- As construction continues to face financial pressures, CPM solutions are a salve for decision-making woes.
- CPM enables early planning via data stream connections and predictive analytics.
- Best-in-class CPM solutions converge financial forecasting, predictive analytics and data-driven insights.
- Choosing the right CPM can give you a significant automation boost.
Construction is a notoriously slow-moving and last-to-change industry. According to McKinsey, labor-productivity growth in construction has averaged a mere 1% over the last decade, while vertical industries (e.g., manufacturing, etc.) have averaged upwards of 3.6%. Worse yet, the average overall earnings before interest and taxes (EBIT) hovers around 5%. Something has to give. In an ecosystem where cost overruns and time delays are the norms, operating under intense financial pressures and chaotic productivity cycles is frustrating, terrifying and headache inducing.
McKinsey also estimates that increased use of tech aimed at solving operational and financial woes could boost growth and revenue in the construction industry in the U.S. up to $5 trillion over the next decade. End-to-end technology suites like Corporate Performance Management (CPM) could act as a lever to break the dam—and it all starts with increased decision-making efficacy.
CPM + Planning: Finding Velocity in the Storm
By now, many construction players are well aware of the value of prediction and analytics. Recent figures suggest that roughly 80% of large and mid-market construction companies have started to invest in analytics and predictive modeling to some degree—though many of those investments are in point solutions or not yet realized. Of course, these pressures are bubbling to the surface in 2021. According to a Turner & Townsend report, 70% of large-scale pharmaceutical construction projects go over budget by at least 15%. Not only is this a direct symptom of an industry long resigned to overruns and productivity woes, but these overages (and the timing frictions that inevitably follow them) are rubbing against vaccine distribution and medical equipment production—highlighting the problem in an accelerated construction environment.
According to that same report, the single best way to minimize or eliminate these cost overruns and delays was early planning. In fact, Turner & Townsend data noted that the single largest problem in construction was early phase pressures forcing companies to have "an over-reliance upon internal benchmarks of past project performance." In other words, intelligent early-stage planning filled with rich, predictive analytics and smart forecasting accelerates the downstream project in a way that improves overall time-to-completion, accuracy and budgetary alignment when compared to rapid jumpstarts. CPM—which primarily acts as a data analysis and predictive modeling layer—gives construction players the insights and foresight they need to successfully plan projects. Not only does CPM act as an end-to-end risk analysis and quantitative cost forecaster, but it converges data to uncover tangible truths in early-stage planning.
Forecasting Against Chaos
In a construction environment drenched in uncertainty, hyper-competitive bid structures and volatile material prices, maneuvering through the web of interconnected points to find your string is growing increasingly difficult. To put it bluntly, most construction companies lack the stomach to navigate the downward wave and chaotic supply chain. CPM is an antacid for those worries. According to the recent KPMG Global Construction Survey, 83% of construction leaders believe that their organization will be data driven within the next five years—with 62% noting that real-time risk modeling and adaptive analytics are also in their playbook.
Two key areas stand out in today's chaotic construction ecosystem: profitability and decision making. At the heart of every move, bid and project lies these two kernels. The recent KPMG survey is reminiscent of past editions. Back in 2015, "maturity in planning and financial forecasting" was the top concern. That thread continues. As a whole, construction leaders are gravitating toward technology that enables profitability and decision making, which lie at the center of CPM solutions.
Not only do CPM platforms provide financial forecasting, predictive analytics and deep insights into projects, they rally together data streams from across your firm to improve reactions, speed and decision making across nearly every layer of your firm. While it's easy to get lost in the menagerie of construction technologies at your fingertips, CPM isn't a point solution: it's the core of your digital strategy.
Embracing the Fast-track to Automation
We've highlighted CPM in the context of decision making, profitability and planning, but CPM is also an enabler of downstream technology. In particular, CPM solutions can bolster automation. Some can provide both an automation solution in the form of data entry and workflow automation, as well as a single viewpoint for automation data to deliver drill-down insights. So, there's dual automation potential happening.
Of course, some of these features are platform specific, and the relative "newness" of CPM solutions in the construction space will certainly leave room for marketing gimmicks. But world-class, construction-driven CPM platforms provide must-have automation features while simultaneously feeding the appropriate insights to your C-level about existing projects. With these features, embracing a CPM quite literally puts you on the fast track to profitability—and in an ever-changing market, the fast track is a good one to be on.
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