While most organizations are racing to ERP go live, some are taking the time to reengineer their business processes. They are not concerned with implementing an ERP system as quickly as possible. Instead, they’re focused on beating the competition by designing differentiated, efficient business processes. They may lose the race to the go-live finish line, but they’ll win the race that actually matters – the race to grow their customer base and increase revenue.
Here are seven tips for improving your competitive advantage through business process reengineering:
1. Budget adequate time and resources. Business process reengineering takes time. In fact, it takes more time than the technical configuration, testing and implementation of ERP software. It probably took your organization years to adopt your current processes, so it will likely take some time to change those well-established processes. You should ensure sufficient time for defining, improving and implementing new business processes. Benchmarking against organizations of similar size and industry will help you set realistic expectations for your project.
2. Define business requirements before selecting ERP software. Organizations often find that modern ERP systems are too flexible to simply start using out of the box. Even the simplest business processes have multiple workflow options. This complexity will slow down your project if your business processes aren’t well defined before the design and build phases of your implementation. If you start your project with a clear vision of your business requirements, you will minimize the amount of time you spend with expensive technical consultants. You’ll also ensure your competitive advantage isn’t lost to standard software functionality.
3. Improve business processes before selecting ERP software. Just as you should define business requirements before software selection, you should also improve your processes as early as possible. This is also the time to consider whether your processes align with your long-term organizational strategy. Waiting until the last minute to improve processes may leave you with no choice but to keep all your existing processes, whether or not they are optimized. Operational efficiency can differentiate you from your competitors, so now’s your chance to surpass them through process improvement.
4. Don’t treat all business processes equally. Many organizations are overwhelmed by the number of business processes they need to document, analyze and improve. They don’t realize they can start by focusing on just the processes that are competitive differentiators. These processes should drive your selection of ERP software and shouldn’t be constrained by software best practices, which may not be best practices for your unique operations. For example, your customer service may be a source of competitive advantage. If so, customer-facing processes should be a priority during business process reengineering and requirements gathering.
5. Integrate business process reengineering with change management. Resistance to change is one of the main reasons business transformation takes longer than expected. Ensuring employees understand and accept new processes is challenging because people naturally dislike change. Before training employees, you should identify the gaps between your current and future state, so employees understand new processes in the context of their day-to-day jobs. A comprehensive change management plan includes more than training. You also need to strategically communicate with employees to ensure they accept new business processes before go live and adopt those processes for the long term.
6. Integrate analytics into business processes. Several ERP vendors offer innovative solutions that leverage business intelligence and predictive analytics. These systems use artificial intelligence (AI) to turn massive amounts of seemingly unusable data into actionable data. But what good is this data if you don’t have a plan for acting on it? When defining your future state business processes, you should include processes for analyzing and acting on data. Chances are, most of your competitors don’t have a strategy for leveraging AI nor have they implemented this innovative technology.
7. Measure results and make incremental improvements. Measuring post-implementation results helps you stay on track to realizing expected business benefits. If you’re not achieving a particular benefit, you should determine root causes and pain points. Continually measuring incremental benefits realization allows you to make corrections as needed. Misalignment between business requirements and software functionality can deter benefits realization. Lack of employee buy-in can also create a roadblock.
Why Reengineer Your Processes?
Every organization deserves ERP software that supports their business processes. The only way to ensure you select such software is to reengineer your processes before selection.
Business process reengineering also ensures your chosen ERP software aligns with your long-term organizational goals. ERP systems are a big investment, so they should support your processes for at least the next five to ten years.
Most importantly, business process reengineering helps you beat the competition by ensuring your ERP system enables differentiated, efficient business processes.
Schedule a Free 30-minute Consultation With a Business Process Reengineering Expert!
Digital transformation can be daunting for any organization, but it is especially challenging on a global scale.
Global organizations typically want to standardize business processes across international operations, but they also need the flexibility to serve diverse customers, employees, economies and regulatory bodies.
The decision to globalize or localize isn’t black and white. Every organization has different operational, organizational, cultural, regulatory and financial considerations. Let’s discuss some of the pros and cons of standardization and differentiation. We’ll also provide tips on how to balance globalization with localization.
Benefits of Global Standardization
International organizations, particularly those that acquire other companies, often have non-standardized business processes. Standardization allows these organization to scale for growth by consolidating business processes. Consistent processes drive operational efficiency and enable global visibility into operations. Financial reporting, for example, is faster and easier when processes are standardized.
While standardization can require a large investment in business process reengineering, you’ll ensure that all processes at all locations are designed to bring you competitive advantage. Global organizations lean toward standardization when they want to deliver quality goods or services with a high degree of predictability.
Benefits of Localization
Localization reduces change resistance because you’re adapting to the unique needs and requirements of different locations. Instead of changing local business processes to align with processes at your headquarters, localization allows you to retain the unique processes suited for each location. Certain locations may need flexibility to manage data and transactions in local languages and currencies. Some countries have intricate requirements when it comes to taxes, currencies and regulatory reporting. Differentiating your processes based on location ensures you stay compliant and avoid penalties.
Balancing Globalization With Localization
If you want the best of both worlds, you should be strategic about which processes you standardize and which you differentiate. Some processes should always be standardized. These include processes such as back-office functions that enable a shared services strategy. Other processes, such as regulatory and reporting processes, should typically be localized. While you may want to localize customer-facing processes, you should probably globalize processes that don’t add as much value.
A balance between globalization and localization becomes even more important when you consider organizational change management. The need for organizational change management at global locations typically increases the more you standardize your processes. While standardization may save money in the long term, you’ll need to invest in extensive organizational change management in the short term. This means more than end-user training. It also involves communicating change impacts and project status updates.
Digital Transformation & ERP Boot Camp
Transform your people, processes and technology to achieve your business transformation objectives.
The most challenging aspect of a global digital transformation might be aligning corporate culture around a singular goal. You must account for cultural differences and language differences.
Executive support is especially important during global projects as local entities may be extremely resistant to globalized processes. People can’t embrace what they don’t understand, so you must communicate the reasons for transformation and how it will benefit employees and the organization as a whole.
Organizational readiness assessments are also critical to global projects. You can assess risk by analyzing your organizational attributes as well as the characteristics of proposed changes.
How Much Software Customization?
Does globalizing your business processes reduce the amount of software customization you’ll need? Sometimes, but not always.
While you may be standardizing your processes based on a global standard, you’re not necessarily standardizing your processes based on software functionality. However, there is typically an overlap between globalized processes and processes that are standardized based on software functionality, as they both mostly involve non-value add processes. It’s probably safe to say that more globalization usually equals less customization (but more organizational change management).
Another strategy for reducing customization is to allow flexibility in each location’s choice of software and vendor. This can make globalization more difficult than usual but not impossible.
