Digitalization puts small contractors at a competitive advantage, too
The wave of digitization washing over global industries is now advancing — albeit slowly — over the construction industry, too. Large, multinational EPCs are taking advantage of digital technologies like artificial intelligence, BIM and digital twins to facilitate safer job sites, faster workflows and seamless collaboration across departments. Though their steady advance into the digitalization era is admirable, it also begs the question: why are the nation’s smaller construction firms being left behind when it comes to technology adoption?
Small construction firms make up the bulk of the U.S. construction labor force, with 63% of home builders and two out of three specialty trade contractors generating less than $1 million in total business receipts. Just 15% of construction firms reported having a staff of more than 1,000 in a 2020 survey . But despite the fact that small construction businesses represent the majority of the industry, the lion’s share of digital tools available on the market goes to larger construction firms.
Small EPCs will remain at a competitive disadvantage if they don’t adopt new technologies and embrace the wave of digitalization sweeping the industry. Turning a blind eye to digitalization means missing out on key growth opportunities; according to the KPMG CIO Survey 2020 , the largest IT leadership survey in the world, there exists a stark gap between digital leaders and the rest of their respective industries when it comes to key success metrics. Leaders who invest in digitalization significantly outperform their competitors in operational efficiency by 12%, customer experience by 14% and employee experience by 11%.
Several challenges have traditionally prevented smaller EPCs from venturing into the realm of digitalization, but the time for shying away from digital transformation has long passed — especially for those who wish to remain competitive in the digital age.
The Technology Adoption Challenges Facing Small EPCs
Why do smaller EPCs have a harder time introducing new technology into their workflows? To start with, there’s a lack of in-house tech and IT support.
Small contractors don’t always have the budget to support IT or development staff to install, run and maintain new digital tools. More than half of U.S. contractors spend less than 2% of corporate revenue on IT, signaling an enormous opportunity for digital transformation in small contracting businesses.
It’s not uncommon for construction companies to forgo IT spending or dedicated IT staff entirely, even with the proliferation of new technologies like BIM, augmented reality, cloud computing and artificial intelligence. Without internal advocacy for the adoption of new technologies, their implementation becomes increasingly hard to prioritize. Lack of a so-called digital core in smaller companies means there’s no one there to demonstrate the benefits and ROI of technology spend.
Cost is arguably a major concern for smaller businesses running on thin margins, too. New technology itself often comes with a steep price point that most construction leaders balk at. What’s more, the industry’s bidding structure means contractors are incentivized to keep costs as low as possible and rely on familiar and cheaper options when drawing up proposals.
Another key challenge facing new technology adoption is, simply put, human nature. We are creatures of habit, and most EPCs are small businesses that have operated on the same analog system since their inception. If a pre-existing system works for a contracting business, leadership is less likely to perform a complete overhaul or introduce new technologies without the pressing need. They’re more likely to rely on the systems that they’re familiar with and that they know work for them, even if they may be a little outdated.
Opportunities For The Adoption Of Advanced Technology Among Small EPCs
Initial resistance among small EPCs is inevitable, but the time is ripe for them to invest in new technologies that won’t break the bank or require expensive training or time investments to use. As industry trends tilt in the direction of digitalization, small EPCs will have to adapt or risk staying at a competitive disadvantage.
An overall shift to digital deliverables will play a key role in the adoption of new construction technologies for small EPCs. Most clients have begun to request digital deliverables of their contractors more frequently, including the smaller ones. Design drawings, proposals, project reports, building reports and models must be available in digital format upon project completion.
The energy industry is among those swiftly going digital , and clients in the oil, gas and nuclear industries are also requiring digital deliverables and work processes from their contractors. This is especially true as energy increasingly turns toward process intensification to create substantially smaller, cleaner, safer and more energy-efficient technology. Energy clients trending toward process intensification gives smaller EPCs a chance to throw their hat into the ring — but only if they have the right digital tools to keep up with the demands of clients who are undergoing their own rapid digital transformations. Small EPCs need to step up their adoption of digital tools or risk being snubbed by potential clients seeking bids from more tech-savvy contractors.
It’s worth remembering that digitization of deliverables isn’t just to the benefit of project owners. Small contractors who shift to digital will ultimately realize that keeping track of deliverables, communicating across departments and creating changes to designs and budgets becomes seamless and streamlined with the help of digital technology. Digitalization makes clients happy and makes work safer, more efficient and cost-effective: a win-win for both clients and contractors.
Understanding the windows of opportunity for smaller contractors to enter the digital arena is all well and good. But until advanced construction technology becomes more widely available, affordable and attractive to them, implementation efforts will continue to run aground.
Catering specifically to the needs of smaller EPC will drive their increased adoption of new technology. But small contractors will need to take the initiative themselves to discover existing solutions that will help them remain at a competitive advantage.
At Hexagon, scaled-down digital solutions exist to benefit the needs of smaller contractors undergoing or considering undergoing digital transformation. That means the technology isn’t time-consuming or expensive to install and that it requires minimal training to operate. Keeping in mind that most small contractors don’t have in-house IT support to guide them through complicated software setups and programs, downscaled solutions make it easy for small EPCs to launch the product the minute it’s taken out of the box — no complicated setup required. Anyone can launch those solutions, tech team or not.
The cherry on top? Downscaled technology solutions are offered at affordable price points that don’t send small EPCs running.
Though the solutions for downscaled technologies exist, awareness is still lacking in the industry. That’s why we provide continual resources to keep contractors up to speed with the options available to them. Understanding what’s out there is the first step towards new technology adoption and implementation among small EPCs. Educational and awareness efforts will need to continue in order for small contractors to stay head-to-head with their competitors.
Small Shouldn’t Mean Stuck In The Past
Digitalization is often heralded as the great equalizer, leveling the playing field for the capabilities of large and small firms alike. No matter the size of your company, leveraging advanced construction technology ensures not only that clients are kept happy and workflows operate with ease and efficiency; it also means your competitors stay your competitors and don’t become your replacement.
To discover more about how digital technology innovations can help your contracting firm, contact Hexagon today.