Most ERP implementations take longer than planned, cost more than expected and don’t effectively mitigate risks. It’s perplexing why this happens so frequently. What can be done to avoid falling into the same trap of so many implementation teams?
According to Panorama’s 2018 ERP Report, 64% of organizations spent more money than they budgeted, and 79% took more time than expected. Even more surprisingly, over half of respondents indicated they experienced some sort of material operational disruption after go-live, such as the inability to ship product or close the books.
While ERP implementations are difficult, some organizations have cracked the code on how to overcome the challenges. Success isn’t due to luck. Project success is initiated with a deliberate and strategic approach that navigates the many pitfalls and risks. Based on this year’s research and Panorama’s experience, here are the top five drivers of successful implementations:
1. Alignment with Overall Business Strategy
Misalignment between a project and an organization’s overall strategy is one of the most common challenges of implementations. For example, we recently worked with a company that was driving an overarching business transformation focused on leveraging technology to surpass its competitors. Their main goal was to improve the customer experience. However, their ERP implementation was more focused on using technology to automate and streamline back-office functions, rather than customer-centric improvements. This misalignment resulted in confusion, higher project costs and diluted results. The project failed to live up to executive and customer expectations.
2. Realistic Expectations During Implementation Planning
We’ve found many ERP implementations are doomed from the start. Often, it’s because their project teams had unrealistic expectations from day one. When expectations aren’t aligned with reality, bad decisions with rippling effects can result. For example, if you commit to complete your project with an inadequate timeframe or budget, you are more likely to cut critical project activities such as organizational change management and business process improvement. This will actually accelerate your risk of time and cost overruns.
SAP vs. Oracle Case Study
SAP and Oracle both invest heavily in cloud technology. However, our client was skeptical about cloud scalability and unsure if the products were mature and proven.
3. Laser Focus on People, Organizational Change Management and Workforce Transition
According to our 2018 ERP Report, organizational and people issues are the number one reason most ERP implementations take more time and money than expected. The key is to not become overwhelmed by this issue but find ways to overcome people issues. Best-in-class implementations and project teams understand that erring on the side of investing heavily in organizational change management will result in a lower cost and risk implementation.
Recommendation: invest as heavily in your organizational change management activities as you would in your software and technical project activities. It will mean less time, money and risk in the long term.
4. Effective Business Process Management and Process Improvement
One of the biggest (and most common) mistakes is to defer to your chosen ERP software to determine how your business processes will look in the future. Today’s ERP systems are robust and flexible, meaning you need to define your business processes before your implementation. The last thing you want, is your expensive functional and technical consultants, billing their time while your team decides how it wants its business processes to look going forward.
Recommendation: define your future state business processes and improvements before you begin your technical software implementation.
5. Strong Project Management, Governance and Controls
Poor project management and controls can wreak havoc on any implementation. Make sure your project charter clearly defines your governance controls and structure. Clear roles and responsibilities must be in place for your project manager, executive steering committee and other internal and third-party project roles.
Governance must align with the unique needs and dynamics of your organization. The framework of your governance must be comprehensive yet dynamic, as well as specific and repeatable.
Since ERP implementations can be complex business transformations (rather than just technology initiatives) it’s important to have the right people, controls and governance in place prior to beginning your implementation.
Recommendation: clearly define your project team, governance and controls as part of your project charter. Consider hiring independent, third-party experts that manage these sorts of implementations for a living.
While this blog is intended to highlight some of the key drivers of successful implementations, we’ve only scratched the surface of this topic. We didn’t say much about risk management, issue identification, communication or transparent reporting.
While effective project governance provides direction and decision-making protocols, it does not replace the need for effective leaders who can manage accountability and validate metrics.