Defining a Support Structure
While you’re determining which of your processes should be globalized versus localized, you should consider whether your support structure will be globalized, localized or customized. Many companies choose to centralize ERP support and helpdesk functions, while others choose to offer decentralized support to cater to diverse locations. The sooner you define a support structure, the sooner end-users will adopt new processes. This is true for both on-premise and cloud ERP implementations.
Defining a Master Data Strategy
Master data is an important but overlooked aspect of the global vs. local conundrum. Not only do you need to cleanse and migrate master data, but you need to define how it will be managed going forward. For example, will local offices have the flexibility to manage their own local chart of accounts, or will changes require centralized and global governance? The same should be decided for other types of master data, including customer, supplier and inventory master records.
Final Piece of Advice
This may be your first global digital transformation, but it’s not ours. Our digital transformation and ERP systems experts understand the challenges of both globalization and localization and how to find the right balance based your organization’s unique objectives.
Schedule a Free 30-minute Consultation With a Digital Transformation Expert!
When the Titanic sank, researchers furiously worked to determine the causes, so all future ocean liners could safely transport passengers. When an organization experiences an operational disruption, it should work just as furiously to determine root causes, so it can learn from its mistakes. Often, these mistakes are related to business process management.
Excavating the Wreckage
Here’s what you might find in the wreckage of an operational disruption:
Low morale among employees
Heavy customization and/or software functionality inadequate for your business requirements
Low benefits realization
Broken glass
Business Process Management: A Key Component of ERP ROI
Don’t let your operational disruption discourage you from attempting business process management again. While it can be a daunting process fraught with risk, it’s the only way your organization can grow and innovate. Here’s how you can learn from your mistakes:
Forgive – Whenever you experience failure in any area of life, your first order of business is to take a deep breath and forgive yourself and others. Only then, can you have a clear head to focus on the facts without allowing emotion to determine your path forward.
Analyze – You can conduct a lessons learned meeting to review project deliverables. While you want to focus on causes, it also is important to look at effects. Quantifying the direct and indirect costs in terms of time and money will give you an idea of the benefits you’ll need to realize to achieve a positive ROI on failure.
Disseminate – Sharing lessons learned with the entire organization creates a culture of transparency and trust. Every department has something to learn from the post-mortem so be sure to spread the knowledge and empower employees to help you succeed in future initiatives.
Components of Successful Business Process Management
While it’s normal to experience a decrease in productivity after implementing new business processes, operational disruptions can be avoided by developing an effective business process management plan:
Business Process Mapping – This involves mapping your current state business processes at a high level, while looking for pain points and opportunities for improvement. There are several degrees of improvement you can choose. Maybe you just want to remove waste. Maybe you’re striving for ultimate efficiency. In rare cases, you may want a radical change where you start from scratch. Once you’ve improved, optimized or reengineered each of your processes, it’s time to map your future state. If you’re implementing new technology, you’ll want to map these future state processes in granular detail to serve as the basis of your software selection.
Organizational Change Management – As mentioned earlier, implementing new business processes often causes a decrease in productivity. Organizational change management can reduce the degree of this productivity drop and shorten its duration. Business process management cannot succeed without customized training and targeted employee communication, both of which should begin before software selection.
Continuous Improvement – A mentality of continuous improvement will ensure that your processes remain optimized overtime and evolve with the needs of your organization. Setting KPIs will allow you to regularly measure performance and determine when processes need further improvement.
Business Process Management Tips for an ERP Implementation
If you’re improving your business processes in preparation for an ERP implementation, you’re probably wondering how software functionality might affect your business process management strategy. The short answer is, it depends.
Basic software functionality is probably adequate for your core business processes, like accounting and inventory management. However, processes that are industry differentiators or sources of competitive advantage – such as CRM or eCommerce – should not be constrained by basic software functionality. Instead, you should dedicate significant time to mapping these processes before you evaluate software. Naturally, you’ll want to plan for the time, money and resources of these efforts. While it’s a larger upfront investment, these processes will deliver a higher ROI if they continue to support your competitive advantage.
Understanding the Wreckage
Now that we know what successful business process management looks like, let’s go back to the wreckage, and see if it makes more sense:
Low morale among employees
If employees are resisting organizational changes, you may have neglected to map your current and future state business processes and identify gaps for training purposes.
Heavy customization and/or software functionality inadequate for your business requirements
If your software doesn’t fit your needs and requires extensive customization, you may have allowed software vendors to wow you with shiny new features instead of scripting the demo based on your business requirements.
Low benefits realization
If your business transformation delivers fewer benefits than anticipated, you may have failed to improve key processes with the most potential to improve efficiency and reduce costs. Or, you may have standardized processes that should be competitive differentiators.
What’s Your ROI on Failure?
Today, we’re better at saving people from shipwrecks, and this is partially due to what we’ve learned from the sinking Titanic. While these lessons learned could never outweigh the loss of life, operational disruptions are different. An operational disruption could eventually bring enough benefit to your organization to outweigh the damage. If you follow our tips for learning from failure and our steps to successful business process management, you can begin to transform your organization and achieve your vision. Your ROI on failure is up to you.
Schedule A Free 30-Minute Consultation With A Business Process Management Expert!
We are at a pivotal juncture in the world of ERP software and enterprise technology.
This may be the first time in my career when there was so much excitement and uncertainty in the enterprise software space. On one hand, major vendors are promoting exciting new flagship technologies. On the other, many CIOs and other executives are nervous about the relative immaturity of these new products.
In many ways, 2018 will bring exciting new trends to be aware of. In other ways, the coming year will bring more of the same.
Here are my top five predictions for the ERP software space in 2018:
1. Capital investments in digital transformation initiatives will continue.
With the global economy continuing to improve, more companies scaling for growth, and capital investments continuing to gain momentum, more companies will be more likely to invest in their digital transformation initiatives. Other contributing factors to this trend: more companies are reaching the end of their legacy system lifecycles dating back to Y2K system replacements, and more industries are going through major, market-driven transformations (think: the retail industry grappling with the disruption of Amazon and the e-Tailing trend). All of these factors will lead more companies to revisit their enterprise system strategies going into the new year and beyond.
2. Cloud ERP software will reach a tipping point.
The trend toward cloud systems has been gaining steam for several years now, but this is the first year where major vendors are all doubling down on their cloud offerings. SAP S4HANA, Oracle Cloud, Microsoft Dynamics 365 and Infor Cloud vendors are all examples of the flagship products being aggressively promoted by the top ERP vendors. The only thing complicating matters? The relative immaturity and lack of proven track record of these systems, along with executives’ continuing comfort level with on-premise deployments. The coming year may be the year where one of these two conflicting pressures win out and cloud systems are either more widely accepted – or the trend proves to be a short-lived fad. (Watch for our upcoming 2018 ERP Report to see if cloud adoption regains momentum after giving up market share last year).
