We all know that technology is driving innovation and transformation in construction. Despite lagging behind in "digital transformation" over the past decade (R&D accounted for a mere 1% of revenue in 2016), contractors and firms are slowly starting to embrace the digital revolution—a trend partially spurred by the uncertainty of 2020. To put it lightly, the construction ecosystem is more complex, interdependent and tech-dependent than ever before, and the gradual necessity for mid-horizon change has been replaced by an immense pressure buildup. If you don't evolve quickly, you will be left behind.
According to a Sage study, 75% of CFOs are driving digital transformation at their companies. It makes sense. Finances are the lever that unlocks downstream tech investments, like IoT, robotics, machine learning and drones. Before you can transform your company you need to transform your finances. From better predictive models to data-driven decision-making, here's how technology is changing the construction financial ecosystem.
Data-Driven Insights Over Gut Feelings and Stale Metrics
The goal of financial management—both in construction and broadly—has always been to improve performance, unlock growth opportunities and prevent risk. Unfortunately, until recently, financial insights have been primarily driven by gut feelings and assumptions. This is changing. Data-driven decision-making, which combines machine-learning algorithms with predictive analytics, produces holistic financial models that account for vertical inputs.
As an example, let's say that you want to decide whether to make a bid on a project. Traditionally, you would look at your past bid history, cash flow and (possibly) existing capital. Then you would make a decision—partially fueled by the fire in your gut—about whether to bid and your bid amount. But there's a problem. Projects vary considerably, and the environment outside of your company is constantly changing. Your cash flow and existing bid practices only paint a small picture. You need a complete, end-to-end overview of your financials to make a truly informed decision.
Construction-centric corporate performance management platforms like Briq leverage thousands of data streams to make smarter, data-driven decisions. Instead of examining bids in the context of past performance, Briq can help you leverage real-time data to make 40% more accurate financial projects—which feeds nearly every decision your firm makes.
The CFO Enters the Strategy War Room
For some time, CFOs have been deeply rooted in the financial side of construction. With modern financial platforms automating many of the mundane and labor-intensive components of their jobs, this is changing. CFOs have always had immense value at the strategic level, but they've been so wrapped up in maintaining the financial architecture, they've been left out of far too many conversations.
McKinsey suggests that CFOs should be directly engaged with every strategic effort (e.g., M&A, risk management, marketing, sales, bids, investments, etc.), and for a good reason. CFOs understand the context of value better than anyone in your company. You may invest in new productivity tech and see your profits drop 3%. On the surface level, that's a failed investment. But what if there was more to the picture? What if your profits would have dropped by 15% due to external factors and economic volatility without that investment?
Financial technology (e.g., predictive analytics, automation, etc.) gives CFOs the time and information they need to involve themselves in these strategic decisions. Not only does financial tech eliminate time-consuming tasks like data entry, but it provides CFOs with the data they need to prove actual value. At the end of the day, that's the most important component of any strategy: value. Your CFO is in a prime position to converge the data you need to prove that value in a tangible way—not just by using superficial metrics like ROI.
Deloitte suggests that businesses should focus on hiring, training or cross-training CFOs with skills outside of finances for this very reason. The role of the CFO is shifting into a strategic position that's deeply embroiled in customer service, collaboration and decision making. According to a Sage report, 39% of CFOs hired since 2009 have experience outside of finance, and this trend will continue to pick up steam. This doesn't mean that existing CFOs don't have value (they understand your business better than anyone), but future hires should be viewed through a tech-centric lens.
Financial Technology Unlocks Digital Transformation
If you're on the warpath to digitization and digital transformation, financial tech should be at the top of your mind. It's the glue that holds your entire investment strategy together. If we imagine digitization as a downward waterfall of investments that eventually converge into a beautiful river, financial technology is the cliff. You cannot justify long-term tech without a strong financial backbone. Again, you have to prove value.
Tech is influencing the financial suite, but the financial suite is also influencing tech. Once you transform your financial infrastructure, you're in the prime position to prove the value of each and every future investment. And you can make these decisions with your CFO in the war room. Remember, predictive analytics and financial forecasts don't solely fuel operational needs; they help you understand every dollar and how it's influencing your company.
Briq is a financial intelligence and management platform built specifically for construction financial professionals.
We join modern technology, with hundreds of years of combined construction experience to give you deep insights into your business.
Briq unifies your financial workflows, making them more efficient, accurate and timely.
By automating workflows, consolidating financial data and enabling real-time reporting, we allow contractors to make efficient and effective financial decisions.