Building-as-a-Service: The opportunities of service-dominant logic for construction

Construction as one of the largest industries worldwide is not necessarily a frontrunner in the application of digital technologies, tools, procedures, and processes. This has been demonstrated in innumerable reports and scholarly work. The industry has a reputation for delivering projects late, over budget and with improvable quality; all of this combined with a certain digital ignorance. Moreover, it is known for having a Goods-Dominant Logic, which is focused on distribution and management of tangible units of output. This is combined with Taylorism resulting in separation of the role of managing the work from the actual execution of work. The planning and erection of a building is cross-cultural, cross-country project setting due to the diverse nature of the industry and its globalised value chain.
Building Information Modelling (BIM), a three-dimensional representation of information including its corresponding management in asset’s life cycle is considered as one of the enablers for the digital future of construction. However, the development of service-dominant logic within the construction industry has not kept pace with technological and technical possibilities or is not discernible. This is based on a very traditional approach of money for goods which in this case means money for planned and built assets. Service as a unit of exchange is very rarely considered in the sector. As has been shown in other sectors, this can lead to further (more profitable) business models and further increases in efficiency and effectiveness.
The aim of the paper is to show the opportunities that exist if buildings are not considered as amalgamation of materials and goods but as a service model. The paper shows what Service-Dominant Logic (SDL) in combination with BIM could offer to the industry and discusses the term Building-as-a-Service (BaaS) from an SDL perspective.

1 Introduction

Construction industry is not intertwined with digital advancements, as shown in various reports and scholarly work, such as Egan 1998; Farmer 2016; Wolstenholme 2009; Wu et al. 2021. This status quo, in addition to low productivity and efficiency gains in recent decades, has led to the construction industry having a reputation for being digitally ignorant due to its handcrafted products and not service-centered (Bertschek, Niebel and Ohnemus 2019; Gallaher et al. 2004). Moreover, a certain degree of reluctance to embrace information management over the life cycle (Borrmann et al. 2018, pp. 2-5) completes the unfortunate picture of the industry. The first normative approaches were taken by means of ISO standards, such as the 19650 series (International Organization for Standardization 2018). Initial approaches are discernible, such as the consistent, lifecycle-based approach of Building Information Modelling (BIM). Information management with its constant exchange of data also requires a service orientation in addition to communication and collaboration. However, it will be considerable time before a holistic information management is implemented at national and more importantly, project level. For the necessary increase in efficiency and effectiveness in the construction industry, it is purposeful to think about a combination of information management and service-dominant logic in order to provide services along the value chain and, above all, for the customer.

2 Construction

2.1 Status quo

The construction industry is subject to many suggestions for improving of its digital capabilities and the obligatory improvements for the efficient and effective completion of tasks and projects over the life cycle (Zinke, Rifai and Liebchen 2021, pp. 6-8). Construction is considered an „incidental innovator” with unstructured innovation, a lack of innovation strategies and innovation organisation (Pohl and Kempermann 2019, p. 6). Overcoming this status quo here requires emphasising standardisation through innovative information management based on Building Information Modelling and the underlying logics for structuring and allocating data (Kern 2019). Focusing on the availability of data over the life cycle is a first step towards a service-oriented logic in the industry to be able to create further innovations (cf. the fundamental work of Ingram 2020, pp. 213-234).

2.1.1 Building information modelling (BIM)

Among market participants and researchers, BIM is described as a disruptive information and communication technology within the construction industry, enabling project teams to manage a project via a model-based cooperative approach (cf. Ma et al. 2018). Data that provides the basis for the provision of services, such as planning, construction and facility management services, is stored on a common data environment and made available to everyone as a trusted information, called „single source of truth” (Deubel 2021, pp. 114-116). This is normative backed in ISO 19650 (International Organization for Standardization 2018, p. 13), defining BIM as

„use of a shared digital representation of an asset to facilitate design, construction and operation processes to form a reliable basis for decisions”.

