Building organizational support is one of the most challenging aspects of getting a new ERP project under way. No matter how difficult your current operational and technical environment is, executives are not always going to support a change – especially if they don’t see or understand the need.
We often help our client teams navigate these challenging situations. Oftentimes, an IT Manager or CIO commences an ERP initiative only to be shot down by his or her boss or executive team. Here are five ways to help you sell the need for a new ERP system to your boss and executive team:
Focus on costs, benefits and ROI. First and foremost, executives want to hear things in terms of tangible dollars and cents. The inefficiencies of the current processes and systems may be painfully clear to you or others in the organization, but executives won’t necessarily feel that same sense of urgency unless they see how it translates into real costs and potential benefits for the organization overall. This may include the potential of reducing “hard” costs such as software maintenance or manual business processes, or it could include “soft” benefits such as the opportunity costs associated with not being able to satisfy customers are increase revenues. Either way, these benefits should be translated to a solid business case that will resonate with your boss and executive team.
Leverage your business and operational peers to build a strong case. If you are part of the IT department or middle management, your case will be much better received when you enlist the support of others from within the business. If you can get your COO, CFO, VP of Marketing, VP of Sales and other executives from the business on board with the initiative, you can leverage their support to help “sell” the need to the executive team without having to go to battle alone. In addition, this will give the potential ERP implementation more support when you most need it.
Consider the status quo and alternatives to a new ERP system as viable options. As a broad generalization, executives like to see a variety of options. You may feel as though a new ERP system is the only viable option – and it very well may be – but you want to demonstrate to your superiors that you have carefully thought through and analyzed different possibilities. This is especially true if those possibilities are potentially cheaper, less risky or more effective than the one you are proposing. Don’t be afraid to explore and compare your recommendation to other alternatives, such as sticking with or upgrading your current ERP system or focusing on business process reengineering. It will only make your ultimate recommendation more credible, and in some cases, you may find that those alternatives are indeed better options than a full-blown rip and replace of your current systems.
Focus on the “how” in addition to the “what” and “why.” Getting to the right decision on which path to pursue is relatively easy when compared to how to get there. In other words, a complete and well thought out analysis and recommendation will consider how the proposed solution will get done. In addition to recommending a new replacement along with potential specific options and solutions, it is also helpful to outline how the implementation will look based on what you know so far. Things such as how new business processes will be defined, how you will leverage organizational change management and how you suggest managing and mitigating risk will all be especially well received by your executive team.
Don’t wait until it’s too late. Good decisions are rarely made when under the gun with limited time. With this in mind, it is important to make and build support for your recommendations well before you are in a time crunch to make the changes. In other words, don’t wait until your ERP vendor stops supporting your current system or your old system breaks before making a move.
Success is never guaranteed, but following these five simple guidelines will help increase the chances that you build the strongest case possible for a potential new ERP implementation.
It’s a constant battle: Technology vs Business. Over the last decade, both our thought leadership and our publications frequently opine the difference between ERP implementations that are business-focused versus those that are technology-focused.
Traditional ERP consultants are experts in their specific technology, typically leading them to focus on the technological aspects of an implementation – and also helping explain why failure rates have been so high over the years.
Business-focused implementations, on the other hand, are generally more successful. These types of implementations go more smoothly, organizations leverage more of the software functionality at their disposal and greater returns on investments are realized than those myopically focusing on the technological aspects of the project.
But what are the differences between technologically focused and business focused ERP implementations? Here are five differentiators between the two:
Executive support focuses on getting the job done right. We often work with client executives simply wanting to get their new ERP system up and running as quickly as possible. They put more focus on minimizing the amount of time and money invested in the project without necessarily considering the longer-term implications. Where more successful business-focused implementations focus on getting the job done right the first time and are able to find the right balance between short-term implementation costs and longer-term costs and benefits.
Business processes are well-defined up front. It can be tempting to throw out your old, inefficient business processes and look to your new ERP system to help you define how your future-state business processes should look. Despite ERP vendors selling you on their product’s capabilities, this is usually a big mistake. Companies without a clear vision of how they want their business processes to look or have a meaningful focus on business process reengineering often fall into the trap of automating those same inefficient processes. Successful companies define exactly how they want their business processes to work and how they want to preserve their sources of competitive advantage. This allows the new software to better conform to how the business should be run.
Organizational change management entails much more than basic end-user training. If you haven’t started any meaningful organizational change management until end-user training, then your project is may very well be in trouble. While end-user training is important, it is just one component of what is ultimately required to ensure your employees adapt to the new software and deliver measurable benefits to your business. More successful business-focused implementations tend to include organizational readiness assessments, change impact assessments, change discussions, communications plans and a plethora of other “people-focused” activities to help ensure your project is successful.
Testing focuses on business usage instead of technical stability. Simply getting technical configurations, customizations and integrations working can be a challenge in and of itself. But if that’s all you do, you will be left with a product that is technically sound, but can’t be used by the business. Keep in mind that most ERP consultants are functional or technical experts in their software, but they are not experts in how your business runs or how the software can best support and improve YOURBUSINESS. However, successful project teams understand the need to focus on user acceptance testing, conference room pilots and other forms of testing the software against desired business processes and requirements.
Benefits realization is focused on real business results. Technically-focused implementation teams tend to set the bar pretty low by simply aiming for a technically sound product that is implemented on time and on budget. Business-focused teams instead focus on tangible measurable results. They set baselines, targets and plans on how to achieve expected performance improvements. Just as importantly, they tweak their business processes or systems as needed when they fall short on any business benefits. As the old saying goes: “you can’t achieve it if you don’t measure it.”
At the end of the day, ERP implementations are intended to improve business results and make your operations more successful. It is important that the focus and plan for your ERP implementation is aligned with this expectation throughout the entirety of your project.
Effectiveness and efficiency are key within any organization. Those two things alone can be the reason to implement a new ERP system. But some organizations fail to realize all of the benefits that come along with reengineering their business processes.
