When your digital transformation doesn’t deliver business benefits, don’t blame the software – blame the benefits realization plan.
Many organizations don’t understand the primary drivers of benefits realization or how to overcome the obstacles to full benefit achievement. According to our 2017 ERP Report, more than a quarter of ERP implementations realize half or less of the business benefits they anticipated.
Ten Steps to Realizing Beneifts
Benefits realization is a comprehensive and integrated approach that combines elements of a cost-benefit analysis, performance metrics, organizational change management and business process reengineering. An effective benefits realization plan consists of ten key activities beginning at the design and build phase and continuing through post-implementation. Below is an overview of these activities, which should be implemented as part of your digital transformation plan:
1. Develop a High-level Business Case, Metrics and Benchmarks – One of the first steps in an ERP project is the financial justification of the technology investment. Your organization should quantify the potential benefits of the project, and compare this to the projected costs.
2. Conduct an Organizational Readiness Assessment – Since most ERP implementations involve large-scale change, your organization should identify resistance to change early in the project. Resistance often begins long before a project starts and continues after go-live.
3. Design High-level, Enterprise-wide Business Processes – While this may seem intuitive to most, it is often not performed adequately, or at all. If you want new technology to support your organization’s operating model, you need to map your current- and future-state business processes. Your optimized and reengineered processes will ultimately drive ERP design and configuration.
4. Develop Operational Metrics and Benchmarks – While a business case can provide high-level detail on projected benefits, it is perhaps even more important to translate these metrics into operational, department-level metrics that you can present to executives.
5. Design Detailed Business Processes – Many organizations that define high-level processes fail to document processes in enough detail to be meaningful to specific workgroups. Your organization should develop detailed documentation to ensure employees understand their new roles and responsibilities.
6. Develop Group Metrics, Processes and Benchmarks – While operational and departmental metrics are useful, they must be translated to an individual level to gauge performance. For example, a customer service manager needs to know how his or her day-to-day work contributes to the benefits identified in the business case.
7. Conduct End-user Training – Your organization should use the detailed process models to develop end-user training that helps employees understand how to use new technology and how to perform new processes and job functions.
8. Measure Benefits Realization – You can identify benefit gaps by comparing projected benefits to actual benefits. This helps managers understand what they are doing well and how they can continue to realize benefits.
9. Conduct a Root Cause Analysis of Benefit Gaps – Root cause analyses can identify causes of benefit gaps. A common cause is end-users using workarounds because they don’t understand the importance of using the new technology.
10. Implement Corrective Action – Managers should implement activities to address root causes. Follow-up training, enhanced communications and process control are some common ways to bridge gaps and increase benefits realization.
Investing millions of dollars in ERP software without justification and validation isn’t wise, especially in today’s competitive environment. By developing a benefits realization plan, your organization can ensure that your project realizes close to 100-percent of the business benefits you expected.