In this definition, the holistic lifecycle approach and the need to make decisions on a reliable (data) basis are particularly noteworthy. This can only be achieved by the mean of a structured information management as discussed by Cerovšek 2021. Studies show significant savings in terms of costs and schedule with an increase of quality of the erected asset (amongst others Bryde, Broquetas and Volm 2013). This leads to the necessities of communication and teamwork skills as well as computer skills in practice for construction professionals (Becerik-Gerber et al. 2012; Kim, Mostafa and Park 2022). The use of data-based methods in the construction industry is not prevalent and has not evolved organically in the industry (Harkonen, Mustonen and Haapasalo 2020) but has primarily been passed within an organisation from project to project or within a team (Radley and Lever 2018).
However, this may only be the beginning of the digital transformation in the sector, which some see as the heralds of an Industry 4.0 movement in the construction industry (Bolpagni, Gavina and Ribeiro 2022; Casini 2022). Here, the approaches of Industry 4.0 are based, among other things, on the constant availability and exchange of data, automation and a high level of service provision (Heßler 2019). An emerging question is in what period can the construction industry make the leap from a process- and phase-driven, craft-based industry to a highly automated, digitized, service- and data-driven industry? For this change in approach and implementation of projects, it would be a possibility to emphasize the service-oriented approach, as described by Lusch and Nambisan 2015. They authors describe it as „innovation as collaborative process occurring in an actor-to-actor network, […] application of specialized competences for the benefit of another actor […] and resource integration”. Considering the aforementioned prerequisites and the requirements for a service-oriented approach, BIM can serve to overcome gaps along the way in the sense of a communication- and collaboration-supporting technology (Demirkesen and Tezel 2021).

2.1.2 Building-as-a-Service (BaaS)

The approach of understanding buildings not only as an amalgamation of materials and labour, but as a service-based approach to the provision of needs and functions is subject to scientific investigation. Therefore, there are yet few, overarching, holistic approaches to this term. In the context of construction, the term “BaaS” is strongly influenced by the required energy performance of assets. Rodriguez Santiago et al. 2014, p. 783 describe it as a

„system which aims to optimize energy performance in the application domain of non-residential building [sic!] in operational stage”.

This definition relies on a technical/technological idea that does not imperatively address the basic functions of a building as proposed by Asadian, Azari and Vakili Ardebili 2018, p. 92: structures, systems, services, management and the interrelationship between them. Thus, it is not about the service(s) IN a building, but ABOUT the building as a service-dominant logic-based asset. In this context, a (commercial) building is understood to mean the following:

„whole building or structure or unit of construction works, or a system or a component or part thereof” (International Organization for Standardization 2017).

The Suffix „as-a-Service” can be defined according to Fehling and Leymann 2018 and adjusted to the context as

„demand-oriented deployment of resources respectively assets. Costs for these resources arise mainly from their use (OPEX) […] with usually no costs for their initial acquisition (CAPEX)”.

The concept is comparable to a conventional tenancy. However, it differs in that the cost and ownership responsibility changes. The client as owner and investor used to have a cost-relevant influence in the planning and realisation phase. With the discussed approach, the costs for investment, planning, construction and operation are now transferred to the planners and constructors of the buildings. This changes the role of the “classic” building owner as investor and later operator; they become the user of a building with significantly lower financial obligations.
Construction companies, in contrast, will increasingly become intermediaries and provide services related with the temporary use of assets – and become a comprehensive real estate provider. The consequence is a shift in the financial risk of erecting an asset in the value chain and is likely to lead to a more service-oriented perspective due to a higher degree of collaboration and knowledge exchange (Schönbeck, Löfsjögård and Ansell 2021). Construction companies must endeavour to make these buildings rentable and to offer attractive services behind them. The provision of assets could be compared to pop-up stores that are given to companies to and for certain times, e.g., for interim use, or in the case of BaaS for medium to longer-term use.

2.1.3 Service-dominant logic (SDL)

Bitner, Ostrom and Morgan 2008 see services as processes, characterized by their

„dynamic, unfolding over a period of time through a sequence or constellation of events and steps […], a chain of activities that allow the service to function effectively”.

The construction industry faces a particular contradiction in this context. Construction (including real estate, infrastructure and related services) contributes on average 5-15% of the national GDP of most countries in the world (UNECE 2021) and yet has the reputation of being one of the most indolent sectors in terms of developing service approaches with the first study in this context conducted Sivunen et al. 2013. The industry faces a paradox: It is a service-driven industry, but at the same time it is a project-based industry that is known for not having a high customer (respectively client) satisfaction rate (Nzekwe‐Excel 2012).
However, this state of lack of customer satisfaction and lack of service need not remain a dichotomy (Kärnä, Junnonen and Kankainen 2004). The predominant model of classical barter is “goods for money”. These goods are mostly manufactured, easily tradable products, which are offers which render services which create values (Gummesson 1995). According to Lusch and Vargo 2004, the primary focus in this logic is on material resources, values, and transactions. They point to an evolution of this traditional logic and a change in focus to intangible resources, value creation and relationships, and an emphasis on providing “services for money”, respectively „buildings for rent” in a BaaS context.
Smyth 2015, pp. 231-240 points out that in construction several features that SDL draws particular attention to are neglected, which is supported by Syben 2018, pp. 196-197. Instead, the focus is more on the negative characteristics:
• focus on surface appearance of market demand,
• overvalue tangible contents,
• undervalue service contents,
• view as provider/producer rather than co-creator and
• undervalue client perception of value.