Part of the problem lies with unrealistic expectations set by ERP vendors eager to sell their product. In other words: buy our software and it will tell you how to run your business. The problem is also caused by organizations that hear what they want to hear in the sales cycle (“our processes are broken and this shiny new software will help us adopt best practices”). Whatever the cause may be, most organizations fail miserably when it comes to making material improvements to their business processes. Here are a few things to keep in mind to help ensure your business process reengineering efforts are successful during your ERP implementation:
Start with realistic expectations. Unrealistic expectations during the evaluation, decision and purchase process is the root cause of many business process reengineering related issues. ERP vendors oversell the ability of their software to define customer business processes and implementing organizations don’t want to go through the pain of redefining their operations. This leaves both parties falling short of their abilities to make real It must be understood up front that changing business processes requires a good deal of time and effort. This way you will be well on your way to truly transforming your business rather than simply automating your broken processes.
Invest time and resources in business process reengineering. I am always fascinated by the number of executives that say they want to transform their business processes, but fail to follow that desire with the appropriate levels of time, people, budget and focus. The most successful ERP implementations we see are those investing their resources and focusing their efforts and reengineering processes. It is rarely a pretty process – or an easy one, for that matter – but it always pays off. And not only does it pay off, but it arguably pays off as much or more than any other project activities that you may invest in.
Don’t be constricted by your ERP software. Believe it or not, your new ERP system’s out-of-the-box functionality is likely to undermine your organization’s business capabilities. No that is not a typo: despite all the potential benefits of ERP systems, each has weaknesses that don’t help your business processes in certain areas – even if the software is the best-fit and makes your business better overall. The best ERP implementers know when to change their business processes to leverage best practices enabled by the software, but they are also smart enough to recognize when they should force the software to change in order to fit their business processes because those established operations are a source of competitive advantage.
Business process reengineering is meaningless without organizational change management. Honestly, you may as well scrap your business process reengineering and ERP implementation efforts if you aren’t going to invest in organizational change management Without them, your envisioned “to be” processes are merely an academic exercise that will collect dust on a shelf. Organizational change management is critical to operationalizing those business process changes and ensuring that your employees are able to adapt to the new processes and systems. Also note that organizational change management goes well beyond end-user training (which most organizations tend to myopically focus on).
You won’t achieve what you don’t measure. Ditto for measuring performance and adopting a benefits realization plan: your business process reengineering efforts are meaningless without them. Defining appropriate performance measures, setting targets and measuring post go-live results are paramount to ensuring that your new business processes deliver the business benefits you expect. By building these into your overall ERP implementation plan, you will be a step ahead of the game.
Most companies gloss over business process reengineering efforts and spend too much time on the technical aspects of their ERP implementations, but you can ensure success throughout your implementation by focusing more on the people and process aspects of your organization.
Ever since I started Panorama Consulting in 2005, I have heard more than a few ERP vendors sell the notion that business process reengineering is irrelevant to modern ERP implementations. Their ERP software, they say, can do away with the need for too much focus on business processes since the “off-the-shelf” best practices will dictate how those new business processes will look.
It sounds good in theory, right? After all, it’s what we all want to hear: a sort of business transformation utopia that doesn’t require too much thinking or effort on our part.
The bad news is that rarely do these perfect case scenarios play out. ERP implementation project team members more commonly find that modern ERP software is too flexible to simply start using “out-of-the-box.” Even the simplest business processes and workflows have multitudes of variations and options to choose from. While this is mostly a good thing, it runs counter to the “forget about process reengineering” mentality so often touted by ERP vendors.
But that’s what’s happening in the market now. What will the year 2020 look like as it relates to business process management? Unlike the constantly evolving nature of ERP systems in general, business process management won’t change much between now and then. Here are a few things to expect over the next several years:
Business requirements will still need to drive ERP software. It’s easy to get caught up in the astonishing technological advances of new ERP software. Each year, ERP vendors spend hundreds of millions of dollars on making their systems more robust and user-friendly, but a successful ERP implementation is about the needs of the business – not the software. As such, implementing organizations should determine their business process reengineering needs first, before selecting and implementing the system that best fits those needs. This approach results in many secondary (but important) benefits, including the fact that it helps ensure selection of the best-fit software, and the technical implementation of the software is done faster and cheaper than if those activities were saved for the implementation phase of the project.
Implementing organizations will need to ensure that they budget adequate time and resources for business process reengineering. Business transformation takes time. In fact, it takes materially more time than the technical configuration, testing and deployment of ERP software. When developing ERP implementation project plans, the more successful organizations recognize this reality and budget time and resources accordingly. Rather than ensuring that new business processes can be defined in a matter of weeks, a more realistic approach is to ensure sufficient time for defining, documenting and implementing new business processes. Think of it this way: it probably took your organization several years or decades to adopt your current processes, so it is highly likely that it will take some time to change those well-established processes.
Business processes need to tightly integrate with organizational change management activities. Organizational resistance is one of the key reasons why process changes typically take longer than most people expect. Convincing employees to understand and accept process changes takes time – more than the “they’ll do it because we said so” philosophy we often see in our clients’ boardrooms. Employees typically don’t actively resist change. Instead, they more commonly struggle to grasp the details and purpose of changes to their jobs, which can be challenging to overcome. An effective organizational change management plan ensures that this doesn’t cause business process reengineering issues and ERP implementation failure.
Integrate analytics into business processes. Robust analytics, business intelligence, data warehouses and reporting are some of the more significant innovations of ERP systems in recent years. Instead of simply storing massive amounts of data in their ERP software, organizations can now glean real-time insights into their operations and financial results. However, none of this matters if these analytics aren’t built into the standard business processes of your organization. Therefore, successful companies now and in the future will more effectively integrate data and analytics into their day-to-day business processes and ERP software initiatives.
