use of ROI as a criterion for business
decision making is inappropriate in view of the
changes that have occurred in modern business
environment.
Implementation of the first ATM machines by banks would not have been
justifiable on ROI criteria alone.
In the context of all these dramatic changes,
construction appears as an historical beacon
of traditional attitudes, methods and
approaches. This can not continue to be the
case...
The threat of substitutes to the products and
services of the construction sector is
increasing.
Construction activity is subject to:
• Influences resulting from the pace of
technological change in other sectors of the
economy
• İncreasingly stringent regulations
• Changing client desires as a result of
variations in tastes, aspirations and purchasing
power
Partly as a respone to these external influences
competition within construction industry is
increasingly intense.
Moreover there is now external competitionmanufacturers of construction materials and
components are integrating vertically by
offering construction services.
In this increasingly dynamic situation
construction sector will have to be vigilant and
forward-looking to survive, let alone to do well.
Clients are becoming more aware of the nature
of construction (and of their rights) and tending
to be more discerning and demanding.
With increasing statutory control, greater client
and user knowledge and, especially, concern
with the environment, professional duties and
liabilities are being defined more strictly.
There is also increasing deregulation and
further privatisation relating to development
and building control.
The environment of the construction industry is
being increasingly influenced by economic,
technological and social factors.
Another major influence comes from the
progress towards the information age. A
structural re-organisation of the industry
appears likely.
As the way in which we execute construction
projects undergoes radical changes, those who
position themselves strategically can maximise
their benefits.
Some construction companies have diversified their
activities to become integrated architecture,
engineering, construction (AEC) firms. This follows
an involvement in design-and-build and turnkey
projects or through mergers, acquisition and strategic
alliances both within and across national borders.
Business development has become an important part
of the construction enterprise.
Competition on the basis of far more than price is
increasingly important.
Most companies start from,
localised exploitation of IT by applying to individual systems i.e.
word processing, accounting, pm and CAD.
then, individual systems become integrated within the organisation.
Up to this stage there may need to be little change to the strategic
processes in the company and certain productivity gains should be
achieved.
The next stages are the ones that can transform a business or the
processes it uses, and involve greater integration with customer and
partners. The ways which buildings are designed or constructed
need to be rethought. Relationships with clients should become
long-term ones. The results of this could be revolutionary change.
Partnering: Such as setting up framework agreements with
consultants, contractors or suppliers for longer periods compared to
a project life (5-10 yrs), allowing project teams to set up working
methods that might be unproductive over the time of a single project
Changing requirements and Business Strategies:
Changes in future building requirements,
• Distant working
• Distant learning
• Cultural buildings-leisure centres, call centres
to handle e-business and computer centres
Strategic management
• High-level, unlike tactical or operational
management
• Competitiveness: The quest for sustainable
competitive advantage (SCA)???(or continuous
regeneration of the strategic plan to produce a
series of short-term but unsustainable competitive
advantages); growth and survival of the
organisation, hence critical to modern business
thinking
Strategic management
The hierarchy of the business planning process
‘Positioning the firm by observing external forces
and internal processes, plan and manage changes’
Strategic management
• Analysis: To understand the strategic
positioning of the firm
• Choice: Formulate courses of action to
achieve the desired strategic position
• Implementation: Plan and manage
necessary changes in organisation
Management science has been greatly
influenced by the work expressed in Porter’s
five forces model for an enterprise to position
itself in relation to others. (Porter 1980)
Competitive forces at play
(Porters Five Forces model)
The five forces model can be applied to
strategic management in construction to
analyse product and location segments of the
construction market and to identify areas
where superior business performance is more
likely because of the more favourable position
of the five forces.
Five competitive forces
1.
2.
3.
4.
5.
Threat of new entrants: Competetive advantage from economies of scale, large
capital investment, product differentiation. Threat of new entrants is particularly
potent in construction, it is easy to enter a part of the sector with minimal investment.
With identical products price becomes the main competitive factor.
Power of suppliers: Competitive advantage from supply relationship exist when few
enterprises dominate supply, no competing product, threat of forward integration
over buyer.
Power of buyers: Buyer has competitive advantage when it is a large volume buyer,
purchases undifferentiated products that are price sensitive not quality sensitive to its
processes, threat of backward integration over supplier.
Threat of substitutes: Substitutes for construction products are, e.g. communication
technologies or cheap air travel instead of road/rail infrastructure (Seikan tunnel)
Jockeying for position: Competitive tool in saturated markets with many competitors
of equal size, slow industrial growth, undifferentiated products or services, high
fixed cost in enterprises.
1.
2.
3.
4.
Porter identified 4 approaches to business
strategy in which the five forces model indicates
the prospect of greatest success.