3. More organizations will be forced off their legacy ERP systems.
As more ERP vendors (link to /erp-vendors/ page) increase their investments in cloud solutions, they will likely continue paring back R&D in some of their legacy products. For example, products such as Oracle EBS, Microsoft Great Plains, and Epicor Prelude are likely to see rapid deterioration of focus and support for these products as they are sunset. Vendors will be less likely to introduce new functionality or provide long-term support for these dated products, leading many organizations to conclude that they have no choice but to migrate to more modern enterprise technologies. When combined with trends #1 and #2 above, executives are more likely to reconsider their platforms of choice moving forward into the long-term.
4. More companies will say “no” to ERP software.
Due in part, to #3, while on one hand we predict more organizations moving toward new technologies, we also see more executive teams being skeptical of ERP systems (link to /erp-software/ page) as we have known them over the last 20 years. Organizations are too painfully aware of the historic and ongoing challenges with the enterprise software status quo, so they will be more likely to consider alternatives to big, complex, monolithic ERP systems. Potential alternatives include less risky upgrades, more attention to business process reengineering, and point solutions. Whatever the exact alternatives pursued, the coming year’s focus will be on fixing more immediate operational issues and pursuing more low-hanging fruit.
5. Organizations grow increasingly allergic to organizational change management.
This is one of the most interesting (and surprising) trends that we are seeing in the market. An increasing number of organizations are becoming seemingly allergic to the term “organizational change management” – while at the same time recognizing the need to address the people side of their digital transformation initiatives. On one hand, they recognize the risk of not addressing organizational change, but on the other, they are jaded by past org change failures.
In other words, organizational change management has a branding and PR problem. This starts with calling is something more specific, such as people enablement, workforce transition, business process implementation, and whatever other words of choice fit. However, words are just words, so it is even more important that organizations recognize the need for proven organizational change expertise and toolsets – something most ERP vendors, consultants, and system integrators aren’t good at.
2018 Will Be a Year of Transition…
These are just five of the biggest predictions that we see in the coming year. It will clearly be an interesting year of transition. How will you navigate these changes to make your organization more successful in the new year and beyond?
In any industry, there are big players and smaller ones.Whether a company is a micro business or giant corporation with triple digit years’ worth of experience, each and every one of them can benefit from operational organization methods, such as ERP systems.In each situation, it is important to consider the size of your company, its needs, and what may happen in the future.Most importantly, there is no cookie-cutter option, and when consulting an ERP system, keep in mind that your individual needs outweigh the biased views of ERP vendors.
ERP Systems for Small Companies
Taking a micro-business, for example. They may have a limited budget and no need for the functionalities of an ERP system, which may be a good fit for a large corporation.It is important to understand that there is no one-size-fits-all or cookie-cutter solutions for ERP systems when it comes to suggesting the correct functionality for a business.
It is an ERP consultant’s job to help a business judge their real ERP needs, as well as its realistic scalabilities.A good consultant should be able to pinpoint scalability of an organization and anticipate future needs so that money is not being wasted when the business outgrows a solution which does not grow with it.These needs must all be met within budget, of course, as a small company may lack certain funds or chose to neglect certain needs to stay within budget.Make sure that current budget restrictions don’t also restrict future growth though.
ERP Systems for Large Corporations
This is true on the other side as well, for large-scale corporations.Obviously, the needs of a multi-faceted business with many departments, roles, and moving parts will be much more complex than those of the small or mid-sized business.In this case, it is important to look at resources and solutions, which should be defined to address a large organization’s long-term needs.In this case, staying away from trends and solutions without much of a track record is a good idea.
ERP Systems for Mid-Sized Corporations
While ERP solutions for small and large companies may seem more obvious, the solution for mid-sized companies may have more factors involved.Possibly, there are future growth plans involved, but then again, maybe not.Sustainable ERP solutions for mid-sized companies are often limited by budgetary constraints.Also, functionality will be important to consider as the fit need to be “just right” based on organizational pain points and needs.
Reviewing options and choosing an ERP System and solution based on need, budget scalability and organizational function are key to a successful implementation for any sized company.It is not correct to think that there is a one-sized-fits-all solutions for all companies, nor is it correct to just think in present-terms as opposed to long-term needs as well.ERP systems can help any sized company achieve future goals.Consult with Panorama today and discuss your options to make the best decision for your company.
The first thing I ask when I meet a client is “what’s happening in your organization?” 99% of the time the answer is “we are looking at what we do and how we do it, and we have figured out that our technology isn’t supporting our business.”
As I constantly approach all types of organizations, these are the three typical scenarios I usually find:
A young organization that started with Excel and QuickBooks, maybe some software associated with a piece of equipment they bought, more likely they outsourced to ADP for human resources, and now they’re ready for a more sophisticated integrated solution.
An established organization that implemented an ERP system 20 years ago, and it was a great fit back then but in the intervening years they have grown, changed, and customized processes; often they have woven a web of support processes and technology that has turned into a cocoon. Now they cannot make upgrades to the system functionalities and they are looking to get up to date.
A larger organization that perhaps has grown through mergers and acquisitions and now has multiple locations, multiple business units – all with their own systems – sometimes they have even the same software but a different instance, or are using it in a different way and they are looking to be a single company with a single consistent solution.
The unifying thread for all of these examples is that there is a need to follow the data, from vendors to the end customer, and across all functional areas. The ability to make good decisions that are enabled by visibility into the data is the number one benefit our clients are looking for. Well, that data is following a stream of business processes. Certain business processes can be the secret sauce that makes your organization different from others and keeps you competitive, or they can be the weight that drags you down and kills your efficiency, profitability, and ability to grow.
Every time we assess an organization, the first thing we do is looking at your current state. We use this as a tool to define the requirements of a new system and to define the “as is” and then look forward to a future state – the “to be”. We identify the pain points in your current processes and what is their cost, in order to set a foundation for measuring the return on investment for the ERP initiative. The goal is to improve efficiency. Typically, we find that solving those pain points comes down to either an organizational issue (communications, organizational structure etc..), business process, or in some cases, a strictly technical issue, such as the ability for a system to handle a certain level of transactions per second.
From a process standpoint, we find that it’s generally one of these three situations among organizations:
Manual processes: having to work between multiple applications or systems, download information from one and manually enter it into another.
Duplicate processes: having to handle the same information in different ways because they have multiple systems, managers or business units with different requests.
Legacy process: we have always done it this way.
Identifying the challenges of an organization is the logical step to improve their processes. It doesn’t always require new technology – sometimes it can be as simple as physical processes – for example, one of our clients was a food company, during the process of mapping their current state we found out that they were pulling materials they used most often from the back of their warehouse, while materials they used rarely were up front. Simply by swapping out the location of their inventory, we were able to make them more productive and efficient.
The question that often comes up is “why wouldn’t we just adopt the processes defined by the software? That must be a best practice, right?