While none of this is much of a change from best practices of today, we expect that more organizations will embrace these proven critical success factors in 2020. We already see a distinct difference in the ERP implementation success rates of organizations that adopt these philosophies and frameworks versus those that don’t.
ERP implementations result in significant changes to an organization. Business process reengineering ensures that unique processes that offer competitive advantage are not lost during implementation. Processes should be improved based on the needs of the organization – not based on software functionality.
This webinar clip explains why business process reengineering is mandatory for ERP implementations.
ERP implementations have often been a mystery to many. Despite how long ERP systems have been around, ERP consultants, system integrators and implementing organizations have yet to crack the code on how to make their initiatives successful.
Much of the problem lies with inaccurate assumptions that propagate themselves over time. The same ERP consultants and system integrators that have failed in the past are the same ones reassuring organizations that they can make their implementations successful.
The good news? There are plenty of organizations that have dispelled these myths and experienced successful ERP implementations as a result. Many of our clients have learned that the following five myths are NOT accurate and are more likely to lead to failure:
Myth #1: Your software selection consultant can’t also implement your ERP software. Some organizations still take the old school approach of segregating the consultant they use for software selection from the one used for implementation. This made sense back before independent consulting firms, but now having separate consulting firms handle different phases of your project leads to higher implementation costs, longer timelines and overall higher costs since it requires new teams to relearn your business each time there is a change. There are higher caliber consultants focused on the business aspects of successful implementations in addition to the technical (see myth #3 below), so be sure to carefully consider those alternatives.
Myth #2: Your ERP implementer needs to be a VAR or software vendor. For a long time, ERP system implementers have assumed that they had to find a system integrator or VAR specializing in the chosen software. However, this myopic view has led to many failures in the past – largely because a system integrator’s competencies in the functional and technical aspects of the software solution are least likely to determine the success or failure of a project. Instead, be sure to look at your entire portfolio of options before backing yourself into a corner with a partner that may be brilliant at configuring and implementing their software, but not so good at making the software work for your business. Companies such as Panorama provide the best of both worlds: a broad base of experience combined with resources that specialize in the various ERP systems available in the market.
Myth #3: Technical proficiency is the most important aspect of implementation. Despite the relative unimportance to overall success, organizations have historically dwelled too much on the technical competencies of their implementing partners. They looked for system integrators and consultants that were technical whizzes and knew the software better than anyone, but couldn’t reengineer a business process, manage a project or manage organizational change to save their lives. As we see with our own implementation clients and expert witness engagements, business competency is far more important than technical specialization. Instead of focusing too much on technical knowledge of your chosen ERP system, be sure to look for consultants that take a big picture view of successful ERP implementations, including business process reengineering, organizational change management and project management.
Bottom line: there are far more options available in the market today than there were in years past. There are consulting firms with the ability to provide viable options that increase your odds for success rather than trying more of the same tactics that have led to so many failures in years past.
Tis the season for weddings! The beautiful weather makes spring a great time for couples planning and hosting weddings. As I help friends with wedding preparations, I find that many of the concepts I have learned in the ERP world make for very applicable advice. Although ERP implementations and weddings appear to be two completely different matters, there are five major concepts that prove to be crucial to both.
1. A clearly defined scope. Wedding TV shows capture this concept best. How many couples do you know who start planning their wedding as a small gathering of close friends and family but end up with a full-blown, glamorous wedding with hundreds of guests? Since weddings are exciting, it is understandable that the magnitude of the event grows over time. Similarly, the scope of an ERP implementation is typically a vendor’s best estimate of your business needs prior to the project’s initiation. If the ERP vendor does not clearly define the scope of the implementation from the start, it will be much harder for the project team to manage the scope later on. “Scope creep” is a common occurrence during implementation because vendors often discover business requirements that were initially overlooked or vaguely defined.
2.Commitment is the key. Wedding planning can be a trying time for couples because it challenges them to work together in ways they have not experienced before. Without the upfront commitment from both parties, planning a wedding can even cause couples to distance or break up. Similarly, an ERP implementation is a big business decision. Gaining and maintaining executive buy-in and commitment from the beginning of the project is crucial to its success. Encouraging executive involvement and effectively communicating with all stakeholders will ensure the project receives support company-wide.
3. Pinpoint your budget. Just like scope, the budget of a wedding or an ERP implementation should be as detailed as possible. Ironing out a strict budget will help the project team manage the budget after implementation begins. Surprises are bound to happen, which may lead to budget increases. In an ERP implementation, it is important to closely evaluate budget enhancements, which should be submitted and documented in the form of change requests.
4. Understand your unique requirements. Many couples hire a wedding planner to help them with the planning of their big event. It goes without saying that the more the wedding planner understands the couple’s preferences and unique requests, the more successful the wedding will be. Similar to this concept, the implementation partner and vendor must understand the company’s unique business requirements prior to implementation planning. The best practice is to have thorough and precise documentation of all of the company’s business process flows and business requirements. Although a daunting task, many companies find great success by hiring independent ERP consultants to facilitate this process.
5. Be ready for the change. Marriage is a big step for a couple and is typically accompanied by many lifestyle changes. The more prepared a couple is for these changes, the smoother the transition will be. Although this is a well-known concept about marriages, it is often overlooked in an ERP implementation. In a similar manner, the more preparation and buy-in you can achieve with your company’s employees, the more success you will see with the implementation and the transition to the new ERP system. Organizational change management (OCM) activities should be incorporated throughout the project. Effective OCM will promote communication, prevent employee resistance and build support for the company-wide initiative.
Both weddings and ERP implementations require full commitment, buy-in from all stakeholders, a detailed budget and in-depth planning. To successfully implement ERP software, many companies engage independent ERP consultants with strong organizational change and business process management methodologies. Learn more listening to our on-demand webinar, The Path to ERP Implementation Planning.