It is important to have a clear business focus before
implementing the IT systems that may be necessary
to achieve it:
Broad target
Narrow target
Lower cost
Differentiation
Compete on cost? In broad or narrow target
market? Or whether it will go for specialisation and
quality?
Reengineering the business is a sequence
of evolutionary and revolutionary
changes, influenced by IT, which drive
organisational change.
Evolutionary:
Step 1:Localised exploitation
Step 2: Internal integration
Revolutionary:
Step 3: Business process redesign
Step 4: Business network redesign
Step 5: Business scope redefinition
National competitiveness
The Diamond Model
Why does a nation achieve international success in a particular industry?
(Porter 1990)
Determinants of National Advantage
(to invest and innovate)
Why does a nation achieve international success in a particular industry?
1.
2.
3.
4.
5.
Factor conditions: The nation's position in factors of production
(traditional), such as skilled labour or infrastructure, necessary to
compete in a given industry . Making the best out of them
Demand conditions: The nature of home demand for the industry's
product or service. The extent to which the nation’s shopping habits
challenge products to improve quality and services.
Associated industries: The presence or absence in the nation of supplier
industries and related industries that are internationally competitive.
Clusters-grouping of associated industries with common interest, to
encourage each other.
Firm strategy, structure, and rivalry: The conditions in the nation
governing how companies are created, organized, and managed, and the
nature of domestic rivalry-experience of competition.
National Strategy/Government: Factor conditions are affected through
subsidies and policies towards capital markets, policies towards
education. Governments are also a major buyer of construction products
(infrastructure etc.)
The Value Chain
The set of processes a firm uses to create value for
its customers is often called its value chain. VC
includes primary processes that directly create
value and support processes that add value
indirectly by making it easier for others to perform
the primary processes.
Difference between value chains are a key source
of competitive advantage between competitors, and
the importance of technology to value chain
analysis should be stressed.
Technique: Value chain Analysis
Value chain: Can be used to identify potential for
competitive advantage within individual parts of the
whole firm.
The VC is a structured way of analysing a business’s
constituents and its links to outside organisations.
Value: What a company creates, measured by the amount
buyers are willing to pay for the augmented product or
service. The difference between value and cost
determines profitability.
VC can be used to identify lower cost, higher value and
value channel linkage applications.
The parts of the chain include an organisation’s
infrastructure as well as different categories of its direct
productive processes.
Technique: SWOT analysis
Strengths
Weaknesses
Opportunities
Threats
Other analysis techniques....
•
•
•
•
Process analysis
Benchmarking
Assesment of core competencies
PESTLE analysis (identify political,
economical, social, technical, legal,
environmental factors)
• ....
Implementation techniques:
Methods to gain competitiveness
•
•
•
•
•
•
Business Process Reengineering (BPR)
TQM
Change focus from ‘Function’ to ‘Process’
Diversification
Product differentiation
....
Strategic management of projects
Importance of projects:
1. Organisations must adobt flexible structures to
respond to the ever-changing business
environment; ‘business as usual’ is no more.
Projects are suitable for handling change, and
project-based organisations are becoming
common. Management by projects is becoming
increasingly normal.
2. The fundamental operating level of contruction is
the project; it is our main operating process
Strategic management of projects
The way one approaches a project determines how successful it will be
It is useful to think of three fundamental levels of a project:
1.
2.
3.
Integrative Level: Project purpose is stated, functional design, areas of
work, basic parameters or constraints defined. Example: Project
Definition Report
Strategic Level: Project milestones required to achieve objectives are
defined. Work packages, organisational units, responsibilities, budgets
are defined. Examples: Milestone plan, responsibility chart, systems
design.
Tactical Level: Detailed design, activity schedule, responsibility chart,
cost
Projects must be seen in the context of the overall strategic management of the
firm, for example how the firm prioritizes its projects
Strategic management of projects
R.Youker, a World Bank project manager, gave a much wider view
of the three levels. A strategy on one level implies the objectives one
level down. To achieve objectives at any level requires a strategy
(Youker 1993)
Strategic management of projects
Projects are subjected to seven forces
(Seven Forces Model, Morris 87, Turner 99)
Strategic management of projects
Tool: Analysis of project life-cycle (primary activities of construction value chain)
Related tools:
• Project management best practice (scope, time, cost, quality, risk,...)
• PM methodologies, such as PRINCE 2 and PmBOK
The importance of IT
IT is a:
1. Tactical technology for internal efficiency
2. Strategic technology redefining the
boundaries of industries and application
areas
In construction there is a shift from 1 to 2; it is realised that
IT goes beyond improving discrete processes. Rather IT is
evaluated strategically, as has already been done in other
industries.
The importance of IT
The key to the successful utilisation of IT is
effective strategic thinking: IT must be
applied for strategic advantage.