We have a global ERP study that we’ve been sending out for almost a decade. What we have found over time is that the success or failure of an ERP implementation most often comes down to people and process. Think of it this way: business process is the DNA of an organization, it’s what differentiates you from other companies. It may be that adopting out of the box functionality will work for you, or it could be that it will make you lose your competitive advantage. But if it turns out that it would make sense to adopt a new practice, it will be essential to manage the change with your people. It is important to identify what is in it for them to do things in a new way, to train them well and then follow up to make sure they don’t slide back into the old ways.
If it turns out that a new software solution takes you 90% of the way but doesn’t support your business model 100%, then it’s time to invest in customization. It’s not just automating processes, it needs to involve what you do and why you do it, before getting to the “how”. That is exactly where business process management comes into place. As you can see that there is no way to address a technology solution or digital transformation without addressing your business processes. Investing the time to define and improve how you do what you do will make all the difference in the success of your ERP initiative.
Business processes are the DNA of your organization. They make your organization unique, and differentiate it from the competition. While you can purchase an ERP system with built-in business processes, you should stop and ask yourself if you really want to do this. Do you want to “work for the software,” or do you want the software to work for you?
If you chose the second option, you are well on your way to making your processes more effective and efficient than your competitors.
Identifying Inefficiencies
When evaluating your business processes, you should determine whether they contribute to your organization’s bottom line. Regardless of industry, most organizations have one thing in common: inefficient processes. Whether these processes are manual, duplicative or customary (we’ve always done it this way), they are hurting your bottom line and need to be improved – especially before you select new ERP software.
Quantifying the Cost of Inefficiency
The cost of inefficiency is very real and very tangible, even though it may not seem as concrete as the known line items in your project budget. How much time is being wasted on current activities and how much time could you save with automation? Apply these time savings to decreased labor costs and other process benefits, and you will understand the measurable cost of inefficiency.
Selecting Enterprise Software
Once you’ve evaluated and improved your processes through business process reengineering, you can find an ERP system that’s a good fit for your organization.
Buying an ERP system is like getting married – you’re in it for decades so you want to make the right decision. A third-party can be your matchmaker and help you find the enterprise software that’s just right for your organization and its optimized processes.
Success Story
When an upstream petroleum oil exploration and production company needed to transition their ERP system from SAP to Epicor9, the company requested professional help in evaluating its business processes.
Following a proven business process reengineering methodology, Panorama mapped the company’s current and future-state business processes to ensure accurate input into the new system. In addition, Panorama oversaw the company’s project plan, milestones, resources and budget.
In the end, the oil and gas company saw quantifiable improvements to its operational efficiency and effectiveness. These improvements were realized less than one year after the beginning of the engagement.
Let’s Do This
Business process reengineering can yield enormous costs savings for your organization and ensure that your digital transformation achieves a positive return on investment. However, improving your business processes is no easy task. Organizations should engage an ERP consultant with a strong methodology and a proven record of success across industries.
This may prove challenging, but I’m going to attempt to explain business process management in less than 500 words. So take your seat, pull out a pencil and hold onto your hat because this is going to be quite a ride.
Business Process Management Defined
Business process management is a holistic approach used to evaluate and improve an organization’s business processes. This is often performed before the organization implements new ERP software. With or without new technology, business process management can enable an organization to improve efficiency and reduce production costs. An organization pursuing digital transformation may use business process management to change their company’s entire business model.
The Importance of Business Process Management
When you automate an inefficient process, you only make an inefficient process faster. Many organizations implementing ERP software choose to improve their business processes before stuffing them into an ERP system.
Today’s ERP software is very flexible and can accommodate a process in a variety of ways. This is why so many organizations take the time to envision their future state processes before selecting enterprise software. These organizations save time and money by determining their software configuration requirements early in project. They also can more accurately estimate customization costs.
Areas of Business Process Management
Business Process Improvement: An organization examines only its key processes – the ones that serve as competitive differentiators. The organization documents its current state process and defines key performance indicators. Then, the organization improves these processes to optimize efficiency while ensuring that controls are put in place to monitor efficiency on an ongoing basis.
Business Process Reengineering: If an organization finds that no amount of improvement can make a process more efficient, they may completely remove the current process and redesign it from scratch.
Business Process Optimization: An organization evaluates and improves all of its business processes, including those that are not a source of competitive advantage. This approach looks at the organization from a financial perspective to determine how to reduce production costs.
Business Process Management Essentials
Business Process Mapping: This involves the outlining of current state processes, the identification of pain points and the gathering of business requirements. The result is a clear map between an organization’s current state and its desired state. Business process mapping facilitates requirements gathering and provides a baseline for developing a business case and outlining expected benefits. The business case is often used to gain executive buy-in.
Business Blueprinting: This is the final step of business process management. Once an organization has improved its processes, they provide their chosen ERP vendor with a business blueprint. This details how the ERP vendor should configure each business process within the ERP system. The blueprint provides specifics on workflows, business logic, checklists, triggers and notifications.
Ray Kroc once said, “the two most important requirements for major success are: First, being in the right place at the right time. And second, doing something about it.”
We see this all the time with organizations. During software development or ERP selection, at one point or another, we have all heard the term “requirements.” What are requirements? Why are they so important? Once you have them, what are you supposed to do with them?
The most condensed answer to this question is: requirements are what an ERP system/implementation or a company must be able to do to perform their jobs.
To simplify things, let’s take software out of the picture. If you were to ask a bricklayer what they need to do their job they might rattle off a list like: bricks, a way to transport bricks to the site, mortar to lay the bricks, a way to transport mortar to the site, a blueprint or reference of what we are building with the bricks. Furthermore, they need a process to determine when the job is done and if the job is finished to specifications.
Notice that in the analogy I never once specified the “how,” only the “what.” During the process of requirements gathering, there is no need to spend precious time on how you want to be able to complete a task. Instead, spend your time on simply completing the task.
Another comparison is the job of a Hollywood screenwriter. A common trap that novice screenwriters fall into is that invariably describing camera angles, music crescendos, lighting motifs and sound effects. This is not their job, their job is to tell a story, the foundation of the entire movie. Without them, you get 90 minutes of bangs, explosions and special effects without any story or characterization that anyone would care about.
The same holds true for requirements. During the requirements process, it is important to focus on what the software should be able to do, not how. Do not get caught in the trap of “the function key F5 must pull up a screen of orders to be processed”. What we need is a screen of orders to be processed, the F5 key is irrelevant. You may settle on a ERP vendor software package that uses a click to open the screen. Choosing software based on specific points like an F-key that must be pressed is a hard justification. Are you really going to choose the software package on that criteria alone?
Now that we have covered the “what” aspect of requirements gathering, what is the best approach to it? There are horror stories related to how requirement sessions go off the rails, rabbit holes are explored to no end and all active participants are talking about details that have nothing to do with the scheduled functional area. The best counter to this hazard is to follow a proven methodology of requirements gathering that consists of careful consideration to workshop session structure and making sure the subject matter experts and process owners are in the room. In many cases, the subject matter expert knows every detail of the process, but the higher-level intentions of the process are the domain of the process owner.
