It is important to understand the implementation of a new ERP system will not simply create a return on investment or solve the issues of a business. These come from the process improvements; the ERP system is a tool and improving the way a business uses the tool remaps the business, leveraging benefits. How you operate your ERP programme is critical to its success. Here are eight pointers to start on the right footing.
“The critical point is, a successful organisation will have consensus on what constitutes success”
The process of implementation starts when the company define the goals the new ERP system will set out to achieve. It is the goals that are critical, and should be referred to during and after the implementation process to ensure focus is retained. ERP systems are, by their nature, large and all inclusive. You will not be able to implement every function. The goals and objectives you set will define the scope of the solution ultimately implemented.
If there is no clear goal, whilst the overall situation may have improved, this will bear no resemblance to the investment of time and money made, and in many cases the business would have been better off not changing.
PS. Remember to communicate these! Too many people file these away once underway. Everything should link back to these. This is the definition of success!
Focus on just the critical few key requirements. It is natural to think “every piece of functionality is critical” or “if we have purchased it, we should use it”. However, STOP! Take a step back and focus 80% of your efforts on the 20% of functionality that drives your business. Which profit drivers are important? Which customer requirements are key to success? Does your industry have any differentiators? How will the software functionality address these critical success factors?
In dealing with numerous ERP selection and implementation projects, this is one of the most overlooked yet vital success factors. Unfortunately, it is easy to get sucked into the bells and whistles the ERP software providers show you unless you have clearly defined which 3-5 critical requirements should be seen with a deep dive.
A key point to note. All ERP implementations start with the premise of using 100 percent out-of-the-box industry functionality with no customisation. By contrast, recent surveys show that 93% of companies say they customise their ERP software. However, challenge the customisations – do they give competitive advantage to your business? If not why do you need them?
“The success of your future implementation lies in the process and data of your current system. Study your current system at length and learn from it to take forward the elements you do well, change the ones you do not do well”.
Setting and defining goals should be driven by the current system. The business may have outgrown the system, or the system may be non-compliant or non-supported, but whatever the reasons the system and the processes inside and outside of the system must be understood. Many businesses want to see X% improvement in Production efficiency, Y% reduction in stock holding or a Z% customer service level, but without understanding the processes behind the current figures there is little benefit in moving forward with these targets because the new system will be implemented using the old processes and produce the same end results.
Without understanding what is causing the current figures, improvements cannot be made. Additionally, these figures need to be recorded over a period in the old system and then compared to a similar timescale in the new system after a period of stabilisation to try and prove any improvements; many businesses never record these figures and can never go back and justify an actual improvement even if one exists.
“The Perilous Dangers of Unrealistic Expectations”
One of the key factors that contribute to an ERP project’s ultimate failure are unrealistic expectations. Expectations need to be controlled throughout the project, but need to be well defined at the initiation of the project. This is even more true for a public company. If expectations are not managed and promises made that are not even feasible, then the project is set on a track for failure.
Do your homework and make sure you understand how long it will take to implement, how much it will cost, and how much time it will take from your internal resources. ERP projects, depending on the size and makeup of an organisation, can be complex and involve much change to an organisation. Delays in the schedule can be difficult, if impossible, to make up and almost always result in an extended timeline and increased costs. Be realistic in your outline planning.
“The money spent controlling and orchestrating a successful project does not compare to the cost of the entire project being delayed a month or more.”
It is important to assemble a group of key stakeholders that will take ownership of the system implementation. This group will determine the goals, manage the timeline for the project, and keep everyone accountable. The group should have at least one principal and a representative from each of the major departments of the company. ERP programmes are difficult to implement and great leadership team can make or break your implementation.
Ensure enough time is spent setting standards and expectations around the delivery mechanics. Ensure these are documented and understood by the programme and governance board. Be clear on the budget and resources required to support the project, and determine the resource ramp-up plan so the project doesn’t stall at the start. Also, make sure everyone involved understands the commitment required from all parties.
A key point to note. In addition to governance the senior team are also charged with removing any roadblocks the programme my face. The faster these are removed the more likely the project stays on track.
“Define the need for change by developing a clear picture of how the organisation will benefit from the outcome. This will gain buy-in and generate enthusiasm for the implementation.”
Before beginning any ERP project, it’s critical to ensure that the entire organisation understands the reasons and strategy behind the move. If decision makers do not clearly support the need for change, your budget and resource planning may be negatively affected. If project members and end users don’t understand the objectives, confusion can prevail over purpose and commitment, increasing resistance to change and reducing the chance of success.
Articulate and endorse the vision. Spend time upfront communicating why this change is necessary and what will happen if you don’t change. Leaders, particularly in areas likely to be affected, need to cascade this message down to staff. Explain any requirements in terms of standardisation and globalisation, the desire to adopt an industry or ERP best practice approach etc.
Determine the priority of initiatives currently under way or planned for the near term. Knowing where the ERP implementation fits into the organisation’s priorities is key to getting the resources and commitment required to stay on time and on budget.
“Understand established business culture and historical response to change.”
Often an understanding of history facilitates future success. For ERP implementations, organisations should consider how resulting changes fit in with, or can be adapted to, the prevailing business culture, as well as what success the organisation has had with past change-based projects. Understanding cultural alignment and change history, as well as the status of competing initiatives, can help appropriately prioritise the project and strategically design it to succeed. If an organisation that has not handled change well in the past is subjected to substantial further change, it may result in change fatigue, which can lead to a lack of engagement and project commitment. If the change is not communicated in a way that highlights its alignment with the organisation’s culture, there will be resistance from the outset.
By setting goals in the beginning and measuring results at six, twelve, and eighteen months after the system is live, you can determine if the expected ROI is being realised. In some cases, it may take longer to get the ROI. However, usually a year after your live date you will see some measurable results.
If you have many goals and areas that need improvement, you may need to take a phased approach to your implementation. You should develop a plan for recognising the attainment of these goals over time.
While implementing a system can be a lot of work and stressful, the payoffs can be huge. Leveraging technology to make your people more effective at their jobs is the key to maximising your project profitability. Comparing actual numbers with previously established benchmarks will reveal if the software tool does what it is intended to do – add value to the business. It is important to periodically review the system’s performance to maximise ROI.
Neil ran his first SAP transformation programme in his early twenties. He spent the next 16 years working both client side and for various consultancies running numerous SAP programmes. After successfully completing over 15 full lifecycles he took a senior leadership/board position and his work moved onto creating the same success for others.