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Four Successful Construction Business Models

  • February 3, 2022

4 Successful Construction Business Models

Successful construction companies follow successful construction business models. A business model influences a company’s target customers, hiring practices, funding needs, and marketing efforts. Before we describe four successful construction business models, we’re going to answer the question: what is a business model? We’ll also dive into the best construction bidding websites to ensure that you’re connected to the best subcontractors, for the best price.

What is a business model?

A business model answers the question: What business are you in? It provides the goal and structure for your business. It’s one of the first decisions you need to make when starting a business, as it informs the market, audience, and message of your marketing efforts. It also determines how you conduct your business, where it’s located, your staffing needs, and the amount of financing you’ll need.This is essentially the business model for construction company.

Your business model should align with your skills, your employees’ skills, the existing competition, and the available market. Before deciding on a model, you’ll need to assess your knowledge, training, and experience, and find out where your skills best fit into the local market. This is where understanding the construction company business model becomes crucial.

One company can have multiple business plans that they are pursuing at the same time. Generally, larger companies have the resources, both financial and workforce, to provide multiple business models and work towards business model innovation. A small construction company should start out focusing on just one until they have developed a market share and have seen success. This is an example of the business model of construction company in action.

Succesful construction business models

1. general construction services.

General construction companies provide non specialized services to their customers. They may focus on just one customer type or offer generalized services to appeal to a broader market. General contractors are an example of companies that provide general construction industry services. This is the general contractor business model. They may focus on appealing to specific sectors of the market, like only residential construction, or may focus on a specific area within the construction sector, like renovation.

General services contractors either hire skilled construction workers, like a project manager, or other contractors to provide services to their customers. Through the use of subcontractors, they are able to provide a wide variety of construction services to their customers.

2. Niche construction services

Niche contractors provide specific construction services that require licensing or special knowledge or training. They often hire workers to provide the necessary specialized skills to perform the work. These companies are hired by general service contractors to perform trade work and specialized work.This can be considered as one of the construction business model examples.

Niche contractors are in high demand, but there can be a lot of competition. It’s important to research the demand and state of the market in your local area before starting this type of company.

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3. Production and manufacturing

Production and manufacturing companies produce or fabricate materials used in construction projects. They can provide a wide range of standardized and custom products and materials. These types of companies are always in high demand.

Before starting one of these companies, research the products and materials that are in need in the local market. You may find a niche that you can fill with your knowledge and skills. These companies often need a lot of funding to get started.

4. Suppliers

Suppliers don’t produce or manufacture construction material but are responsible for selling and distributing products manufactured by others. These businesses can be brick and mortar establishments that serve the local market, or an e-commerce site that serves a larger market. Their customers include general contractors and trade contractors that use their materials. They require less money to get started.

How business models influence marketing

Depending on which construction business management model you select, it can have an effect on how you market your business. This is where understanding the construction management business model is crucial. It affects your target audience, how you deliver your marketing message, and what message you send.

General services contractors market to the general public. The marketing campaign may target only business customers for commercial contracting or homeowners for residential contractors. General contractors may also choose to provide services targeted to specific niches, like healthcare, restaurants, or infrastructure. These companies should target their marketing to these audiences where they get their information. Their marketing message should focus on their knowledge and experience.

Niche contractors, or subcontractors, have a more specific audience – general contractors who can use their services. Their marketing message should be tailored to these companies and describe their experience and expertise. Trade contractors can find GCs looking for their services on lead sites, like PlanHub . It’s an easy way to find work and market effectively to GCs who need them.

Manufacturers and suppliers can market directly to the contractors who need their services or products. They can also target designers who specify their products in project documents. The marketing message should focus on the features and benefits of their products.

Selecting a business model is one of the first steps to starting a new business. It determines who the business’s customers are, which in turn affects the workers they hire and directs their marketing efforts. Contractors looking for work need to be clear about their marketing audience and where they can find them. This is the essence of a successful construction business. Free general contractor software like PlanHub connects general contractors and subcontractors. To see how PlanHub can help your company find more work, schedule a demo today .

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Construction Business Models

best business model for construction company

Table of Contents

I. Introduction

A brief overview of the construction industry and its importance.

The construction industry is a vital sector of the global economy, responsible for the design, construction, and maintenance of the built environment. This includes everything from homes and offices to bridges, roads, and infrastructure. The industry plays a crucial role in the development and growth of society, providing the infrastructure and buildings that support our daily lives.

The construction industry is one of the largest employers in the world, providing jobs for millions of people. It is also a major contributor to economic growth, as construction projects generate significant investments and provide a boost to the local economy. Construction projects also stimulate other industries, such as manufacturing, transportation, and services.

In addition to its economic importance, the construction industry is also essential for improving the quality of life. Construction projects, such as hospitals, schools, and affordable housing, are essential for meeting the basic needs of society. Furthermore, well-designed and constructed buildings and infrastructure can improve the health, safety, and overall well-being of people.

However, the construction industry is also one of the most resource-intensive industries, with a significant impact on the environment and society. Therefore, it is increasingly important for the construction industry to adopt sustainable business models that minimize negative impacts and maximize positive contributions. This includes reducing the environmental footprint of the industry, improving energy efficiency, and promoting the use of sustainable materials and technologies.

Business Model Canvas for Construction Products

Image: Business Model Canvas for construction business on EpiProdux.com

The need for a robust and sustainable business model innovation

As the construction industry continues to evolve, the need for robust and sustainable business model innovation becomes increasingly important. A robust business model is one that is well-suited to the needs of the project, the owner, and the industry and can withstand changing market conditions. A sustainable business model is one that minimizes negative impacts on the environment and society while maximizing positive contributions.

Business model innovation in the construction industry can take many forms, including new ways of financing, designing, building, and operating construction projects. For example, new technologies such as Building Information Modeling (BIM), cloud-based project management tools, and data analytics are changing the way construction projects are managed and are leading to a new generation of technology-driven business models. These technologies can lead to improved efficiency, reduced costs, and faster completion times.

Another example of business model innovation is the adoption of sustainable business models such as Integrated Project Delivery (IPD) and Green Building. These models focus on reducing the environmental footprint of the industry while also improving social and economic outcomes.

A robust and sustainable business model is essential for the long-term success of the construction industry. It allows the industry to respond to changing market conditions, to meet the needs of the project, the owner, and the industry, and to minimize negative impacts on the environment and society.

You can read more here about the construction business models in this library, with 200 different business models for construction companies’ products.

Construction Business Model Library with 200 examples

Image: Construction Business Model Library with 200 + examples generated on EpiProdux.com

II. Traditional design-bid-build model

Explanation of how the model works.

The traditional design-bid-build model is the most widely used business model in the construction industry. Under this model, the owner of a construction project hires an architect or engineer to design the project and then solicits bids from construction companies to build it. The company that submits the lowest bid is awarded the contract. This model is straightforward and easy to understand, but it can also be time-consuming and expensive.

Design-bid-build business model vs Design-Build Business Model in Construction

Image: Design-bid-build business model vs Design-Build Business Model in Construction

The design-bid-build process typically begins with the owner hiring an architect or engineer to design the project. The design team creates detailed plans and specifications, which are then used to solicit bids from construction companies. The construction companies review the plans and specifications and submit a bid, which includes a detailed estimate of the cost of the project and a proposed schedule for completion. The owner then selects the company with the lowest bid to build the project.

Pros and cons of the model

One of the main advantages of the traditional design-bid-build model is that it is easy to understand and implement. The process is straightforward and the roles and responsibilities of each party are clearly defined. This can make it easier for the owner to manage the project and for the construction company to estimate costs and schedule the work.

However, the traditional design-bid-build model also has some significant drawbacks. One of the main disadvantages is that it can be time-consuming and expensive. The process of designing and soliciting bids can take several months, and the cost of hiring an architect or engineer can be significant. In addition, the pressure to keep costs low can lead to corners being cut or inferior materials being used.

Another drawback is that the design-bid-build model can be less transparent and less competitive. Since the owner is not involved in the design and construction process, they may not have a clear understanding of the project’s progress or the quality of the work being done. Additionally, the process of soliciting bids from multiple companies can be less competitive than a single company doing the design and construction.

III. Design-build model

The design-build model is a popular alternative to the traditional design-bid-build model in the construction industry. Under this model, the owner hires a single company to design and build the project, which simplifies the process and reduces costs. This model is particularly well-suited to smaller projects and can be more efficient, but it can also be less transparent and less competitive.

The design-build process begins with the owner hiring a single company to design and build the project. The company is responsible for both the design and construction phases of the project, which eliminates the need for the owner to hire separate design and construction teams. This can save time and money, as the design and construction teams are able to work together more efficiently.

One of the main advantages of the design-build model is that it is more efficient than the traditional design-bid-build model. The design and construction teams work together from the start of the project, which can reduce the time it takes to complete the project and minimize delays caused by miscommunication or misunderstandings. Additionally, the owner only has to deal with one company, which can simplify the process and reduce costs.

However, the design-build model also has some disadvantages. One of the main drawbacks is that it can be less transparent and less competitive. Since the owner is only dealing with one company, they may not have a clear understanding of the project’s progress or the quality of the work being done. Additionally, the process of awarding the contract to a single company can be less competitive than soliciting bids from multiple companies.

Another disadvantage of the design-build model is that it can be risky for the owner. Since the owner is relying on a single company to design and build the project, if that company is unable to complete the project, the owner may be left with a partially completed project and no other options. Additionally, if the company goes bankrupt or otherwise fails to complete the project, the owner may be left with a significant financial loss.

IV. Construction management model

The construction management model is a widely used business model in the construction industry. Under this model, the owner hires a construction manager to oversee the project, who then hires subcontractors to perform the work. This model can be more flexible than the traditional design-bid-build model and allows for more input from the owner, but it also carries more risk for the owner as they are responsible for managing the subcontractors.

Construction Management Model

Image: Dassault Systems approach to Construction Management

The construction management process begins with the owner hiring a construction manager to oversee the project. The construction manager is responsible for managing the project from start to finish, including the hiring of subcontractors to perform the work. The owner is responsible for providing the construction manager with the necessary funding and resources to complete the project.

One of the main advantages of the construction management model is that it is more flexible than the traditional design-bid-build model. The construction manager can work with the owner to create a customized plan that meets the owner’s specific needs and budget. Additionally, the construction manager can be more involved in the design and construction process, which can lead to better quality and more cost-effective projects.

However, the construction management model also has some drawbacks. One of the main disadvantages is that it carries more risk for the owner. Since the owner is responsible for managing the subcontractors, they may be held liable if the subcontractors fail to complete the work properly or on time. Additionally, since the owner is responsible for providing the necessary funding and resources, they may be left with a partially completed project if funding runs out.

Another disadvantage of the construction management model is that it can be less transparent and less competitive. Since the owner is not involved in the design and construction process, they may not have a clear understanding of the project’s progress or the quality of the work being done. Additionally, the process of hiring subcontractors can be less competitive than soliciting bids from multiple companies.

V. Public-Private Partnership (PPP) model

The Public-Private Partnership (PPP) model is becoming increasingly popular in the construction industry as a way to finance, design, build and operate large, complex infrastructure projects. In this model, the public sector partners with the private sector to share the risks and rewards of a project. This model can provide significant benefits such as reduced costs, improved efficiency and better alignment of incentives between the public and private sectors.

The PPP process typically begins with the public sector identifying a need for a new infrastructure project, such as a new highway, hospital or school. They then invite private sector companies to submit proposals for designing, building, financing, and operating the project. The private sector company that is awarded the contract is responsible for designing, building, and operating the project, while the public sector provides the funding.

One of the main advantages of the PPP model is that it can reduce costs for the public sector. The private sector is typically able to design, build, and operate the project more efficiently and at a lower cost than the public sector. This is because private sector companies are typically more efficient and have more experience in managing large construction projects.

Another advantage of the PPP model is that it can improve efficiency. Since the private sector is responsible for designing, building, and operating the project, they have a strong incentive to complete the project on time and within budget. Additionally, the private sector is typically able to bring new technologies and innovations to the project, which can lead to improved quality and cost savings.

A key advantage of the PPP model is that it aligns the incentives of the public and private sectors. The private sector is typically only paid once the project is completed and is generating revenue, which means they have a strong incentive to complete the project on time and within budget. Additionally, the private sector is typically responsible for maintaining and operating the project for a specified period, which means they have a long-term incentive to ensure the project is of high quality.

However, PPP projects can also have some drawbacks. One of the main disadvantages is that it can be complex and time-consuming to set up and manage. Additionally, since the private sector is responsible for designing, building and operating the project, the public sector may not have as much control over the project, which can lead to a lack of transparency. Additionally, the private sector may not always put the public’s interest first, and the contract may not always be in the public’s best interest.

Another potential challenge with PPP projects is the allocation of risks and responsibilities between the public and private partners. PPP projects often involve a transfer of risks from the public sector to the private sector. However, the allocation of risks and responsibilities should be carefully considered and balanced, as both parties have different capabilities, interests, and objectives.

Additionally, PPP projects require a significant amount of legal and financial expertise to set up and manage. The public sector may lack the necessary resources and expertise, which can lead to delays and increased costs. Furthermore, PPP projects often require a significant amount of upfront financing, which can be a challenge for some private sector companies.

Examples of successful PPP projects in the construction industry

There are many examples of successful Public-Private Partnership (PPP) projects in the construction industry around the world. Some notable examples include:

The Chicago Skyway Toll Bridge: This project involved the renovation and operation of a toll bridge in Chicago, Illinois, USA. The private sector partner, Skyway Concession Company, financed, designed, built, and operated the bridge for 99 years under a lease agreement with the City of Chicago. The project was completed on time and within budget, and it has become a model for other PPP projects around the world.

Chicago Skyway Toll Bridge

The Sydney Harbour Tunnel: This project involved the design, construction, and operation of a tunnel under Sydney Harbour in Australia. The private sector partner, Sydney Harbour Tunnel Company, financed, designed, built, and operated the tunnel for 99 years under a lease agreement with the government of New South Wales. The project was completed on time and within budget, and it has significantly improved transportation in Sydney.

The Sydney Harbour Tunnel

The London Underground Public-Private Partnership (PPP): This project involved the upgrade and maintenance of the London Underground rail system in the UK. The private sector partners, Metronet and Tube Lines, financed, designed, built, and maintained the rail system for 30 years under a contract with Transport for London. The project was completed on time and within budget, and it has led to significant improvements in the reliability and safety of the London Underground.

The M6 Toll Road: This project involved the design, construction, and operation of a toll road in the UK. The private sector partner, Midland Expressway Limited, financed, designed, built, and operated the toll road for 30 years under a concession agreement with the government of the UK. The project was completed on time and within budget, and it has significantly improved transportation in the region.

