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Here are three predictions for construction contractors in 2020. This year, contractors can leverage the latest technologies and business models to make significant strides in efficiency and stay competitive against a backdrop of new market entrants.

1. Non-traditional challengers try to take a bigger slice of the construction cake

In a recent survey of more than 300 senior construction leaders, most decision makers agreed their next wave of competition is coming from non-traditional companies such as software giants, start-ups, and China and other emerging market players. Only on-fifth said other current incumbents would be their biggest source of competition going forward.

This trend has been on the rise for the past year, with companies such as Amazon entering the U.S. construction market with prefabricated design company Plant Prefab. Amazon’s idea of selling a smart home is that it’s simpler if the cabling, sensors and other equipment that make a building responsive and intelligent can be built in rather than added on later. Amazon is also selling prefabricated hospital rooms, taking advantage of efficient mechanicals and technology trades in a shop environment.

In the coming decade, there is disruption on the way. According to a report from Oliver Wyman, technology will not only change construction, but the expectations of project owners in consumer expectations around connectivity, energy efficiency and security.

Luckily, better project governance and financial control can help contractors deal with time and budgeting constraints, as enterprise software can eliminate many blind spots found in a typical construction contracting business. The question is whether established construction industry giants will lead the charge toward more effective enterprise technology that fixes these historic problems, or more progressive firms from outside the industry will play the role of the usurper.

2. The digitally bold will future-proof their productivity over the next five years

While McKinsey expects the productivity of construction companies to increase 20% between 2020 and 2025, this will only be the case for businesses that deploy the latest technologies and use them well.

As the first port of call, contractors must implement business systems with the central task to proactively monitor and manage the entire lifecycle of a construction project from contract award through to commissioning, and even provide maintenance and facilities management services after handover. This requires a move away from spreadsheet-driven project management unconnected to the accounting system of record and towards true enterprise resource planning (ERP) software.

A centralized software environment can facilitate processes such as BIM, which require that all data on a project be housed in a centralized data structure. An enterprise software environment can also be extended with new technologies, including data from the IoT-enabled assets and drones.

The construction industry already uses more drones than any other sector, but a drone used in construction inspection is only a great thing as long as it’s able to report its findings to a project or asset structure easily and smoothly. Scanning for damage using laser technology works only if the information is going somewhere and analytics are being applied to ascertain underlying trends and issue work orders to resolve immediate problems found. Data from these technologies only become valuable once they are introduced into the transactional system (the ERP).

3. Modular construction will grow by 50% by 2023

McKinsey believes offsite construction can increase the speed of construction by as much as 50% and reduce costs—if done in the right environment—by 20%. Offsite construction is a true game changer. It increases productivity because things can happen concurrently when they would previously have been sequential. It prevents weather-related delays. It also enables more-efficient use of human capital because productivity in a central shop environment is higher than on a construction site.

The challenge for the established contractors is getting their existing business models, systems and skill sets ready for these new methods. Maximizing the potential of offsite construction will require contractors to reduce the unique, one-off nature of their projects and pursue greater standardization. This enable them to re-use standard design elements and subassemblies, deliver finished projects that are higher in quality and perform better, and expedite the robotization of the offsite construction shop environment.

Contractors must put multiple hats on to protect their business into the next decade

As these three trends take hold in 2020, contractors will need to diversify to become manufacturers, builders as well as service organizations in their own regard. The decisions they make as we enter the next decade will have profound consequences on their productivity and competitiveness. Investing in the right technologies and adopting new business models will determine their success, as well as their bottom line.

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