Localized, closed hotel and taxi businesses have already suffered the critical hit. Will construction be next?

In his famous “Burning Platform” memo, Steven Elop, former CEO of Nokia, described the troubled situation where Nokia was in 2011. According to him, Nokia would survive using extreme measures under his lead. However, as we know now, competitors took Nokia’s market share by using entire ecosystems instead of competing with individual devices and features. Two platform ecosystems, Android and iPhone, defeated the product family platform.

From the perspective of construction business, however, Nokia, Airbnb, and Über all seem somewhat irrelevant – merely distant anomalies like the dot.com bubble in the late 90s. Platform business model is viral indeed, but why should we consider it in the context of construction? We already have BIM, lean construction, software development companies and even new business models, like IPD and the alliance model. I argue, however, that companies like Nokia, Airbnb and Über and their fate may have the same relevance to construction as fruit flies had to genetics.

In construction sector, we have tried to solve the problem of poor productivity for forty years. Still, the evidence of our failure is clearly seen on construction sites every day. Given the fact that construction covers 7 – 15 % on average of a nation’s GDP in developing and developed countries alike, and the unused potential of development of productivity increases compound interest a day by day, it is only a matter of time before a major disruption hits the sector.

The idea of platform ecosystems has already taken shape on a variety of business sectors. Not only travel and transportation have been transformed, but even large and traditionally slow industries, such as healthcare, agriculture and banking are catching on. At the core of a platform ecosystem is a multisided market, that connects producers and consumers. As the platform enables new interactions and value creation, it also typically eliminates unnecessary participants, middle-men and gatekeepers. This is clear if we compare legacy taxi business and the way Über operates.

Localized, closed and conservative taxi and hotel businesses suffered the critical hit already. The game change took both businesses by a total surprise, as it came from outside of the strategical business radar.

The paradigm of construction business model is also about to change. The question is, whether we will initiate the change by ourselves inside the business, or whether there will be others who create new value – and collect profits – by exploiting the productivity potential. Our future depends on our ability to make a business model innovation internally. Construction sector needs platforms of our own, before other platforms will eat our business.

 

Originally published in the Aalto University blog

Picture: Fira Group Oy, Helen Korpak

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