Point of View

10X Growth for Building Service Contractors through Digital Transformation

February 26, 2021

India is set to witness rapid economic growth in this decade. Some Project Contractors will make the most of this wave, some will disappear in consolidation. Digital will be a key determinant.

The golden opportunity of a decade (202x)

What if we tell you if you do 25 Crores turnover today, you should target 250 Crores in the next 10 years. If you do 100 Crores today, you should gear up for 1,000 Crores. Sound big? Well it’s only about 25% y-o-y growth. But the catch is to grow at this rate CONSISTENTLY FOR 10 YEARS, on an INCREASING BASE.

Your social news feed must have started shifting from challenges to opportunities? If not, here it goes: India is projected to grow from USD 2.7 trillion to USD 10 trillion by 2032. That’s almost 4x growth in about 10 years. And it is said that India will be the world’s third-largest economy by that time. The Construction and Building Services industries will contribute to a major chunk of the growth.

But wait, mid-sized businesses will see faster growth-rates than the general economy. And well-managed mid-sized businesses will outpace the average growth of mid-segment businesses. In short, there is an opportunity for “well-managed mid-sized businesses” to grow even by 10x! 

Top Challenges for Building Services contractors

To capitalize on this opportunity, you need to carefully plan and prepare to address the challenges. When we speak to our customers and industry leaders in Building Service Contracting, they often call out the following growth challenges:

Talent availability

It’s going to be increasingly difficult to attract and retain qualified and affordable talent. 

  • You will be competing for talent not only with other companies in your industry, but also with well-funded startups in other industries and the gig-economy in general.
  • Average time spent per job will be shorter, so you need to consciously design your operations to be more systems-driven.

Increasing margin pressure

There will be further downward pressure on an already thin margin. Competition from multinational entrants will accelerate this further.

  • You need to leverage data to the fullest extent to estimate and quote at right prices, identify attractive projects, and back out of less-viable projects.
  • You should have tight and proactive control over budget variances to protect margins.
  • You need to differentiate your services to be able to command  premium pricing over the competition.

Geographic expansion

To capture a larger share of the opportunity, you will need to expand your geographic presence. Local players should aspire regional presence, regional players should aim for national presence.

  1. You need to develop capabilities to coordinate with remote teams
  2. You should leverage economies of scale by centralising functions such as purchase, commercials, and accounting.
  3. Standardized processes, system-driven operations and controls will play a pivotal role.

Vertical integration

We already see this trend becoming a reality. For instance, many HVAC contractors have made a move to MEP services. Some have even added IBMS and Corporate interiors to their portfolio. Customers will increasingly prefer one vendor offering integrated Building Services. You need to add newer skills, departments, and people to cater to this need. 

You may be used to taking decisions based on intuition and past-experience based benchmarks in one familiar segment, but this may not be viable when you offer a broader set of services. You need to leverage data and MIS effectively at each step of decision making to win the integrated service-provider game.

Operational Efficiency

While there are several factors that are beyond your control, this one certainly is in your control. To compete with large companies at different geographies in multiple service lines, you will need to:

  • Get more work done with the same staff
  • Eliminate coordination delays, errors, and inefficiencies
  • Increase speed of decisions and approvals
  • Increase transparency and accountability

Vendor Consolidation

The micro and very small contracting businesses were put to the test in the last 5 years with factors such as GST, cashless economy, and COVID-19. In this decade, small and medium businesses will need to stand the test of consolidation. It is imminent  that fewer but larger players will emerge. We have already seen the onset of multinational companies entering the building services sector in the last decade. This trend will only accelerate.

Companies with strong operational back-bone, systems-driven processes, data-driven decisions, integrated services, regional or national presence, differentiated offering will emerge as the winners.

Technology advancements

There is a lot of technology innovation happening in the construction space at a rapid pace - BIM, IoT, intelligent buildings, CMMS - you may already be familiar with these technologies. But less is talked about the technologies for contractors to manage their operations and create a strong systems back-bone for supporting their growth.

The B2C customer segment has seen technological advancements at a rapid pace in the last decade. Acceptable service standards have risen tremendously. The same trend will become a standard for B2B services in this decade. Customers will expect their service providers to be fully digital-enabled, be present on all channels, be highly responsive to their requirements, and be trusted advisors to customers. 

Why digital will be the cornerstone of this growth

Many of the challenges are already familiar to the industry. But their combined effect  will accelerate in the coming years at a rapid pace. If anything, COIVD-19 has clearly shown us the weak links in the entire operations chain.

You can’t solve these challenges with manual and highly people-driven operations. You need to create a digital foundation for your business. It’s not going to be a one-time activity, but an ongoing core-activity that will result in sustainable competitive advantage.

How leading Project Contractors are using digital

A vast majority of the Building Services contractors still use manual or semi-automated workflows in their operations. Luckily, we now have case studies of many contracting businesses in India that have successfully adopted digital transformation. The results are now available for all contractors to take inspiration from. We have curated the reported results into broad categories for your easier understanding.

Common digital work platform

You may be currently using a mix of individual software (such as service management software, purchase management software, accounting software) and manual methods (like excel). For a successful digital transformation, you need to establish a common work platform that connects all of your employees - across all departments and processes.

“You don't need to log into multiple software and take the data. If you ask for an MIS which needs to pick up certain things from this and certain things from that, this is easily available. So, MIS is faster, more accurate, integration of data is easier, and navigation and operations is easier.” - Mr. Amitabha Sur, Director, Aircon India

An all-in-one growth platform will ensure the following:

  1. End-to-end operations are streamlined - from the sales stage to closure stage.
  2. All data is in one platform, so you do not depend on people for getting information.
  3. Productivity is significantly increased.

Data-driven decisions

“Data is the new oil”. Unrefined data is of little value to you. It has to be combined and presented in ways that will help you  make operational and strategic decisions.. Should you authorize this purchase? What will be the effect of the rate variation on the overall project profitability? What is the unbilled inventory in this project? These questions shouldn’t take hours or days to answer. You need to have ready answers so that you can apply them in daily decision making.

Strategic analysis of lost enquiries can unveil the trends on where you need to improve. Variance analysis at a BOQ category level will highlight the overall effectiveness of your estimation process.

Proactive operational controls

From the estimation stage, through indenting and purchase stage, you need to ensure that any variances are proactively controlled. When you have a large number of simultaneous projects, along with a large number of purchases on a daily basis, software driven controls are very effective in preemptively controlling variances.

Scale through standardization

Growth needs a strong process backbone. A standardized system-driven process will give you the scalability.

“Previously, we used to handle 20 concurrent projects. Now we are able to handle 60 high-quality concurrent projects, with almost the same backend staff.” - Sridhar, Director, Enmac Systems. 

Wow-factor customer experience

Digitally enabled customer experience is something all contractors aspire to provide. The following are the practical ways of boosting customer experience.

  1. Respond to customer queries instantly, with your mobile app.
  2. Raise scope variances right on time, not at the end of the project.
  3. Complete preventive maintenance services on time.
  4. Go for digital service reports, send service updates through Whatsapp, accept online payments.

About GrowSmart

GrowSmart is the all-in-one growth platform preferred by leading mid-sized Building Service contractors across India. GrowSmart is made for Project Contractors, proven for results, easy to use, and is affordable. Want to know how you can initiate digital transformation for your company? Please drop us an email for expert advice.

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