The Golden Ears Bridge: This project involved the design, construction, and operation of a bridge in British Columbia, Canada. The private sector partner, Golden Crossing General Partnership, financed, designed, built, and operated the bridge for 30 years under a concession agreement with the government of British Columbia. The project was completed on time and within budget, and it has significantly improved transportation in the region.

VI. Technology-Driven models

Explanation of how technology is changing the construction business models.

The construction industry is currently undergoing a technological revolution, with new technologies such as Building Information Modeling (BIM), cloud-based project management tools and data analytics being adopted at an unprecedented rate. These technologies are changing the way construction projects are managed and are leading to a new generation of technology-driven business models.

Drones collect construction progress data 24h

Image: Construction managers collect construction data in real-time for a instant reporting

The adoption of new technologies such as BIM, cloud-based project management tools and data analytics

Building Information Modeling (BIM) is a digital representation of a building or infrastructure project. It allows architects, engineers and construction professionals to work together in a virtual environment, creating a detailed and accurate model of the project.

BIM enables better collaboration, coordination, and communication throughout the construction process, which can lead to improved quality, reduced costs and faster completion times.

10D Building Information Modeling (BIM) from Accenture

Image: 10D Building Information Modeling (BIM) from Accenture

Cloud-based project management tools are also becoming increasingly popular in the construction industry. These tools allow construction professionals to access project information from anywhere, at any time, using any device. They enable real-time collaboration and communication, as well as providing an easy way to store and share project information. This can lead to improved efficiency, reduced costs and faster completion times.

Data analytics is also changing the way construction projects are managed. With the growing amount of data generated by construction projects, data analytics enables construction professionals to make better-informed decisions by providing insights into the performance of the project. This can lead to improved quality, reduced costs, and faster completion times.

EpiProdux is a business model software that can help construction businesses to create more innovative business models and make more profit by providing them with the tools and resources they need to optimize their operations, reduce costs, and improve efficiency

The impact of technology on the industry’s efficiency, productivity, and cost savings

Technology-driven business models in construction are more efficient and cost-effective, as they allow for better collaboration, coordination, and communication. They also enable construction professionals to make better-informed decisions and to improve the overall performance of the project.

However, there are also some challenges associated with technology-driven business models in construction. One of the main challenges is the lack of expertise and skills needed to implement these technologies. Construction professionals need to be trained to use these technologies, which can be time-consuming and expensive. Additionally, the cost of these technologies can be high, which may be a barrier for some companies.

In conclusion, the construction industry is currently undergoing a technological revolution, with new technologies such as Building Information Modeling (BIM), cloud-based project management tools, and data analytics being adopted at an unprecedented rate. These technologies are changing the way construction projects are managed and are leading to a new generation of technology-driven business models. They are more efficient and cost-effective, as they allow for better collaboration, coordination, and communication. However, there are also some challenges associated with technology-driven business models in construction such as lack of expertise and skills, and high costs of technology. Despite these challenges, technology-driven business models in construction are becoming increasingly important and are the future of the industry.

VII. Conclusion

The importance of choosing the right model for a specific project and the needs of the owner.

It is important to note that choosing the right business model for a construction project is crucial for the success of the project. Each business model has its own advantages and disadvantages, and the best model for a specific project will depend on the project’s size, complexity, and the needs of the owner.

For example, the traditional design-bid-build model is well-suited for small-scale projects where the design is well-defined and the owner is not looking for significant input or flexibility. However, for larger, more complex projects, the design-build or construction management model may be more appropriate. These models allow for more input and flexibility from the owner, and they can lead to more efficient and cost-effective projects.

Similarly, the Public-Private Partnership (PPP) model may be suitable for large, complex infrastructure projects, such as transportation, energy, and water supply. However, it may not be as effective for smaller or less complex projects.

The key to success in choosing the right business model for a construction project is to conduct a thorough evaluation of the project’s needs and the owner’s requirements. This includes an analysis of the project’s size, complexity, budget, and schedule, as well as the owner’s goals and objectives.

It is also important to consider the owner’s level of expertise and experience in construction. For example, if the owner is new to the construction industry, they may want to consider a more traditional model, such as the design-bid-build model, as it is easier to understand and manage. However, if the owner has experience in construction and wants more input and flexibility, a design-build or construction management model may be more appropriate.

In conclusion, choosing the right business model for a construction project is crucial for the success of the project. Each business model has its own advantages and disadvantages, and the best model for a specific project will depend on the project’s size, complexity, and the needs of the owner. It’s important to conduct a thorough evaluation of the project’s needs and the owner’s requirements before deciding on the right business model.

The importance of the construction industry and the need for sustainable business models.

The construction industry plays a vital role in the development and growth of society by providing the infrastructure and buildings that support our daily lives. However, it is also one of the most resource-intensive industries, with a significant impact on the environment and society. Therefore, it is increasingly important for the construction industry to adopt sustainable business models that minimize negative impacts and maximize positive contributions.

Sustainable business models in the construction industry focus on reducing the environmental footprint of the industry, while also improving social and economic outcomes. They aim to minimize the use of resources, reduce waste and pollution, and promote the use of sustainable materials and technologies.

One example of a sustainable business model in the construction industry is the Integrated Project Delivery (IPD) model. This model is based on collaboration, trust, and a shared vision among all stakeholders. It aims to optimize the performance of the project by aligning incentives, reducing waste, and fostering innovation. This model is considered more sustainable as it emphasizes on shared risk and reward, and it encourages collaboration and communication among all stakeholders.

Another example of a sustainable business model is the Green Building model, which promotes the use of sustainable materials and technologies, and aims to reduce the environmental impact of buildings. Green buildings are designed to be energy-efficient, water-efficient, and to have a reduced carbon footprint. This model is considered sustainable as it helps to reduce the environmental impact of buildings and promote energy efficiency and conservation.

In conclusion, the construction industry is essential for the development and growth of society. However, it is also one of the most resource-intensive industries, with a significant impact on the environment and society. Therefore, it is increasingly important for the construction industry to adopt sustainable business models that minimize negative impacts and maximize positive contributions. Examples of sustainable business models include Integrated Project Delivery (IPD) and Green Building. These models focus on reducing the environmental footprint of the industry while also improving social and economic outcomes.

EpiProdux is a business model software designed specifically for the construction industry. It helps construction businesses to create more innovative business models and make more profit by providing them with the tools and resources they need to optimize their operations. The software allows businesses to streamline their processes, improve communication and collaboration among stakeholders, and make data-driven decisions.

Frequently Asked Questions

What are the different types of business models in the construction industry.

The traditional design-bid-build model, the design-build model, the construction management model, and the Public-Private Partnership (PPP) model are some of the main business models used in the construction industry.

What is the traditional design-bid-build model?

The traditional design-bid-build model is the most widely used business model in the construction industry. Under this model, the owner hires an architect or engineer to design the project and then solicits bids from construction companies to build it. The company that submits the lowest bid is awarded the contract.

What is the design-build model?

The design-build model is an alternative to the traditional design-bid-build model. Under this model, the owner hires a single company to design and build the project, which simplifies the process and reduces costs.

What is the construction management model?

The construction management model involves the owner hiring a construction manager to oversee the project, who then hires subcontractors to perform the work. This model can be more flexible than the traditional design-bid-build model and allows for more input from the owner, but it also carries more risk for the owner as they are responsible for managing the subcontractors.

What is the Public-Private Partnership (PPP) model?

The Public-Private Partnership (PPP) model is becoming increasingly popular in the construction industry as a way to finance, design, build, and operate large, complex infrastructure projects. In this model, the public sector partners with the private sector to design, build, and operate a project.

What are the advantages and disadvantages of each business model?

Each business model has its own advantages and disadvantages, and the best model for a specific project will depend on the project’s size, complexity, and the needs of the owner. The traditional design-bid-build model is straightforward and easy to understand, but it can also be time-consuming and expensive. The design-build model is more efficient, but it can also be less transparent and less competitive. The construction management model allows for more input and flexibility from the owner, but it also carries more risk. The Public-Private Partnership (PPP) model can be a viable option for certain types of projects, but it is important for the public sector to carefully evaluate whether it is the right fit for their specific project and needs.

Can you provide examples of successful Public-Private Partnership (PPP) projects in the construction industry?

Some notable examples include The Chicago Skyway Toll Bridge, The Sydney Harbour Tunnel, The London Underground Public-Private Partnership (PPP), The M6 Toll Road, and The Golden Ears Bridge.

What is the role of technology in construction business models?

The construction industry is currently undergoing a technological revolution, with new technologies such as Building Information Modeling (BIM), cloud-based project management tools, and data analytics being adopted at an unprecedented rate. These technologies are changing the way construction projects are managed and are leading to a new generation of technology-driven business models.

Why is it important to choose the right business model for a construction project?

Choosing the right business model for a construction project is crucial for the success of the project. Each business model has its own advantages and disadvantages, and the best model for a specific project will depend on the project’s size, complexity, and the needs of the owner. A thorough evaluation of the project’s needs and the owner’s requirements is necessary in order to select the most appropriate model. Failure to choose the right business model can lead to project delays, cost overruns and failure to meet the needs of the project and the owner.

How can business model innovation contribute to the sustainability of the construction industry?

Business model innovation can take many forms, including new ways of financing, designing, building, and operating construction projects. Adopting sustainable business models such as Integrated Project Delivery (IPD) and Green Building can minimize negative impacts on the environment and society while maximizing positive contributions. This includes reducing the environmental footprint of the industry, improving energy efficiency, and promoting the use of sustainable materials and technologies.

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5 Successful Construction Business Models

12 January 2024

Construction business models that work are followed by successful construction companies. A company’s target market, employment procedures, financial requirements , marketing strategies and business growth are all influenced by its business model.

One of the biggest employers in the world, the construction sector employs millions of people. Construction projects produce considerable investments and help the local economy, making them an important factor in economic growth. Other businesses, like manufacturing, transportation, and services, are also boosted by construction projects.

In fact, by the end of 2023, the construction industry will add 168.5k jobs, 10k more than expected a year ago.

Strong and durable business model innovation is becoming more and more necessary as the construction sector changes. A strong business model is one that can endure shifting market conditions and is well-suited to the needs of the project, the owner, and the industry. 

Let’s take a look at some successful construction business models here.

What is a business model?

A business model establishes the direction and framework for your company. It’s one of the first choices you have to make when beginning a business because it determines the target market, target audience, and marketing message. It also affects your company’s operations, location, personnel, and financial requirements.

Your company’s business strategy should align with your skills, those of your staff, the level of competition already present, and the market size. Before settling on a model, you must evaluate your education, training, and experience to determine where your talents best complement the regional market.

One business may be pursuing several different business concepts at once. In general, larger businesses have the labour and financial capacity to provide a variety of business models and pursue business model innovation. 

A small construction company should concentrate just on one until they have achieved success and gained a market share. From there, businesses can diversify their offerings by adding new markets.

5 successful construction business models

In 2021, the UK construction market was valued at $448.7 billion . Key construction sectors are expected to see annual average growth rates (AAGR) of over 1% between 2023 and 2026, supported by infrastructure initiatives for transportation, energy, housing, healthcare, education, and telecommunications.

The selection process can be overwhelming for potential construction businesses due to the abundance of models. So how do you decide? You must first think about your strengths and weaknesses.

Additionally, you’ll devote endless hours to reading books and conducting market research. Here are some of the most effective business models for the construction industry.

General construction management

Companies specialising in general construction offer their clients non-specialized services. They might concentrate on a single customer segment or provide more broadly applicable services to a larger market. 

One company that offers broad construction industry services is a general contractor. They may concentrate on appealing to certain market segments, such as exclusively residential buildings or a particular area within the construction business, such as refurbishment.

To provide services to their clients, general contractors work with other contractors or experienced tradespeople like project managers. They can provide their clients with a wide range of construction services thanks to the utilisation of subcontractors.

Niche construction services

Niche contractors offer specialised construction services that call for licensing, specialised training, or knowledge. They frequently employ construction professionals to give the specialised talents required to complete the assignment. General service contractors use these businesses to carry out specialised construction projects and trade work.

Despite the great need for niche contractors, there can be fierce competition. Before launching this kind of business, it’s crucial to investigate the market and demand in your area.

Materials used in building projects are produced or manufactured by production and manufacturing organisations. They can offer a vast selection of regular and unique items and materials. These businesses are in high demand all the time.

Investigate the goods and resources required in your local market before launching one of these businesses. You might discover a void that your expertise and abilities can fill. These businesses frequently need significant financing to launch.

Suppliers are in charge of marketing and distributing goods produced by others rather than creating or manufacturing construction materials. These companies might be shops that cater to the local market or e-commerce websites that cater to a broader customer base. 

General and trade contractors who rely on their materials are among their clients. They require less money to get going.

Commission-based model

The commission you receive for acting as the middleman between buyers and sellers is the foundation of this type of business model. You’ll collaborate with a different house construction business to locate potential clients for their goods and services.

Every time you bring in a paying customer, you’ll receive a portion of the revenue. You will earn more money the more transactions you close. Because you won’t need to make a significant financial investment in this firm, this business plan is ideal for those who don’t want to take chances.

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One of the initial steps in launching a new firm is choosing a business model. It establishes who the company’s clients are, which impacts the hiring decisions they make and how they focus their marketing efforts. Contractors looking for work should know who their target market is and where to locate them.

If you want help growing your construction business within the construction industry , our team at Growth Idea can assist you. 

As well as our expert Business Growth Consultancy Services , we offer a free business strategy review where we will assess your current situation and develop a plan for how you can scale your business effectively.

Book your free business strategy review today, or simply get in touch to find out more!

Successful construction business models faqs, how do you structure a construction company.

Typically, the general manager, department managers, project managers, project supervisors, project coordinators, and employees are listed in the organisational chart from top to bottom. The owner/CEO is positioned at the top.

What are the qualities of a good construction company?

The five characteristics of a successful construction company, starting with the head and using the body as an example, are leadership, planning, work performance, project management, and accounting.

What does the future look like in construction?

Robotics, automation, and emerging technologies in construction. Future construction sites are projected to make greater use of cutting-edge equipment including 3-D printing, exoskeletons, autonomous vehicles, drones, and building information modelling (BIM).

Next steps…

Book a complimentary breakthrough business discovery call and gain the clarity you need to take your business forward →.

best business model for construction company

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Construction Business Model Transformation With 10 Examples

Construction business model transformation  .

Construction business model transformation is a dynamic process that involves rethinking traditional approaches and embracing innovative solutions to enhance efficiency, sustainability, and profitability.

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This transformation journey leverages cutting-edge technologies, new methodologies, and advanced management practices to reshape the way construction projects are designed, planned, executed, and maintained.

As the industry evolves, stakeholders are increasingly recognising the need to adapt to changing market demands and address emerging challenges, propelling the construction sector into a new era of growth and performance excellence.

Why is Construction Business Model Transformation Important? 