Next up is mapping the process. This illustrates the process in front of everyone so that nothing is lost. After that, you take the process maps and make them into requirements. For example, looking at a process map we may see: Receive order from website EDI > transfer order to picking > deliver product. We have several requirements for the software such as: the ability to integrate with 3rd party website EDI, the ability to display list of products that need to be picked from the warehouse, the ability to mark products as picked, The ability to transfer picked products to delivery module, the ability to recognize delivery route based on customer delivery address….and so on. Then you will categorize the requirements by process, and in turn by functional area. The requirements can then be delivered to the software developer or vendor to determine if the work can be done or not.
Requirements communicate need. What do you need to do? What does your business need to function? Your business has unique operations and characteristics that set you apart. Don’t let those unique attributes hit the ground because your time was spent talking about what your business doesn’t need. Your business needs to be able to manufacture and deliver products and services to customers. I guarantee that your business doesn’t need the F-key.
Coffee lovers, you know this too well. It’s early. You’re trying to get your “morning burst of energy” (aka caffeine), so you drive to your local coffee shop. There are two types of people:
1. The people who go through a drive thru line
AND
2. The people who park their car and grab their coffee inside
However, the coffee shops who have a drive thru option can have a tough job.
They have to keep both lines moving at a very fast pace. You can’t have a terribly long drive thru line (people will see how long the line is and decide to go elsewhere), but you also have to cater to those who came inside to grab their coffee. Both lines are full of people who need fast service.
If there is anything we all know about coffee shops it is that people can get very angry without their caffeine. That’s why baristas need to be as efficient as possible. They’re in the trenches. They can realize what needs to be done in order to make everyone’s morning move smoother.
Let’s take this as an example: In order to move both lines along quicker, a barista may ask for the cappuccino machine to be moved to a more centralized location so that there is not as much running back and forth between the two lines (drive thru and in-store customers). The barista making the claim for the move is most likely a subject matter expert because they experience this issue on a daily basis. This is when a Six Sigma Quick Hit called a “DMAIC” can be used.
DMAIC stands for: Define, Measure, Analyze, Improve and Control. Out of all of these steps, the “control” proves to be the most challenging.
For the most part, this process is straightforward. To “define” a problem, talk about the problem, why it is a problem and why it should be addressed. This keeps your problem in scope.
As for “measuring,” it basically means the consumption over time. You probably have that number, so establishing your baseline for comparison is usually not the issue.
The “Analysis” can employ a number of techniques depending on the situation including fishbone, root causes, and analysis of variance. Pick the best analysis tool for your situation and remain consistent.
Now it’s time to “improve.” A lot of people get bogged down on whether they are taking the best approach on this. Remember, business process reeneingeering is iterative. Apply an improvement, measure, analyze, improve, measure, analyze, improve. Record your data over time and stick with what is working. Record the process change as a marker on the graph so you know what worked at a particular time. Now comes the tough part… “control.”
You get measurable results and then you have a “Eureka!” Moment. When this happens, a lot of people will run off to tell everyone that they were were “right” the whole time. Slow down. Without the “control,” your process will slowly revert back to what it was before. It may sound crazy, but there is a reason why it was that way to begin with.
Let’s go back to our barista. Imagine that one of the measurables was that a cup was consumed from the cup counter hopper. If the user moved the cappuccino maker over next to the cup dispenser, then you should see an activation from the cappuccino maker within seconds.
Compare that to the data from our baseline (which would have been at least 10 seconds because they had to run across the store). If the investigator sees inconsistent or erratic times from the cup hopper to the cappuccino maker, then that is a red flag and a follow-up conversation with the barista should be conducted. (This is when some organizational change management comes in handy!)
You must control your new process and verify it with quantitative data collection and identification techniques. At the very least, give it a solid month or two of implementation so that you have the data to back up the process improvement initiative. After that, even if the users revert to old ways, you have the report to tell the boss that it worked, but that it needs oversight, executive buy-in or a corporate mandate.
Process improvement is not “hard,” but it requires a methodical approach. Most of the time we eyeball process improvements and hope for the best. Depending on your pay scale, this can be expensive or at the very least, divert unnecessary resources away from primary operations. If done methodically and with an iterative approach, the tasks of the DMAIC process can be relatively passive. Give it a try, you might just like it. Either way it shows you’re a go-getter and know how to make things happen.
Organizations implementing ERP software are ultimately looking to improve their business productivity and efficiency through innovative technology. To achieve this goal, organizations should ensure that organizational changes promote their long-term business strategy. Companies that are hoping to maximize business benefits from their new ERP software must rethink their business processes and continuous improvement strategies in order to achieve ERP success.
Business process management, coupled with continuous improvement, is imperative to any successful ERP implementation. In order for a business to thrive in a competitive marketplace, it must focus on process excellence, which ultimately leads to innovation. Business process management and continuous improvement create value across an organization by challenging the current state of the business and determining the efficiency of current state processes. When companies challenge the status quo, this will nurture continuous innovative thinking.
Managers must foster an environment where empowerment is given to all members of the organization before, during and after the ERP implementation. Supplemental education after the ERP go-live can create new thought processes and approaches since employees have already gained an understanding of the basic ‘block and tackle’ processes of the ERP system. They can subsequently challenge the status quo to seek business and process improvement.
An innovative organization involved in continuous improvement is agile and nimble. Such an organization is able to experiment with different solutions to a problem and can further understand business needs and industry opportunities presented through the agile learning process. Once the continuous improvement model is adopted, businesses can benefit from the outcome of performance improvement to fix short-term issues and develop a long-term strategy.
Continuous improvement must be adopted throughout an organization to achieve ERP success. If your organization adopts this philosophy and shifts its culture towards innovative thinking, you will increase your competitive advantage within your industry, leading to long-term success
Organizations implementing ERP software are ultimately looking to improve their business productivity and efficiency through innovative technology. To achieve this goal, organizations should ensure that organizational changes promote their long-term business strategy. Companies that are hoping to maximize business benefits from their new ERP software must rethink their business processes and continuous improvement strategies in order to achieve ERP success.
Business process management, coupled with continuous improvement, is imperative to any successful ERP implementation. In order for a business to thrive in a competitive marketplace, it must focus on process excellence, which ultimately leads to innovation. Business process management and continuous improvement create value across an organization by challenging the current state of the business and determining the efficiency of current state processes. When companies challenge the status quo, this will nurture continuous innovative thinking.
Managers must foster an environment where empowerment is given to all members of the organization before, during and after the ERP implementation. Supplemental education after the ERP go-live can create new thought processes and approaches since employees have already gained an understanding of the basic ‘block and tackle’ processes of the ERP system. They can subsequently challenge the status quo to seek business and process improvement.
