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Agile methods have proven successful in increasing customer satisfaction and decreasing time and cost to market under uncertain conditions. Key characteristics of agile methods are lean, flexibility and highly iterative development with a strong emphasis on stakeholder involvement. Today construction firms in general and small to medium‐sized enterprises (SMEs) in particular are surviving in a drastic competitive environment in which they are facing more and more challenges. Additional innovation is needed in the construction sector, with increased participation from more competitive SMEs. The main purpose of this paper is to present a model to prioritize available management systems to help SMEs address the challenge of today's market competition more effectively.

The research methodology used is that of interpretative case study and grounded theory based on a strong empirical foundation, on which new theoretical insight into knowledge management as an autonomous action is developed. The paper looks at ways by which SMEs are managed, based on the empirical data collected from 12 case studies. It presents the empirical findings drawn from the case studies. Finally, the adoption of agile methods is subjectively assessed as to its potential contribution for improving the business processes of small and medium construction firms.

It is assessed that agile methods offers considerable potential for application in construction SMEs and that there are significant hurdles to its adoption in the actual phase. Should these be overcome, agile methods offers benefits well beyond any individual company.

Construction firms need to be aware of the advantages of new management paradigms and practices. The analysis shows that SMEs in the construction sector have to internalize agile values into their business processes to reap the benefits of agile methods. It also reveals that existing practices show some kind of agile flavours.

Agile principles and methods are explored, including: philosophy, values, practices and benefits. The management approaches used by construction SMEs are analyzed and discussed. The paper presents recommendations and insights for enhancing the performance and efficiency of SMEs by adopting agile values in their business processes.