Not too long ago, I read the book Great by Choice by Jim Collins, which outlines the stages of business failure, along with the various strategies that successful organizations use to navigate uncertainty and chaos. While reading the book, I could not help but relate these concepts to ERP failures and the various challenges that every ERP implementation inevitably faces.
Like running a company, managing an ERP implementation is fraught with risk, uncertainty and challenge. There are many things outside a project manager’s control, such as organizational resistance, misaligned business processes and a host of other issues that cannot always be predicted – no matter how talented the implementation team may be. What makes successful ERP implementations different from those that are failures are the various strategies that teams use to navigate these challenges.
Since Panorama was founded in 2005, we have helped over 200 organizations with their ERP implementations and have assisted a number of organizations in recovering their projects from failure. We have also served as expert witnesses in the highest profile ERP lawsuits in the industry. Based on this extensive experience, we have found that ERP failures don’t happen overnight. Instead, they happen over time.
Here are the three primary stages of ERP failure that we have witnessed over the years:
Stage one: The ill-advised implementation plan. I cannot tell you how many times we have seen ERP implementation plans that are completely unrealistic. Too often, ERP vendors and sales reps use these plans as selling tools rather than planning mechanisms, which leads to unrealistic expectations and, ultimately, disappointment. Unfortunately, poorly defined implementation plans entail more than just mere disappointment; they also ultimately lead to corners being cut and resources being diverted from the critical success factors most important to ERP success. For example, when a project team underestimates the time and budget required to successfully implement – a trap that most project teams fall into – they ultimately end up cutting critical activities such as organizational change management once they realize they don’t have the resources to complete the project in the timeframe and budget outlined in the plan. Think of a poor implementation plan as the first domino to fall in an ERP failure.
Stage Two: Uncontained organizational resistance. Most executive teams we work with do not realize how difficult organizational change management will be until they are in the midst of their implementations. Early on, they optimistically assume that employees will happily embrace the change and not actively resist the project. However, most organizational resistance is very subtle, non-intentional and rooted in non-malicious causes that can and do undermine ERP success. Common symptoms of heavy organizational resistance include the propensity to over-customize the software, failure to engage in meaningful business processes reengineering and inefficient post go-live processes, among other things. Only a comprehensive organizational change management plan can effectively mitigate these and other challenges related to organizational resistance.
Stage Three: Technical and software myopia. One of the biggest problems with the ERP software industry is that consultants are generally too focused on software functionality instead of holistic business processes, organizational change management and the non-technical areas of focus that ultimately enable success. While most ERP consultants are trained to be experts only in their specific ERP software, our research shows that software functionality and other technical issues are one of the least important criteria that will ultimately define success or failure. In other words, how well the software is configured has very little to do with the ultimate level of success of your project. The good news is that just because most consultants do not have the complete skill set required to make a project successful that does not mean they do not exist or that they cannot be augmented with other team members.
These three stages of ERP failure do not necessarily happen in this exact sequence each time but they do represent the most significant causes of failure that most project teams experience along the way. By successfully navigating these three stages of failure, your team will be better equipped to navigate the various challenges that they will inevitably experience during their ERP implementation.