CET 97
DOI: 10.3303/CET2297066
Paper Received: 10 May 2022; Revised: 5 August 2022; Accepted: 8 August 2022
Please cite this article as: Singaram Ratana L., Zakaria R., Munikanan V., Aminudin E., Shamsuddin S.M., Yahya M.A., Sam A.R.M., Wahi N.,
Gara J., Sahamir S.R., 2022, SME Contractor Multi-Criteria Business Model on Adaptation of Construction Industry Revolution 4.0 in Malaysia
– A Review on Business Models and Adaptation Challenges, Chemical Engineering Transactions, 97, 391-396 DOI:10.3303/CET2297066
CHEMICAL ENGINEERING TRANSACTIONS
VOL. 97, 2022
A publication of
The Italian Association
of Chemical Engineering
Online at www.cetjournal.it
Guest Editors: Jeng Shiun Lim, Nor Alafiza Yunus, Jiří Jaromír Klemeš
Copyright © 2022, AIDIC Servizi S.r.l.
ISBN 978-88-95608-96-9; ISSN 2283-9216
SME Contractor Multi-Criteria Business Model on Adaptation
of Construction Industry Revolution 4.0 in Malaysia – A
Review on Business Models and Adaptation Challenges
Loganathan Singaram Ratanaa,*, Rozana Zakariab, Vikneswaran Munikanancc,
Eeydzah Aminudinb, Siti Mazzuana Shamsudind, Muhamad Azani Yahyac, Abdul
Rahman Mohd Samb, Noraziah Wahid, Jawa Anak Garaa, Shaza Rina Sahamird
aSchool of Civil Engineering, Faculty of Engineering, Universiti Teknologi Malaysia, Johor Bahru, Malaysia
bUTM Construction Research Center, Universiti Teknologi Malaysia, 81310 UTM Skudai, Johor Bahru, Malaysia
cDepartment of Civil Engineering, Faculty of Engineering, Universiti Pertahanan Nasional Malaysia, 57000, Kuala Lumpur,
Malaysia
dFaculty of Architecture Planning and Surveying, Universiti Teknologi MARA, Shah Alam, Selangor, Malaysia
loganathan5@graduate.utm.my
The construction industry worldwide is now facing the Industry Revolution 4.0. As such, the industry is
undergoing significant transformation to adapt to the needs and challenges of the revolution. New technologies
and digitalization in the construction industry, innovating the whole traditional project cycle and bringing more
tech savvy and effective in the project delivery of its life cycle are, among others, issues that need to be
addressed. Contributing towards the whole construction business model, there is a need to enhance the existing
business models that are available. The objective of this paper is to review the types of business model, the
definition, and the challenges faced by SMEs to adopt the business model. As a reference, more attention is
given to business model canvas. Challenges faced by SME contractors to implement construction industry 4.0
technologies and enhance their productivity are the expected contributions to the body of knowledge. This paper
concludes, many studies highlight on finding new elements to be added into existing business model canvas.
At end of the research, it is found that manpower, machinery, material, finance and information technology are
the new elements that need to be added in existing business model canvas. Furthermore, this paper will help
the scholars and industry players to understand how the Industry Revolution 4.0 significantly affect the
construction industry, SME and their business model.
1. Introduction
Small and Medium Enterprises (SMEs) are contributing significantly to the economic development, social
uplifting and political stability of any country. SMEs are diverse in nature. SMEs can be established for any kind
of business activities in urban or rural area (Amin, 2004). It can be considered as a back bone of the national
economy (Edrak et al., 2014). Many entities, particularly the government, have allocated many reputations on
the expansion of SMEs to realise its contribution to the progress of the economy. In order to reinforce the SMEs,
a number of plans and services are provided to improve their performance and affordability. Construction is an
extensive flat business, supporting all other industries suggestively, where value development almost happens
in the intelligence of amenities or assets expansion. Construction workers distributes only about 30 % of their
operative period to their key duty. The remaining 70 % is engaged by successive spending, moving elements,
positioning up, rearranging the structure site and witnessing resources and equipment. According to the author’s
knowledge, no comprehensive work was dedicated to raise the competency level of SME contractors to
Construction Industry 4.0 revolution. Throughout this research, challenges faced by SME contractors to
implement construction industry 4.0 technologies and enhance their productivity are the expected contributions
to the body of knowledge. A new recommendation of a SME contractor’s business model will be proposed and
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general strategies that SME’s could adopt to raise their business performance and level of competency in
moving towards the Construction IR 4.0.