Construction business model transformation is crucial for a variety of reasons, ensuring the long-term success and sustainability of the industry. One primary reason is the need for improved efficiency in project delivery. Traditional construction processes often suffer from delays, cost overruns, and quality issues, which can be mitigated by adopting innovative approaches and methodologies. By implementing new technologies and processes, construction firms can streamline their operations, reducing waste and boosting productivity.

Another important factor is the growing emphasis on sustainability and environmental responsibility. The construction industry has a significant impact on the environment, contributing to carbon emissions, resource depletion, and waste generation. Business model transformation enables the adoption of green building practices, energy-efficient technologies, and circular economy principles, resulting in more environmentally friendly and resource-efficient projects.

Moreover, market demands, and customer expectations are rapidly changing. Clients are increasingly seeking greater value, faster delivery, and more customised solutions. By embracing business model transformation, construction companies can better respond to these demands by developing new service offerings, incorporating digital technologies for enhanced customer experience, and fostering a culture of innovation.

The construction industry is also facing a growing skills gap and labour shortages. By adopting new business models that incorporate automation, robotics, and other advanced technologies, firms can address these challenges while increasing safety and reducing the reliance on manual labour.

The competitive landscape of the construction industry is evolving, with new players entering the market and established firms seeking differentiation. Business model transformation enables construction companies to stay ahead of the competition by continuously adapting to market dynamics, exploring new revenue streams, and fostering a culture of innovation and agility.

In summary, the importance of business model transformation in the construction industry lies in its ability to drive efficiency, sustainability, adaptability, and competitiveness, ensuring the sector’s long-term growth and success.

What are the Main Challenges of Construction Business Model Transformation?  

The main challenges of construction business model transformation include:

1. Resistance to change: Construction is a traditional industry, and many stakeholders may be hesitant to embrace new technologies, processes, or business models. Overcoming this resistance to change requires effective change management and communication strategies to engage all parties involved.

2. Integration of new technologies: Adopting new technologies, such as Building Information Modeling (BIM), drones, or robotics, can be challenging for construction companies due to the need for significant investments, training, and potential disruption to existing workflows.

3. Fragmented industry structure: The construction industry is characterised by a large number of stakeholders, including owners, contractors, subcontractors, suppliers, and regulators. This fragmented structure can complicate the adoption of new business models and collaboration efforts.

4. Regulatory environment: Construction projects are often subject to complex regulations and building codes, which may hinder the adoption of innovative approaches or technologies. Companies must navigate this regulatory environment while pursuing transformation initiatives.

5. Skill development and workforce training: The successful implementation of new business models and technologies requires a skilled workforce capable of adapting to new processes and tools. Companies must invest in training and education to ensure their employees are equipped to handle these changes.

6. Financial constraints: Business model transformation may require significant upfront investments in technology, infrastructure, and human resources. Smaller construction firms, in particular, may face financial constraints that limit their ability to pursue these initiatives.

7. Data management and security: The increased use of digital technologies and data-driven decision-making in construction projects necessitates effective data management and security practices to protect sensitive information and maintain compliance with privacy regulations.

8. Measuring success and ROI: Quantifying the benefits and return on investment (ROI) of business model transformation initiatives can be challenging, as the impact may not be immediately apparent or easily measured. Establishing clear metrics and performance indicators is crucial for evaluating success and ensuring continuous improvement.

9. Balancing innovation and risk: Pursuing transformation initiatives can involve a certain degree of risk, as companies experiment with new technologies, processes, and business models. Construction companies must strike a balance between fostering innovation and managing potential risks to project outcomes and overall business performance.

10 Examples of Construction Business Model Transformation  

Numerous examples of construction business model transformation exist across the industry, showcasing how companies have adapted their operations, adopted innovative technologies, and implemented new business models to increase efficiency, reduce costs, and enhance competitiveness. These transformations have led to significant improvements in project delivery, sustainability, and overall business performance.

Here are 10 examples of construction business model transformation:

Vinci Business Model Transformation  

The Vinci Group is a global player in the construction industry, and in recent years it has undergone a business model transformation to adapt to changing market conditions and customer demands. This transformation has involved several key elements:

  • Diversification: Vinci has diversified its business lines beyond traditional construction activities, expanding into areas such as concessions, energy, and infrastructure. This diversification has allowed the company to reduce its reliance on traditional construction activities and to take advantage of growth opportunities in other sectors.
  • Emphasis on sustainability: Vinci has made sustainability a core part of its business model transformation, integrating environmental, social, and governance considerations into its operations. The company has set ambitious targets for reducing its carbon footprint and has developed innovative solutions for sustainable construction.
  • Digitisation: Vinci has embraced digital technologies to improve its operations and enhance customer experience. The company has developed tools for project management, data analysis, and collaboration, and has invested in new technologies such as artificial intelligence , virtual reality, and 3D printing.
  • Partnership and collaboration: Vinci has adopted a collaborative approach to its business model transformation, partnering with other companies and stakeholders to develop innovative solutions and share best practices. The company has also established open innovation platforms to engage with startups and entrepreneurs and to foster innovation within the industry.

Construction Business Model Transformation

Vinci’s business model transformation has allowed the company to adapt to changing market conditions, to differentiate itself from its competitors, and to position itself as a leader in sustainable construction and digital innovation.

Bechtel Business Model Transformation

Bechtel Corporation is a global engineering, construction, and project management company that has undergone a business model transformation in recent years to adapt to changing market conditions and customer demands. This transformation has involved several key elements:

  • Emphasis on sustainability: Bechtel has made sustainability a core part of its business model transformation, integrating environmental, social, and governance considerations into its operations. The company has set ambitious targets for reducing its carbon footprint and has developed innovative solutions for sustainable construction.
  • Digitisation: Bechtel has embraced digital technologies to improve its operations and enhance customer experience. The company has developed tools for project management, data analysis, and collaboration, and has invested in new technologies such as artificial intelligence , virtual reality, and 3D printing.
  • Modularisation and standardisation: Bechtel has adopted a modularisation and standardisation approach to construction, which involves breaking down projects into standardised components that can be assembled offsite and then transported to the construction site for final assembly. This approach can reduce construction time and costs, improve quality and safety, and minimise waste.
  • Lean construction: Bechtel has implemented lean construction principles to improve efficiency and reduce waste in its operations. This involves optimising workflows, minimising unnecessary activities, and continuously improving processes to increase productivity and reduce costs.
  • Collaboration and partnership: Bechtel has adopted a collaborative approach to its business model transformation, partnering with other companies and stakeholders to develop innovative solutions and share best practices. The company has also established open innovation platforms to engage with startups and entrepreneurs and to foster innovation within the industry.

Bechtel’s business model transformation has allowed the company to differentiate itself from its competitors, to position itself as a leader in sustainable construction and digital innovation, and to improve efficiency and reduce costs in its operations.

AECOM Business Model Transformation 

AECOM is a global infrastructure consulting firm that has undergone a business model transformation in recent years to adapt to changing market conditions and customer demands. This transformation has involved several key elements:

  • Emphasis on sustainability: AECOM has made sustainability a core part of its business model transformation, integrating environmental, social, and governance considerations into its operations. The company has set ambitious targets for reducing its carbon footprint and has developed innovative solutions for sustainable construction.
  • Digitisation: AECOM has embraced digital technologies to improve its operations and enhance customer experience. The company has developed tools for project management, data analysis, and collaboration, and has invested in new technologies such as artificial intelligence , virtual reality, and 3D printing.
  • Client-centric approach: AECOM has shifted to a client-centric approach to its business model, focusing on understanding and meeting the unique needs of its clients. This involves working closely with clients to identify their goals and objectives, and then developing customised solutions to achieve those goals.
  • Integrated delivery: AECOM has adopted an integrated delivery approach to construction, which involves bringing together all project stakeholders (including designers, builders, and owners) to collaborate on project design, delivery, and operation. This approach can improve project outcomes, reduce costs, and enhance sustainability.
  • Partnership and collaboration: AECOM has adopted a collaborative approach to its business model transformation, partnering with other companies and stakeholders to develop innovative solutions and share best practices. The company has also established open innovation platforms to engage with startups and entrepreneurs and to foster innovation within the industry.

AECOM’s business model transformation has allowed the company to differentiate itself from its competitors, to position itself as a leader in sustainable construction and digital innovation, and to improve customer satisfaction and project outcomes through a client-centric and integrated delivery approach.

Skanska Business Model Transformation 

Skanska is a global construction and development company that has undergone a business model transformation in recent years to adapt to changing market conditions and customer demands. This transformation has involved several key elements:

  • Emphasis on sustainability: Skanska has made sustainability a core part of its business model transformation, integrating environmental, social, and governance considerations into its operations. The company has set ambitious targets for reducing its carbon footprint and has developed innovative solutions for sustainable construction.
  • Digitisation: Skanska has embraced digital technologies to improve its operations and enhance customer experience. The company has developed tools for project management, data analysis, and collaboration, and has invested in new technologies such as artificial intelligence , virtual reality, and 3D printing.
  • Lean construction: Skanska has implemented lean construction principles to improve efficiency and reduce waste in its operations. This involves optimising workflows, minimising unnecessary activities, and continuously improving processes to increase productivity and reduce costs.
  • Safety focus: Skanska has made safety a top priority in its operations, adopting a “zero accidents” policy and implementing strict safety protocols and training programs for its employees and partners.
  • Collaboration and partnership: Skanska has adopted a collaborative approach to its business model transformation, partnering with other companies and stakeholders to develop innovative solutions and share best practices. The company has also established open innovation platforms to engage with startups and entrepreneurs and to foster innovation within the industry.

Skanska’s business model transformation has allowed the company to differentiate itself from its competitors, to position itself as a leader in sustainable construction and digital innovation, and to improve efficiency, safety, and collaboration in its operations.

Turner Construction Business Model Transformation 

Turner Construction is a leading construction management company that has undergone a business model transformation in recent years to adapt to changing market conditions and customer demands. This transformation has involved several key elements:

  • Emphasis on sustainability: Turner Construction has made sustainability a core part of its business model transformation, integrating environmental, social, and governance considerations into its operations. The company has set ambitious targets for reducing its carbon footprint and has developed innovative solutions for sustainable construction.
  • Digitisation: Turner Construction has embraced digital technologies to improve its operations and enhance customer experience. The company has developed tools for project management, data analysis, and collaboration, and has invested in new technologies such as artificial intelligence , virtual reality, and 3D printing.
  • Integrated project delivery: Turner Construction has adopted an integrated project delivery approach to construction, which involves bringing together all project stakeholders (including designers, builders, and owners) to collaborate on project design, delivery, and operation. This approach can improve project outcomes, reduce costs, and enhance sustainability.
  • Lean construction: Turner Construction has implemented lean construction principles to improve efficiency and reduce waste in its operations. This involves optimising workflows, minimising unnecessary activities, and continuously improving processes to increase productivity and reduce costs.
  • Safety focus: Turner Construction has made safety a top priority in its operations, implementing strict safety protocols and training programs for its employees and partners.

Construction Business Model Transformation With 10 Examples

Turner Construction’s business model transformation has allowed the company to differentiate itself from its competitors, to position itself as a leader in sustainable construction and digital innovation, and to improve efficiency, safety, and collaboration in its operations.

Bouygues Construction Business Model Transformation

Bouygues Construction is a French construction and engineering company that has undergone a business model transformation in recent years to adapt to changing market conditions and customer demands. This transformation has involved several key elements:

  • Emphasis on sustainability: Bouygues Construction has made sustainability a core part of its business model transformation, integrating environmental, social, and governance considerations into its operations. The company has set ambitious targets for reducing its carbon footprint and has developed innovative solutions for sustainable construction.
  • Digitalisation: Bouygues Construction has embraced digital technologies to improve its operations and enhance customer experience. The company has developed tools for project management, data analysis, and collaboration, and has invested in new technologies such as artificial intelligence , virtual reality, and building information modeling (BIM).
  • Client-centric approach: Bouygues Construction has shifted to a client-centric approach to its business model, focusing on understanding and meeting the unique needs of its clients. This involves working closely with clients to identify their goals and objectives, and then developing customised solutions to achieve those goals.
  • Industrialisation: Bouygues Construction has implemented industrialisation principles to improve efficiency and reduce waste in its operations. This involves optimising workflows, using prefabrication and modular construction techniques, and continuously improving processes to increase productivity and reduce costs.
  • Partnership and collaboration: Bouygues Construction has adopted a collaborative approach to its business model transformation, partnering with other companies and stakeholders to develop innovative solutions and share best practices. The company has also established open innovation platforms to engage with startups and entrepreneurs and to foster innovation within the industry

Bouygues Construction’s business model transformation has allowed the company to differentiate itself from its competitors, to position itself as a leader in sustainable construction and digital innovation, and to improve customer satisfaction and project outcomes through a client-centric, industrialised, and collaborative approach.

Hochtief Business Model Transformation 

Hochtief is a German construction and engineering company that has undergone a business model transformation in recent years to adapt to changing market conditions and customer demands. This transformation has involved several key elements:

  • Emphasis on sustainability: Hochtief has made sustainability a core part of its business model transformation, integrating environmental, social, and governance considerations into its operations. The company has set ambitious targets for reducing its carbon footprint and has developed innovative solutions for sustainable construction.
  • Digitisation: Hochtief has embraced digital technologies to improve its operations and enhance customer experience. The company has developed tools for project management, data analysis, and collaboration, and has invested in new technologies such as artificial intelligence , virtual reality, and building information modeling (BIM).
  • Client-centric approach: Hochtief has shifted to a client-centric approach to its business model, focusing on understanding and meeting the unique needs of its clients. This involves working closely with clients to identify their goals and objectives, and then developing customised solutions to achieve those goals.
  • Lean construction: Hochtief has implemented lean construction principles to improve efficiency and reduce waste in its operations. This involves optimising workflows, minimising unnecessary activities, and continuously improving processes to increase productivity and reduce costs.
  • Safety focus: Hochtief has made safety a top priority in its operations, implementing strict safety protocols and training programs for its employees and partners.

Hochtief’s business model transformation has allowed the company to differentiate itself from its competitors, to position itself as a leader in sustainable construction and digital innovation, and to improve customer satisfaction and project outcomes through a client-centric, lean, and safety-focused approach.

Fluor Business Model Transformation  

Fluor Corporation is an American multinational engineering and construction firm that has undergone a business model transformation in recent years to adapt to changing market conditions and customer demands. This transformation has involved several key elements:

  • Emphasis on sustainability: Fluor has made sustainability a core part of its business model transformation, integrating environmental, social, and governance considerations into its operations. The company has set ambitious targets for reducing its carbon footprint and has developed innovative solutions for sustainable construction.
  • Digitisation: Fluor has embraced digital technologies to improve its operations and enhance customer experience. The company has developed tools for project management, data analysis, and collaboration, and has invested in new technologies such as artificial intelligence , virtual reality, and building information modeling (BIM).
  • Integrated solutions: Fluor has shifted to an integrated solutions approach to its business model, offering a range of services across the entire project life cycle, including engineering, procurement, construction, and maintenance. This allows the company to provide end-to-end solutions to its clients, improving project outcomes and reducing costs.
  • Operational excellence: Fluor has implemented operational excellence principles to improve efficiency and reduce waste in its operations. This involves optimising workflows, using lean construction techniques, and continuously improving processes to increase productivity and reduce costs.
  • Safety focus: Fluor has made safety a top priority in its operations, implementing strict safety protocols and training programs for its employees and partners.

