When ERP was first introduced to the market it was touted as a panacea to disparate fragmented systems. Finally, a solution that could streamline all business processes and centralise data. It would also boost cash flow, deliver cost savings, ensure real-time reporting and improve customer services.
The great news is that ERP can deliver all of these things and more. Unfortunately, ERP implementations failure rates can exceed 75% (according to Gartner), and global consultancy McKinsey estimates that more than 70% of all digital transformations fail.
In a digitally transformed world, ERP lies at the centre of how a business operates and yet too often ERP projects cause more headaches than they solve.
So, what goes wrong and how can the most common problems be avoided? There are three broad reasons for an ERP project to be considered a failure: costs are significantly exceeded, schedules are not met and improvements do not live up to expectations. These issues can happen in isolation of each other or altogether – and they happen faster than expected.
Which is not to say that the opposite cannot be true as well. We consulted with a business that was already 12 months into its ERP implementation when we came on board. At that point, the project had cost $60 million and there was no end in sight. And then a new CIO came in and put a stop to everything. He made the decision that, with immediate effect, only vanilla business processes and systems would be implemented, unless it was business critical to create a turnkey solution, and it would need to be faithful to the business. He put a high bar on change requests and made board-level approval necessary for any variation. Six months and $6 million dollars later, the ERP system had been successfully implemented.
Why was it failing, and what went right after the new CIO took control of the project? In most cases, the business doesn’t want to change. Everyone wants to keep doing what they have always done, and use a technology platform to enable their existing systems and processes. The result is massive (and costly) customisation, instead of building on the knowledge that ERP partners have due to implementing ERP multiple times.
Instead, it’s important to go back to basics. 80% of an established ERP will meet most of a business’s needs. Customisation has immense downsides and should be the absolute last resort, as the CIO in our use-case knew. The big challenge is convincing business units to adjust how they work to suit ERP modules, which have been developed based on best practice for the industry and department in question.
From dream to reality: Achieving ERP success
With this in mind, here are seven ways to avoid ERP failure.
1. Combine your ICT strategy with the operational needs of your organisation.
ICT strategies are based on grand visions: transforming the business, implementing new technology, and determining how the business can be supported for the next five to ten years. These strategies are important because they give meaning and purpose to the transformation and provide a governing set of principles to make the many significant judgement-based decisions that are required throughout the journey. The problem is that such strategies are usually high-level and do not sufficiently describe the more practical requirements with which to assess how well prospective ERP solutions will fit into the business. A lack of insight into the business’s operational requirements and technology constraints also means that businesses can’t assess whether prospective solutions can support the business’ capabilities and fit within its broader technology landscape. Complimenting the strategy with the next layer down of requirements is hard work that should not be skipped over.
2. Avoid getting caught up in the features, functions and UI of ERP platforms.
Vendors sell the dream of everything that can be done with ERP and make promises that each module is ‘easy and configurable’. The result is that when a project kicks off, each department starts asking for a lot of configuration based on potential features and functions, instead of adopting and adapting the business to what the tool can do out of the box. The more they see, the more they want it, and there ends up being no level of traceability between what is now being implemented across different business units against what was originally bought. Soon, the scope goes completely out of kilter and the project quickly starts to unravel. Costs soon skyrocket while the business tries to make the technology support unwieldly processes instead of using ERP as a baseline for digital transformation. The real value of best-of-breed ERP is that these solutions provide a stable baseline from which to start enhancing. In most businesses, existing systems and processes are fragmented and differ from department to department. A standard ERP package, on the other hand, is based on business process and system best practice – there’s no need to pay for customisation, which is the beauty of best-of-breed ERP.
3. Manage your complexities.
ERPs are organisation-wide, but the value case changes on every module. For example, in cost modules, cost to serve is a key factor, and the process and system serves to reduce inefficiencies. However, in the case of councils, which have a large asset base, efficient maintenance and asset management are important. The challenge is that while standard ERP modules can deliver exactly what a business needs, ERP is not one system. It’s multiple modules all meeting separate business purposes. Separate value drivers come together under one platform, which is what makes ERP implementation so complex. Understanding these complexities and focusing on change management as integral to overall success is critical.
4. Invest in change management.
To build on a great ERP technology platform, processes and systems must be enhanced and improved and change management must take place, and without the right support and framework in place, this does not happen. Instead, the organisation quickly becomes stressed. A lot of time, effort, and emotional effort goes into change management and so – to save time, costs and because the level of change is not adequately accounted for – the organisation becomes overloaded with it. The great news is that when change management is properly handled, employees themselves will start driving the ERP initiative because they believe in the benefits of new ways of working.
5. Back the project with enough resources.
Everyone in an organisation that is trying to digitally transform has a job already. The subject matter experts in particular are busy and they don’t have the time to be in the project as well. The result is huge project teams who cannot give the project the time it needs. There is an expectation that the project can be achieved in the day-to-day operations of the organisation without making changes, but because ERP implementations are huge, this simply isn’t possible. Instead, success will be achieved when project teams can give the project adequate time, focus and energy. Plan this from the beginning and budget for training as well.
6. Leverage the real value of ERP.
The real value in ERP lies in better, more transparent information, which is extremely difficult to quantify in terms of hard costs, savings, improved efficiencies and productivity without the correct data in hand. It’s a conundrum: You need ERP to improve your business, but you can’t prove the value of ERP because of poor data, processes and change management. Taking this conundrum further, even if you successfully implement new business processes and backfill your people, in order to fully achieve the benefits of ERP, your organisation needs to get better at data governance, data stewardship and data exchange. Once that is in place, it needs to start thinking about reporting and analytics to get to the point where data-driven decision making becomes a reality. Until this happens, ERP involves high costs that cannot be adequately compared to the benefits. If this is accepted at the beginning and adequate focus is given to change management and training to ensure data is leveraged, the benefits of ERP will become quantifiable down the line – and they are often enormous.
7. Accept that ERP is vital – but getting there can be tough.
The fact that achieving ERP success will require investment, the right team, focus, dedication and change management can be daunting. It’s the reason why these areas are often glossed over when considering ERP. But successfully implementing an ERP project requires incredible levels of hard work and investment – both cash and human capital – to get there are. Face this upfront. Show your teams that the pain will be worth it. People will rise to the challenge if they understand what is expected of them.
The powerful impact of ERP
ERP is the foundation for organisational digital transformation. A well-configured ERP solution can help organisations strategically advance their digital maturity and drive transformation. A robust ERP software combines analytics, automation, and big data to drive process and operational productivity and efficiencies. However, if all of these benefits are lost at implementation level ERP will never deliver on its promises. The solution? It’s time to get back to basics with tried-and-tested standard ERP modules and focus on avoiding these common pitfalls.
With ERP being one of the most powerful tools of success, it is essential to keep it in top shape! Visit allaboutXpert today to view smart solutions that support your organisation!