2. Problem Statement
SME contractors’ company was established a long time ago and are still practicing the conventional method of
construction and are very comfortable in their old method zone. As a result, SMEs are lacking the exposure of
the current trends in the construction industry. A well-established plan and procedures to deliberately adopt IR
4.0 are serious (Lim et al., 2020). SME business and productivity have to operate and monitor with advanced
technologies of IR 4.0, thus, warrant the need of competent person to operate the software. As for the SME, the
future will be full of challenges when the new norm is mandatory with the utilisation of Building Information
Modelling (BIM) in construction project. BIM has determined the growing adaptation of the technology amongst
the construction players (Rooshdi et al., 2021). In order SME contractors to stay relevant, existing business
model is required for enhancement. At the end of this research, new elements will be introduced for SME
contractors to absorb into the existing business model. According to Technological and Economic Development
of Economy (2017), the challenges faced by SME’s in adopting BIM are dictated by 5 factors. They are
technology, cost, management, personnel and legal. Technology factor describes the functionality and
accessibility of BIM tools, need for sophisticated data management and lack of data interoperability. Cost factor
is about financing the training session, cost of specialised software and required cost for software upgrade.
Under the management factor, the challenges are managers’ awareness and support, cooperation from other
industries and practical strategies. Personnel factor is on the habitual resistance to change and unfamiliar with
the BIM. Under legal factor, the challenges are the ownership of the BIM data and its ownership, contractual
environment and lack of protocols.
2.1 Background Study on the Challenges
Industry 4.0 has already been in the construction business for quite a while and the knowledge is on dissimilar
levels of maturity. Technologies such as BIM, Cloud Computing, and Modularization have industrialized
suggestively while other skills such as Augmented, Virtual and Mixed Reality are still being improved and by
some means affect the sustainability in the industry. The application of IR 4.0 within the Construction Industry
is still missing extremely despite having user-friendliness of these technologies (Alaloul et al., 2020). Table 1
below lists several other challenges being discussed by other authors.
Table 1: Topic and Author on the Construction 4.0 Challenges
No Topic Author
1
2
Customer Relation
Technological Challenges
(Guma et al., 2019)
(Ellahi et al., 2019)
3 Organisation / Knowledge (Cerchione and Esposito 2017)
4
5
6
Strategy / Leadership
Creative Thinking
Pandemics
(Hizam-Hanafiah et al., 2020)
(Ellitan et al., 2020)
(Mckibbin and Fernando 2020)
7
8
9
10
Employees (qualification)
Productivity Challenges
Education on IR 4.0
Halal Sustainability
(Razali 2018)
(Chin and Yusoff 2020)
(Tandon 2020)
(Ahmad Zaid 2020)
11
12
Working Capital Management
Management and Profitability
(Aktas et al., 2015)
(Nguyen and Nguyen 2018)
13 Financial challenges (Kukharuk and Gavrysh 2019)
14
15
16
Information challenges
Maintenance Operations
Technical Competency
(Kukharuk and Gavrysh 2019)
(Mohd Noor et al., 2021)
(Ismail and Hassan 2019)
17 Technological challenges (Kukharuk and Gavrysh 2019)
18 Obstacles associated with automation (Ingaldi and Ulewicz 2020)
Besides that, Coleman et al. (2016) have identified problems and challenges in business analytics and big data
analytics for SMEs. SMEs are, in numerous cases, not totally alert regarding the effects of digitalisation.
