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When organizations embark on any enterprise software initiative, they need to ask one question: is this a relatively simple ERP implementation, or is it a broader digital transformation?

It may sound like an unimportant, subtle difference in nomenclature, but the answer to this question has significant implications. The way the initiative is planned, the way decisions are made and the overall focus of the project will be largely influenced by this decision. Every executive needs to determine the best way to tackle his or her initiative. But first, it is important to understand the difference between ERP implementations and digital transformations:

Disruptive technology instead of automating the status quo. ERP implementations too often focus on automating already inefficient processes. At best, ERP systems may provide incremental improvements to business processes. Digital transformations, on the other hand, materially disrupt and improve current business models. More specifically, these initiatives find ways to leverage innovative technology to provide better products and services to customers. ERP implementations are about greater efficiency without changing the business model, but digital transformations are about changing the business model and enabling business processes.

Business process reengineering instead of incremental improvements. While ERP implementations focus on incremental improvements to business processes – such as finding more efficient ways to perform already existing functions – digital transformation enables more “quantum leap” improvements to business models. For example, new ERP systems can provide better data and functions to more efficiently get products to customers, whereas a digital transformation could materially change what products are delivered and how they are delivered to customers. True business process reengineering is enabled only by digital transformation.

Employee acceptance of new technology instead of transactional training. ERP implementations have historically addressed organizational change management as a means of training employees on new systems. By contrast, digital transformation focuses on enabling broad employee acceptance of those systems – typically via comprehensive organizational change and workforce transition programs. ERP system initiatives are notorious for underinvesting in organizational change, which is a large reason for the high failure rates. Successful digital transformations, on the other hand, invest heavily in the people side of the equation.

“Whatever technology fits” instead of being cornered into one technology solution. Organizations often feel as though they need to select a single technology platform to automate their entire business operation. However, technology can’t be everything to everyone. A single ERP system may not be the best answer for many. Instead, smarter organizations better leverage technology to improve their businesses by exploring the plethora of options available to them. Modern technologies are flexible and easy to integrate, so companies don’t need to back themselves into the corner of a single platform as they have in the past.

Which will you pursue: an ERP implementation or a digital transformation? Whichever you choose, everyone in your organization should be aligned regarding your business strategy.

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