An innovative organization involved in continuous improvement is agile and nimble. Such an organization is able to experiment with different solutions to a problem and can further understand business needs and industry opportunities presented through the agile learning process. Once the continuous improvement model is adopted, businesses can benefit from the outcome of performance improvement to fix short-term issues and develop a long-term strategy.
Continuous improvement must be adopted throughout an organization to achieve ERP success. If your organization adopts this philosophy and shifts its culture towards innovative thinking, you will increase your competitive advantage within your industry, leading to long-term success.
When most companies contact us for help, they immediately assume that their current systems are the root cause of many of the operational pains that they are feeling. Processes are inefficient, employees hate the current systems, data is a mess and there is no way to scale for continued growth in the future. So, they often assume that new ERP systems will provide the silver bullet they need.
But when we dig a bit deeper, we often find that technology is not the root cause of the problems. In order to truly transform their businesses to get to the next level, organizations often need to address deeper root causes: improving business processes, better defining roles and responsibilities, better training employees and a host of process- and people-related issues are common drivers of improvements.
Enterprise technologies may be one component of your overarching business transformation, but we see our share of initiatives that lead to several non-technical work streams. Here are some reasons why your business transformation may not need to involve technology – at least not yet:
Without business process reengineering, new technology will simply pave the cow paths. Too often, companies jump into their enterprise software initiatives without redefining their business processes. This typically leads to “paving the cow paths” – in other words, simply automated your already broken business processes. Business process reengineering is an important first step and foundation to an effective ERP implementation, so even if technology is a key part of your roadmap, make sure that you’ve done the heavy lifting to redefine key business processes prior to implementing a new system.
Technology is useless without the right guiding enterprise and IT strategy. It’s easy to quickly embark on a new technology system because it will be an improvement over what you currently have – regardless of whether or not it fits into your strategic plan. There are simply too many options and variables to consider in the technology space, which can cause some to stumble when those decisions don’t fit your overall strategy. For example, a risk-adverse company that is focused on revenue enhancement and is also sensitive to biting off more than they can chew may be better off defining a strategy that puts sales-related technology (such as CRM systems) front and center, rather than more traditional, back-office ERP systems. Technology can actually be a hindrance to your overall transformation efforts when it is not aligned with your overall corporate, operations and technology strategy.
Organizational change management is what ultimately drives transformation – not technology. Technology may enable it, but it rarely drives true transformation. Instead, people and processes are what will drive the change, so it is important to ask how important new technology is in the grand scheme of things. For example, your organization may have an outdated legacy system that hasn’t been upgraded in a decade. It’s easy to point at the system as the problem, but perhaps people aren’t using the system correctly and your team hasn’t taken full advantage of what that old system can do for you. It may turn out that technology still becomes part of the answer, but it is important to consider organizational change management as a potentially lower risk, lower cost and higher ROI type of alternative to a full-blown ERP system.
Even if it really is time for a new ERP system, the other non-technical aspects of your initative will drive true business transformation. Let’s assume that your business transformation can’t happen without new technology. That may very well be true – and it is true for a majority of our clients– but it is important to recognize that it is one of many important components considered for your transformation. Especially in uncertain times of slow economic growth or flat revenues and profits, it is important to take a measured approach that looks at your transformation from all angles. Be sure to consider how CRM systems, HCM systems, eCommerce, and/or other enterprise technologies might address your needs relative to a higher-cost and higher-risk ERP software initiative.
You may very well find that new ERP systems or other enterprise technologies are key to your transformation effort. If that’s the case, then make sure that the timing for new technology is right and that you’ve addressed people and process issues first and foremost.
Many ERP projects fail because they don’t adequately address these important organizational change management issues.
Whether you’re implementing new ERP software or undergoing business transformation, your organization’s success depends on the amount of time and money you invest in business process reengineering. This 60-minute webinar outlines the components of business process reengineering that you need to include in your project plan.
The rock band REM once sang, “It’s the end of the world as we know it, and I feel fine.” After a lifespan of over 50 years, we’ve reached the end of “ERP software” as we know it as well.
As a company that has built an entire business around providing independent ERP consulting services, it may seem ironic that we are officially calling ERP software dead on arrival. It may come as a shock to some, but it’s not really much of a surprise if you look at the history of ERP.
A Brief History of ERP Systems
Beginning around 1960, Material Resource Planning (MRP) was developed as an early iteration of ERP to help manufacturers better manage and automate their manufacturing and inventory management processes. The evolution of this software continued through the 1980s and 1990s, when the rise of MRPII extended its reach to integrate outlying functions within these companies. This included warehouse management, financial reporting and order entry. This was the birth of ERP as we have recently come to know it.
The late 1990s saw the rise of SAP, Oracle, JD Edwards, and other key ERP vendors, which began dominating and integrating the complex needs of Fortune 500 companies. The 2000s saw the rise of Tier II providers, such as Microsoft Dynamics, Infor, and Epicor – some of whom have moved up to become Tier I providers.
The Current ERP Landscape
Over the last 10 years since Panorama Consulting was founded, there have been a number of trends that have foreshadowed the current death of ERP. For example:
Consolidation among current ERP vendors. There are smaller barriers to enter in the market, but the proliferation of players has been leading to more consolidation than in years past.
More options in the market. These days, companies don’t need to settle for a behemoth ERP system. Instead, there are a multitude of options: SaaS, cloud, on premise, best of breed, point solutions, business intelligence and a host of others.
Enterprise software is available to companies of all sizes and industries. When I first started in the ERP consulting industry 20 years ago, ERP was mainly for bigger manufacturing companies. Now, companies of all sizes and industries have a wide variety of viable options.
ERP systems have a bad reputation. For all their upside potential, too many ERP implementations still fail after all these years (see our 2016 ERP Reportfor the most recent data).
A weak global economy has made companies too risk-adverse to take on ERP implementations. Just as we saw during the financial crisis of 2008-2009, companies have pulled back on capital spending over the last several months. There is a lot less tolerance for big, expensive, time-consuming and risky ERP implementations that are historically notorious for blowing past time and cost budgets, while at the same time under-delivering on business benefits and ROI.
This has all coalesced into a market that does not bode well for many ERP systems. In fact, this long-developing landscape has led to the inevitable destruction of ERP software as we know it.
What this Means to the Future of Enterprise Software
Don’t fret: all is not lost. The future of enterprise software is brighter than ever – it just entails a much different landscape than many CIOs and ERP consultants are ready for.
Here are a few things that CIOs and executives can do to navigate the new realities of the post-ERP world:
Make Enterprise Strategy Front and Center. With so many options in the marketplace, a plethora possible directions to go and the many pitfalls of a rapidly-changing landscape, your enterprise strategy should determine which direction you pursue. In the past, companies jumped head first into an ERP selection and implementation process, but now, smart companies are defining a smart enterprise strategic roadmap to drive technology, process and people decisions.