Fluor’s business model transformation has allowed the company to differentiate itself from its competitors, to position itself as a leader in sustainable construction and digital innovation, and to provide integrated solutions that improve customer satisfaction and project outcomes. By emphasising operational excellence and safety, the company has also improved efficiency and reduced risks in its operations.

Royal BAM Group Business Model Transformation  

Royal BAM Group is a Dutch construction and engineering company that has undergone a business model transformation in recent years to adapt to changing market conditions and customer demands. This transformation has involved several key elements:

  • Focus on sustainable construction: BAM has made sustainable construction a key focus of its business model transformation, integrating environmental, social, and governance considerations into its operations. The company has set ambitious targets for reducing its carbon footprint and has developed innovative solutions for sustainable construction business model transformation.
  • Digitisation: BAM has embraced digital technologies to improve its operations and enhance customer experience. The company has developed tools for project management, data analysis, and collaboration, and has invested in new technologies such as artificial intelligence , drones, and building information modeling (BIM).
  • Integrated solutions: BAM has shifted to an integrated solutions approach to its business model, offering a range of services across the entire project life cycle, including design, engineering, construction, and maintenance. This allows the company to provide end-to-end solutions to its clients, improving project outcomes and reducing costs.
  • Operational excellence: BAM has implemented operational excellence principles to improve efficiency and reduce waste in its operations. This involves optimising workflows, using lean construction business model transformation techniques, and continuously improving processes to increase productivity and reduce costs.
  • Collaborative partnerships: BAM has formed collaborative partnerships with clients, suppliers, and other stakeholders to improve project outcomes and reduce risks. This involves working closely with partners to identify common goals and objectives, and then developing customised solutions to achieve those goals.

BAM’s business model transformation has allowed the company to differentiate itself from its competitors, to position itself as a leader in sustainable construction business model transformation and digital innovation, and to provide integrated solutions that improve customer satisfaction and project outcomes. By emphasising operational excellence and collaborative partnerships, the company has also improved efficiency and reduced risks in its operations.

Kiewit Business Model Transformation  

Kiewit Corporation is an American construction and engineering company that has undergone a business model transformation in recent years to adapt to changing market conditions and customer demands. This transformation has involved several key elements:

  • Integrated project delivery: Kiewit has shifted to an integrated project delivery model, which involves collaborating with owners, designers, and subcontractors to optimise project outcomes. This approach focuses on aligning project goals, sharing risks and rewards, and maximising value for all stakeholders.
  • Emphasis on safety: Kiewit has made safety a top priority in its operations, implementing strict safety protocols and training programs for its employees and partners. The company has also developed innovative solutions for improving safety on construction sites, such as wearable technology and automated monitoring systems.
  • Digitisation: Kiewit has embraced digital technologies to improve its operations and enhance customer experience. The company has developed tools for project management, data analysis, and collaboration, and has invested in new technologies such as virtual reality and drone technology.
  • Lean construction: Kiewit has implemented lean construction principles to improve efficiency and reduce waste in its operations. This involves optimising workflows, reducing lead times, and eliminating non-value-added activities to increase productivity and reduce costs.
  • Sustainability focus: Kiewit has made sustainability a key focus of its business model transformation, integrating environmental, social, and governance considerations into its operations. The company has set ambitious targets for reducing its carbon footprint and has developed innovative solutions for sustainable construction business model transformation.

Construction Business Model Transformation With 10 Examples

Kiewit’s business model transformation has allowed the company to differentiate itself from its competitors, to position itself as a leader in integrated project delivery and safety, and to provide sustainable solutions that improve customer satisfaction and project outcomes. By emphasising digitisation and lean construction business model transformation, the company has also improved efficiency and reduced costs in its operations.

The Future of Construction Business Model Transformation 

The future of construction business model transformation will be characterised by increased adoption of digital technologies, sustainable practices, and innovative business models. As the industry evolves, we can expect greater integration of technologies like artificial intelligence , robotics, and advanced data analytics to optimise project management, resource allocation, and decision-making.

The shift towards environmentally responsible construction business model transformation methods will become more prominent, encouraging companies to adopt green practices and materials.

Collaboration across the supply chain and the emergence of new, flexible business models will also play a crucial role in addressing the dynamic needs of clients and the market, ultimately shaping the future of construction business transformation .

Business model transformation in other industries

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7 Ways to Build a Successful Construction Business

Table of contents.

best business model for construction company

The stakes are high in the construction industry. Building homes and buildings is expensive, and safety issues are paramount. Customers tend to be cautious and highly involved in the construction process, which can potentially cause issues for construction firms. 

Construction company owners must be mindful of customer service, quality, costs and many more factors to find success and attract loyal customers. We’ll explore seven tips for building a successful construction business and highlight essential tools for everyday operations.

According to Real Estate Witch, the typical cost to build a house is $466,000, and the average renovation cost is $48,384. Commercial buildings that businesses buy or lease can run $30 to $90 per square foot for materials and labor.

How to build a successful construction business

While the construction industry forecast is bright and shows no signs of slowing down, construction businesses face challenges and dangers that aren’t for the faint of heart. 

When building or growing your construction firm , pay attention to the following factors to protect your reputation and business and thrive in the industry.

1. Prioritize customer service in your construction business.

In the hiring process , seeking talented contractors is crucial. However, finding employees who can provide efficient customer service is also essential. 

Your clients will remember your team’s work and how your employees treated them during the construction process. Assemble a team who will respect your clients, display patience and show understanding when there are concerns or issues. This level of support will help you avoid customer service pitfalls and go a long way toward generating customer loyalty, earning repeat customers and gaining valuable referrals.  

2. Find your niche in the construction industry.

Contracting encompasses many niches. If you specialize in a particular area, make it known. Promoting your company as superior in a specific niche – for example, window installation or roof repair – is an excellent way to ensure you’re the one clients call when a window cracks or the roof starts to leak. 

Even if you’re a general contractor, you can still offer a broader spectrum of services while branding your company as “the best” in a specific niche.

Avoid fines and legal repercussions by ensuring you have the proper construction business licenses and permits in place.

3. Market your construction business.

Marketing your construction company is crucial. While acquiring clients through word-of-mouth advertising is great, developing a robust regional and local marketing strategy will further grow your business. Use fundamental branding tools to help get your company’s name out there so people think of you when they need a contractor.

4. Cover your bases by insuring your construction business.

A company needs business insurance , especially when working with heavy machinery and electric tools is on the daily agenda. Ensure you have general liability insurance and coverage for potential injuries, property damage and lawsuits. These days, choosing insurance policies is straightforward, especially when finding affordable, specialized insurance policies for your industry.

5. Stay involved in your construction business.

This step comprises two parts:

  • Stay available to your customers. No matter what, you must remain available to your customers. Construction can be a confusing process for those unfamiliar with it, so your clients may have questions or want to be clued in on how things are going. The more time you set aside to hear them out and alleviate their concerns, the more comfortable they’ll feel hiring you in the future or recommending you to a friend.
  • Show up at construction sites. Staying involved also means personally showing up to supervise on-site. Obviously, you can’t be everywhere at once. Still, your clients and employees must know you’ll be popping by regularly. Your presence shows customers that they’re a priority and will remind your employees that they must always do their best work.

6. Don’t cut corners in your construction business.

It might be tempting to go with less expensive materials. However, remember that saving now often means spending more later. 

Ensure all equipment is up to the task and can withstand the test of time. For example, investing in stainless steel screws might be smart when working in a location vulnerable to wet weather conditions. Customers may not be well versed enough in construction to know the difference, but they’ll certainly notice if things start to rust or break down.

7. Be organized in your construction business.

It’s essential to keep your business organized . For example, maintain thorough bookkeeping to ensure you stick to your budget and get paid for your work promptly.

It’s also wise to track how much time and energy you dedicate to your services. This will prevent you from spreading yourself too thin and taking on too many clients or tasks at any given time. It might seem like more customers are always better, but that’s only true if it doesn’t require you to sacrifice the dedication you can give to each one.

To ensure you get paid as a construction contractor , set up clear client contracts, send out comprehensive invoices, and establish payment schedules and terms.

The business tools needed to run a construction company

To have effective and efficient construction and customer communication processes, you need industry-specific tools. Here are some essential tools you’ll need:

Construction estimating software

Estimating the cost of labor and materials – plus your profit – is a crucial element of your construction business. If your price is too high, you won’t get much business. If it’s too low, you will lose money or need to revise your estimate, leading to poor customer satisfaction. 

Construction estimating tools provide reasonable, comprehensive estimates you can modify if material prices change or the project’s scope shifts. The best construction estimating software includes modules for scheduling, client communication, invoicing and project management, in addition to price estimation. 

Construction POS systems

Point-of-sale (POS) systems are generally associated with retailers. However, construction POS systems allow you to accept customer payments via smartphones and tablets, and provide robust payment and customer-tracking features. 

Many construction POS systems help track inventory so you can reorder efficiently and avoid project delays. They can also track business metrics like sales and profitability and help with scheduling. If you have subcontractors, you can track their time and scheduling as well.

Construction payment processing tools

All successful businesses must be able to receive and process payments promptly. Construction projects typically involve several large periodic payments. Getting paid without delay is even more critical because you must order materials for the next construction phase. 

While you might receive many payments by check, construction companies should also accept credit cards and other payment forms. Accepting multiple payment methods can boost customer convenience and payment efficiency.  

When choosing a credit card processor for your construction company , find a provider that offers month-to-month service so you can close your account if it’s not a good fit.

Smart helmets

Safety is a significant issue on construction job sites; it always pays to protect your workers, subcontractors and others visiting the site. Smart helmets are a high-tech way to improve safety. These helmets are hard hats with sophisticated tools built in, including sensors, tracking tools and augmented reality . 

Smart helmets can warn wearers of potentially dangerous conditions or alert team members if help is needed. They can monitor workers’ health in real time to avoid potentially disastrous accidents. The augmented reality feature helps with site planning and provides a visual overlay without the need to carry around site plans or blueprints, allowing workers to use their hands for balance and stability.

Virtual reality 

While architects and engineers may be used to 2D blueprints and renderings to visualize completed projects, it’s more challenging for clients. Imagine being able to virtually walk clients through what their new home or office will look like. Virtual reality in construction is at an early stage, but it’s poised to become a significant competitive advantage and game changer in the industry. 

In addition to using virtual reality to improve client interaction and sales, construction firms can use it for training, reducing labor costs and improving efficiency.

Evyatar Sagie contributed to this article.

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New Business Models and Digital Platforms in Construction 4.0

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Digital transformation is more important than ever. Data and analytics change how architecture, engineering, and construction (AEC) firms operate. But some changes are invisible to the eye: transformation of business models. To avoid commoditization, some companies are moving fast to adopt digital platforms to run their business. They add new services to their existing portfolio and they build new partnerships. We see the emergence of new roles (chief data officer, chief digital officer, chief transformation officer, chief analytics officer, chief partnership officer), new activities (that focus on data capture and usage), and new tools (to make business decisions and develop insights based on data). As a consequence, entirely new ecosystems are emerging: the originators, the providers, the aggregators, the controllers, and the consumers. This article explores in more detail the various aspects of this new Construction 4.0 scene.

An Invisible Revolution

All pioneer AEC firms try to reinvent themselves: they collect data, they build their own digital platforms, they operate them with new business models, and they offer new services to their ecosystem. This is an Invisible Revolution because things look unchanged. The most essential changes are changes in the way the industry is structured, not in the way buildings are built.

IR

The Nature of Innovation Has Changed

The AEC industry is changing in the very way it is structured and its services are rendered. Technology is just a puzzle piece. True and sustainable innovation does not come from technology alone; it comes from new business models.

The Nature of Disruption Is Changing

Companies conquer new markets, and they disrupt their competitors by creating digital platforms and by running their business with new business models.

AEC Has Already Entered the Platform Economy

Disruption already changed how the telecom, media, retail, transportation, music, and hospitality industries are structured. AEC is no exception. Companies deliver value and capture value by orchestrating networks. The AEC industry is a platform industry already.

Culture Is Central to This Transformation 

Construction tends to be a late adopter to change. So, for the AEC industry, this new wave of transformation is also a cultural one. Moving to more data-centricity is an huge cultural challenge.

Digital Platforms, Business Models, and Culture

All of this is what we call the Arc of Transformation. It is also the name of a program we created to help some of our clients with their strategic initiatives, to help them address these key topics: capitalize on information, orchestrate your network, and improve your performance.

image3

Large AEC Players Are Moving Faster than It Seems

Large AEC players all launch strategic initiatives to improve their current market position, to build their future competitive advantage, and to prepare for the next wave of transformation. Most of the time, these strategic plans are kept confidential and are unknown to the general public. We tend to describe this industry as slow and not so innovative. It's actually the exact opposite. Many great things are happening. The largest players are taking their destiny into their hands.

image4

These large companies play defense and play offense as well. There is a big difference between playing defense, working on your bottom-line agenda, and playing offense, working on your top-line agenda. When you play offense, you need to rethink your priorities and your efforts. What happens is that incumbent firms are conflicted. Their efforts lack focus and prioritization. They suffer because they need to play offense and to play defense at the same time. Yet, there is no opposition between playing defense and playing offense. You have to execute both plays at the same time.

image5

Typically, companies put their efforts in three domains: 

1) Test, develop, implement, and scale digital solutions to solve major pain points.

2) Adapt and modernize processes and workflows.

3) Use, learn from, and build their own digital platforms.

The most advanced launch strategic initiatives related to industrialized construction and Design for Manufacture and Assembly (DfMA). These firms have developed their own prefabrication delivery capability and embrace modular construction. Companies such as Boldt, Clark, DPR, Mortenson, Balfour Beatty, BAM, Mace, and NCC are examples here. They manage these new businesses in various ways, sometimes through subsidiaries or spin-offs. Industrialized construction is the beginning of a radical transformation journey for these firms.

Related:  Reaching New Heights with Modular Construction with Greg Thompson

Playing offense

The Future of Construction: Construction 4.0 

These moves impact the way the whole industry is structured. The Future of Construction is a topic already explored in two initiatives I was part of: the book  Construction 4.0: An Innovation Platform for the Built Environment  and ENCORD foresight work.