Subsequently, this causes misunderstanding in the difficulty and cost of digitalisation solutions, so that their
possible financial assistances cannot be properly projected. The consequences of external pressure as the main
driver have advantages and disadvantages, more so, for small and medium-sized enterprises. This could lead
392
to the late adoption of Industry 4.0, because compared to mass markets catered by large enterprises, niche
markets are less competitive. According to Oesterreich and Teuteberg (2016), there are allegations of
digitisation and automation in the context of Industry 4.0 towards to construction industry.
3. Type of Business Model
Business models — at the present time, in other sectors a widely used managerial practice for designing,
comparing and analysing an organisation’s value creation logic. There is a less discussed and researched
concept in the field of construction. Current business model literature sees the concept as an essential part of
successful business, as its main purpose is to separate a company from others and to give it an advantage in
regard to its competitors (Teece, 2010). A business model defines the way a company operates, how it creates
value for its customers and how it captures value from its operations to make a profit. In the last 15 y, much
literature has developed around the concept of the business model (Lanzolla and Markides, 2021).
3.1 Business Model Canvas
A Business Model Canvas (BMC) established by Osterwalder instrument can be quite operative here in helping
users recognise an organisation's business model. The BMC can help users visually represent of the elements
of a business model and the potential interconnections and impacts on value creation. Table 2 below shows
critical literature review analysis on the Business Model Canvas.
Table 2: Critical Literature Review Analysis on Business Model Canvas
No Title and Author Year
Published
Keywords Important Points
1 A Business Model
Canvas for Social
Enterprise (Vial,
2016)
2016 Business Model,
Canvas, Social
Entrepreneurship
Six components: value creation – how (1) and
who for (2), competencies (3), strategic
positioning (4), monetization (5), time, scope
and size ambitions (6)
2 A Circular
Economy
Business Model
Innovation
Process for the
Electrical and
Electronic
Equipment Sector
(Pollard et al.,
2021)
2020 Circular
Economy
Business Model,
Innovation,
Electric and
Electronic
Equipment,
Circularity
Indicators
Fivefold interconnected layers, provides
electrical and electronic equipment
manufacturers with a comprehensive layered
process for developing and implementing a
circular economy business model tailored to
their business offerings.
3 Adaptation of the
Business Model
Canvas Template
to Develop
Business Models
for the Circular
Economy
(Schöllhammer et
al., 2020)
2020 Circular
Economy,
Business Model
Canvas, Digital
Ecosystem,
Industrial
Symbioses and
Synergies.
Five patterns that extend the existing Business
Model Canvas 1) Return diagnostic process; 2)
Recovery system; 3) Recovery relationship 4)
Recovery channels; 5) Recovery incentive
system
4 Business Model
Canvas as a
Basis for the
Competitive
Advantage of
Enterprise
structures in the
Industrial
Agriculture (Dudin
et al., 2015)
2015 Strategy,
Competitive
Advantages,
Business Model
Canvas,
Enterprise
Structures,
Industrial
Agriculture,
Competitiveness.
Enterprise structures develop not only one
business model and its canvas, but several
business models, in order to increase the
performance of the tools.
393
The literature review was conducted by referring articles indexed in Web of Science, Scopus and Science Direct
journal. The conditions used were the influence of Industry 4.0 from a SME approach, demonstrate Business
Model Innovations from the Industry 4.0 approach and how the acceptance of the Industry 4.0 affects the
Business Models components. The time period of the literature review was defined between 2013 to the present.
The keywords "Business Model" AND "Industry 4.0" OR "Industrie 4.0" OR "Business Model Canvas" OR
"Innovative Business Model”. The papers recollected were 264 and eliminating copies, 146 papers were taken
into account. By analysing these journals (as mentioned above) in VOS viewer software, a network visualisation
is developed as shown in the below Figure 1. The network contains 4 clusters (blue, red, green and yellow) with
277 links with minimum occurrence of 5. A total of 394 links are connecting with each other words. Some main
keywords are competitive advantage, technology, originality value, sustainable development and sustainable
business model. SME and social enterprise still lack studies and further studies can be conducted on related to
this subject.