Technology is an enabler of business process improvements, organizational changes and overall business transformation. As mentioned above, ERP implementations have long under-delivered at too high of a cost – mainly because many executives focused too much on technology rather than processes and people. Now, the smarter and more successful organizations are viewing enterprise technology as just one component of an overarching business transformation.
When in doubt, punt on the technology. In times of uncertainty, doubt, and tight budgets, the last thing you want is to over-invest in a large ERP project that may not deliver a strong ROI. That explains why we are seeing so many companies punt on their software decisions and instead ask us to “get their houses in order” by improving their business processes and organizational structures. You can always implement technology later, and people and process changes can typically yield more immediate results at a lower cost, so there is no harm in waiting to potentially bite off more than you can chew.
What’s Next?
This may seem like bad news for some, but it is great news for most organizations. Organizations no longer need to feel as though they are backed into the corner of a “big bang” and hard-to-digest ERP implementation. Instead there are plenty of options and lower-hanging fruit to choose from.
Even as a company that has carved out a niche as being the leading independent ERP consultants, we recognize the evolving needs of our clients – and these changing needs have provided new ways for us to improve our clients’ businesses via enterprise strategy, business process reengineering, organizational change, business transformation and a host of other areas that both play to our core competencies and meet the evolving needs of our clients.
Enterprise technology will always exist, and so will Panorama Consulting’s role as the world’s leading provider of independent enterprise consulting services, but it is indeed the end of ERP as we know it. And I feel fine.
If you would like to discuss this topic and how it may influence your own organization, feel free to reach out: info@Panorama-Consulting.comor 720-515-1ERP (1377)
As those of us in the U.S. prepare for a long Independence Day weekend, it is a good time to reflect on the role of independence for those about to select and implement new ERP systems.
Historically, ERP implementations were an all-or-nothing proposition: you would evaluate a few options, then purchase and implement a single ERP system for the entire organization. This approach, of course, was before the advent of independent ERP consultants – a role pioneered and perfected by Panorama Consulting.
Now that times have changed, there are alternatives that can and should be considered from a technology-agnostic, independent perspective. Unless you are an industry incumbent with goals misaligned with your customers, an ERP implementation doesn’t need to take the “usual” approach. There are a number of methods for finding an enterprise strategy that is based more on your organization’s specific needs and less on what ERP vendors want to sell you.
For example, below are three alternatives that you may want to consider along with the “typical” ERP implementation scenario:
Consider best of breed ERP systems. Most of our clients begin their ERP implementations with the vision of deploying a single system across the entire organization. While this may be a means of standardizing operations across the company, it isn’t always the best option since there could be functionally-focused systems that can better address specific business needs. For example, Salesforce often provides better CRM functionality than many ERP systems, while Workday often provides better HCM functionality. In other words, choosing an ERP system doesn’t need to be an all-or-nothing proposition; it often makes sense to find a core ERP system to handle financials, inventory management and other core functions, but use bolt-ons to handle more advanced functions, such as demand planning, product configuration and project management.
Just say no to ERP software. It may sound crazy, but it can be extremely beneficial to at least consider “none of the above” as one of your ERP software scenarios. For example, what is the cost-benefit of keeping your current system and instead focusing on making improvements to your processes and configuration of the system? What about an upgrade of your existing software? Many companies we work with rush down the path of selecting a new system without fully considering lower cost, lower risk and higher benefit scenarios. Although it may seem like an absolute must that your current system be replaced, it is important to consider lower cost and lower risk options, such as business process reengineering or organizational change management improvements to your existing environment.
Watch for the technically-focused ERP implementation. When you are an ERP vendor, your primary incentive is to sell software and get your technical resources billable. When you are a company implementing ERP software, on the other hand, your incentive is to improve your business operations by whatever means necessary. Unfortunately, these two incentives are often at odds with one another throughout your ERP implementation. It is important to remember that you don’t have to purchase too many modules or licenses to start the meter on expensive technical resources right away. For example, many of our clients opt to focus on business process reengineering before they begin technical configuration, which is a more effective best practice. Whatever you do, it is important to treat your project as a business implementation instead of a technical project focused too much on the software itself.
While there is no simple, one-size-fits-all answer to how to start and move forward with an ERP implementation, these three tips will help you consider your options from a different perspective. Only by objectively and independently assessing your full spectrum of options will you find the best option that makes the most sense for your organization.
Last week, I wrote a blog about why there is never a good time to start an ERP implementation. While these reasons are all valid, some organizations just aren’t going to be able to stomach the cost and risk of a new ERP system with an uncertain economic environment.
For those organizations that are in no way ready to start a new ERP project: there is still hope. Here are five ways to deliver a positive ROI to your organization without yet taking on the cost and risk of a new ERP system:
Initiate a business process reengineering engagement. Your organization is probably wasting a lot of time, money and resources with inefficient and manual processes. While a new ERP system is one way to address those issues, business process reengineering can be a lower-cost and lower-risk way to get more immediate value from your efforts. Look for ways to leverage business process and industry experts to redefine your business processes in a way that takes advantage of low-hanging fruit and delivers immediate value to your company. The other big benefit of this approach? This work will help accelerate your ERP implementation once you are ready to start.
Explore how to get more out of your current technology. You may have an old, outdated and difficult-to-use legacy system, but can you apply band-aids to get more out of that system for just a few more years? Perhaps an upgrade or reconfiguration will buy some time until you are ready for a more suitable long-term solution? While not necessarily ideal for the long-term, this solution can help ease the pain in the short-term while you gain the appropriate approvals for your larger-scale ERP implementation. Leveraging a technology-agnostic firm like Panorama can help you get the most out of your current technology.
Define an enterprise and IT strategic roadmap. Many companies aren’t sure where to start when commencing their ERP initiatives. This can lead to a sense of fear and paralysis. The market has a multitude of technology options – SaaS, on-premise, best of breed, single ERP, cloud, etc. – but those decisions don’t need to be complicated. Determining the right technologies that are best aligned with your overall strategic objectives can ensure that you are focusing your efforts on the technological options that make the most sense for you. Learn more about Panorama’s IT strategy options here.
Implement organizational changes. It may be that some simple organizational changes will enhance your current situation. For example, we are working with a large manufacturing and distribution client that has put their ERP project on hold. In the meantime, they are looking for ways to tweak employee roles and responsibilities to get more out of their system. They are also identifying potential pockets of resistance to address now – paving the way for their ERP implementation once it resumes next year.
Explore niche enterprise technologies. Enterprise technology doesn’t need to be an all-or-nothing proposition. It may be that certain technologies will deliver more low-hanging fruit in the long-term. For example, several of our clients are evaluating CRM systems, HCM systems, eCommerce, Point of Sale, Business Intelligence and other technologies that aren’t as expensive as full-blown ERP systems. One recommendation would be to make sure that you’re not backing yourself into a corner in the future with whatever system you might be considering, so make sure potential future ERP acquisitions support and integrate with the system you are currently considering.