The Shape of Things to Come 

Based on our observations, here is what we can predict:

  • Boundaries between silos and categories we know will progressively disappear.
  • Hybrid players will gain importance.
  • Diversification of business models will be the new normal.

The terms we use now are outdated. In the future, we will be looking at this: an industry made of companies called originators, providers, aggregators, controllers, and consumers. This will better reflect the work actually done by these companies. First, let's look at today's sequential and fragmented value chain:

Graphic1

Progressively, we should expect to see the emergence of new types of players and ecosystems:

  • The originators  will be firms gathering land and financial resources. They will create data by defining the built assets.
  • The providers  will provide the design, the raw material, the building products, the workforce (whether it is humans or robots), the equipment, and, most of all, the data.
  • The aggregators  will be like the general contractors of today. They will orchestrate the projects and manage the flows of data: they will run, supervise, and monitor.
  • The consumers  will be like the facility managers of today, in charge of the maintenance and the operations. They will use the data created by the other players to run the built assets.
  • Finally, the controllers  will control the finished work (the “as-built”). They will make sure the quality of the data and the processes are enforced.

Graphic2

It's not a question of 'if' your company should take on digital transformation, but 'how.' It's about doing the right things, at the right time.

Right things, right time

Learn more with the full class.

Olivier Lépinoy belongs to the Autodesk Business Development team for the AEC industry. He is building and developing the conditions for Autodesk to be part of its clients’ strategic initiatives. Olivier is an expert in strategies to help firms pivot and grow new businesses. He took part in multiple digital platform initiatives for the largest firms worldwide. His current focus is on helping firms explore and build new business models. With past experiences in architecture, at VINCI, at Accenture, and at IBM, Olivier has built an unparalleled career path across disciplines and business ecosystems. He is one of the co-authors of the acclaimed book,  Construction 4.0: An Innovation Platform for the Built Environment. Olivier Lépinoy holds two master’s degrees: in Civil Engineering (Ecole Spéciale des Travaux Publics, Paris) and in Earthquake Engineering (UCLA, USA). He is also a licensed architect and an urban designer (Ecole d'Architecture de Versailles).

Home > Business Agility > The New Business Revenue Model For The Construction Sector

The New Business Revenue Model For The Construction Sector

by Kenny Ingram   |   Sep 14, 2021   |   Estimated reading time: 3 minutes  |   in Business Agility , Business Technology , Construction and Contracting , Engineering, Construction & Infrastructure , IFS Cloud   |   tagged construction ERP , Construction Project ERP , construction software , Project ERP

An increasing number of asset owners are seeking to outsource service and maintenance contracts for their assets over its whole lifecycle. These contracts traditionally are taken on by specialist facility and asset management firms, however in an industry continuously challenged by low profit margins is this model changing?

Having faced diminishing margins for capital projects, COVID-19 pandemic disruptions and sporadic revenues, embracing a business model that manages the full asset lifecycle throws construction firms a lifeline. However, it requires a complete change in mindset: construction firms must not only manage the building an asset but ensure it remains fit for purpose throughout its whole life, which adds even more complexity to core construction processes such as design, estimating and procurement.

The main reason that this new business model is gaining traction in the industry is that is addresses several key challenges including; low profit margins, low productivity and poor project delivery rates. But let’s expand on these further.

Low Profit Margins

Low productivity , poor project delivery rates .

best business model for construction company

So, the benefits are clear but the real question that construction firms need to consider is whether delivering the full asset lifecycle model is worth the risk?

In this whitepaper – Asset Lifecycle Servitization: The New Business Revenue Model For The Construction Sector discusses how profitability in the sector no longer resides in creating a building or asset, but rather delivering a total package spanning integrated project and lifecycle management. It’s an opportunity for constructors and manufacturers to significantly grow their business with exciting, long-term new revenue streams. It is no coincidence a recent report how a recent report by McKinsey estimates construction sector disrupters could share a $265 billion annual profit pool. 1

IFS Cloud for Construction enables construction firms who are looking to adopt the full asset lifecycle model a solution that contains construction and operation and maintenance specific functionality in one single solution allowing for accurate end-to-end project control. To understand how operating from one version of truth can allow your construction business to succeed, download the executive summary here .

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Kenny Ingram

About Kenny Ingram

Vice president, engineering, construction & infrastructure.

Kenny is the Vice President for the following industries: construction, contracting, engineering, infrastructure and shipbuilding. In addition, he is heavily involved in other project and asset lifecycle industries including oil and gas, energy, utilities, and defense. Kenny's main responsibilities are…

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What’s the Best Business Structure For a Construction Company?

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To run a successful business, a company needs to establish the right legal entity. In the construction business, as in most other businesses, there are four basic business structures from which to choose. These include sole proprietorship, LLC, a C Corp, and an S Corp. Each structure has its advantages and disadvantages that need to be considered before choosing one for your construction business.

Pros and Cons of a Sole Proprietorship

A sole proprietorship is a business with no distinctions between the owner and the company itself. In other words, you are the sole owner, and all profits from this structure flow directly to you as an individual. This also means that you will be responsible for all of the debts and liabilities that may arise from your business.

Advantages of Sole Proprietorships:

  • A sole proprietor is taxed as a regular taxpayer along with any other income they make from their construction business (you don’t need to pay corporate taxes).
  • With this business structure, the owner is self-employed, so you don’t have to worry about formation or paperwork. This can be beneficial at the start of a business when there’s little need for funding. There are also no requirements for filing annual reports or paying fees to the state, which saves time and money during the initial stages of a business.

Disadvantages of Sole Proprietorships:

  • Liability is the biggest issue associated with a sole proprietorship. The owner of this business structure is personally liable for any debt or legal consequences incurred by the company.
  • Securing business loans can be difficult because there’s no collateral or separation between the business owner’s assets and those of the business.
  • The lack of an established record-keeping system and the absence of a legal distinction between the business and its owner can make it challenging for a sole proprietorship to expand.

This is an excellent option for small start-ups because it doesn’t require much paperwork. But, there are risks with this option, as if someone sues your business and wins, you will most likely have to pay for it personally. 

Pros and Cons of an LLC (Limited Liability Company)

This is a business structure that provides limited liability to its owners and requires the filing of an LLC application with the state. You can even have a single-member LLC. The business owner or owners of LLCs are not held personally liable for the business debt, and the business has a legal distinction from its owners.

Advantages of Forming an LLC:

  • LLC owners do not have to pay taxes on their company’s losses and can choose how they want to be taxed, whether it’s as a sole proprietorship or partnership. 
  • LLC owners have access to a wider pool of resources and financing opportunities because the business is registered with the state. This type of legal entity also makes it easier for the company’s growth and expansion.

Disadvantages of Forming an LLC:

  • It is necessary for construction business owners to regularly file documents with the state to maintain their LLC status.
  • LLCs can grow more complicated and expensive to maintain over time due to other fees that are required by the state.
  • As your company grows, it may need more legal counseling which can become costly.

In most cases, an LLC is a good business structure for a construction company that is looking to expand and grow into a larger venture with more employees.

Pros and Cons of a C Corp (C Corporation)

A C corporation is a type of corporation that is taxed separately from its owners. This means that the business pays income taxes on its profits and the shareholders also pay taxes on their dividends, even if those profits were taxed at the corporate level.

Advantages of a C Corporation:

  • C corporations can raise money through selling stock, which can be helpful for some growing businesses.
  • C corporations offer the opportunity for tax deductions that are not available to other types of businesses organizations. For example, a C corporation can deduct the cost of health insurance premiums for its employees.

This type of corporation is ideal for businesses that plan to have a large number of shareholders.

Construction businesses looking to go public or partner with a larger company should consider a C corporation.

Disadvantages of a C Corporation:

  • C corporations are more expensive and complex to set up than other business structures.
  • C corporations are subject to “double taxation” on profits, which means the business and its shareholders are taxed on profits twice.
  • C corporations are subject to greater government regulation than other business structures.

In general, a C corporation is a good fit for construction companies that want to raise money from outside sources and have a large number of shareholders.

Pros and Cons of an S Corp (S Corporation)

An S corporation is a type of C Corporation that the IRS designed to help small corporations minimize their paperwork while still gaining many of the tax benefits of incorporating.

Advantages of an S Corporation:

  • S corporations can take advantage of the reduced liability benefits typically associated with a C corporation, while still enjoying the tax benefits of being a sole proprietorship or partnership.
  • S corporations allow for pass-through taxation, which means there is no need to pay corporate taxes on company profits. The so-called “double taxation” issue of a regular corporation is solved with an S corporation because profits and losses are passed directly to the shareholders.
  • Construction business owners can reduce their risk of liabilities by limiting their personal financial responsibility for company debt and litigation.

Disadvantages of an S Corporation:

  • S corporations have stricter requirements for shareholders and minimum distributions, which means a smaller pool of potential investors.
  • An S corp is not allowed to have more than 100 shareholders. As a result, it can’t go public without first converting to a C corporation, and is somewhat limited in its ability to raise capital from investors (particularly individual investors, each of whom would be considered a shareholder). 

In general, an S corporation is a great fit for construction companies. You avoid double taxation, can raise money from outside sources, and you enjoy limited liability protection.

How To Choose the Right Structure for Your Construction Business

When it comes to choosing a structure for your construction business, the best option is often determined by how quickly and ambitiously you want to grow.

LLC and S corporations are better options for small businesses that hope to expand and grow into larger ventures with more employees. These structures help protect owners from personal liability issues while still allowing access to outside funding.

Sole proprietorships are good options for small construction businesses because they are quick and easy to establish, however, they offer limited liability protection

Overall, business owners should choose their business structure based on the type of work they do and their growth plans.

How to Legally File an LLC or Corporation for Your Construction Business

If you have made the decision to form an LLC or corporation for your construction business, it is important to understand the legal process and requirements for doing so.

In order to form an LLC, you must file Articles of Organization with your state’s Secretary of State. This document will outline the business name and purpose of your LLC, as well as the names and addresses of its members.

In order to form a corporation, you must file Articles of Incorporation with your state’s Secretary of State. This document will outline the name and purpose of your corporation, as well as the names and addresses of its directors and officers.

Both the LLC and corporate filing processes typically require fees, which vary by state.

It is important to note that both LLCs and corporations are separate legal entities from their owners, meaning that owners are not personally liable for company debts or lawsuits.

If you need help filing an LLC or corporation for your construction business, it is best to consult with a tax adviser or an attorney specializing in business law.

Construction Business Entities FAQs

What is the best business structure for a construction company.

The best business structure for a construction business depends on the type of work they do and their growth plans. An LLC or corporation is a good option for small businesses that hope to expand and grow into larger ventures, while a sole proprietorship may be a good option for small businesses that don't expect to expand beyond a handful of employees.

Is a Sole Proprietorship or LLC Better for a Construction Business?

Being a sole proprietor means that you are self-employed and own your business outright, so you are held responsible for all its debts and liabilities. All business income is also taxed as income on your personal tax return, including self-employment taxes.

On the other hand, an LLC offers limited personal liability protection for its members, and all income from the LLC is typically taxed at a lower rate than personal income.

Is a Construction Business LLC or S Corp Better?

Both LLCs and S corporations are good options for construction businesses who want the limited liability protection of a corporation, with favorable tax treatment, and while still having access to outside funding. 

Does My Construction Business Need an EIN?

An EIN, or Employer Identification Number, is a unique nine-digit number that is assigned to businesses by the Internal Revenue Service (IRS). It is used to identify businesses for tax purposes.

A construction business does not need an EIN unless they have employees. In that case, the EIN would be used to file employment taxes. This applies to both LLCs and corporations. 

Do You Need a Business Bank Account as a Sole Proprietor?

A sole proprietor does not need to have a separate business bank account, as all business income and expenses are considered part of the owner's assets. However, it is a good idea to segregate business and personal assets to make tracking and bookkeeping easier.

An LLC or corporation must have its own bank account, and all income and expenses should be tracked and filed separately.

There are a few things to consider when deciding the best business structure for your construction company. An LLC or corporation offers limited personal liability protection for its members, and all income from the LLC is typically taxed at a lower rate than personal income. Ultimately, the best business structure for your construction company depends on the type of work you do and your growth plans.

Other Helpful Articles

Step-By-Step Process For Buying a Construction Company

Construction Industry Regulations & Laws

Guidelines & Rules for Construction Sites

General Construction Liability Insurance & Other Construction Business Insurance You Need + Costs

OSHA Construction Safety Standards & Regulations

Small Construction Business Tax Deductions & Tips

Why Crisis Could Be the Catalyst to Construction Business Model Transformation 

Business Model Transformation in Crisis for Construction Industry

Over the past few months, the world has been gripped by the COVID-19 pandemic. As of today, we face an unprecedented scale of socio-economical disruptions not just limited to unemployment, but also how our industry operates. Both construction office and field operations will be forever changed with the rise of remote work and new site and safety protocols. New ways of working have emerged, and we have seen how fragile our existing ecosystems are. This global crisis offers an unprecedented and pivotal opportunity to transform how we build.

Beyond the new day to day shift, the current crisis has been a forcing hand in highlighting how the industry can no longer accept the status quo including low productivity, low predictability, low margins, adversarial pricing models, financial fragility, lack of collaboration, lack of investment in R&D and innovation. The risk of commoditization is higher than ever for incumbent players, even the largest ones. New questions and discussions are emerging in an in-depth manner, as they will set the foundations on how the construction industry goes forward once some semblance of normalcy is regained.

An easy way out of the grips of this crisis does not exist. But there is a more prospective alternative—transformation of Business Models. As I extensively discussed in our 2020 Trends Webinar at the start of this year, these changes will not just be the “trend” of 2020; it will be the “trend” that reshapes the decade, perhaps even longer. Companies will have to grasp this in order to survive and thrive. Inventing alternative Business Models is not a luxury; it is the condition for future successes.  

Why Innovation Through Technology Is No Longer Enough

Since the dawn of the Information Age, Technology, and with it, Innovation has been boundless. With that comes fundamental societal changes. Data is the new oil, and Information is the new virtual dollar that companies wield. Yesterday, Innovation was a rare breakthrough; today, it is the requirements of aspiring entrepreneurs and companies looking to generate an even larger profit. In the future, the very nature of innovation and disruption will change.

Disruption is also prevalent in the market. The consequences of innovation are breaking up traditional concepts or norms, or in this case, something originating from outside the market. While some construction firms have developed ad-hoc technology solutions to manage the shift to remote work in the face of this crisis, it remains to be seen whether these practices will be kept in place post-crisis. These companies found themselves torn between the demands of radically new realities imposed by “the New Normal” and the deep-rooted necessity to transform digitally. Meanwhile, clients are increasingly concerned that the sector is not keeping pace with the rates of improvement seen in other sectors of the economy.  

