ERP failures may be more common than you think, but they don’t simply happen without warning. They also don’t happen overnight. Instead, failures and other ERP implementation project challenges tend to build over time. Seemingly small risks become bigger, while a subset of risks may mutate into exponentially more complex challenges over time. If not properly identified, managed, reduced or eliminated these risks will reach a tipping point – wreaking havoc on the project, or worse, causing a full-blown failure.
To the trained eye, many risks are recognizable from the start. The key is to know what to look for and how to navigate the challenges. I like to call this iterative process, “actionable strategies for risk mitigation.” Risks come in many forms, if you’re too close to your project (immersed in detail) or don’t have a deep specialization in digital transformations the road ahead may be bumpy.
Below are five key takeaways about assessing risk on your ERP implementation project:
1. Seek out unbiased, independent third-party resources, to conduct a formalized risk assessment throughout your implementation
A crucial mindset is to accept risk exists and put forth a concerted effort and plan to control it. An objective, third-party assessment of your implementation is a best practice. It’s key to involve someone who isn’t clouded by, or too close to the day-to-day details to recognize risks and warning signs. One way to do to this is to bring on a resource that isn’t part of the project team. Someone whose area of expertise includes risk assessment experience with several similar projects throughout their career.
These assessments should be done regularly throughout your implementation to identify probability of occurrence, consequence severity and impact. Unlike most of your team members, an external partner can also dedicate time and methodology to this important effort (think identify, manage, eliminate or proactively avoid or reduced risks). You can learn more about Panorama’s independent oversight service offerings here.
2. Look at potential ERP implementation risks from all possible angles
Project risks come in different shapes, sizes and variations so it’s important to assess your project using many different “lenses.” Risk factors can span a spectrum relating to people, process and technology. Identifying and recognizing risk earlier on is preferable to reacting to risk factors as they pop up. For example, Panorama uses a project assessment framework, evaluating from 12 key areas including data, organizational change management, business processes, project management and a host of other areas. Whatever evaluation framework you decide to use, it’s important it provides a comprehensive and structured analysis of your project in a time sensitive manner.
3. Assess project risk using the most common root causes of ERP failure
Those of us who have been involved with enough ERP implementations recognize there are commonalties across projects (pitfalls, cost impacts, failure points) in these initiatives. Rather than recreating the wheel or shooting from the hip, it’s useful to start by evaluating project risks relative to what other similar projects experience. This helps ensure you have a “checklist” of sorts to help identify and focus on specific project risks and threats. With this said, you’re also working in a constantly changing environment. The ability to monitor and adjust is key, as well as understanding how the project’s risk profile may change.
4. Prioritize risks and identify risk mitigation plans
When done correctly, most project assessments identify more risks than can reasonably be addressed with limited resources and team members. Additionally, not all risks require a mitigation strategy. Therefore, prioritization is important since it enables your team to focus on addressing the things posing the most immediate and/or greatest risk to your project. An objective view of your project and plenty of experience will ensure the most pressing issues are being addressed first. For these highest priority risks, you will want to create and execute a risk mitigation plan backed by a contingency plan.
5. Recognize early warning signs of ERP implementation risk
It’s important not to underestimate the complexity of an ERP implementation. It’s also not an exaggeration to say there’s a direct correlation between successful implementations and early risk identification. Experience and research shows most ERP failures marinate over time. A string of small, seemingly insignificant mistakes can morph into sometimes unstoppable failure points when unattended. Like the “canary in the coal mine,” it’s important to recognize the value of early warning signs. Read this blog to learn some of the common warning signs of ERP implementation risk.
The takeaways mentioned above highlight the importance of dedicated independent risk oversight, which can sometimes get buried in the excitement and momentum of an implementation project. It’s a complex subject and I’ve only touched on it. Realistically assessing risks, recognizing recurring risks and understanding the opportunities made possible by risk are other important considerations. Don’t tackle these challenges alone.