If you need to make some changes, but are nervous about fully committing to an ERP system, these are some ways that you can move forward without breaking the bank.
It’s unlikely that someone would go on a long journey without first procuring a map and planning their route. People have an easy time visualizing a destination when planning their route but don’t understand the pitfalls that lie in the journey. Business process management is the roadmap to the destination of a successful ERP implementation.
Like all roadmaps, there are multiple routes to consider. Within an ERP implementation there are various levels of business process management to consider as you design your new system:
Business Process Management (BPM) – Business process management is a holistic approach used to evaluate, improve and align business processes to an organization’s overall goals and strategy. It enables businesses to be more efficient and flexible to change.
Business Process Improvement (BPI) – There are a variety of approaches within business process management; the first being business process improvement. In this approach, it’s important to examine the key processes within an organization that are competitive differentiators. Six Sigma methodologies are used as a backbone to evaluate and improve key business processes. First, organizations identify the current state and primary key performance indicators to measure success. Next, organizations determine root cause, validate root cause and improve processes to optimize ultimate efficiency. Finally, organizations put a control plan in place to monitor the ongoing process and ensure checks are put in place to trigger appropriate responses if key metrics fall out of control.
Business Process Reengineering (BPR) – Business process reengineering identifies the current process but requires a more radical change. It is used when current processes can’t be improved with minor changes but need to be redesigned from scratch, creating a new process from start to finish.
Business Process Optimization (BPO) – Optimization looks at all of the existing processes within the business and seeks to improvethem to reduce the company’s overall cost to produce. Before you place software atop a process, you want to ensure the process is operating at maximum efficiency, because when you automate an inefficient process, you only make an inefficient process faster. This is why BPM is so essential to an ERP implementation.
Today’s ERP systems are very flexible. There are multiple – sometimes even hundreds – of different ways ERP software may accommodate your business needs. Understanding your desired state prior to implementation activities will save time later in the process and reduce the risk of choosing the wrong configuration. It tells the ERP vendor how you want your processes designed so they can select the configuration that accurately aligns with those processes. It also gives you knowledge of what processes may require customization and an understanding of additional costs you may incur for it.
Choosing the right level of business process management is critical to designing a roadmap for your ERP implementation. Having a roadmap in place is a smart way to avoid the common pitfalls associated with getting lost along the way.
Written by January Paulk, Director of Organizational Change and Business Process Management Services at Panorama Consulting Solutions.
Organizations implementing ERP software are ultimately looking to improve their business productivity and efficiency through innovative technology. To achieve this goal, organizations should ensure that organizational changes promote their long-term business strategy. Companies that are hoping to maximize business benefits from their new ERP software must rethink their business processes and continuous improvement strategies in order to achieve ERP success.
Business process management, coupled with continuous improvement, is imperative to any successful ERP implementation. In order for a business to thrive in a competitive marketplace, it must focus on process excellence, which ultimately leads to innovation. Business process management and continuous improvement create value across an organization by challenging the current state of the business and determining the efficiency of current state processes. When companies challenge the status quo, this will nurture continuous innovative thinking.
Managers must foster an environment where empowerment is given to all members of the organization before, during and after the ERP implementation. Supplemental education after the ERP go-live can create new thought processes and approaches since employees have already gained an understanding of the basic ‘block and tackle’ processes of the ERP system. They can subsequently challenge the status quo to seek business and process improvement.
An innovative organization involved in continuous improvement is agile and nimble. Such an organization is able to experiment with different solutions to a problem and can further understand business needs and industry opportunities presented through the agile learning process. Once the continuous improvement model is adopted, businesses can benefit from the outcome of performance improvement to fix short-term issues and develop a long-term strategy.
Continuous improvement must be adopted throughout an organization to achieve ERP success. If your organization adopts this philosophy and shifts its culture towards innovative thinking, you will increase your competitive advantage within your industry, leading to long-term success.
We have all heard the phrase “time is money.” In ERP projects, you not only have to work hard, but you have to work smart in order to get the project done both in time and in budget. The largest issues plaguing ERP projects are that they take longer than originally expected and cost more than originally expected. According to our 2015 ERP Report, these problems largely stem from project managers, executives and ERP consultants failing to properly scope the complexities and risks unique to any given organization.
Much of the time, scopes are based on simple assumptions, such as number of modules or number of users. However, these assumptions don’t take into consideration operational complexities, resistance to change, diversity of product lines and level of standardization among various locations. All of which are all variables that materially impact the cost and duration of your project.
Here are five strategies to keep in mind when scoping for your ERP project to rise above the norm:
Account for the complexities of your business. Is your business relatively simple? OR Is your business a complex set of business processes supporting a diverse line of products? The mix of operational complexity versus simplicity, business process standardization versus decentralization, and employees’ willingness to change are all examples of variables that will ultimately determine the cost and duration of your scope. Be sure to get an independent view of these variables when planning your project (in other words, not from the same person trying to sell you the software).
Include business transformational activities that will make or break your project. Technical-related activities are rarely the cause of project scoping issues – or the cause of success or failure, for that matter. Instead, business transformational activities such as business process reengineering and organizational change management are exponentially more likely to drive you cost, duration and ultimate success. When scoping for your project, be careful not to myopically focus too much on the technical aspects of the project.
Be realistic about your project assumptions. It is vital to recognize whether or not your assumptions are realistic because they have the power to make or break your project. Many organizations enter their implementations with the assumption that there will be no customization on their projects. However, according to our experience and research, over 90% of organizations end up customizing their ERP software to some degree. This can materially affect your implementation duration and cost. Take the time at the beginning of your project to ensure that the assumptions you and your ERP consultants are working from are accurate.
Benchmark against other organizations and data points. We have all heard the anecdotal stories about what to expect from ERP implementations. However, these isolated examples are rarely indicative of what the average project looks like. With this in mind, make sure to look at broad data sets of other organizations similar to yours to grasp a good understanding of what your implementation cost and duration may be. One helpful resource is Panorama’s 2015 ERP Report. This annual report outlines actual average costs and durations for hundreds of companies across the globe. The data in each report is typically much more reliable than single examples cited by ERP vendors and sales reps.
Watch for the “it looks good on paper” trap. On paper and in theory, I could save just about any organization millions of dollars simply be removing all organizational change management However, this wouldn’t reflect the financial impact of employee resistance, project delays, lost sales and other common risks of failing to address organizational change. Just because something looks like it may save you time and money on paper doesn’t mean that it will. Make certain that your scoping assumptions account for the real “hidden” long-term costs of potentially saving time and money in the short-term.
In today’s world, time is most certainly money. However, the trick is being smart on the front end of your project to ensure a smart end to your implementation. An ERP project is not something that will come together with little thought. It requires a lot of TLC.
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