Chapter 2.2 describes these opportunities and their added value for the construction industry. The fundamentals of the SDL and its applicability in construction make it purposeful for the construction industry to focus on these values as well. This is partly already observed, as discussed by Preuß and Schöne 2016, p. 5, but this slow change still contrasts with an administrative rather than a service culture.

2.2 Opportunities

It should be emphasised that there is not one single approach to a solution, but a combination of diverse concepts and approaches. However, SDL’s combined approach of BaaS and BIM could be an opportunity to lead the construction industry to a higher level of service orientation. Koskela 2000 described the underlying approach two decades ago which can be aligned:
• a chain of transformations (BIM, SDL, BaaS),
• a flow of work (BIM, SDL) and
• a generation of value for the customer (SDL, BaaS).

2.2.1 Focus on customer needs

Without understanding the requisites, expectations of the customer and their underlying values, the concept of value is undefined (cf. the extensive research of Lavikka et al. 2021). Adding to this, it is necessary to understand that clients do not necessarily represent one person that acts as a single entity. It is rather to be interpreted as a placeholder where diverse, conflicting values, interests, requirements, temporal perspectives and different data demands have to be reconciled (Emmitt and Bertelsen 2005, pp. 73-74). It is necessary to elicit these differing requirements together with the client, evaluate them and elaborate feasible solutions by the use of simplification and systematization (Çıdık, Boyd and Thurairajah 2017). Moreover, assets are planned and built without necessarily knowing the individual (later) user/customer. This leads to the occurrence of modifications in the actual realisation. BaaS in combination with SDL addresses this by building for a target group and not a specific customer.
Tzortzopoulos, Kagioglou and Koskela 2020, pp. 29-30 call for a combination of better requirements management, collaborative interactions, sharing of information and knowledge and the expedient management of design activities to increase value. In the early design phase, the foundations are laid for more efficient further processing of the asset, so the authors. Here, BIM can help to create this value in the early phases of a construction project by clearly structuring data and transfer it to the operational phase. BIM can act here as a data supplier for the life cycle (Dalla Valle, Campioli and Lavagna 2020, p. 49) and supply in the operational phase BaaS with occupational data, e.g. occupancy, equipment, accessibility, cleaning intervals, etc.

2.2.2 Appropriate valuation of tangible contents

The first approaches and considerations of value management and value engineering can be observed in the construction industry, but they are mostly related to the project realisation phase. (Kelly, Male and Graham 2015, p. 427). What is more, the industry is characterised by the fact that an immobile product is produced in which the involved parties each contribute a specific fragment (Borrmann, Lang and Petzold 2018). Due to increasing complexity and regulatory, individual and sustainable requirements of construction projects, it is becoming increasingly impractical to manage sophisticated assets without the help of IT (Coss 2017). Overcoming these requirements for IT-supported project management has been a key issue in recent years in order to remain competitive in the marketplace and still is (Kamble, Gunasekaran and Gawankar 2018). This results in different depths of processing, involvement and implementation of every participant and different aspects of quality management, often due to information asymmetries, as discovered by Zeng, Lou and Tam 2007. BIM is seen as having a bridging function that allows both worlds to be united: linking classic construction activities in the physical world with digital models. However, this can only be an intermediate state in the further development, as it cannot be fully ascertained which information is accurate – a classic question of trust: How much can a recipient of information trust the information given? (Bowe, Robles and Mathews 2017). Overcoming this phenomenon by the use of structured, comprehensive information management can result in a higher, physical quality of the overall asset, as discussed by Yarnold et al. 2021.