When the construction industry talks about significant changes, it will no longer be just about what the next building style or new technology that firms should adopt, but rather how our industry would mold itself for the future. The construction industry shall change in the very way it is structured and its services rendered. Technology is just a puzzle piece, whereas true and sustainable innovation does not come from technology alone; it comes from new Business Models. These transformations are invisible to the eye, but they are happening. Building, infrastructures, cities look unchanged, but the underlying business delivery networks are being revolutionized. Disruption already significantly changed how the Telecom, Media, Retail, Transportation, Music, and Hospitality industries are structured. Construction is no exception. While, across the globe, the Construction Tech ecosystem is blooming, new players and incumbent firms launch strategic initiatives to improve their current market position, to build their future competitive advantage, and to prepare for the next wave of transformation. Most of the time, these strategic plans are kept confidential and are kept unknown to the general public.  

Sinking or Swimming in the New Normal

Over nearly half a year, we’ve seen the toll the pandemic has taken on many businesses, whether local or international, small or large. Many companies have been forced to take drastic measures to reduce costs—through shifts in labor, marketing campaigns, or general service. Construction companies have not been excused. Even before the crisis occurred, signs were showing cracks in the entire industry. The tipping point had been achieved. It seems that reverting to “business as usual” is no longer an option.

Of course, is this the first crisis that we have weathered? No. History doesn’t repeat itself, but in many cases, it rhymes. Examining a report that BCG made regarding the 2008 financial crisis, it can be seen that 80% of the S&P Global 1200 companies had reactionary tendencies, as opposed to enacting proactive procedures. This entailed that they waited until their businesses took a downturn before beginning to focus on mitigation. On the other hand, the 25 top performers had increased liquidity and proactively invested in strategic acquisitions. This is a concrete example of how “fixing it before it breaks” is a decisive philosophy in a rocky market.

Let’s take a look at an example. Second in the S&P rankings, a US health care equipment company, Abiomed, was focused on developing the world’s first artificial heart in the 1990s. But in 2005 the company purchased Impella, a heart pump technology. Today, Impella accounts for the majority of the Abiomed’s revenue. Proactivity had allowed Abiomed to complete a large-scale pivot that could position it for growth, even in turbulent times.

Another story from a well-known brand: Starbucks had Howard Schultz returning as their CEO when the recession hit. He took it upon himself to decide to transform the customer experience—by returning the brand to its roots. Making the customer feel welcome and cared for became the top priority, along with high-quality control and standards for their products. To achieve such a goal, Starbucks emphasized its own people. They began to invest in store managers, giving them more opportunities to demonstrate value to the business, thus giving them a voice and a sense of ownership for the brand. At the same time, the company closed all of its US branches for half a day in order for baristas to relearn how to make expresso. Starbucks soon climbed from 89th in the 2009 BrandZ valuation index to 72nd in 2011, from valuation at $7,260m to a +40% change at $11,901m. Today, it sits at number 24 with a valuation of $45,884m. The move by Howard Schultz and Starbucks was widely lauded as a terrific investment.

Construction Business Transformation: More Than a Tweak

To adapt to changing needs during the crisis, we are witnessing companies making “tweaks” – anything from slightly adjusting their model to comply with social distancing methods to adopting tools to enable employees and managers to work remotely. We have also heard executives re-evaluate their operating models in response to the crisis. More and more construction firms think that if they act now to modernize their operations and diversify their activities, they will be more robust, and it could help them adapt to future disruptions.

But to mirror the stories as told above, dealing with a market in turmoil needs more than just a few tweaks. From a new report from McKinsey & Company : “Organizations that make minor changes to the edges of their business model nearly always fall short of their goals. Tinkering leads to returns on investment below the cost of capital and to changes (and learning) that are too small to match the external pace of disruption.” The majority of incumbents fail to develop and implement radically new business models in parallel to their core business.

An overhaul is needed, if not long overdue, for companies seeking to create necessary conditions for change. Echoing the previous statements and stories of proactive mitigation and tweaks, we must also look at changes to the fundamentals of altering a business model. With the massive flow of information in present society, a digital transformation would mean putting data as the “basis” of a multi-faceted approach targeting the designing, planning, managing, and delivering of projects.

However, the key to success in a “data-centric” approach needs to not just focus on a company’s bottom line efficiency (optimization and modernization of operations, cost-saving, higher productivity), but also the top-line: increased growth, radical innovation, and the transformation of the business portfolio. Grasping on to old and familiar ways prevents change and transformation even if it may be currently easier and less costly than to transition. Most companies want to become data companies. They know they need to come up with fundamentally new business models to survive in the long-run. But most of them do not succeed in doing so. They either lack a good overall strategy to integrate the new and the old or fail throughout the transformation process.

The Future Business Models of Construction

The whole Architecture, Engineering, Construction, and Operation (AECO) industry may turn towards Platform Business Models. The traditional construction model of a sequential/pipeline business model (focused on controlling and vetting the clients and the suppliers) could very well be phased out in favor of a Platform Business Model (orchestrating resources, selling services to the whole ecosystem, leveraging a network). With difficulties in staying ahead of the competition, grow, and maintain their margins, most of the largest AECO firms look at Platform Business Models with envy. Yet, the transformation of a Business Model is a long journey, and not all AECO firms are agile enough and have the investment capabilities to pivot toward new models.

In recent times, a growing number of companies are seeing the potential benefits of adopting digital platforms across project lifecycles. Fewer spent resources and less generated waste can drive down costs and expenses. Better quality, greater trackability, and predictability can improve the trust relationship between clientele and the company while upholding if not also uplifting industry standards of accountability. Greater productivity, increased collaboration, and better management of built assets hallmarks of increased efficiency, all allow the company to tackle even more projects within the same span of time.

However, when it comes to Platform Business Models, changes also bring questions just as much as it may bring gains. Since Data is a valuable asset, who will own it? Who will become the Main Data Contractor? Who will be the providers of the platforms, who will be the producers of the offerings, who will be the Consumers of the services, who will be the Owners of these Platforms, and who will control the IP?

One of the leading examples of Platform Business Models would be Skanska, a Swedish based contractor and one of the world’s largest construction companies. At the other end of its partnership, is IKEA. The two companies are in an agreement that Skanska will build and install prefabricated homes using modular construction practices favored in some Nordic areas. This entails that a consumer can simply walk into an IKEA store, pick out their home from a wide selection of components, to which Skanska will deliver it and build for the consumer at the designated place. That type of business model melds IKEA’s existing power as a direct-to-consumer modular furniture producer, and Skanska’s strength as a leader in construction and development into a composite that is stronger than the sum of its parts.  

The Largest Players Are Moving Faster than We Think

In order to avoid commoditization, integrating value-added services, real estate development, and even design and fabrication shops to streamline delivery, are some of the new practices adopted by some construction companies. The most advanced ones launch strategic initiatives related to Industrialized Construction and Design for Manufacturing and Assembly (DfMA). These firms have developed their own prefabrication delivery capability and embrace modular construction. Companies such as Boldt, Clark, DPR, Mortenson, Balfour Beatty, BAM, Mace, and NCC are examples here. They manage these new businesses in various ways, sometimes through subsidiaries or spin-offs. Industrialized Construction is the beginning of a radical transformation journey for these firms.  

Other players create their own data platforms and try to create new ecosystems around them. They partner with technology companies, build tailor-made solutions, develop new service offerings, and conceive new business models to deliver and capture value. They try to move up the ladder, from asset builders and service providers to technology creators and network orchestrators. Companies like Bechtel, Bouygues, Daiwa House, Ferrovial, Kajima, Larsen & Toubro, Lendlease, Takenaka, and VINCI have all launched strategic initiatives in this direction. Some of these large players already manage several business models. In their case, the challenge is to diversify even more and to build synergies between the old and the new.

For other large companies, adjacent to the AEC industry, the pivot of their business and their transformation is already underway. Caterpillar, ISS, Jones Lang LaSalle, Kone, LafargeHolcim, Saint-Gobain, Schneider Electric, Wienerberger are examples here. Across the globe, mid-size and large engineering firms (AECOM, Arcadis, Fluor, Jacobs, WSP…) are also attempting to pivot and develop new business models to grow differently. In addition, the largest and most innovative design and architectural firms try to reinvent themselves: offer new services and build new business models to support them.

Platform Business Model attracts companies because it is considered by all technology and business experts as the most valuable type of business model. But it is still difficult to predict what is going to happen. Business models scale differently, and network orchestrators grow revenues faster, generate higher profit margins, and use assets more efficiently than companies using the other three business models. In many ways, network orchestrators operate in ways that run counter to what we’re used to thinking of as the best practices of other business models. For an incumbent firm, it is a journey. During this long transition, roles and boundaries are changing and becoming blurry. What is certain is that Data is the new raw material, fueling the dramatic ecosystem shift taking place. All players will create and also consume Data. In the future, firms will buy, sell, and trade Data. There will be Data Miners, Data Controllers, Data Brokers, Data Wholesalers, etc.

At an industry level, expect to see the emergence of new types of players and ecosystems:

  • The ORIGINATORS will be firms gathering land and financial resources. They will create data by defining the built assets.
  • The PROVIDERS will provide the design, the raw material, the building products, the workforce (whether it is humans and robots), the equipment, and, most of all, the data.
  • The AGGREGATORS will be like the general contractors of today. They will orchestrate the projects and manage the flows of data: they will run, supervise, and monitor.
  • The CONSUMERS will be like the facility managers of today, in charge of the maintenance and the operations. They will use the data created by the other players to run the built assets.
  • Finally, the CONTROLLERS will control the finished work (the “as-built”). They will make sure the quality of the data and the processes are enforced.

Planners, land developers, designers, engineers, builders, and facility managers will still exist in the future. These five new categories are just new ways to look at the industry from the point of view of the data. Designers, engineers, and builders will still have plenty of work to do in the future. If we come together to capture, sort, and clean the structured and unstructured data of our industry, there will be increased benefits for everyone.

Today vs. Tomorrow: Embracing Duality and Working on All Aspects of Transformation

While business transformation is needed to sustain the future of the AECO industry, firms still need to adjust their strategy to address immediate concerns. According to an EY report on business disruption , this can be achieved by embracing duality, “As a result, strategy can be neither long-term nor short-term; an organization’s strategy must encompass both, and the interactions in between.”  

With Digital Transformation comes a new era of data and cultural reinvention that will be the answers to the technological aspect of the transition. For this matter, culture is as important as technology, and for any firm, a strong and agile culture is a competitive advantage. Construction tends to be a late adopter to change, and for the AECO industry, this new wave of transformation is also a cultural one. For these firms, moving to more data centricity is an immense cultural challenge. “The way things are done,” behaviours, beliefs, customs, attitudes, given ideas, feelings, perceptions, emotions are disrupted.  

At Autodesk, we are convinced that firms need to be more intentional about their Digital Transformation. We want our clients to make better decisions about their future. A special program called the “Arc of Transformation” has been set up to manage these strategic plans. It helps clients prepare and develop their out-of-the-ordinary initiatives, with new mindsets and new behaviors. With this method, they can improve in three domains: the activation of their data, the improvement of their performance, and the orchestration of their network. In order to go beyond heroics, a focus is placed on the cultural aspect of transformation. We believe this is one of the missing pieces of the puzzle. A lot of initiatives fail because this domain is underestimated. While working with clients, we use the Originator – Provider – Aggregator – Controller – Consumer framework to help them formulate their strategic orientation towards new roles and responsibilities. It changes our client’s perceptions of themselves. We have also defined frameworks to kickstart our clients’ business transformation. It guides them to set the right priorities, establish a solid program, and quickly achieve business outcomes. This allows us to assess their business by establishing their strategic profile, a business model health check, and using predefined initiatives and capabilities frameworks. The next step is our Industry Outcomes offerings catalog to quickly achieve business benefits and bridge the gap between innovation and business.

Rising Tide of the New Normal

The change in how a construction company operates, or how the industry operates, is not a simple change that can happen overnight. It’s a crucial shift that is of paramount importance, which will commence at every level. From marketing to management, laborers to leadership, companies to consumers, a rethink of strategy, and embracing duality is at hand.  

As venture capitalist Marc Andreessen stated in his influential essay, “ It’s time to build ”: “Part of the problem is clearly foresight, a failure of imagination. But the other part of the problem is what we didn’t *do* in advance, and what we are failing to do now”. To this respect, we see in our client’s organizations the emergence of new roles (i.e., Chief Data Officer, Chief Digital Officer, Chief Transformation Officer, Chief Analytics Officer, Chief Partnership Officer), new activities (that focus on data capture and usage), and new tools (to make business decisions and to develop insights based on data). Companies are forging new relationships with technology companies, shifting their collaboration from purchaser/vendor to becoming partners. We believe this is only the beginning.

As COVID-19 passes, so too will our previous trends and habits of the workplace and industry as we change and adapt. Here are some resources that may help you.  

  • The foresight report published by the European Network of Construction Companies for Research and Development (ENCORD). It can be downloaded here . I contributed to this work, and it is also a plea for Business Model Innovation.
  • The Autodesk – RICS report on Industrialized Construction and the Future of Work.  It explains where the industry is going and what new roles and skillsets are needed now and in the near future.
  • The book “Construction 4.0: An Innovation Platform for the Built Environment” , published in February 2020, is available for download on the publisher’s website or here . I was one of the co-authors.

There is no obligation for you to agree with or embrace the topics exposed in this article. I would like you to finish it being able to apply the ideas directly to your own culture for immediate effect. If you’d like to engage in an in-depth discussion on how business transformation in construction can help firms wade uncertainty, let’s discuss. Contact me on LinkedIn .

I will present this vision in more detail during a virtual session at Autodesk University 2020. It can be found in the Industry Talk section. It is called “New Business Models and Business Model Transformation in Construction 4.0” (#CS464709).

Olivier Lepinoy

Construction trends, tips, and news – delivered straight to your inbox, you might like..., demystifying autodesk technology: unlocking efficiency for factory planning and factory design, less guesswork, more confidence: how to make better decisions in construction , behind the build: interview with georgia loadholt, operations analyst at clancy & theys construction company.

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8 Profitable Construction Business Ideas For Your New Venture

8 Construction Business Ideas

Deanna deBara

When most people think about working in the construction industry, they think about big, burly machines, hard hats, and sky-high buildings. But what if we told you that you don't need to build the next Empire State Building to be successful in the construction industry?

Thankfully, the construction industry offers a number of possibilities that extend well beyond the realm of large brick-and-mortar structures. There are several lucrative and rewarding construction business opportunities that dovetail the industry, each offering their own unique potential for success and growth. So, if you're one of those aspiring business owners looking for viable and innovative construction business ideas, you're in luck.

But what, exactly, are those businesses? Let’s take a look at eight construction business ideas to inspire your small business:

1. Trade-based business

The construction business is all about putting buildings together, but the trade industry is what keeps those buildings working day in and day out. So, if you're skilled in a particular trade, starting your own trade-based business can be a great move. It's an awesome opportunity especially if you've got hands-on experience and a deep understanding of a specific field.

