It’s no secret that most ERP systems fail to deliver the business benefits anticipated by the organizations implementing the software. More specifically, our 2012 ERP Report reveals that 50-percent of organizations fail to receive at least 50-percent of the expected business benefits from their investments in enterprise software. Adding insult to injury, and as outlined in our blog last week, is the fact that most organizations experience a misalignment between their business operations and ERP systems, which typically worsens over time as the companies go through acquisitions, international expansion, supply chain reorganizations, and other changes.
The reasons for the failures to achieve business benefits as well as operational misalignments with ERP software often point to business processes. As opposed to incorporating process best practices in their ERP systems, most ERP vendors and system integrators use the flawed practice of designing and configuring the software to handle a hodgepodge of transactional workflows in the system, most of which do not integrate in a cohesive end-to-end business process. Despite all the talk about best practices, order-to-cash and procure-to-pay business process workflows, and all the other buzz terms in this area, the ERP industry is still sorely lacking in its ability to develop, institute and manage business processes effectively as part of an ERP implementation.
So what can a company do to take more of a business-centric approach to its ERP system? Here are four best practices, proven through our years of independent experience, research, and expert witness work related to ERP lawsuits:
1. Define your ERP business blueprint. The common industry best practice favored by most system integrators, software vendors, and ERP consultants is to force the implementing organization to adopt the software by ignoring the “as is” processes and focusing on how to design the various transactions in the system. However, this methodology is flawed (as is proven by years of ERP failures), and doesn’t take into account the holistic, end-to-end business processes required to run the business. A technology-agnostic business blueprint, on the other hand, looks at the end-to-end workflows, organizational responsibilities, and metrics required to drive the business. In addition, this business blueprint approach defines how non-ERP processes and hand-offs will happen and, more importantly, focuses the implementation team’s attention on eliminating non-value-add activities and re-engineering broken business processes. The traditional and outdated approach of simply adopting the industry best-practices in the out-of-the-box software fails to address these critical issues.
2. Develop a business case and benefits realization plan. Simply put, your business processes won’t stick within the organization without the appropriately defined metrics to drive those business processes. In addition, without a benefits realization plan, expected business benefits will not be realized. It is no coincidence that most projects fail to create a full business case and benefits realization plan and most of those same projects also fail to realize the business benefits potential of their new ERP systems. In order to succeed and fully optimize your business benefits, your team will also need a comprehensive plan outlining how exactly the organization will achieve the planned business benefits. For example, the plan should include details of the specific measures used to drive business benefits, the exact business intelligence required to measure the benefits, the person(s) responsible for managing to the performance and so forth.
3. Create an organizational change management plan. Defining the software and business processes is the ante to stay in the game, but the organizational change management (OCM) component of any ERP implementation is the variable that will ultimately determine whether or not business processes “work” and whether or not people actually adopt those business processes. While most ERP system integrators and consultants think of OCM as a synonym for “training,” that is only one minor component of a successful organizational change plan. In addition to end-user training, an effective organizational change management program will include organizational impact analysis, employee communications plan, project branding, organizational readiness, and several other key components that we have proven to be the differentiators between ERP success and ERP failure.
4. Create an ERP Center of Excellence (COE). Once your ERP software is installed and “live,” it is important to manage it to mitigate the operational misalignments mentioned above. An effective COE should focus not simply on how to “fix” the software should it break or require upgrades, but more importantly, on the steps an organization can take to ensure that the software keeps up with evolving business needs and requirements. In addition, an effective COE will enable you to identify training needs, potential areas of organizational resistance, and broken business processes that can be continuously improved via better use of the ERP software. Most organizations and their system integrators define the finish line of their ERP implementations at the time of “go live,” but they should also be ensuring a framework and plan to create an organization that continuously improves its business processes and use of ERP software.
These four best practices are critical areas that we have seen in effective and successful ERP implementations, but which are typically absent in troubled or failed ERP projects. These are some of the remediations we often bring to the table when clients hire us to clean up their ERP implementations and constitute the core of the some of the best practices we implement when clients hire us to manage their implementations from the start.
For more information, download Ten Tips for a Successful ERP Implementation and join us for our upcoming webinar, Tips on How to Build a Business Blueprint for ERP Systems on March 22 at 10 a.m. MT.