Without an appropriate strategic perspective
and robust conceptual models, it will be
difficult to identify an appropriate role for IT.
In order to help understand how to plan IS, it is necessary to see how an IS strategy fits
into an organisation, and its relationship with other elements of the organisation. This
figure depicts the relationship of IS with IT and business strategy, which helps to view
IS strategy in the overall business context.
(IS/IT/business strategies relationsship, Ward & Griffiths 1996)
The importance of IT
General steps to set direction for business 
Assessment of the
business
Vision for the
business
Business strategic
planning
Assessment of
information use and
management
Vision of how the
business should use
information
Technical and
managerial
Information
Architecture
Planning steps for handling IS 
(IS/IT/business strategies relationsship)
Business operational
Plans and Budgets
Information system
strategic plan
Information system
Operational plans
and budgets
FRAMEWORKS
A framework is a brief set of ideas for organizing a thought
process about a particular type of thing or situation.
A business is a system consisting of many subsystems, some
of which are information systems.
A system is a set of interactive components that operate
together to accomplish a purpose.
A business process is a related group of steps or activities
that use people, information and other resources to create
value for internal and external customers.
Internal and external customers of a business process are
the people who use its outputs. Internal Customers are the
people within the same firm who work in other business
processes that create additional value before the product or
service goes to the external customer. External customers
are people who purchase products or services from the firm,
or they may be governmental agencies or groups that receive
information, taxes, or other things from the firm (Alter).
One of a growing number of contributions in
managing IT and applying it strategically has
been made by Michael Earl (1989)
[The need for IT to be applied for strategic
advantage and the need for frameworks to be
used to support this]
Earl describes a series of frameworks to support a range of IT management
issues. Earl has labelled these frameworks awareness, opportunity and
positioning
Purpose
Scope
Use
Vision
Possibility
Education
Ends
Probability
Analysis
Means
Capability
Implementation
Each of these frameworks and the models within
them are a means of changing the way we look at
IT. None of them in themselves offers a complete
answer.
Do they apply to us?
If so, do they apply in a different way to us than to
other sectors?
Awareness frameworks: Most conceptual
They are intended for executives to explore the potential impact of IT, and areas
of impact. They deal with the possibilities and the why rather than how. They are
used to help change mind-sets, to suggest the scale of possible changes, and to
indicate the strategic scope to a business or a sector.
Refocusing models: Based on asking two fundamental questions about the use of
IT:
• Can IT be used to significantly change current business as opposed to continuing
with traditional products and processes.
• Should IT address internal operations or approach to marketplace?
Application in construction: To help us think of what form of
strategic IT systems we may develop. First observe and classify the
type of IT systems being used by us now. Second to identify,
speculate on and specify the type of IT systems that should be used
in the future.
Awareness frameworks:
Impact models: Who should the IT systems be
developed for? (e.g. industry, firm or strategy
level).They suggest a number of different
levels at which IT can be applied.
In construction…
Level 1
National Construction Industry- Public sector agencies
Level 2
Professional Institution- Professional bodies and trade
associations
Level 3
Construction Enterprise- Enterprise
Level 4
Construction Project-
Level 5
Construction Product- Client and project team
Client and project team
Awareness frameworks:
Scoping models: Concerns the information
component of processes and products. There
is little scope for exploitation of IT in a sector
or part of a sector where the information
content is low.
Information intensity matrix
Information
intensity
matrix
Information
content of
process
Information content of product
Low
High
Low
Delivery and
assembly of low-tech
building subsystems,
e.g. windows, doors,
concrete beams,
excavating.
Delivery and
assembly of hightech building
subsystems, e.g.
elevator access
control system.
High
Construction process
in planning,
estimating,
managing and
control stages
Architectural and
engineering design.
Software
development.
Database creation
and distribution.
The number of new computer systems and current research initiatives that
seem to address doors and windows because they fit demonstrations of the
technology rather than the need and scope suggests this model may have
application in providing us a clearer view of the strategic scope
(Betts 1999)
Earls Opportunities Frameworks
• Systems analysis tools: Value chain (strategic), data flow
diagrams (information flow), process and product models.
• Application search tools: Where should IT applications be made
within an economic process, life-cycle analysis.
• Technology fitting framework: Examine current systems and
emerging technology to identify opportunities for technological
progression. Looking at new, smart technology (VR, Objectoriented systems, etc.) and trying to find problems that this
technology can solve is not wrong, but only one approach.
• Business strategy frameworks: Evaluate the ‘five forces’ and
how IT can affect the forces and improve firms strategic
position.
Opportunities Frameworks
System Analysis tools
Three basic approaches:
Strategic approach- value chain
Information flow- data flow diagrams
Technology- process and product models
Value chain: Can be used to identify potential for competitive advantage within
individual parts of the whole firm.
