You may have noticed the ERP consulting industry moving away from the term “ERP implementation” in favor of “digital transformation.” This isn’t surprising as ERP implementations have a bad reputation – they often go over budget and over schedule and fail to realize significant business benefits. While digital transformation does involve ERP or other technology, “ERP implementation” insufficiently describes initiatives involving large-scale change to people and processes.
Digital Transformation v. ERP Implementation
Rarely will an ERP implementation return a positive ROI. Digital transformation, on the other hand, can create competitive advantage and position your organization for future growth – but not without a detailed change management strategy and a strong change management methodology.
What is Large-scale Change?
If your initiative is truly a digital transformation, that means you’re changing more than your technology – you’re undergoing large-scale change and fundamentally altering structures, processes and employees’ day-to-day jobs. If new technology is merely enhancing one of these elements, then you’re likely experiencing small-scale change. You’ll still need a change management methodology, but it will account for a smaller percentage of your project budget.
Whenever an organization implements new technology, it should consider the possibility of large-scale change. New technology is an opportunity to reengineer business processes and improve efficiency. This proves more difficult after a technology solution is already in place. Maybe you want to stick to business as usual for now, but what about five years down the road when you want to pursue digital transformation? Technology configured for your old business processes may not support new processes, at least without extensive customization.
That’s not to say you can’t pursue a change management initiative without implementing new technology. Many organizations want to transform their culture or introduce incremental process improvements without touching technology. However, a full-scale business process reengineering initiative typically necessitates at least an evaluation of your current technology.
How to Implement Large-scale Change
Three words: Organizational change management. That’s the only way to successfully change your people, processes and technology. You may have heard it called people enablement, workforce transition or business process implementation, but the most accurate term is organizational change management, as it encompasses everything from communications to training.
Here’s a high-level overview of an effective change management methodology:
1. Prepare for Change – You should perform a risk analysis and assess your organizational readiness. This involves identifying the characteristics of change as well as organizational attributes, such as culture and leadership style. These assessments set the stage for developing a change management strategy roadmap, which includes a proposed change management team as well as a sponsorship model.
Executive sponsorship is key for project success. Executive sponsors should secure resources for the project team, encourage manager buy-in and educate employees about upcoming changes.
2. Manage Change – Following your change management roadmap, you can develop a communications plan, resistance management plan and training plan. A communications plan involves a stakeholder assessment and an outline of key messages. When developing a training plan, you should conduct a needs assessment and gap analysis, then document your business requirements.
Employees and executives have different perspectives on change. While the executive might see process efficiency and cost savings, the employee sees new required skills, changes to their work environment and a possible loss of status. That’s why you need a change management methodology that addresses communication, resistance management and training.
3. Reinforce Change – You should gather feedback from employees to assess the results of change management activities. Identifying root causes and pockets of resistance will help you implement corrective action. If some of your changes are successful, you should celebrate these to ensure continued success.
Reducing Resistance to Change
Executives hear the word “change” and think of cost savings and efficiency gains. Employees hear the word “change” and think of additional responsibility and possible job loss. Unsurprisingly, employees almost always resist organizational change.
Employees may refuse to learn new processes, or they may speak negatively about the project amongst coworkers. This can slow down your digital transformation, and you might experience quality problems and reduced productivity. If employees don’t use your new software or follow new business processes, you won’t achieve the business benefits you expect.
One way to reduce resistance to change is to increase employee involvement. For example, employees can help brand the project. You can run a contest and ask them to submit potential project names and project logos.
You can also reduce resistance by answering key questions: Why are we changing? What are we changing? Who will be changing? Most importantly, you should answer the question, What’s in it for me? You should explain how employees will benefit from the project, not just how the organization will benefit.
Why are Most Change Efforts Unsuccessful?
- Lack of Executive Sponsorship – Executives should demonstrate support for the digital transformation and remain visible throughout the project. They should also build a coalition of other sponsors.
- Ignoring the “People Side” of Change – You may be changing processes and technology, but employees will need to change too. They will have new roles and responsibilities, and if they don’t embrace these, your change management initiative may fail.
- Lack of Dedicated Resources – The number of project resources you will need depends on the nature of change, scope of change, geographical distribution and project phase. A lack of resources translates to a lack of ownership and accountability.
- Ignoring Resistance to Change – You can identify resistance to change by seeking feedback through meetings, interviews and focus groups.
- No Communications Plan – Your plan should outline messaging, timing and audience. Typically, senior leadership and project leads will deliver these messages, which will be unique to each audience and each project phase.
The ideal change management methodology depends on the scope of change. Digital transformation typically involves large-scale change that entails strong executive sponsorship, a targeted communications plan and a large team of dedicated resources.
Learn more by watching our on-demand webinar, How to Address People and Change During Your Digital Transformation.