Strategic Management of IT in Construction

normaldeerManagement

Nov 20, 2013 (3 years and 6 months ago)

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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 a
n

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 competition
-
manufacturers 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.
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.

2.
Power of suppliers
: Competitive advantage from supply relationship exist when few
enterprises dominate supply, no competing product, threat of forward integration
over buyer.

3.
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.

4.
Threat of substitutes
: Substitutes for construction products are, e.g. communication
technologies or cheap air travel instead of road/rail infrastructure (
Seikan tunnel
)

5.
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.


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:

1.
Broad target

2.
Narrow target

3.
Lower cost

4.
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


(Porter 1990)

Why does a nation achieve international success in a particular industry?

Determinants of National Advantage

(
to invest and innovate
)

Why does a nation achieve international success in a particular industry?


1.
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

2.
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.

3.
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.

4.
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.

5.
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

Weaknesses
Opportunities
Threats
Strengths
Other analysis techniques....


Process analysis


Benchmarking


Assesment of core competencies


PESTLE analysis (identify political,
economical, social, technical, legal,
environmental factors)


....



Implementation techniques:


Business Process Reengineering (BPR)


TQM


Change focus from ‘Function’ to ‘Process’


Diversification


Product differentiation


....


Methods to gain competitiveness

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:











Projects must be seen in the context of the overall strategic management of the
firm, for example how the firm prioritizes its projects

1.
Integrative
L
evel
:

Project p
ur
pose is stated, functional design, areas of
work, basic parameters or con
s
traints defined. Example: Project
Definition Report

2.
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.

3.
Tactical Level
: Detailed design, activity schedule, responsibility chart,
cost

Strategic management of projects

(Youker 1993)

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

Strategic management of projects

(Seven Forces Model, Morris 87, Turner 99)

Projects are subjected to seven forces

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

Strategic management of projects

The importance of IT

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.

IT is a:

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

Assessment of the
business
Vision for the
business
Business strategic
planning
Business operational
Plans and Budgets
Assessment of
information use and
management
Vision of how the
business should use
information
Technical and
managerial
Information
Architecture
Information system
strategic plan
Information system
Operational plans
and budgets
(IS/IT/business strategies relationsship)

General steps to set direction for business


Planning steps for handling IS




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]


Purpose


Vision




Ends


Means

Scope


Possibility


Probability

Capability

Use


Education


Analysis


Implementation

Earl describes a series of frameworks to support a range of IT management
issues. Earl has labelled these framework
s

awareness, opportunity and
positioning


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
-

Client and project team

Level 5

Construction Product
-

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 content of product














Information
content of
process


Low





High


Low


High


Delivery and
assembly of low
-
tech
building subsystems,
e.g. windows, doors,
concrete beams,
excavating.


Delivery and
assembly of high
-
tech building
subsystems, e.g.
elevator access
control system.


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)

Information

intensity

matrix

Information intensity matrix

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, Object
-
oriented 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.


A
lternative 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 approac
h

in which
the problem and solution is
reassess
ed

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.