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The impact of digital

01. Providing non-construction services to clients enough to adjust quickly to the market, lean enough
João Paulo Domingos Joaquim Duarte Oliveira Filipe Sousa Faria to be competitive and innovative enough to deliver
Firms are providing a full spectrum of solutions
Deloitte Portugal Deloitte Portugal Deloitte Portugal quality and new services. In less than ten years, we
to extract value from technologies and the key

transformation on [email protected] [email protected] [email protected]

business expectations of each client. The core
goal is to shift from an exclusive focus on E&C to
will have witnessed a massive industry and business
reconfiguration.

construction companies’ becoming a “full” business partner. In E&C, exploring new ways to grow will remain the
building block for generating profits and building

diversified strategy
In recent decades, firms have been investing market share. Revenue and knowledge will be
mainly in developing their offering of services in increased through dedicated innovation hubs,
consulting, staffing solutions, procurement and business incubators and accelerators and corporate
supply chain, real estate and management (such venture initiatives. Competitive advantage and
as operations management, facilities management strategic market positioning will be achieved through
What motivates companies to and IT). Certain players are also investing in less partnerships with universities, start-ups and experts in
The construction industry globally operates in a highly diversify their business? related areas, such as fashion and hospitality. niche technologies/knowledge areas, enabling firms to
potentially become specialists. Participation in cross-
competitive environment, with narrow EBITDA margins. Companies continue to re-invent their business 02. Performing activities included in the asset life
market discussions and initiatives and a strengthened
portfolio to leverage a set of specific drivers, involving cycle
Unexpected events, such as the current COVID-19 construction and non-construction activities. These Expanding the business portfolio also means
position in the value chain will be attainable by
acquiring stakes through M&A activity. This is a path
crisis, present additional challenges. Engineering and are: increased synergies, harnessed competitive offering an integrated set of solutions throughout that results in improved financial performance and risk
advantage and knowledge, as well as higher the asset life cycle. To become end-to-end solution
Construction (E&C) companies have been diversifying profitability, shorter life cycles and more recurring providers, companies have been investing heavily
management and a growing market share, whether
centered on the core business or not.
their business portfolios. The motivations behind this revenue from non-construction activities. However, in concessions, water and waste management,
since these activities usually require higher investment energy systems and plants, maintenance and At the same time, E&C companies with different
are common to all sectors and consist of growth, levels than pure construction, diversification entails asset management solutions, remodeling and diversification levels, ranging from pure construction
synergies, reduced risk and cash flow recurrence and risks such as the burden of debt. turnarounds. to diversified groups, are expected to hit the market
differently, following their own particular strategies. For
stability. diversified companies, the future will bring additional
Two-way diversification strategy The agenda for the future trade-offs and challenges.
Construction groups have been diversifying their Construction 4.0 will continue to transform the
Digital transformation brings new challenges and new business portfolio and, more recently, have done so industry through digitization (through, for example,
Construction groups with an extensive presence
across segments will firstly have to evaluate which
diversification opportunities. In this article we explore mostly through M&A activity. They do this by providing the automation of construction sites and artificial
segments to serve, even before defining the assets/
non-construction services to construction customers intelligence). Market disruption forces companies to
how E&C companies will ramp up growth now and into and performing several activities included in the asset be agile, i.e., to reassess their strategy and operations
initiatives in which to invest. Intuitively, they will have
to be selective and prioritize investments (to an even
the future. life cycle. in a timely manner. Companies need to be flexible

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greater degree), choosing between building up core Conclusion assurance, consulting, financial advisory, risk advisory,
tax and related services. Our network of member firms
activity, integrating the value chain and embracing new in more than 150 countries and territories serves four
businesses. Despite this, and following market trends, out of five Fortune Global 500® companies. Learn
E&C is an industry in evolution. In the coming years, how Deloitte’s approximately 312,000 people make an
the construction segment will continue to have the
companies must continue to invest in technology impact that matters at www.deloitte.com.
biggest share of the pie, after divestments of non-core
if they are to sustain their position. Innovation
businesses. Companies will rethink their participation This communication contains general information only,
and growth will be centered on core business, and none of Deloitte Touche Tohmatsu Limited, its
in knowledge-intensive segments to free up investment
despite the potential collateral contribution to member firms or their related entities (collectively, the
capacity for capital-intensive segments (construction). “Deloitte network”) is, by means of this communication,
diversification. Diversified E&C groups will come up
Pure construction players will keep the focus on their rendering professional advice or services. Before
with reinvented business portfolios and the growth making any decision or taking any action that may
single core business and invest in strategic assets, such
and competitiveness of other activities, especially non- affect your finances or your business, you should
as technology, to develop competitive cost advantage consult a qualified professional adviser. No entity in
construction, are expected to fall.
(efficiency). the Deloitte network shall be responsible for any loss
whatsoever sustained by any person who relies on this
There are two key takeaways: the need to explore communication.
new ways to grow as a key success factor and the
importance of making strategic decisions tailored For more information, contact Deloitte Consultores, S.A.

to the degree of diversification and profile of each © 2020 Deloitte

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