The dichotomy between successful and struggling organizations is becoming more pronounced as the technological landscape changes. Over the last 20 years I’ve been in the consulting industry, I’ve been both directly and indirectly involved with thousands of companies and executives that have given me a unique insight as to why some organizations are better equipped to succeed than others. While it would be nice if everyone benefited comparably from new enterprise technologies and opportunities, unfortunately, the benefits of new technology are not evenly distributed.
Throughout the manufacturing industry, these challenges are particularly apparent. A majority of our clients have historically been in one of several different manufacturing-related industries such as: aerospace and defense, industrial manufacturing, chemicals, food and beverage and consumer products. Regardless of a company’s sub-vertical, each and every one faces very similar challenges and opportunities.
Based on my experience and observations, below are five things that I’ve found successful manufacturers to be more equipped to handle than their less successful counterparts:
More flexibility. Whether you work for a business-to-business operation or a direct-to-consumer outfit, flexibility is the name of the game today and in the future. Real humans – the same ones who experience flexibility in their consumer purchasing processes –expect a minimum level of flexibility in their B2B purchases as well. Manufacturers selling directly to consumers must be even more flexible in their manufacturing processes in order to accommodate the expectation of flexibility among those buyers.
Better integration of data. For years, ERP systems and other enterprise software have succeeded at collecting and gathering data. However, few manufacturers have been able to make a sense of these masses of data. The more successful manufacturers, on the other hand, are figuring out how to turn data into information that can be acted upon. This requires well-defined, repeatable and scalable business processes. For example, demand forecasting and advanced planning processes are much more effective when they effectively integrate inventory and sales information.
Leveraging the “internet of things.” The internet of things is a buzzword – both in manufacturing and in other industries – but not many manufacturers are leveraging this reality. To summarize, the internet of things allows manufacturers to leverage data from multiple sources and devices. Successful manufacturers must determine how to best leverage the proliferation of data sources throughout their supply chains. Many have historically understood how to integrate manufacturing execution systems into their ERP software and processes, but now they must figure out how to best leverage data from tablets, scanners and other micro-devices into their business processes.
More clearly defined business processes.Business process reengineering and documentation is an important prerequisite for a successful ERP implementation or manufacturing operation. This is why prosperous manufacturers invest time in this important process while the less successful ones fumble their way through trying – but ultimately failing – to leverage new technologies in a meaningful way.
Better use of organizational change management. New business processes means lots of change for employees. Because most people avoid change, it is important to leverage organizational change management strategies, tools and tactics that translate new systems and processes into operational reality. Without doing so, the vision of new business processes and systems will never become reality. Consider organizational change management as the tool enabling the rubber to meet the road.
ERP software selection intimidates many organizations. One of the most challenging aspects of an ERP implementation is selecting software that supports your organization’s business processes and helps your organization achieve measurable improvements. Even more challenging? Finding a truly independent ERP consultant to help you through the process.
When selecting enterprise software that meets your organization’s business requirements, it helps to seek advice from an independent third-party with a breadth of knowledge about all potential ERP vendors. A partner with a technical implementation focus or a practice related to a particular vendor might lack both this breadth of knowledge and the objectivity necessary for ERP success. On the other hand, a partner with a vendor-agnostic approach will be more equipped to provide your organization with a thorough ERP provider assessment.
In the consulting world, “independent” refers to the level of association a firm has with specific ERP vendors. If a firm is independent that means that it has no association with specific vendors and, therefore, no potential for conflicts of interest.
Independent ERP consultants have a different revenue model than software-specific consultants. Because they don’t profit from selling as much software as possible, independent consultants can focus on the true needs of their customers and help them select the “best fit” software – not the software that will lead to the most follow-on work. Independent consultants do not encourage the selection of a particular software system merely because it contributes to their own bottom line.
When it comes down to it, an independent consultant should not necessarily recommend that your organization implements ERP software in the first place. If your organization’s business processes are not optimized, an independent consultant likely will not recommend an ERP software package until those processes are evaluated and, if necessary, reengineered at a high level. Because independent consultants don’t make money from software sales, there is no conflict of interest when determining whether or not your business is ready for ERP. They understand that no ERP system, no matter how advanced, automatically fixes inefficient business processes. This is why many independent consultants emphasize the importance of focusing on business process reengineering and organizational change management before software selection.
Selecting the right ERP software requires the unbiased advice of a firm that wants to see your organization succeed – not just spend money. An independent ERP consulting firm, like Panorama, has the expertise necessary to guide your organization through a successful and unbiased software selection. Our approach is based on our extensive research revealing the difficulty of ERP selection and pointing to the necessity of independence.
This webinar clip will explore the ways companies can evaluate and find the right ERP software for their organizations. Hosted by January Paulk, Director of Client Services at Panorama, this is a must-see for any organization looking to select new ERP software. This is the last part of a five part series.
“Out with the old, in with the new.” We all know the phrase and ERP is no exception. When clients approach us to help them select and implement new ERP systems, improving business processes is one of the main drivers for wanting to replace their legacy systems. Most of our clients have systems ranging from 12 to 15 years old. During that time, many of these organizations have grown, gone through massive organizational changes and developed a number of bad habits along the way – paving the way for improved business processes.
Many organizations tend to run their enterprise software implementation projects in ways that undermine their process improvement efforts. This may help explain why, according to our newly released 2015 ERP Report, only 58% of organizations consider their ERP implementations successful and only 45% are satisfied with their ERP vendor post implementation.
If you don’t manage your business process reengineering initiatives appropriately, here are three ways your organization’s bottom line will suffer:
Not spending enough time on business process reengineering during your ERP implementation. The most fundamental shortcoming for many organizations is the failure to recognize the need for business process reengineering. Not allotting for the appropriate focus, time and resources can make your processes worse than prior to your implementation. Half-baked business processes lead to confused and frustrated employees, which leads to lower bottom-line results. Our experience and research shows that the most successful ERP implementations are the ones that develop project plans with a business process focus rather than a myopic “software only” implementation.