2.2.3 Increase service productivity

Kuusi, Junnonen and Kulvik 2020 point to the fact that the construction supply chain in the European Union (and beyond) is experiencing severe fragmentation – a development that has been observed for decades. This is combined with sustained low growth and low profit margins. Neither is this a new, sudden phenomenon, but a manifestation of a saturated industry that has matured over decades (Cain 2004; Gallaher et al. 2004). These developments are based on an on-site approach, i.e., the necessary materials are delivered to a construction site and assembled by hand to form an asset (Maxwell and Couper 2022).
To enable higher service productivity, various considerations exist, such as moving manual work to a protected factory environment to achieve higher manufacturing quality on the one hand and to meet the needs of customers on the other (Lavikka et al. 2021, p. 839). The application of lean principles, known from the automotive industry, are supposed to have a facilitating function here (Aureliano et al. 2019). Furthermore, well-known and proven techniques such as just-in-time and prefabrication shall be utilised to enhance the handling and use of the three M’s: manpower, machinery and material (Sui Pheng and Meng 2018). This shall be backed by the increase use of robotics (Spengler 2021) or the use of Augmented Reality (Alavi et al. 2021).
However, Milakovich 1995, p. 123 already recognised that it is necessary to permanently provide services at a level of performance that complies with or surpasses all customer expectations. For this, an internal quality management system is necessary, the author continues, which not only checks the quality standards, but also records the customer requirements and reconciles them. This requires data literacy along the value chain. The conflict here is that this competence must first be built up but cannot be implemented without practical experience from projects. As a result of this inadequacy, either too little, too much or incorrect data is ordered, generated or provided by clients, which then leads to an overflow of information (Wildenauer and Basl 2021, pp. 118-120). This information must first be evaluated before it can be utilised into services. This approach ties up resources and leads to no added value.

2.2.4 Establishment of co-creation

Although being the fundamentals of successful and long-term cooperation, especially in the labour- and coordination-intensive construction industry, Co-Creation has attained attention over the last few years. To some extent, this can be reconciled with Sánchez-Fernández, Iniesta-Bonillo and Holbrook 2009 observations that customers (clients in this case) are increasingly better informed and prepared and thus actively demand higher value generation. As already indicated by Liu, Fellows and Chan 2014, p. 121, a more intensive knowledge exchange in a trusting client-contractor relationship can promote the innovation process for the parties involved. However, the limitation associated with this is that due to the high defragmentation of the industry, lack of coordination and communication, among other things, these project businesses are less dynamic and innovative. It should be noted that according to the SDL paradigm, firms do not create value, but instead elaborate value proposals. It is the client that creates value by using these proposals (Vega-Vázquez, Revilla-Camacho and Cossío-Silva 2015). Based on the work of Vargo and Lusch 2008, Galvagno and Dalli 2014, p. 644 defined in their research Co-Creation as

„joint, collaborative, concurrent, peer-like process of producing new value, both materially and symbolically […] as a general concept”.

Co-Creation is considered crucial and needs to be combined with innovation to reach the promoted benefits (cf. the work of Smyth, Razmdoost and Kusuma 2016) with an early involvement of the client(s) and their needs (Wei and Lam 2014). Based on the research findings of Tommasetti, Troisi and Vesci 2015 it is necessary to consider eight interdependent dimensions in their value co-creation measurement conceptual framework:
• cerebral activities (positive attitude, expectations, trust, tolerance),
• cooperation (compliance, responsible attitude),
• collation (researching, sorting and assorting of information),
• changing Habits (pragmatic adaption, change management),
• co-production (Co-design, Co-delivery, both to provide value in use),
• co-learning (sharing information, feedback),
• connection (relationship building and their maintenance) and
• combination of complimentary activities.

Research has shown that interdisciplinary cooperation according to the above eight interdependent points may be essential in the construction industry (Michna, Kmieciak and Czerwińska-Lubszczyk 2020). BIM serves as a facilitator here (Miao 2022). However, this cannot be implemented by a single party but requires everyone along the value chain, as construction project parties have little experience creating […] digital services according to Lavikka, Lehtinen and Hall 2017, p. 544. It is the responsibility of the individual involved in the construction industry to give these eight points the necessary attention, but a compulsory requirement for the implementation of SDL in the sector.

2.2.5 Establish long-term mutual benefits

In the standard work on innovations in the construction industry by Jones and Saad 2003, pp. 193-195, one of the primary approaches to enabling long-term mutual benefits is described as partnering. This approach is defined as increasing the collaborative advantage through inter-organisational alliances. In addition to mutual learning, this also includes the sharing of risks that arise in the processing of an asset. It is a mutual commitment for the benefit of all participants, in which resources are disclosed and can be accessed by all participants. This requires working with greater transparency and accountability and to involve users and stakeholders in life-cycle based decision-making processes (Haugbølle and Boyd 2017, p. 5). The basic service concept is evident in this context: each commissioned party is part of the project team for the respective commissioned part only. The respective value-generating work can be taken over by other parties in their work packages. The idea is to replace price competition with competence competition with corresponding services (Habib 2020, pp. 76-81). This open concept can only work with the kind of information management that BIM enables in a structured way. According to the findings of Fewings and Henjewele 2019, p. 243 extensive case studies, five points of improvements are necessary to achieve this ambitious goal:
(1) developing people in construction,
(2) adopting smart and digital technologies,
(3) contributing more to infrastructure-based economic growth,
(4) investing more in sustainability and efficiency,
(5) provide strong leadership.

