Strategy+: 3 common mistakes to avoid before starting your intelligent ERP transformation journey and how to devise a strategy to avoid them.
- As companies look to enter and conquer the digital world, implementing or upgrading the ERP technology is usually one of the top agenda items to tackle. With the vast variety of ERP options in the market today, some leaders fall short to create an end-to-end solution that truly serves their business vision.
- Companies can fail to establish a successful ERP transformation program before they even setup and mobilize it by doing these three classic mistakes: (1) focusing on a specific technology & a handful of system integrators rather than performing an unbiased value and solution-fit analysis (2) not appropriately measuring the transformation impact on the current business operations, enterprise architectures and organization culture (3) promising to tackle the ERP transformation with speed by adapting an agile approach, rather than truly focusing on the quality execution of the program and continuously monitoring program success.
- To avoid these three classic mistakes upfront, management should invest time in the strategy and roadmap development activities. Tools, such as Business Case and the Strategic Alignment Roadmap, should be used dynamically (i.e. updated regularly) by the innovation program sponsors to better plan and execute the strategic ERP transformation journey.
What are the 3 common mistakes that can lead to an unsuccessful ERP transformation journey right from the beginning?
CIOs are pressured today more than ever to digitize the workforce. With the right strategic plan & execution, digital technologies bring a competitive advantage; it ensures a market growth and a revenue increase for many organizations.
Digital transformation deals with every aspect of an organization. Creating a digital ecosystem impacts the daily business-as-usual operations, the innovation processes, the supporting technologies (including ERP and non-ERP), the workforce and the overall organization culture.
ERP vendors today promise their customers with some set of intelligent ERP solutions (e.g. embedding RPA or AI technologies with the core ERP software) to generate a never seen before insights and process designs. However, delivering on that promise is a different story. It is on the companies and their partners to come up and build the digital vision by connecting the dots through the actual implementation to create that intelligent ERP system.
When organizations think about establishing an intelligent ERP solution, many leaders should try to avoid the following three classic mistakes:
Mistake #1: Focusing only on the ERP technology, while neglecting other IT systems and programs in the organization landscape
Classic mistake: Company kicks of the ERP strategy and roadmap exercise with a specific technology in mind; looking at only the ERP systems and neglecting the other IT applications in the environment.
In some IT environments, we see that companies tend to have 100+ applications supporting their business operations. At the same time, same companies would lack an inventory of their applications (i.e. single source of truth) showing how these applications play a part in supporting the business operations or how they interact with the current ERP system. Focusing on just the ERP technology by itself will ultimately lead to the program failure because the issue is not in the ERP system alone, but with the entire IT application landscape.
Digitizing the workplace is not only about selecting or upgrading the ERP system. It is more about creating the end-to-end solution to enhance the processes supported by the ERP technologies. When c-suite leaders transition the program responsibilities to the business or IT leads and the contract procurement leads, companies tend to lose sight of the “why we need this” and focus on the “what we need to do today fast and how we can implement the new version for the least amount of cost”.
Companies upgrade their ERP systems because they want to grow revenue and customer base or because they want to increase customer satisfaction (i.e. the why behind the transformation). The ERP transformation program needs to go back to the basics by looking at the bigger picture. In other words, all program sponsors need to be looking beyond one technology (e.g. SAP S4) and understand the entire technology components of the organization such as data management software, business warehouse applications, CRMs applications, and all the in-house developed applications. This will help create the intelligent ERP end to end solution.
Mistake #2: Downplaying the impact of the ERP technology on the entire organization components: technology, process, data & people
Classic mistake: Management does not perform an unbiased business and IT impact analysis to understand risks arising from the new transformation program; leading to major delays during the implementation and/or failed go-lives down the road.
An ERP transformation project does not only affect the technology (e.g. SAP S4) but also the components of the entire organization including processes, data, and people. I have seen several companies go through a 6-8 months of design, build & test processes and then they pull the plug right before the go-live due to the fears of missing the earnings at the quarter; this is because the systems and people are not ready and sometimes it seems that they will never be ready.
