● Construction companies are digitizing rapidly, yet many lack the strategic intelligence to guide these investments.
● CPM and ERP solutions are two different solutions but work well in tandem.
● Many construction players are turning towards CPM solutions to keep them afloat and growth-ready in the "new normal."
● CPM platforms will continue to gain steam as the construction tech landscape consolidates and trends towards analytics and AI.
As construction companies carefully approach 2021, the balancing act between heavy-duty tech investments and operational/financial health is top-of-mind. The industry is digitizing at the speed of light. According to McKinsey's benchmarking arm, construction companies that successfully embrace digital transformation see baseline productivity gains of 15 percent and cost reductions between 4 and 6 percent. There's tangibility in construction tech, and virtually every mid-market AEC firm is looking to capitalize on digital investments.
Yet, there's a small issue. How do you reconcile these investments against your core corporate strategy? ERPs and point solutions bring amazing value to your organization. But that value has to be weighed in the context of budgets and forecasts. Corporate Performance Management (CPM) solutions are designed to solidify corporate strategy in the face of digitization. Not only do CPM platforms eliminate the over-reliance on spreadsheets to execute financial forecasting and budgeting, but they bring smart automation tools and forecasting into the equation — which can be used to fuel investments, execute projects, and define business requirements.
So, where do CPM platforms belong in today's construction ecosystem? And what does the future hold for AEC-centric CPM solutions?
CPMs, ERPs, and the Fine Line Between Digital Strategy and Execution
Gartner's definition of Corporate Performance management is "the methodologies, metrics, processes, and systems used to monitor and manage the business performance of an enterprise." In other words, CPM solutions bridge gaps between corporate strategy (think, financial health, project selection, forecasting, etc.) and execution. It's tempting to assume that CPM solutions and ERP solutions are equal in practice. You can find ERPs with forecasting features, and plenty of ERPs offer a wealth of financial capabilities. But ERPs aren't built to inform corporate strategy. They're execution-layer tools.
CPMs converge data from across your organization and leverage that data to produce financial forecasts, highlight project objectives, and alleviate bidding concerns. If ERPs are the heart of your tech stack, CPM solutions are the brains. For example, Briq can produce extremely accurate financial forecasts to help you execute against cash flow, labor, and cost-to-completion requirements. We take thousands of data streams, use AI to automate WIPs, and give you real-time insights into your current financial situation. In turn, you can use these insights to fuel project decisions and ERP-driven supply chain executions.
The Current State of Corporate Performance Management (CPM) in Construction
The construction industry is in a cautious financial position. During COVID-19, plenty of companies shuttered temporarily, most lost significant capitalization, and many reduced capex by 25 to 30 percent — essentially dooming any ongoing projects or investments. Now, AEC firms are carefully minimizing their risks of financial overcommitment, while still appeasing growth-hungry taste buds. It's a complicated financial ecosystem. You want to secure as many projects as possible (especially if you're still in financial pain). But you can't risk project failures or financial overcommitment in the short term.
These concerns are alleviated by CPM solutions. Again, ERPs can help you build resilient supply chains and tackle pesky back-office concerns. But they don't provide significant value to the strategy layer. You need to understand your financial position perfectly. In particular, construction companies need to understand four specific financial buckets to ensure post-crisis growth:
- Optimizing working capital
- Minimizing op expenses
- Managing discretionary spending
- Controlling capex
To do this, firms are turning towards CPM solutions. As an example, Briq's industry-leading forecasts combine data across systems to generate real-time financial insights and forecasts. In turn, these forecasts inform corporate strategy around operation, spending, capital, and capex. This leads to smarter downstream tech investments, proper project selection, and savvy M&A moves. In today's construction landscape, CPM isn't just another tool in the alphabet soup of tech acronyms and platforms. It's a gateway to financial strategy.
The Future of CPM Solutions
We can categorize construction technology into three buckets:
● Execution-layer tools
● Back office
● Digital collaboration
CPM solutions carefully weave all three of these buckets together. In fact, CPM platforms are the glue that holds your entire stack together from a financial perspective. They inform execution decisions, provide back-office financial intelligence, and promote digital collaboration through accurate forecasting. According to McKinsey, the future of construction technology lies in "technologies that enable visibility into management of business or operations processes through native capabilities and seamless integration with other technologies to aggregate data and process control in a single place."
With a mere 20 percent of construction companies investing in platform technologies, the landscape is relatively fractured. Point solutions dominate the tech stack, and many companies still rely on ad-hoc financial intelligence such as a combination of ERPs, spreadsheets, and third-party vendor integrations. Unfortunately, digital transformation doesn't lend itself to these ad-hoc practices. You need a single source of truth for your strategy layer. And every decision needs to be guided by highly accurate forecasts.
CPM solutions aren't only a salve in the cash-strapped post-COVID construction environment. These platforms represent a shift in tech mentality. Construction firms are ready to digitize and embrace the future of analytics, AI, machine learning, and on-site technologies. CPM platforms are orchestrators of this next wave of digitization.