As recently outlined in the press, two high-profile organizations have fallen victim to yet two more ERP implementation failures. SuperDry and Tesco Bank, both based in the UK, blamed their recent financial woes on disastrous ERP failures. SuperDry, a fashion retailer, was allegedly unable to stock the appropriate risk of product through its distribution chain as a result of their implementation. Similarly, Tesco Bank, a consumer bank, experienced problems with its ERP system as well, resulting in customers being locked out of their accounts for three days and profits dropping by nearly 2/3 in the first half of this year.
There is good news and bad news here. First, the bad news: unfortunately, these are just two examples of a plethora of high-profile failures in recent months and years. Lumber Liquidators, Shane Company, and Waste Management are just a few of the many organizations that suffered high-profile and well-publicized failures in recent years. The good news: most ERP implementations succeed or fail based on how organizations handle their implementations – factors completely within their control – rather than uncontrollable issues related to their chosen ERP software, ERP vendors, or system integrators.Panorama Consulting is frequently called in to provide independent expert witness testimony for some of the highest profile ERP lawsuits, many of which you have probably read about in the press. For confidentiality and court-ordered reasons, we can’t share specific information about any of the cases we’re involved with. However, in our recent ERP Boot Camp, we presented a session outlining some of the lessons learned from our extensive experience with ERP software implementations and service as an expert witness for ERP lawsuits. Below are three common trends we see in most ERP failures in lawsuits that we are asked to consult on:
Lack of clarity surrounding business processes and business requirements. Most ERP lawsuits involve situations where the client and their system integrator did not clearly define business requirements. While most ERP vendors and implementation consultants will go through a checklist of items that need to be defined in order to configure the software, this is not nearly enough to provide a comprehensive and complete view of how an organization’s business processes and workflows will look. However, clearly defined business processes are critical to keep the project on track and to ensure employees clearly understand the big-picture of how the organization’s operation will run in the future. This lack of business process clarity will typically result in over-customization, lack of understanding from employees, and configuration that is misaligned with business requirements – all of which often lead to implementation chaos and failure.
Mismanaged expectations. The first domino to fall in an ERP implementation is often mismanaged expectations. In the heat of trying to land a new client and in the midst of not clearly understanding the scope or magnitude of an implementation, ERP vendors and system integrators often underestimate the amount of time, money, and resources required to complete and implementation. To add insult to injury, organizations often rely on vendor estimates that only consider technical implementation activities and overlook other key implementation activities such as organizational change management, business blueprinting, thorough conference room pilots, business integration testing, and other critical items. Mismanaged expectations lead to underfunded and understaffed projects, which results in cutting corners and scope, snowballing and leading to failure.
Poor organizational change management. Most ERP vendors and system integrators define organizational change management as “training.” However, there are two problems here. First, vendors provide generic training that is focused on transactions rather than the big picture and are not tailored to fit the implementing company’s business processes, so this sort of canned training is typically mediocre at best. Second, training is one of several key components of an effective organizational change management program. Employee communications, change discussion guides, organizational design of roles and responsibilities, project branding, and benefits realization are just a few of the additional elements of organizational change management that will make or break your ERP implementation.
Through our years of experience in ERP implementations and consulting on ERP lawsuits, we have actually defined ten key things that go wrong in implementation failures vs. those initiatives that are successful. These are just three things to keep in mind as a starting point to not only avoid failure, but to make your ERP implementation successful. If you’d like to learn additional strategies and tactics to ensure your organization realizes all of the business benefits possible from its ERP system, check out our free ERP webinar series.