Leadership shall be seen according to the definition of Partington 2003, which focusses on the involvement, participation and empowerment of followers. Points 1 and 5 concern social skills, point 2 technical and points 3 and 4 economic issues. However, Langford and Retik 1996 points out a crucial importance: The industry needs to agree on whether this approach is a real rethink of the industry’s project delivery or merely a new contracting method that cannot meet the high standards it has set for itself. Given the long timespan between the publication of the work 26 years ago, it remains a legitimate objection how much longer the industry can afford to merely discuss these issues. Previous literature research by Bygballe, Jahre and Swärd 2010 showed that this partnering philosophy was predominantly implemented on a per-project basis and was not holistically conceived. BaaS would be a valuable possibility to use buildings for (medium- to long-term) purposes and thus save resources for not building new assets.

3 Résumé

Considering the aforementioned five demands according to Smyth 2015 in their interrelated dependency with the formulations thereunder, it becomes apparent that they cannot be implemented in an unconnected context and manner. As long as old ways of thinking prevail in the construction industry and assets are seen as mere objects, the necessary innovations to increase efficiency and effectiveness will not be successful in the long-term. A shift in thinking is needed in the light of scarce resources, not to build buildings for the sake of buildings, but to think of assets as BaaS that can be used as flexible and timely as appropriate. The construction industry can develop impressive, new, long-term and sustainable business models here, in which the service-dominant logic is applied throughout the life cycle of an asset to be realised. To achieve this mutually beneficial state, further academic research and practical application is inevitable. This concerns in particular the financial and legal aspects associated with this new form of building allocation.

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Kľúčové slová/Key words

building-as-a-service, construction, digital future of construction
budovanie ako služba, stavebníctvo, digitálna budúcnosť stavebníctva

JEL klasifikácia/JEL Classification

M31

Résumé

Budovanie ako služba: Príležitosti logiky dominantnej služby pre stavebníctvo

Stavebníctvo ako jedno z najväčších priemyselných odvetví na svete nie je nevyhnutne lídrom v aplikácii digitálnych technológií, nástrojov, postupov a procesov. To bolo preukázané v nespočetných správach a vedeckých prácach. Toto odvetvie je známe tým, že dodáva projekty neskoro, prekračuje rozpočet a má lepšiu kvalitu; to všetko v kombinácii s istou digitálnou nevedomosťou. Okrem toho je známy tým, že má logiku dominantného tovaru, ktorá je zameraná na distribúciu a riadenie hmotných jednotiek produkcie. To sa spája s taylorizmom, čo vedie k oddeleniu úlohy riadenia práce od samotnej realizácie práce. Plánovanie a výstavba budovy je medzikultúrne, medzištátne projektové prostredie kvôli rôznorodej povahe priemyslu a jeho globalizovanému hodnotovému reťazcu. Building Information Modeling (BIM), trojrozmerné zobrazenie informácií vrátane ich zodpovedajúceho manažmentu v životnom cykle majetku, sa považuje za jeden z predpokladov digitálnej budúcnosti stavebníctva. Vývoj logiky prevládajúcej v stavebníctve však nedrží krok s technologickými a technickými možnosťami alebo nie je badateľný. Je to založené na veľmi tradičnom prístupe peňazí za tovar, čo v tomto prípade znamená peniaze za plánované a vybudované aktíva. Služba ako jednotka výmeny sa v tomto sektore zvažuje veľmi zriedkavo. Ako sa ukázalo v iných sektoroch, môže to viesť k ďalším (ziskovejším) obchodným modelom a ďalšiemu zvýšeniu efektívnosti a hospodárnosti. Cieľom príspevku je ukázať možnosti, ktoré existujú, ak sa budovy nepovažujú za zlúčenie materiálov a tovarov, ale za model služieb. Príspevok ukazuje, čo by logika dominantnej služby v kombinácii s BIM mohla ponúknuť odvetviu a rozoberá pojem budovanie ako služba z pohľadu logiky dominantnej služby.

Recenzované/Reviewed

25. April 2022 / 31. April 2022