Deferring to your chosen ERP software to tell you how to reengineer your business processes. ERP vendors sell their software stating that the software will tell you how to run your business more effectively. While this may sound good in theory—don’t fall for it. Even with all of the capabilities of today’s ERP systems, you still need to roll up your sleeves and define how you want your business processes to look and work if you want the system to be a success. If you simply allow the software to make the decisions, it will force your organization to go over both time and budget and could completely fail to deliver any meaningful business benefits.
Underinvesting in organizational change management to help make the processes stick. Even if you do take the time to articulate your future business processes, it will be worthless if your employees aren’t well-versed in the new processes. For example, let’s say you have 200 employees affected by the new system. Each of those employees has an average of 10 tasks they need to adapt to in the new system (a very conservative number since most implementations involve many more). This translates to 2,000 changes that the people in your organization will need to adjust to.
2,000 potential points of confusion
2,000 potential process breakdowns
and 2,000 ways to undermine your bottom line if organizational change management isn’t adequately addressed.
Basic end-user training won’t cut it, either. You need a comprehensive organizational change management plan ensuring your employees are comfortable with changes well before go-live. (Learn more about Panorama’s organizational change management methodology here).
There is good news! There are easy fixes to these common pitfalls:
Devote. Make sure that you devote the time and resources in your project plan to account for these important business process activities.
Develop. Verify that a comprehensive organizational change management plan is developed and implemented to help institute the changes within your organization.
It may be easier said than done, but these two things will have a more material impact on your bottom line to certify that your implementation can be a success.
Learn more about business process reengineering by downloading our 2015 ERP Report.
While many ERP system initiatives are intended to help replace outdated legacy systems, our clients typically leverage new systems to help them promote and prepare for growth. Whether their plans are to grow through organic growth, mergers, acquisitions or all of the above, our focus is on how to help our clients scale for future growth.
We are often called upon to leverage our innovative and effective organizational change management strategies as a way to fuel our clients’ future success. In other words, our clients are looking for much more than technological guidance – they are looking for ways to reengineer their entire organization in a way to fuel growth and bottom-line results.
Looking at our collective experience with successful ERP implementations, five organizational change management strategies have been particularly effective among our high-growth clients:
Consider business process reengineering and organizational change management as critical path implementation activities. Let’s call a spade a spade: software configuration and testing will be relatively easy compared to the people and process aspects of your implementation. In fact, our 2014 ERP Report found that organizational change management issues were the most difficult aspects of implementing companies’ projects, while technology was the easiest. With that in mind, you will want to prepare accordingly by ensuring you devote plenty of time and resources to your project’s organizational change management and business process reengineering activities.
Where applicable, take a “cookie cutter approach” to your business. While many have negative connotations of the term “cookie cutter,” companies that most effectively manage growth standardize their operations wherever they can as part of their ERP implementations. Back office functions such as HR, IT, finance, procurement and accounting are prime candidates for standardization, but even more customer-facing processes such as customer service, ecommerce and product lifecycle management can be more standardized than they are now. This standardization is critical to future growth, especially if you expect to seamlessly roll future acquisitions into your current operations. All of this suggests that you will want to devote plenty of your project’s time and resources to business process reengineering and organizational change management.
Be as diligent rolling out organizational changes as you are with the technology. One of the key issues with ERP vendors, ERP consultants and other industry incumbents is that they are too focused on the technological aspects of implementation. If more organizations spent as much effort on organizational change management as they did on the technology, failure rates would be much less. Our 2014 ERP Report proves that just over 50% of organizations experience operational disruptions at the time of go-live, most of which could have been avoided by investing more in organizational change management. Avoid the temptation to try to save money by cutting organizational change management because it will ultimately cost you much more than you save.
Develop a solid business case and benefits realization plan. You will not save money or make your operations more efficient unless you develop a business case that can be translated into a benefits realization plan used to manage actual business results. If you can’t achieve business benefits with your core business as is , you can’t expect the ERP system to enable effective growth in the future. The business benefits achieved by implementing new software, processes and organizational structures will multiply exponentially as you scale the company – but only if you diligently measure and manage those business benefits along the way.
Leverage a comprehensive, proven and effective organizational change management strategy. The tired, outdated means of merely considering end-user training and some basic employee communications as part of an organizational change management plan have proven to cause failure. Most ERP consultants and system integrators don’t understand organizational change management – because it’s not what they do – it’s up to the implementing organization to find the right resources to help them through their entire organizational and business transformation. Focus on the key aspects of organizational change management if you want to truly prepare your organization for success and growth.
At the end of the day it’s vital to remember that technology installation, configuration and testing won’t determine your level of success. Organizational change management will ultimately determine how effective and successful your project is – and how well-prepared you are for future growth.
All business transformations require effective leadership buy-in and communication. The executive and management teams sponsoring a major change in an organization are tasked with an important mission: what to communicate to employees and how to say it.
Any major business change – such as an ERP implementation or business process reengineering initiative – can result in quite a bit of fear, uncertainty and resistance among employees.
On the surface, an ERP implementation may look like a new system is being implemented by the IT department. In reality, however, it entails changing business processes, taking away tools and methods that employees may have helped create over the years. It requires employees to learn an entirely new system. In some cases the new ERP system may entail a redistribution of job roles and responsibilities. With this backdrop in mind, it’s no wonder that employees typically fear the worst and resist change.
This brings us back to leadership communication. In order to alleviate the employee anxieties outlined above, effective executives and managers need to focus on several key components of their messaging:
What is the big picture change? First, you need to communicate the big picture vision of the change itself. Whether the transformation involves a new ERP system, all new business process reengineering or an outsourcing initiative, it is important to outline the context of the change, including the general description and scope of the transformation.
Why are we changing? The next big question on everyone’s minds will be, “why are we changing?” Whether the reason for the change is to improve efficiency, better serve customers, improve the financial results of the company or any other organizational reasons, it is vital to communicate those details to employees so they understand why it is important to the company’s health, success and viability.
