Building & Construction: Understanding an Industry Through Its Value Chain

Full transcript

Let's take the building and construction industry and use it to understand how an industry really works. We'll start with the industry itself, identify the key actors, follow the value chain, and then zoom into one customer to understand exactly where value is created. An industry is not one company — it is an ecosystem of different actors, each contributing something different. Property owners initiate projects, architects turn requirements into designs, contractors build them, manufacturers and distributors supply materials, and authorities establish the rules under which everyone must operate. Now we can see the industry as a value chain. A project begins with a plan, gets designed, financed, and approved, then materials and services are procured. The project is built, inspected, and handed over, before entering its longest phase: operation, maintenance, and eventual renovation. Different actors contribute at different points along this chain. To understand what a supplier can actually contribute, we need to zoom in much further. Let's take the main contractor as our customer and look carefully inside their business to see how it is structured and what it needs to accomplish every single day. Inside the contractor, the business divides into several domains: estimating and tendering, procurement, project execution, site operations, quality and safety, equipment management, finance, and handover and customer management. These domains describe everything the business must accomplish to deliver a successful construction project. Each domain contains a set of business processes. Take project execution: the contractor must plan the work, schedule resources, procure materials, deliver them to site, execute the work, inspect it, report progress, and finally hand it over. Following these steps brings us much closer to where real value is actually created. Even a single process breaks down into specific customer activities. Receiving materials on site means someone must receive the delivery, check it, unload it, move it to the right location, store it, make it ready for installation, and record everything that happened. Understanding these activities is where a supplier can find its true opportunity to create value.