Imagine you've got a plumbing license. You could use that to kickstart your own plumbing business, overseeing all the plumbing stuff for new buildings in your neighborhood. Or maybe you're a pro electrician. In that case, you could start an electrical contracting business and work with construction teams to make sure their buildings are wired up right. 

If you're a wizard with woodwork, a carpentry business might be your thing. And if you're a "jack of all trades," you could go for a more general repair service. Whatever your trade, you can create a construction-related business that's built around your unique expertise.

2. Construction site management

Operating a successful construction site is a bit like trying to solve a giant, real-life jigsaw puzzle. There are so many pieces that need to fit together perfectly, and it can get pretty tricky. That's why construction companies often hire outside help to keep all the balls in the air and make sure everything stays on track.

If you've got a knack for a particular part of construction management, there are a bunch of cool business opportunities out there for you. For example, you might be great at land surveying. You could offer services to check out the land before a company starts building on it. Or maybe you're a pro at logistics, and you can ensure all the building materials get to the site on time and without breaking the bank. 

You could even offer services to keep all the workers organized and make sure they're finishing tasks according to the project's timeline. Whatever your skill, there's probably a construction site out there that needs it.

3. Construction cleaning business

Putting up a new building can be a messy endeavor—literally. If you're someone who can deal with that mess effectively, launching a cleaning business could be your ticket into the construction industry. But that’s only the tip of the iceberg. There are actually a bunch of cleaning services you could offer to construction firms.

You could provide daily site cleaning services, effectively making sure the area is free of debris and ready to go for the next building day. Or you could specialize in putting the finishing touches on newly built residential properties. A good cleanup can really make those homes shine and wow potential buyers, you know?

No matter what niche you choose within the cleaning business, remember to gear up with the right tools and supplies. After all, clearing a construction site of leftover debris will demand a different toolkit than getting a brand-new home prepped for its first open house. So keep that in mind as you plot your cleaning empire. This is about more than just cleanliness—it's about being ready for whatever the construction world throws your way.

4. Construction supply company

Every construction company out there invariably needs materials to bring their buildings to life—so why not start a construction business that supplies those materials?

You have a range of options depending on the specific type of construction firms you wish to collaborate with. You might carve out a niche specializing in both raw and business materials. Alternatively, you could consider focusing on materials tailored to unique projects. This could include roofing supplies, ceramic tiles for lavish bathroom renovations, interlocking slabs perfect for picturesque outdoor patios, or maybe even a steady supply of gravel, sharp sands, and cement essential for driveway paving.

On another note, why not contemplate a business geared toward supplying construction equipment? Imagine providing shovels, railings, and all-important safety gear to dedicated construction crews. With careful planning and an understanding of your market, you could become an invaluable partner in the construction industry, offering a one-stop shop for all their material and equipment needs. Just remember, every big construction project begins with the right supplies. This could be one of the most profitable types of construction business ideas. 

5. Interior design 

Every construction company plays a pivotal role in erecting homes and commercial buildings, taking pains to ensure their creations are safe, robust, and structurally sound. But they're often not the ones putting the icing on the cake, so to speak, by making these structures aesthetically pleasing. That's where the artistry of interior design professionals comes into play.

If you have an eye for design and a desire to contribute to the construction industry, becoming an interior designer could be the perfect fit. It's a fantastic way to exercise your creative flair while also dipping your toes into the bustling world of construction. And let's not forget, the opportunities in interior design extend far beyond just the construction realm.

Imagine collaborating with construction firms to infuse style and sophistication into their builds. Or perhaps take matters into your own hands by marketing your services directly to clients who are craving a designer's touch in their spaces. The reach of interior design is broad, and social media platforms like Instagram or Pinterest offer incredible platforms for showcasing your work. This visibility could be the key to scoring more business opportunities, allowing you to create a more robust and sustainable business.

6. Landscaping

No matter what kind of building a construction company is putting up, odds are the outdoor areas, like yards or lawns, will need some TLC. They'll need someone to plan the layout, plant the grass and trees, and keep everything looking sharp. That's why running a business in landscaping and lawn care can be a big money-maker in the construction world.

So, what's your special thing? There are plenty of ways to make a name for yourself in the landscaping and lawn care game. If you're all about the creative side, think about offering landscape architecture and landscaping services for new builds. Make the outdoors match the cool new building and boost its appeal.

On the other hand, if you're looking for steady work, starting a lawn care business could be the ticket. Offer maintenance services like mowing and weeding once the building is up and running. It's a great way to keep the cash flowing in on the regular.

7. Home painting business

Interior design is all about making the inside of a building beautiful. Landscaping is about making the outside beautiful. But there’s another construction related business that focuses on the aesthetics of both the interior and exterior of buildings—and that’s painting.

Starting a commercial or home painting business can be a great way to work in the construction industry. Again, there are a number of different ways you could promote a painting business; you could partner directly with construction companies to paint their new builds—or you could market your services directly to homeowners or property managers. There are also a number of different services you could provide; if you wanted to work with homeowners, you could offer interior and exterior painting services. If you wanted to work with residential property managers, you could offer to paint their units in between tenants. If you wanted to work in the commercial space, you could offer painting services any time a new company moves into the building. You could even start a paint consulting business, offering consulting services to homeowners or building managers who want to DIY their painting project—but need some pointers to ensure the best paint job.

8. Administrative services for construction companies

The bulk of a construction company’s work is, of course, in construction. But just like any other small business, there are a ton of administrative tasks that need to get done on a daily basis in order to ensure a construction business runs smoothly. 

And while some businesses hire administrative professionals in-house, other construction companies choose to outsource their administrative services—which is why, if you’re organized and have experience in administration, you might want to consider launching a business around providing administrative support to construction companies.

Construction businesses need to stay organized in order to run effectively—so if you’re an organized administrative professional, your experience could be in high demand in the construction industry.

Depending on your background and experience, there are a number of different types of administrative services you might provide to the construction industry. For example, if you have a background in accounting, you might provide bookkeeping services. If you’ve worked in HR, you might offer to handle employee paperwork , time tracking , and payroll . If you’ve spent more of your career as an administrative assistant, you might offer general administrative services like scheduling or data entry.

Tips for success when starting any type of construction related business

Ready to start your own construction or construction related business? Here are a few tips to keep in mind to make sure the business you’re building is a successful one:

  • Find a niche. The more targeted you can be with your services, the more appeal you’ll have to potential customers—so, if you really want to be successful working in the construction industry, you need to carve out a niche for your construction related business. So, for example, instead of starting a general painting business, you might consider starting a home painting business that specializes in interior painting for custom homes.
  • Create a business plan. Every new business needs a business plan—and a construction or construction related business is no exception. Before you make any moves, take the time to plan and create a road map to get you from where you are (a person with a construction business idea) to where you want to be (a business owner with a successful construction business). ‍
  • Look for partnership opportunities. As you can see, there are a huge variety of business types that fall under the construction industry umbrella, and few of them directly compete with each other. Look for opportunities to partner with other construction related businesses when it has the potential to be advantageous for everyone involved; for example, if you’re starting a lawn care business, you might reach out to local landscape architect businesses to see if they want to refer clients to you for lawn maintenance once their design projects are complete.
  • Invest in Your Team. Construction, or any related business, is inherently a team effort. It requires a blend of skills from project management to technical proficiency. Therefore, it's crucial to invest in your team. Ensure that your staff is not only equipped with the necessary skills but also motivated and driven to succeed. This could mean providing ongoing training, rewarding good performance, or cultivating a positive work environment. After all, the strengths and productivity of your team can have a direct impact on your business's success.
  • Adopt Technology. The construction industry, like many others, is continuously influenced by advancements in technology . Embracing these changes can provide your business with a competitive edge. For instance, project management software can streamline processes and improve efficiency, while virtual reality (VR) can facilitate client visualization of projects before completion. The technology you adopt should align with your specific business needs and could ultimately improve the services you offer, customer satisfaction, and your bottom line.

Get out there and start the best construction business for you

Clearly, there are a number of business opportunities in the construction space. But now that you know the different types of business you might consider building, all that’s left to do? Get out there and build a profitable business that plays to your strengths—and is the best business in the construction space for you .

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Please note you do not have access to teaching notes, developing a construction business model transformation canvas.

Engineering, Construction and Architectural Management

ISSN : 0969-9988

Article publication date: 22 December 2020

Issue publication date: 10 June 2021

Industry 4.0 is driving an incremental shift in paradigms for the construction industry. Current research in the built environment is limited to exploring the exponential technological prowess of Industry 4.0 with very little work on its implications to the construction business model, strategy and competitive advantage. There arises a challenge for researchers to understand how appropriate technologies can be assembled to assist in achieving the goals of construction businesses. The overarching aim of this research is to develop a construction Business Model Transformation Canvas (BMTC) to map the transformation of construction enterprises in Industry 4.0.

Design/methodology/approach

The research was carried out by conducting an expert forum with academics from nine universities across Australia and New Zealand. The study employed purposive sampling, and the academics were selected in a strategic manner in order to provide data that are relevant to the research.

The research identifies that technology-based partnerships supporting strategy and capability building, platforms enabling enterprises to conceive, design, manufacture and assemble buildings and competition with stakeholders having superior capabilities not in building but in other areas of business are fundamental to Industry 4.0 transformation.

Originality/value

The results present state-of-the-art development of business model research in construction that intends to support the strategic planning of construction enterprises in Industry 4.0. This research is the first and only research that uses a business model canvas (BMC) for strategy-reformulation in incumbent construction enterprises to maintain a competitive advantage in Industry 4.0. Merits of the construction BMTC lie in its holistic approach, visual representation and simplicity.

  • Industry 4.0
  • Business model canvas
  • Construction business model transformation
  • Smart construction
  • Modern construction
  • Offsite construction
  • Expert forum

Acknowledgements

The authors would like to acknowledge that this research is fully funded by the Centre for Smart Modern Construction under the School of Built Environment at Western Sydney University.

Das, P. , Perera, S. , Senaratne, S. and Osei-Kyei, R. (2021), "Developing a construction business model transformation canvas", Engineering, Construction and Architectural Management , Vol. 28 No. 5, pp. 1423-1439. https://doi.org/10.1108/ECAM-09-2020-0712

Emerald Publishing Limited

Copyright © 2020, Emerald Publishing Limited

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BUSINESS MODEL CANVAS

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best business model for construction company

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Agile-Operating-Model

The Agile Operating Model: Why It Is Perfect for Construction Companies

In economic and sociopolitical times as demanding as those facing the world today, from the increase in material costs to international labor shortages and supply chain difficulties brought by the global health crisis and political instability, operational business excellence has never been more pivotal.

Transparency is the new visibility when it comes to capital construction project developments. For decades, organizations have struggled to capture accurate, reliable project performance, cost and schedule data. However, in recent years, there has been a growing emphasis on bringing visibility to these processes across all organizational functions.

“What will a top 20 percent Innovative leader look like in 5 or 10 years’ time?

We believe that these organizations will be highly agile and thrive in an environment of continual disruption. Current leaders who have invested in technology and innovation are already developing the skills and operating model to succeed”.

KPMG; Leaders and followers in the engineering & construction industry, Global Construction Survey, 2019

Since an operating model is a foundation of how organizations function and work on a day-to-day basis. Adopting agile operating principles and practices such as lean thinking, Design Thinking, and Agile is becoming increasingly familiar in capital project communities. These operating principles drive project delivery efficiency by streamlining communication across departments and teams, empowering individuals with accelerated decision-making capabilities, promoting cross-functional collaboration, and integrating standardized processes across an organization.

Operating Model and Organization Design

Operating Model and Organization Design

As a result, construction operations must be agile to maintain effectiveness in today’s fast-paced world. So, let’s take a closer look at what an Agile operating model means for construction firms and how it can help them thrive in today’s business climate.

Understanding the agile operating model

The agile operating model is a work philosophy for digital project management that was first created in the sphere of software development in 2001 – through the inauspicious yet groundbreaking publication of the Agile Manifesto .

The agile operating model is a framework for integrating agility into a business. It enables organizations to respond quickly and efficiently to shifting business conditions. Business agility can be applied and customized in all business activities, such as product management, marketing, sales, operations, and supply chain. The most successful companies are those that can quickly adapt to market changes, recognize new opportunities and respond with speed and agility. Business agility is about organizational culture, work design, continuous improvement and having the right people on board.

“Companies know that rigid, slow-moving models no longer cut it. The challenge is to move toward a structure that is agile, flexible, and increasingly collaborative while keeping the rest of the business running smoothly. Successful incumbents become agile by simplifying. They let structure follow strategy and align the organization around their customer objectives with a focus on fast, project-based structures owned by working groups comprising different sets of expertise, from research to marketing to finance”.

McKinsey Digital; Six building blocks for creating a high-performing digital enterprise, 2015

These same intrinsic operational values make the agile operating model an excellent means of adaptive management in the construction industry. Many of its principles, practices and tools synergize well with construction companies’ operational needs, including: 

01. Ease of collaboration

An agile operating model helps companies collaborate across all functions and departments. Collaboration is more effective with common principles, vocabulary, and practices and t eams work smarter, leveraging seamless communication channels and virtual co-location technology . This is one of the most critical aspects of successful Agile implementation.

02. C ommon understanding of value stream

Projects are often siloed within organizations, which can create many inefficiencies. Adopting agile operating principles can help break down these silos to create a shared understanding of the value stream. A value stream map helps an organization understand the flow of their projects, from customer requests through production and delivery. It can also help identify where gaps in functionality exist, where there are areas for improvement, and where any bottlenecks exist.

03. Ensure end-to-end transparency

Transparency extends beyond requirements into the entire lifecycle of a project. Each process phase should be transparent, including the backlog, status, estimated effort, and duration. Transparency into the status of a project allows stakeholders to make decisions about future projects or take corrective action on the project they are managing .

04. Risk is managed proactively

A truly agile organization proactively manages risk and uncertainty with a transparent operating model that enables project leaders and stakeholders to identify potential issues as they arise, making informed decisions to mitigate these risks. In addition, team members feel empowered to ask questions and identify problems as they arise, fostering collaboration and helping stakeholders understand their challenges and constraints.

05. Culture of continuous improvement

For decades, organizations have struggled to grasp the total cost of capital projects fully. Agile culture of continuous improvement drives investment in tools that help capture project data and drive greater transparency and accuracy. Organizations can employ agile project management tools in capital project environments to track schedule progress, resource utilization, project spend, risk and issues.

06. Greater resilience to the unexpected

The agile operating model promotes a greater resilience to unexpected events. The waterfall approach is sequential, while the agile process is iterative. In the waterfall approach, all activities are completed in one go, while in the agile methodology, they are broken down into smaller chunks. This allows greater flexibility, as organizations can pause and re-evaluate certain aspects of a project if specific criteria are not met.