Sometimes companies do not go through an impact assessment upfront to build mitigating countermeasures around the risks arising from the ERP transformation. I have seen companies kick off the program only to find out that there are multiple huge obstacles with integrating system, cleansing the data or upskilling the end-users. These kinds of obstacles completely jeopardize the success of the program.
Management need to understand the current business vision, the existing operating model and how the ERP system is supporting the daily operation. Then, it is critical to conduct an impact assessment to understand how the ERP system will change what is working well and what is working poorly. Ultimately, companies do not want to fix a nice to have feature but break a profitable business process that was working okay in the legacy systems.
Mistake #3: Choosing a fast deployment and low cost implementation over a high quality and a thoughtful execution
Classic mistake: When selecting a partner, company tend to go with a vendor that overpromise the delivery of the first go-live, thus giving a cheaper rate. Companies should not underestimate the assumptions placed by their partners/vendors and should focus on the quality of the execution.
To be very honest, creating an intelligent ERP environment for any company is not going to be cheap. Cost of the technology alone today sometimes can be astronomical; not to mention the cost of labor, partners and other related expenses such as upgrading the disaster recovery site and performing new compliance & assurance related activities.
In order to reduce the cost of the implementation, some companies and their system integrators focus on deploying the ERP solution in a shorter period. Speed can be a good sign of the project success but in most cases it is not. For example, to shorten the period of implementation, design phase is minimized; it is very common that management would elect not to develop business process design documents in the spirit of going agile. This is a common pitfall because management still needs to document clearly the business requirements and the process end-to-end design to allow for better decision making and traceability of the design requirements.
Also, in order to reduce the cost of the implementation, some companies tend to go with the cheaper rate or proposals from the integrators rather than focusing on selecting the right vendor with the right skills that fits the organization culture. When I assess any program, I look first at the program sponsors and program partners. I try to assess the level of dedication and technical proficiency they bring to the organization, especially if the technology is new with limited knowledge resources. In many cases, you soon find that the business users are not happy with the level of expertise and dedication and innovation that the program partners are bringing. That can be the worst situation because the design of the ERP system will always be flawed and fixing it will cost way more down the road.
How to get ahead of these mistakes and avoid falling trapped in an unsuccessful ERP transformation journey?
Solution #1: Developing a Business Case and using it as an operational tool to establish and monitor program success
A well-documented business case is a great tool to show the strategic vision a company wants to achieve. A top down approach in developing the business case will allow the company to outline a clear desired business outcome and the key tasks and milestones needed to achieve program success.
The issue lies with how companies go about building a business case. The business case document is usually seen as tool to document the technology to be purchased, to highlight some of the costs of the technology and to point out a hopeful timeline to the implementation and first go-live date. Additionally, once the program kicks-off, the business case is never re-visited to monitor progress against the initial plan.
Business case is a powerful tool. It is much more than a one-off document used for compliance and funding purposes. It should be a dynamic document that is used by the program sponsor to appropriately strategize and implement solutions that achieve the competitive advantage that organizations desire to achieve.
In the coming Strategy+ series, we will explore the attributes of a great well-documented business case. We will walkthrough in details how does a business case puts your ERP journey at the right path and can hold your different partners (i.e. consultants) accountable by measuring the ERP program against specific measurable outcomes.
Solution #2: Communicating the company’s vision using the Strategic Alignment Roadmap (SAR) tool
The SAR tool examines the organization’s set of initiatives across 4 different set of areas (quadrants): Process Improvements, Technology Enablement, People Planning and Risk Management. The Strategic Alignment Roadmap (SAR) tool is developed to help organizations document the set of initiatives needed to bridge the gap between the current state operating model and the desired future state operating model. To overcome the challenges of Business and IT alignment, I developed this Strategic Alignment Roadmap (SAR) tool; the SAR tool can help companies create a holistic view of the different programs to communicate the different strategic initiatives among all the stakeholders.
In the coming Strategy+ series, we will explore the attributes of how to develop and use the SAR tool.
Bringing it all together,
Right now, there are many powerful ERPs in the market, and this is the right time to be opportunistic and lead your organization to unprecedented success. However, planning, strategizing, careful execution and continuous monitoring are key to the success of today’s digital transformation initiatives. It is imperative to use the right tools and select the right partners to appropriately achieve the company’s vision.