Figure 1: Illustration of Network Visualisation
3.2 Traditional Business Model
A business model describes a construction for how a firm makes and distributes value to clients and the
instruments working to capture a share of that worth. It's a coordinated set of fundamentals surrounding the
movements of costs and incomes (Teece, 2018). The creating, modification, application, and conversion of
business models are outputs of high-order (dynamic) competences. Energetic capabilities, which are reinforced
by administrative habits and executive skills, are the firm's ability to integrate, build, and reconfigure interior
capabilities to report, or in some cases to bring about, variations in the business environment. The strong point
of a firm's dynamic capabilities is vigorous in many ways to its ability to preserve productivity over the long term,
including the capability to plan and regulate business models (Teece, 2018).
3.3 Challenges in Adopting Business Model Canvas
SMEs are engaging consultants or advisors to produce the business model canvas. A fundamental concern for
any business model is required whether and how an online platform could replace such real-life interactions, for
instance, because deep domain knowledge on the market conditions of SMEs is crucial. Secondly, evaluation
shows that SMEs may still struggle to find the right tooling for their needs and context (de Reuver et al., 2016).
Similarly, the study reveals some boundaries regarding the philosophy, namely, that when the stockholders and
businesspersons have different opinions of the value proposition, it can hinder further productive conversation
unless some agreement is reached, which did not always happen (Sort and Nielsen, 2018).
394
3.4 New Elements in Business Model Canvas
Social entrepreneurship business models deserve a specific set of components, and develop a specific business
model canvas for social entrepreneurship (Vial, 2016). This author recommended a new element to be added
in the business model canvas proposed by Osterwalder. From the research conducted, the new business model
elements are manpower, material, machinery, finance and information technology. Element manpower
describes the way SME manage the manpower challenges due to the new technologies. Element material is
covers material management, material identification and vendor selection. As for element machinery, its covers
equipment availability, delivery of equipment and maintenance. Element finance describes financial difficulties
by SME, cash flow, and financial control. Element information technology is mainly on the SME readiness
towards adopting information technology related developments. By adopting these new elements into the
existing business model, SME contractors will be able to foresee the challenges and eliminate far before
penetrate in to adopting the IR4.0 technologies. Schöllhammer et al. (2020) promotes a reconsidering in the
economy, politics and society to be part of business model canvas which can help to generate new globular
forms of association permitted by digital ecosystems. It is important to have possible and potential changes in
the business model canvas such as taking into account increase and decrease of raw materials, taking into
account the changes in the consumer demand, taking into account the new needs of key customers (Dudin et
al., 2015). Müller (2019) studies shows that user and provider aspects need to be included in their business
model. Firms need to choose if the carriages are a danger towards their recognized business models, and
whether SME must consequently evade the provider role in the direction of Industry 4.0. Nevertheless,
captivating a provider character to Industry 4.0 could also permit SMEs to entirely grip the capacities of Industry
4.0, which keep on out of reach of Industry 4.0 users. SMEs are recommended to study equally roles but
stimulated to take the risk to change to an Industry 4.0 provider.
4. Conclusion
A new recommendation of a SME contractor’s business model will be proposed and contribution of generics for
the SME contractors to raise their business performance and level of competency in adopting the Construction
IR 4.0. The enhanced business model will cover project delivery elements, the manpower, material, machinery,
finance and information technology. This research will help SME contractor to stay relevant to Malaysia National
Policy on Industry 4.0, where it underlines one of the key objectives to attract stakeholders to shift towards the
industry 4.0 applications and technologies, subsequently, enhancing Malaysia’s attraction as one of the
preferred locations for smart manufacturing.
Acknowledgements
Author acknowledges all the co-authors on their contribution and co-operation on composing this paper. Author
would like to extend gratitude to Dr Mushairry Mustaffar on his contribution for proofread this paper. Special
thanks conveyed to ICLCA for giving platform to publish this paper. Also, thanks to University Teknologi Malaysia
for being the main research hub.
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SME Contractor Multi-Criteria Business Model on Adaptation of Construction Industry Revolution 4.0 in Malaysia – A Review on Business Models and Adaptation Challenges