How does the change affect me? Employees want to understand what the change means to them individually. How exactly will their jobs change? What will happen to the “old way” of doing things? How will they be trained on the new processes and systems? All of these and other questions need to be clearly communicated to ensure that they can accept and embrace the changes.
There is no boilerplate, one-size fits all communication strategy that works for every organization. It needs to be customized to fit your culture, industry and employee base. There are two things one must consider when determining how to communicate to their employees:
Medium. Simply relying on one channel is not effective. It is best to leverage multiple channels to get your message across. It is imperative to remember that different people learn in different ways. While some may retain information shared via email, others may need to have a discussion in person or attend a classroom training to fully absorb the changes.
Frequency. It takes seven repetitions for the average person to retain a message. Remember that you have a deeper understanding of the message than your employees do, so do not be afraid to repeat the same message until you are blue in the face..
Remember that the messages you communicate as a leader will largely determine how effective your business transformation will be. The mechanics of the transformation isn’t nearly as important as how well you rally the troops to support and enable the changes to your organization. This communication plan should be an integral part of your overall organizational change management strategy.
Through the treacherous years of manual processes, outdated legacy systems, inaccurate performance data and internal operational breakdowns, most organizations are ready for a heavy dose of business process reengineering.
Everyone has different opinions of what business process reengineering actually means and what its correlation is to ERP implementations. Our team has found seven common myths about business process reengineering that we will share along with a healthy dose of reality check:
Myth 1: Business process reengineering doesn’t need to happen during ERP projects. This is perhaps the most misguided of all the myths mentioned. Every ERP system – regardless of which you choose – will most likely wreak some sort of havoc on your business processes. Most of these changes will be positive improvements but will still require some effort in defining your operations in the new system environment.
Myth 2: Simply implementing a new ERP system will drive process improvements. This may take the cake for the most pervasive myth in the industry regarding business process reengineering. Today’s ERP systems are extremely robust and flexible, meaning even the simplest business processes can be performed multiple ways. Organizations need to defined their business processes so the software can be configured and customized accordingly.
Myth 3: ERP project teams should focus on “to-be” rather than “as-is” processes. If you are an ERP vendor or sales rep, current-state processes probably don’t affect your dad-to-day. But if you are the organization making the changes or the employees doing the work every day, then the current processes absolutely do matter. It is critical that you assess the current state of your processes to help you define the future state as part of your business process reengineering and optimization efforts.
Myth 4: Business process improvements can be done without organizational change management. Many executives think that they can simply redefine and implement business processes without organizational change management. However, this is a very misguided view of how to enable process and system changes. The most effective business process reengineering efforts succeed largely because of the way change management is addressed – not because of how well the processes are defined on paper.
Myth 5: You can’t reengineer business processes before knowing which software you are going to implement. Obviously, screen transactions and menu options are driven by specific ERP software, but the how, what and when of what your business actually does is mostly independent of your software. Sure, your new ERP system may provide some new and better ways of carrying out the detailed transactions, but the general nature of your business operations probably won’t change much. For this reason, it is typically more advantageous and efficient to both evaluate and improve your business processes prior to selecting and implementing a new system.
Myth 6: All business processes need to be overhauled before selecting and implementing a new ERP system. In opposition to myth #5, some executives believe that they need to evaluate, redesign and reengineer their entire business prior to selecting and implementing a new ERP system. However, this is not the case. Typically, the most successful organizations focus on improving their core areas of competitive advantage or differentiation as part of their ERP implementations, while letting non-core business processes follow the lead of the software’s out-of-the-box functionality.
Myth 7: Business process reengineering will cause my ERP system to take more time and money to implement. The Achilles heel of many failed ERP implementations is that they assume that “doing things right” will cost more time and money than if they cut some corners along the way. While it may look good on paper to strip out any extensive business process work, the reality is that your project will most likely take longer to implement and fail at go-live if business processes are not adequately addressed as part of your implementation. Remember it is much less expensive to do things right the first time than to clean up after an ERP failure.
If you have hopes of a successful ERP implementation—and let’s face it, everyone does—be sure to keep a realistic view in mind and don’t cut corners. And, as always, beware of the seven deadly myths.
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Lean Six Sigma is a phrase that encompasses lean manufacturing and six sigma process improvements into one overall management strategy. In order to understand how your company should embrace these principles, you must first understand the components of Lean Six Sigma and business process reengineering, particularly in the context of an ERP implementation.
Efficiency and quality cover a broad spectrum within the realm of manufacturing. We’ll use the example of hand-made products produced one-at-a-time by a single individual as the least efficient and most error-prone form of manufacturing. In contrast, we’ll use semi-conductor manufacturing, with its highly automated and digitized processes, extreme precision and repeatability as the high end of the spectrum. All manufacturing falls somewhere between the two, and where your company falls will determine the cost effectiveness of embracing Lean Six Sigma protocols.
Since roughly 50% of the efficiency gains for any lean project will come from organizational and layout modifications, it’s a good idea to take a look at how people and materials currently move within your manufacturing processes. Some things to look for include:
Do raw materials enter the line and move along a straight path to their finished state?
How often are materials handled from the time they enter the manufacturing process?
How often are materials manipulated by people vs. machines?
Does your manufacturing facility have enough space?
Do you currently use people for tasks where machines could be substituted?
Do employees have cross-functional skill sets (i.e., do they have the capability to perform other tasks if their primary job is offline for any reason?)
Your company’s current level of digitization is a good indicator of the gains to be realized by adopting a Lean Six Sigma approach. If your company’s functional groups (marketing, sales, accounting, etc.) use paper, have independent computer systems or don’t communicate directly with one another, you’re missing out on opportunities to increase efficiency and organizational readiness.
