A Blue Ocean Strategy was first introduced by professor Kim and professor Mauborgne at France’s INSEAD in their book “Blue Ocean Strategy.” They define a market which is well explored and crowded with competitors as a “red ocean.” An untapped market which has opportunities for growth, it is called a “blue ocean.” In the book, they state that companies should not fight their competitors in an excessively competitive red ocean but should swim for open waters. They encourage companies to be innovative and grow in a competitive free market or blue ocean.
In order to stay in the blue ocean, companies should have their own business differentiators. In my opinion, having unique business processes equipped with a customized ERP system is a good way to differentiate the organization, thus enabling the company to navigate themselves into a blue ocean.
When people talk about ERP software, they usually think of it as certain software package designed to perform operational activities in a computer based environment. With more and more companies implementing ERP in order to facilitate their businesses, ERP has become a universal tool for companies belonging to various industries. However, since business requirements for ERP software are differ based on organization, finding the right ERP software to fit your company’s business processes is critical.
Our 2009 research shows that 41.9% of companies “changed business processes to accommodate ERP functionality,” and only a small percentage of companies (8.8%) “changed their business processes independent of ERP, then selected or configured software to align with new processes.” Besides, customization is a big issue. From the same research, 25% of companies choose to heavily customize their ERP systems, while 28.3% of companies choose not to customize their ERP systems at all; the majority of companies tend to do at least some customization during and ERP implementation. Clearly, companies don’t like out-of-box applications and there would be no differentiator by adopting the software without any customization. Jumping to the flip side of this debate, ERP customizations can be complex and involve future risk.
So here is a dilemma – whether to be unique in the blue ocean or take risks? The three tips Eric Kimberling mentioned in his blog, ERP Software Customization: The Ultimate Sin of Enterprise Software?, might be helpful in addressing this dilemma: understand configuration and customization; ensure well-defined business requirements; and establish solid ERP project controls.
All in all, companies implementing ERP systems shouldn’t avoid customization if it is necessary, as retaining a unique business model and processes are crucial to the success of the entire business. Maintaining the right level of ERP customizations and balancing the risks and advantages involved in the ERP implementation are the best strategies to sail in the blue ocean.
Blog entry written by Haoyan Sun, a business analyst at Panorama Consulting Group.