Agile operating model key requirements

Four Challenges of Adopting Agile Team structure - Digital.Gov

The key to implementing an agile operating model is to focus on customer value. Any business should be able to clearly identify their customer and their needs, then translate those needs into tangible and measurable outcomes. And since customers’ needs and expectations are constantly changing, successful businesses need to be flexible enough to adapt to those changes quickly. To achieve these goals, construction companies should focus on these four key areas of the agile operating model: culture, leadership, collaboration, and decision-making:

  • Culture: Construction companies need to emphasize cultural change in order to compete effectively. They should create cultures that embrace collaboration, openness, and long-term value creation. Of course, it is easier said than done, but cultural change is a priority because it helps businesses to adopt agile implementation, which can be an obstacle if not prioritized.
  • Leadership: Construction companies are notorious for their hierarchical cultures and top-down decision-making, which are incompatible with the agile operating model. Successful agile implementation requires a business to emphasize self-organizing teams, enable them to make decisions independently, and focus on delivering value to customers.
  • Collaboration: Construction companies must embrace a more collaborative, open culture to implement an agile operating model. This means making decisions more inclusive and less hierarchical, creating and maintaining solid partnerships with all stakeholders, and delivering customer value efficiently.
  • Decision-making: Construction companies need to embrace more inclusive decision-making approaches to understand their customers better and translate their needs into tangible outcomes. Decisions must be made at lower levels, and the decision-making process must be open and accessible to all stakeholders.

The interplay of traditional construction working best practices and the agile operating model

There can be no doubt that the traditional operating model of construction companies has manifold advantages. Indeed, the vast urban sprawls and high rises of the world’s great cities are themselves testaments to how effective the construction sector is in shepherding the very fabric of civilization ever forwards.

Construction has always been a challenging industry. However, the pace of change and need for innovation is accelerating faster than ever, thanks to the massive transformation of digital fabrication and automation, new operating models, and changing preferences of customers who now demand transparency and sustainability in their investments.

The interplay of traditional construction best practices and the agile operating model depends on the level of digitization within a specific industry. The agile operating model could be applied almost as-is if a sector is highly digitized and automated. At the same time, it’s important to recognize that not all practices apply in every situation. The agile methodology works well in some scenarios but might not be an optimal fit for others. Some methods, such as traditional waterfall and agile planning methodologies, are best used together for maximum positive impact on projects.

Not only does this imply a more streamlined integration of agile operational methods when undergoing a digital transformation, but it also serves to remind construction industry professionals that the agile operating model can proactively shore up weaker links in the value chain just as readily.

How does the agile operating model align with the traditional construction business model?

Agile and traditional construction business models can overlap across several dimensions. Let’s review a few of the most common ways in which Agile and traditional construction business models align:

  • Cost: Traditional business models try to forecast and manage costs. agile business models use data to inform decision-making.
  • Scope: Traditional business models rely on contractual obligations and careful scoping to deliver on projects. Agile business models focus on collaboration and responsiveness to change.
  • Deliverables: Traditional business models focus on the contractual obligations of each side. Agile business models focus on collaboration and delivering value to customers.
  • Resources: Traditional business models rely on planning and forecasting. Agile business models focus on using data to inform decisions.

How does the agile operating model differ from the traditional construction business model?

The agile organization is dawning as the new - The 5 Trademarks of Agile Organizations - McKinsey Dec 2017

Source: McKinsey; The 5 Trademarks of Agile Organizations 

The agile operating model is more future-focused, and the traditional operating model is more past-focused. The agile operating model focuses on continuous improvement, collaboration across the business, and quick decision-making based on data. The traditional operating model focuses on planning and control that are more slow, methodical, and based on estimates and forecasts. Regarding working with customers, the agile operating model focuses on collaboration and responsiveness. The traditional operating model has more of a contractual focus where the customer and contractor are both responsible for meeting their obligations.

How the agile operating model aligns with traditional leadership

The agile operating model emphasizes adaptive leadership practices. These include coaching, mentoring, and leading through influence. In contrast, traditional leadership practices are more about directing and commanding. While the agile operating model emphasizes these adaptive leadership practices, it does not suggest that traditional leadership practices are irrelevant.

The agile operating model also emphasizes the importance of empowerment in the construction industry. This is why Construction enterprises must adopt inclusive decision-making approaches and empower their employees to make the right decisions to adapt to the agile operating model.

Leadership styles such as situational and transformational leadership are still important in construction companies and are beneficial when driving operational excellence. However, being agile in construction does not mean tossing out formal leadership styles. Instead, it means finding a balance between traditional and agile leadership.

Agile construction companies evolve the efficiency of project development

Agile Productivity

Revenue growth is a top priority for every construction business, and Agile construction companies evolve the efficiency of project development by measuring and improving every stage of the process. This includes monitoring project risk, resource capacity, and portfolio management. Projects are monitored and controlled consistently. Projects are managed and monitored through collaboration, regular review meetings, and project dashboards. Projects are executed and managed with a hands-on approach. Projects are organized using a coherent methodology. Many of the best practices associated with the agile operating model are new to the construction industry. This includes:

  • Agile contracting: Agile contracting is a form of commercial contracting that uses standard forms tailored to the needs of specific industries. The contract is agreed upon at the start of the project and rectified as needed throughout the project life.
  • Agile procurement: Procurement is a process for identifying, evaluating, and selecting suitable materials or services for the project. It begins when the project is first conceived and continues throughout the project’s life, involving the people responsible for project decisions throughout the organization.
  • Agile risk management: Risk is any event that could negatively affect a project’s expected outcome. Agile risk management ensures that all relevant stakeholders are involved in risk identification, assessment, and mitigation.

Moreover, in an era in which the labor shortage of countless industries, construction included, is a major point of debate worldwide, the cross-generational appeal of the agile operating model is a significant advantage if effectively actioned in construction management process improvement. Similarly, those construction sector laborers and white-collar workers with many years of experience can use the strategies empowering agile construction companies to leverage their expertise more effectively, drastically improving job satisfaction.

How Agile construction companies communicate and collaborate better

Communication is one of the most critical elements of the agile operating model, as it’s essential for project collaboration. Unfortunately, it’s also the area where many construction businesses struggle the most. Communication challenges within construction projects typically occur due to siloed teams that lack a single source of truth or a shared understanding of the project’s goals. Moreover, communication can be complex in a multi-site or multi-national project environment. The following strategies should be implemented to improve communication and collaboration within your organization:

  • Practice Agile communication : Agile communication techniques prioritize closer collaboration and information sharing among stakeholders to ensure alignment and allow quick decisions and alterations throughout the process. It reduces the steps required to get the information across and includes a minimalist approach to documentation.
  • Use visual management : Visual management involves creating visual representations of project plans and ensuring everyone involved have access to these visuals. This can be achieved by integrating Kanban boards where Agile construction teams can visualize their work process’s stages (and substages).
  • Create a knowledge management system: A knowledge management system is a centralized tool that enables employees to find the information they need quickly, no matter where they are.
  • Create the right culture: The right culture can support a “build relationships” strategy that helps you identify and connect with people with the necessary skills. It would be best if you also encouraged your team members to be more open and transparent, making collaborating easier.

Thanks to this enhanced level of collaboration, the day-to-day workflow in agile construction companies are much more efficient, and opportunities for idea generation, innovation and a level of empathy and understanding as to what makes each team tick are also enhanced.

The benefits of harmonizing the agile operating model with Modern Methods of Construction (MMC)

Six fundamental changes underpin a new approach to capital project delivery - McKinsey 2020

Source: McKinsey; Si x fundamental changes underpin a new approach to capital project delivery 

A construction company can benefit from implementing Modern Methods of Construction (MMC) and harmonizing them with an agile operating model. Your project teams can make better decisions thanks to the correct information and data availability. This can help you to avoid delays and cost overruns. MMC is a collection of methods and practices used to deliver projects. A construction company can benefit from implementing MMC principles such as integrated planning, demand management, automation, and Design for Manufacturing and Assembly (DfMA) . These principles are designed to make projects more efficient, straightforward, and safer. When you combine these principles with an agile operating model, you can expect to see the following benefits:

  • Better productivity : You can produce accurate estimates that reflect the project’s current state. This will reduce the risk of delays and cost overruns.
  • Less risk: You can identify and manage risk earlier in the process. This will help you to avoid unnecessary costs.
  • Reduced project complexity: You can build more uncomplicated, integrated plans that don’t require excessive resources. This will help you save money.

Since MMC minimizes downtime, waste of materials, and unnecessary workforce, Agile construction companies may use their new skills in analyzing and evaluating MMC practices to improve their scheduling efficiency as they implement MMC strategies in new developments.

Why construction businesses should adopt Agile

“A new operating model combines cloud-based digital technologies and agile operational capabilities in an integrated, well-sequenced approach that can rapidly accelerate digital strategy and transformation. The model helps to coordinate end-to-end operations across silos—supporting customer and employee journeys, for instance—while taking technology out of quarantine and making the most of it across all lines of business”.

McKinsey; Five priorities for CEOs in the next normal, September 2021

There are plenty of reasons why construction companies should adopt an agile operating model. The most important of these is that they allow quick and nimble decision-making in a constantly changing business environment. This is particularly important in the construction industry, where project timelines are notoriously hard to predict, and change is pervasive. When construction projects are delayed due to external factors, agility allows businesses to respond quickly. They can scale down or even cancel specific projects without worrying about their core operations grinding to a halt. This is crucial, given that many construction companies have struggled to keep up with the pace of change in recent years. If a company follows a rigid operating model, they risk being unable to respond to significant disruptions in its environment. This will almost certainly lead to substantial reductions in profitability and growth.

The digital transformation of the construction industry makes the agile operating model essential

A recent article by McKinsey, “Voices on Infrastructure: The project of the future,” highlights the need for construction companies to implement an agile operating model to support their digital transformation. That’s because the Agile model is designed to optimize the flow of information between stakeholders. It does this by reducing the number of steps involved in a particular process, meaning that your project teams can improve collaboration and decision-making thanks to the correct information and data availability. This can help you to avoid delays and cost overruns.

Bashar, the founder of the Construct360 system, can help orchestrate your company’s digital transformation and implementation of a modern operating model, explaining which agile strategies should work best for you. Agility and MMC are blurring the lines between manufacturing and construction. Are you and your team up for the challenge?

The agile operating model is one of the change catalysts and enablers in the Construct360 practical approach to digital transformation in construction and real estate development companies.

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Bashar Jabban

More From Forbes

Why every business needs its own gpt.

Forbes Technology Council

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CEO and cofounder of Glean .

Consumers are adopting generative AI faster than any technology in recent memory. OpenAI, Microsoft and Google are embedding it into the tools and platforms used a billion times daily by people around the world.

And given the potential of a tool like generative AI for the workplace, businesses are chasing close behind in trying to figure out how to incorporate a version of ChatGPT into their workflows. Generative AI is already used by 37% of marketers, 35% of technology teams and 30% of consultants, according to a Statista study from last December.

Why? Open generative AI models can seemingly perform a stunning variety of knowledge tasks. People are using it to write and check software code, draft marketing campaigns or press releases and produce HR policy documents and onboarding materials. Some are looking to use it to accelerate search and knowledge discovery across businesses of any size like nothing we’ve ever seen before.

As someone who has spent most of their career working with AI, especially as applied to search, I have to say—hang on a minute. This speed of adoption is risky. Large language models (LLM) like ChatGPT do represent an enormous improvement in coherency (the ability of AI to produce sense-making answers), but open models don’t deliver any value if they can’t deliver their answers in a business context. One accidental error or confidential leak can trigger serious privacy and security violations.

iOS 17 4 Release Date Awesome iPhone Update Just Days Away

A 30 second skull and bones video that negates 11 years of development, google suddenly issues new warning for samsung galaxy and pixel users.

Before we can rely on LLMs in the enterprise, the technology has to deliver on three major requirements: accuracy, trust and permissions.

An off-the-shelf model like ChatGPT 4 or Bard can produce wrong answers so confidently that a non-subject-matter-expert would have a devilish time identifying the flaw. This renders open-model generative AI inconsistent at best and disastrous at worst. A study from April 2023 audited four popular generative search engines and found that, on average, only 51.5% of generated sentences were fully supported by citations, and only 74.5% of citations supported their associated sentence. They’re right—these results are “concerningly low for systems that may serve as a primary tool for information-seeking users.”

The business setting requires responses that are correct in their nuance, not just understandable and directionally correct. To understand precisely which information to surface, an enterprise AI has to understand an organization's intricacies, policies, language, and how teams and individuals collaborate, along with many other factors. Getting rid of “creative errors” requires an enterprise LLM to be trained on a specific domain (law, insurance, oil & gas) or company knowledge graph, especially for semantic tasks like search.

Knowledge domains are like Russian nesting dolls: Within each domain, there are sub-domains, each with its language. Some tasks require more domain knowledge than others. For example, for named entity recognition (plucking out proper names), a model trained in the English language will be good (because the domain is not super important).

But, an LLM trained in my company’s specific knowledge graph would know that a search for Scholastic should return information about our data retrieval and scoring model, also called Scholastic. If you were to type questions about Scholastic into ChatGPT 4, you’d likely get responses about curriculum, education or the children’s book publishing company. Similarly, Bloomberg’s GPT , trained on 50 billion parameters from its financial data, significantly outperforms open models on natural language processing in the financial services domain.

There are critical aspects of trust businesses need to have in place before they can reliably use generative AI in the enterprise. For starters, the results must be human-interpretable. Everyone in an organization has to know how the model generates the answers it provides.

Transparency is another critical contributor to trust. The provenance of any generated answer should be clear and explicit: creator, date, the context of its creation, how it adheres to data governance policies and, ideally, its relationship to other materials and source files. Humans have to be in the loop. They need tools like free-form text fields to alert admins and up- or down-voting to flag inaccuracies to feel like they can trust the machine.

Permissions

No company would (or should) set loose an open-model LLM on its company’s information without first guaranteeing its users only see answers they’re allowed to see. Enterprise LLMs can and must adhere to a company’s privacy rules and data governance policies, just as any enterprise application would. However, generative AI changes the nature of the data governance problem.

Company-specific LLMs can reduce the chance of information leakage because they’ve already modeled the company’s unique language. A system built on words in that domain or restricted to that company’s knowledge will better understand if and when certain people have access to that information. It can better answer questions like, “Is the information we’re generating for you specific to the documents you can access?” (This problem won’t disappear as long as concepts like information and documents remain blurry.)

Generative AI will be a critical force multiplier for knowledge workers. Still, we must ensure the models that businesses depend on for critical knowledge discovery are based on a stable, secure and trusted foundation. We’re far from taking our hands off the wheel; even the most trusted knowledge models need human oversight. But the generated truth is out there.

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Arvind Jain

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