The goal of adopting a Lean Six Sigma strategy for your company is not about reducing defects to 3.4 million per widget – it’s about customer satisfaction. Well-designed manufacturing processes produce better products at lower cost while generating fewer complaints and product returns. Before implementing a new ERP system, organizations should adopt the Lean Six Sigma principles above and ensure that they are following a strong business process reengineering methodology.
One of the most common challenges for entrepreneurs, CEO’s and other executives is the age-old dilemma: how much time should you spend working “on” your business instead of “in” it. Companies of all sizes, industries and geographies tend to struggle with finding the right balance.
Michael Gerber was one of the first to articulate this common challenge in his book The E-Myth Revisited. To summarize the general dilemma: executives at organizations often get consumed with “doing” the work rather than “building” a business that enables the work to get done. Although the book focuses more on this challenge in the context of startups and small businesses – where this potential pitfall is especially prevalent – it is something that companies and organizations of all sizes face.
For example, if a business hasn’t built appropriate business processes, defined organizational roles and responsibilities – along with other aspects of business infrastructure required to scale a business – the organization is more likely to experience stress associated with lack of business process clarity. In this type of environment, executives spend more of their time putting out fires, handling crises and managing exceptions instead of spending their time on the strategic aspect of “building” their business.
On the other hand, executives that spend more of their time working on their businesses tend to experience less organizational crises, stress and confusion. In addition, their business operations tend to run more smoothly and predictably. Perhaps most importantly – at least to most of our clients – is that these types of businesses are highly scalable and enable faster growth than their less effective counterparts. In short, these executives have taken the time to build a well-oiled machine, and as a result they spend less of their time managing problems and struggling with scalability.
This philosophy is especially important when considering how to manage your operations and IT infrastructure. Implementing a more effective ERP system is a way of working on the business and creating that consistency, predictability and scalability that successful organizations are vying for. Many executives have solved the struggle with the “fires” caused by outdated legacy systems and broken business processes by installing ERP software; however, simply implementing new enterprise systems isn’t enough for those that really want to work on their businesses. Too often, executives think that the ERP software itself will be the silver bullet for improving their business operations.
In addition to addressing their enterprise software, executives must also facilitate business process reengineering as a way to optimize their operations, deliver better results and create a foundation for future growth. The more successful organizations devote the time, energy and resources required to thoroughly improve their businesses – often times before they implement new ERP software. If they move too quickly they run a high risk of “paving the cow paths” or implementing software that simply automates their already broken, inefficient and non-scalable business operations.
Finally, effective organizational change management is crucial when working on your business, whether as part of or independent of an ERP implementation. Clearly defined roles and responsibilities, clear communication and understanding along with performance measures are all critical success factors while building a scalable business. Again, too often we see executives under the impression that simply implementing a new ERP system will fix those problems, but if anything, they exacerbate those organizational “people” issues while simultaneously undermining effectiveness and scalability along the way.
While it may sound easier said than done, working on your business rather than in it will determine your organization’s success and growth in the future. However, once you get your ducks in a row, life becomes quite a bit easier, less stressful and more effective for you, your employees and your customers.
Business process reengineering is a critical component of ERP implementations in any industry. Given the massive changes and turbulence sweeping energy-related companies across the globe, these elements are especially important in the oil and gas industry.
Every industry has its own challenges and changes. These can include a weak global economy, regulatory changes, increasing competition or consolidation among industry players. Through these challenges we have gathered that the lessons of the energy industry are applicable to any industry or company going through changes.
Below are a few concepts to keep in mind for the oil and gas industry – or any other industry experiencing significant changes and obstacles:
Business process reengineering should focus on both top-line revenue growth and cost containment. Too often, energy companies and those in other industries put too much focus on top-line growth OR cost containment when they should be focused on BOTH. For example, just a few months ago, energy companies had a surplus of revenue pouring in. Fast forward three months, and now they are scrambling to find ways to scale back operations and contain costs to deal with these economic realities. These companies should not forget about additional ways to leverage more top-line growth, especially in an environment with a shrinking market. Effective business process reengineering will look at both sides of the business benefits equation.
Process improvement should touch all major areas within a company. Just as process definition and improvements should focus on revenue growth and cost containment, it should also address multiple areas within your company. As integrated as most companies are – whether in energy or other unrelated industries – business processes shouldn’t be addressed in isolation. Instead, they should be addressed in an integrated way so that the efforts are able to generate more “bang for the buck” and deliver a solid return on investment (ROI). This approach also ensures that inefficiencies aren’t simply shifted from one functional area or business process to another, which is typically the case when business processes are improved in isolation.
Business process reengineering efforts should precede any ERP implementation or IT initiative. Too many organizations – including those in the oil, gas and energy industry – fall into the “implement a new ERP system and the process improvements will come naturally” trap. In order to get the full business benefits of a new ERP system, it is important to define and even implement many of the process changes prior to selecting and implementing a new ERP, CRM, SCADA, fixed asset or mobile workforce management system. This is something we covered in more detail in a past blog: Five Reasons Why Business Process Reengineering Should Happen Before Your ERP Implementation.
Align organizational change management with your process reengineering efforts. Defined business process improvements are meaningless if they aren’t implemented and if employees aren’t adopting them. For this reason, organizational change management activities should enable the desired changes from a people perspective. For example, detailed business processes by department or workgroup should be defined and communicated in a targeted fashion well before end-user training. In addition, your organizational change activities should include more tangible performance metrics and KPIs to track the improvements over time. You can learn more about our recommended organizational change management strategy and playbook by viewing our on-demand webinar.
While these lessons are not necessarily unique to the oil and gas industry, this vertical underscores some of these industry-agnostic lessons that are useful to anyone considering business process reengineering or an ERP software initiative.
There is a belief that a new ERP system by itself will turn around a struggling business or make a thriving business more successful. As exciting as a new ERP system can be, servers, software and hardware are expensive. Organizations need to conduct due diligence to find the correct IT strategy for their needs instead of solely focusing on their budget. An outside set of eyes can be very helpful as they are not blinded by department loyalties or corporate fiefdoms and can see the current environment for what it is. An outside agent also has ample lessons learned from other IT strategies and your company can save money and heartaches by listening to their advice.
