Mastering the Modern ERP Transformation

Many companies learn the hard way that to differentiate themselves in the marketplace, they need a solid foundation of processes and systems as well as a team of people who know how to keep them running smoothly. Without those things in place, even the coolest new capabilities are little more than lipstick on the proverbial pig.

Sure, they may be able to serve their customers with AI-powered support bots, but if the underlying service management is not working well with the ordering platform, what good does it do? Add in the persuasive sales teams from both large software vendors and system integrators, armed with their compelling, “perfect world” business cases and the pressure to embark on multi-year, multi-million dollar digital transformations, and it's a recipe for disaster.

Of course, very few IT leaders (and even fewer business leaders) are eager to embark on ERP transformations unless they have to. The annals of IT are filled with horror stories of such programs going off the rails — and taking their sponsors with them.

But investing in that foundation can only be postponed so many times. Technology and systems do not age well. Patchwork IT environments and system sprawl eventually become a boardroom issue.

The good news is that we no longer have to repeat the ERP-implementation past; we can learn from it. If there is a primary lesson, it’s that there is no one-size-fits-all approach. Every company is different. Recognizing that truth and designing a plan based on what the organization needs and can support increases the probability of success.

Asking the Right Questions First

An ERP implementation will involve the typical fit gap analysis, scoping, and budgeting necessary for any enterprise technology program. Beyond that, however, there are some key questions to consider before launching into an ERP transformation today:

What problem are we trying to solve?

Before investing in a solution, it is critical to understand the weaknesses in the value chain and their impact on upstream and downstream processes. That understanding can drive what solution to select. This effort should also include rigorous triage. Some back office functions may not be performing as well as they could, but they may be good enough. Leaping into a wholesale reimplementation of an ERP can tax the organization and distract from those areas that really can move the needle.

How would various ERP options align with our culture?

An environment where IT is constantly bending to fit exceptions may not be ready for the rigor of a German-engineered ERP system, for example. Don’t try to put a round peg into a square hole. But don’t let “that is how we have always done it” get in the way of necessary change either. If the value chain analysis shows that the IT organization is adapting on the fly and living and dying by acts of heroism when processes and systems fail, perhaps people and process should change to fit into that square hole.

What can we afford?

Some leading ERP solutions can accommodate just about any process permutation and regulatory quirk a business might encounter. But implementing a robust, global platform to meet the needs of a sub-Fortune 500 company with more limited resources is a very costly choice. There may be an opportunity to outsource functions which need to work reliably, are not customer-facing, and do not deliver a competitive advantage to free up resources to focus on the most valuable ERP capabilities for the business.

How quickly does our business change?

An ERP transformation requiring two to three years to deliver benefits won’t work for fast-moving businesses. In fact, “big bang” ERP implementations that take two years or more are rarely advisable, not only because of the risk involved but also because the world keeps changing. What seemed like a good idea two years ago may not make sense today. ERP implementations should be structured to deliver results rapidly and allow for course corrections. Selecting a core function to implement first will provide benefits quickly, create a beachhead for further transformation, and ease the organization into adoption with less disruption.

Learning From (Other People’s) Mistakes

Should the answers to the questions above suggest the need for ERP modernization or transformation, there are a few key lessons from the past that can increase the likelihood of a successful implementation. 

• Don’t delay the inevitable. The longer you wait, the riskier and more expensive the implementation will be. ERP decisions are often made under pressure. Few people wake up one day and say, “It is a great day to transform my ERP!” More likely, they are experiencing increasing unplanned downtime; data access, timelines or accuracy issues; expensive renewals; or concerns about critical software becoming unsupported. Getting ahead of those issues is always advisable.

• Seek impartial counsel. Software vendors and integrators offer “free” business cases that are inevitably very compelling. After all, the greater ROI they can promise, the higher the likelihood they land a large engagement. However, these parties often lack an understanding of the company’s culture and resources. They also may not have the intimate business knowledge to understand whether the solution will be the right fit. A business case is a necessity, but a conflict of interest should be avoided. Getting impartial advice is a good investment.

• Get into the system right from the start. Traditional software implementation methodologies prescribe an analysis and design phase that is typically disconnected from the ERP system. Invariably, things get lost in translation: the users are thinking about how they used to do their work and the consultants and software vendors are thinking of how the software product is designed. There is little common language and the vendor will make tweaks to boilerplate deliverable templates at high hourly rates. Minor quirks become major customizations, extending the timeline and increasing the budget. It’s impossible to design an efficient implementation in a vacuum. It’s far better for everyone to leap into the uncomfortable future right away. What is discussed on the first day can be shown and tested on the second day. Starting with the closest fitting industry template and adjusting from there is a good start.
  
  
• Adopt an agile delivery approach. ERP programs “the way we have always done it” will get you a nine to 12-month analysis and design phase, promises of transformation, and a breathtaking price tag. It’s not 1995; it’s time to take a different tack. Creating a delivery rhythm appropriate for the environment’s pace of change is critical for the success of the program. Agile does not mean delivering code every two weeks in the early days of an ERP project. It can, however, provide the structure necessary to get the project moving quickly. Breaking down the work into two-week increments is a healthy exercise to validate the timeline and budget, map outcomes to the business case, and hold everybody accountable.

Doing the Hard Work

Companies need to stay in control of their digital transformation. The ERP system is the core foundation for those efforts. It may seem easier to hand control of the program over to software vendors or integrators, but that’s less likely to deliver results effectively and efficiently.

Asking the core questions above and learning from the ineffective approaches of the past may take more effort upfront but will deliver much greater returns. These rigorous exercises can inform the development of an ideal ERP implementation strategy for a particular organization. Technology can enable improvements, but the hard work is to figure out what needs to be improved first.