The VC is a structured way of analysing a business’s constituents and its links to
outside organisations.
Value: What a company creates, measured by the amount buyers are willing to pay for
the augmented product or service. The difference between value and cost
determines profitability.
VC can be used to identify lower cost, higher value and value channel linkage
applications.
The parts of the chain include an organisation’s infrastructure as well as different
categories of its direct productive processes.
DFD is a way of tracing the information flow within processes (figure 4.5, pg 91).
They can be drawn in support of the impact model- to trace information flow
within enterprises. Process analysis techniques =Systems analysis techniques
Opportunities Frameworks
Application search tools
These help identify where IT applications should be made within an economic
process (i.e. Lifecycle checklist Table 4.6)
Technology fitting frameworks
Current systems and emerging technology are examined to identify
opportunities for technological progression.
This form of framework is based on the technology-push driver of
technological innovation (not strategy pull)
Business strategy frameworks
Strategy models such as five forces model can be used as a means of
positioning an enterprise in relation to market forces particularly through
exploiting industry changes.
The model can be used to identify where IT can be used,
• to prevent new competitor entrants,
• to exploit buyer or supplier power relationship,
• to offer substitutes,
• Jockeying position between competitors
Positioning Frameworks
• Scaling models: How far to take IT systems in terms of
their strategic importance to an organisation? Are they
critical, or just systems that aid the business process?
Example: How quickly would failure of an IT system come
to the CEO’s attention?
• Spatial models: Impact on industry sectors. They are
appropriate for analysing whole industry sectors and
their general characteristics.
• Temporal models: Relate to time and level of managerial
and technological progression. These frameworks
address the issue that the achievement of improved IT
support to effective construction processes must be
managed and gradually achieved. They relate to time
and the level of managerial and technological
progression.
The importance of IT
We must be clear why are
we advancing technologies
and the purposes to which
they will be put and the
extent to which they will be
used. Our approach to IT
should be:
 ‘Systems’
 ‘Strategic’
Very often the IT will only be part of a business process
reenginering (BPR) effort.
The importance of IT
• The sectors where IT appears to have made the most
dramatic impact are where major competitive forces
for change exist. Examples: deregulation of airline and
financial services, global survival of automobile
manufacture.
• In construction, there are many isolated and individual
examples of enterprises and projects where IT is being
used for improvements in internal productivity. The
area where construction organisations appear to be
failing to exploit IT strategically is for their internal or
external competitiveness. In construction, few can
offer new or improved services by use of IT.
(Betts 1999)
IS planning
Systems Analysis and Design
• An information system (IS) is the collection of computer
hardware and software, procedures, documentation, forms,
and people responsible for capture, movement,
management, and distribution of data and information
• The process followed to develop a system is called systems
analysis and design (SA&D). SA&D processes are based
on a systems approach problem solving that is driven by
several fundamental principles
SA&D principles
• Clear idea what the system must do before discussing how it
will work
• Choosing an appropriate scope for the situation you will analyse
greatly influences what you can and cannot do to solve a
problem.
• A strategy is to recursively break a problem down into smaller
problems, which are more manageable than the whole problem.
• Alternative solutions representing different perspectives should
be generated and compared before a final solution is selected.
• The problem and understanding of it continues to change while
you are analysing the problem. The approach could be; a staged
problem-solving approach in which the problem and solution is
reassessed at each stage.
Strategic information systems planning (SISP)
An IS strategy brings together the business aims of the
company, an understanding of the informatin needed to
support those aims, and the implementation of computer
systems to provide the information (Wilson 1990).
SISP
An information audit will normally be the first step to an
effective IS strategy.
•
The audit is a process of discovering, monitoring and
evaluating the company's information flows and resources
in order to implement, maintain or improve information
management.
•
Consideration must be given to both internal
operations and the external environment of the company.
•
The audit will identify key aspects at all the levels of
the company namely: site, project, business unit and
strategic.
The information audit must identify:
• The construction company's information resources
• The construction company's information requirements
• The costs and benefits of the company's information
resources
• Opportunities to use information resources for strategic
advantage
• Information flows and processes both within the company
and for its projects
• IT investment options that can facilitate the construction
company's business initiatives
SISP
Matrix of information resources and requirements
Some SISP methodologies
• Soft systems methodology (SSM), is driven
by the analysis of human activity
• Information Engineering (IE) which is
predominantly data driven
• Process Innovation (PI), which is driven by
processes and technology
SISP
• Soft systems methodology (SSM): Simple
to use, top-down methodology
• Process innovation (PI): Ties business
process reengineering with IS/IT.
• Information engineering (IE): Basically a
software development approach.