Following are four steps for developing a winning IT strategy:
1.Find the right fit: There are a lot of IT solutions out there, and finding the correct one for your business is critical for continued growth. Cost is usually the primary metric that most companies adhere to, but there is much more to consider before pulling out the corporate credit card. Is it appropriate to host your activities in the cloud? Would you rather have your IT infrastructure on-premise? Do your employees need connectivity on the road? How long are you going to live with the IT upgrade? Are you allowing employees to bring their own devices and hook them up to your network? Do you have enough bandwidth? How big and competent is your IT staff? All of these must be considered in addition to cost.
2. Identify the benefits: A baseline of the current business processes is necessary. The IT strategy should start with the overall business strategy and how technology can make your organization efficient, increase production, reduce management costs and improve collaboration. There needs to be a clear roadmap between the current state, the IT strategy and the future state. Timing also needs to be factored into the vision of success. Typical IT upgrades are planned to last for three to five years, but this is highly dependent upon the client and their specific needs. Since IT is a rapidly changing field, the implementation should be started as soon as the IT system is agreed upon.
3. Prepare the employees: An IT strategy cannot be a lightning bolt from the executive suite without consideration for the various departments and end-users. There needs to be a deliberate change management strategy that includes, informs and provides realistic expectations. All departments must be included in the change management strategy and shown how the new IT strategy relates to company goals, how it will make end-users’ jobs easier and how and when they will be trained. Whenever Panorama proposes a new IT strategy, the end-users worry that the new IT program will be paid for by employee cuts and reduced benefits. While some jobs may be made redundant, it is important to have a theory of victory for the employees. Some jobs may be cut, but there will be new work opportunities and jobs will be created because of the new IT capability.
4. Manage the risk: Risk management – particularly with impacts to current business processes and employee expectations – need to be identified and either overcome or mitigated. It is important to have a no-nonsense look at the company and detail how the firm can handle the IT changes. An inventory of the current IT infrastructure as well as a detailed look at its strengths and drawbacks are critical as this creates connectivity within and outside of the company. One of the biggest risks is training, but if the company has created a sound IT strategy, married it to the business processes and set the stage for success with the employees, training should go swimmingly. There will always be friction to change and a sound change management plan will help ease friction and outright resistance to the training and the new IT system.
You don’t have to walk in the tall cotton alone in determining your IT strategy. Find a capable partner to help you navigate the rough patches during an IT strategy and implementation. Panorama can help you by providing critical insights on business processes, change management, risk reduction, and of course, help you determine the best IT infrastructure for your specific needs.
ERP implementations are challenging propositions for companies looking to adopt new enterprise systems. This fact is true for companies of all sizes, industries and levels of complexity, but is especially true for small businesses.
The good news is that small businesses have a number of options to choose from when evaluating potential ERP systems. Traditional ERP vendors are moving downstream to find more sources of customers and revenue in the small business segment, while a host of upstarts and best-of-breed solutions are providing niche solutions for smaller organizations.
Unfortunately, along with these options comes the reality that small businesses are often times not well-equipped to manage the complexities and challenges of ERP implementations. More specifically, they habitually lack the bandwidth, skills and experience to make these initiatives successful. More often than not, these smaller organizations fall prey to the various traps of ERP implementations, such as budget overruns, slippages to project timelines and lack of business benefits realized.
Below are five of the most common mistakes that we see small businesses make when trying to manage ERP implementations for their organizations:
Mistakenly thinking that their ERP implementation will be simple and cheap. According to our experience and research, small businesses are just as likely as Fortune 500 companies to spend too much time and money on their implementations without realizing the expected business benefits. ERP implementation pitfalls don’t discriminate, meaning that the same challenges that haunt large, multi-national organizations create problems for smaller businesses as well. No ERP implementation is simple or cheap – not even for the smallest of organizations.
Unrealistic implementation expectations. In addition to thinking that ERP implementations are simple or cheap, small businesses often have unrealistic expectations in other areas as well. For example, they often think that they won’t need as many resources to make their projects successful or that they won’t need to spend much time reengineering business processes. However these thoughts couldn’t be further from the truth, so it is vital for any size business to take the time to make sure they have realistic expectations related to implementation time, budget, resources and critical activities in order to be successful.
Failing to focus on the future state of the business. The first two challenges typically result in a third challenge, which is to gloss over the future state of the business. Since most small businesses implement new ERP systems because they want to scale for future growth, it is important for them to adequately define business processes and requirements that will take them into the future rather than simply “paving the cowpaths” and automating business processes as they are now.
Neglecting organizational change management. Change is hard, even for employees of the smallest, nimblest and most entrepreneurial businesses. In fact, change related to ERP software can be even harder for smaller and more innovative organizations since they are used to being nimble, but not used to adopting the discipline typically required by ERP systems. For these reasons, it is important to not overlook organizational change management. Critical project activities such as training, communications and organizational readiness may not take as much time or effort as they do for large companies, but they are still important nevertheless.
Outsourcing the ERP implementation to ERP consultants. Most smaller organizations we work with are very lean with very little extra bandwidth to take on the requirements of an ERP implementation. With this backdrop it can be very tempting to call in the ERP consultants to take care of everything. While this may sound good in theory – and your ERP consultants may like the idea as well since it means more money for them in the short-term – your project will not succeed without a minimum level of involvement and commitment from your own executives and team members. There is no magic formula for the right mix of internal and external resources on your project, but it is important to have some sort of balance.
To be fair, small businesses aren’t the only ones to make these five mistakes. However, these challenges seem to be more common and more pronounced among small- and mid-sized organizations, so it is important to keep these pitfalls in mind as you prepare for your ERP implementation.