A recent Harvard Business Review blog highlights a common challenge in the world of business IT and ERP systems: CIOs and their IT departments are often disconnected from executive teams and the business needs of their organizations. Despite the best intentions of CIOs, IT Directors and other managers entrusted with aligning enterprise technology with the overall needs of the business, most are failing to do so.
We often see a similar phenomenon with our clients. In many cases, the CIO becomes so wrapped up in the technological aspects of their ERP implementations and IT strategies that they lose sight of the bigger picture. Adding further fuel to the fire, ERP vendors and system integrators often oversell and overemphasize their technological capabilities – regardless of how well aligned these capabilities may or may not be with the operational needs of their clients.
HBR’s research adds additional credibility to what we had seen as anecdotal evidence or trends at some of our clients. For example, below are a few key findings from the blog:
- Approximately half of CEOs view IT as a commodity that should be purchased as needed rather than something that should be developed as an internal and customer-facing source of competitive advantage.
- Half of the CEOs feel that their CIOs don’t understand their business or the ways that technology can help enable their business.
- Perhaps most troubling for CIOs: only a quarter of executives feel their CIOs perform above their peers, while 57% anticipate a significant change to their IT function and 12% expect a complete overhaul.
The authors of the blog and the study assert that the reason for these trends has less to do with the CIOs and more to do with the changing nature of business. To summarize, the study contends that IT systems haven’t kept up with our economic shift from more of an industrial market focused on productivity to more of a knowledge-based economy focused on collaboration. Based on our experience and research, we agree that the ERP industry faces a similar disconnect between the way software has traditionally been built versus the needs of today’s businesses and government entities.
So what does this mean to the average CIO or executive team about to implement a new ERP system? Here are a few ways that CIOs and other executives can better leverage their ERP software initiatives to ensure alignment between the business and technological aspects of their organizations:
1. Business process reengineering should be more comprehensive and less focused on system transactions. Most system integrators, consultants and vendors tend to focus on system transactions when designing ERP software. However, and as validated in HBR’s research, this approach is more suited for ERP systems of the 1990s than for the 2010s (it is also a key reason why ERP failure rates have not improved in recent years). Instead of focusing on how to streamline keystrokes and deciding where specific fields should appear on certain screens, business process reengineering should identify ways that different workgroups or departments can better collaborate, share knowledge and create a better product or service more efficiently. A top-down business process reengineering approach is best suited to accomplish this and will feed the technical team’s configuration requirements downstream in the project.
2. Organizational change management needs to not only help employees better understand how the ERP system works but also how their jobs are changing. As organizations continue to evolve from industrial entities into knowledge-based centers of collaboration, employees need to be coached and managed through this change. In the midst of this change, employees will resist efforts to go back in time and force-fit an ERP system configured for the needs of an industrial manufacturer in the 1990s, which is what the old guard of the industry knows and does best. While point #1 above will ensure that the software is configured to meet the needs of modern times, an effective organizational change management plan is still required to transition employees, customers and suppliers to this new way of doing business. The software won’t do it for you, no matter how well it is technically designed or implemented.
3. ERP project management needs to focus on the needs of the business as well. Part of the reason most ERP implementations take longer than expected and cost more than expected (according to our 2013 ERP Report) is because the project team has set unrealistic expectations to begin with. Traditional ERP consultants and system integrators aren’t business-minded so they find it difficult to manage ERP implementations as a business initiative rather than a technology project. Sure, an ERP system can theoretically be implemented and configured in a weekend if you really try, but not if you want it to match the needs of your business. The latter is what takes time and needs to be budgeted and planned for. While the HBR study underscores the common disconnect between CIOs and business, this misalignment is just as prevalent between ERP systems and business. An effective project management team and methodology focused on the business and technological components of a successful ERP implementation is the only way to navigate this common pitfall.
The challenges highlighted in HBR’s research aren’t anything new. We’ve seen the symptoms, researched the causes, and applied solutions to our client situations since Panorama’s founding in 2005, but this is the first time we’ve seen a broad study that delved even deeper into general IT misalignment between business and technology. Hopefully this new research, coupled with our experiential knowledge base dating back nearly a decade, helps create awareness for companies to do what it takes to avoid repeating mistakes of the past.
Learn more by downloading The 2013 ERP Report: Organizational Change and Business Process Management.