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ERP implementation can be successful if… 08/27/2011

Posted by TBoehm30 in ERP.
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This is a special contribution from one of my Tatum colleagues.  See below for a short bio on Dan Gingras.

If there are three letters which can wreak fear in the “c suite” it’s the letters ERP.   Enterprise Resource Planning will bring visions of costs overruns, schedule delays and general havoc to most company officers, and with good reason;  most ERP Implementations fail to deliver the benefits promised in the sales cycle according to numerous studies into the success of these projects. 

It doesn’t have to be that way though.   We’ve studied these implementations for decades, and the causes for these substandard implementations are well known and widely documented, so why do we still have unsuccessful implementations.    The key to these failures is that there is a disconnect between what we know and what we actually do.  So let’s review what we’ve seen in the ERP implementation marketplace over the past few years.

•  Lack of Top Management Commitment

Clearly this is the most significant contributor to project success, and unless the top officers are part of the project from the beginning it’s a sign that you’ll have problems.  The litmus test for commitment is whether the top officers are willing to demand that the top salespeople change to best practices as part of the implementation.  When the salespeople say “our customers won’t support that change” the CEO usually will cave.   Unless there’s significant pushback by the CEO, you can rate the commitment as “lukewarm”     It’s easy to say, but it’s difficult to execute change.

•  Inadequate Requirements Definition

Failing to understand the detailed requirements accounts for nearly 60% of ERP implementation failures, based on our experience.  Creating an adequate Requirements definition document for a system selection is an effort that takes months and involves most of the company.  There are dozens of functions within most companies, and within these functions there are hundreds of processes.  Each of these processes can have hundreds of elements, so the requirements can be extremely complex, and unless each feature/function is properly defined, you will not find out until you well into the implementation, and generally this will require some pain (read: customization) to fix.  It’s important to understand not only what is done, but what is possible, and this requires a thorough understanding of the ERP marketplace.

•  Poor ERP Package Selection

How many ERP packages are selected based on a demo or set of demos done by the software vendor?   Too many, because unless the demo scripts are based on the requirements definition study, and scripted to follow the desired processes of the company then they’re not of much value.   A demonstration of a system should represent the business process of the company exactly.  If you make cement, than watching a demonstration of the software make a bicycle isn’t going to show you how the system will work in your business, and users who see the demo will be distracted by features, functions and the user interface, which may not be applicable to your business.   The script of a demo must reflect the requirements gathered in the requirements gathering phase of the selection.  If not, then don’t waste your time.

•  Inadequate Resources

Implementing a new ERP system involves re-designing processes, sometime from scratch.  Do you really want your processes designed by anyone less than the best person in your company?  Most ERP implementations involve creating a core team of full time employees to design, test and train.  Unless you pick your “best and brightest” you are short-changing the organization.  We like to tell our clients that they should pick the future leaders of the company, because this core team is going to completely re-engineer the company and it will be the group who knows all the new processes the best since they designed them.   Taking the ‘best and brightest’ out of the company for a significant period of time is expensive and painful, but it’s the way to succeed.  Short change the resources, or select less that the best at your own peril.   Easy to say, but tough to do.

•  Resistance to Change/Lack of Buy-in

“Paving Cow Paths” as Michael Hammer of “Reengineering the Corporation” is pretty easy to do, and it generally involves getting the new software to do what is being done now.   It’s difficult to comprehend why a company would buy a new system to improve its processes, and then try to get it to work exactly like the old system, but it happens every day.  Remember that the “institutional knowledge” or best practices of hundreds or thousands of other companies are  “baked into”  the new software, and you should take advantage of that knowledge by changing your processes to fit the new system.  Yes, it’s painful, but it’s the best way to succeed.

There are a number of other keys to success in implementing a new ERP system, but these are the ones we see most often, and the ones which are most troubling since they’re so well known.  The difference between knowing and doing is surprising and troubling, but it continues.    Share this list with your team and discuss how you can avoid the gap between knowing and doing.

A special thanks to Dan Gingras for this article: 

Gingras is a Partner in the New England practice of Tatum.

He has 25 years of experience as a technology executive with extensive qualifications in all facets of project life cycle, from initial feasibility analysis and conceptual design through documentation, implementation, user training and enhancement. He is well know as the author of numerous articles in trade magazines and writes a regular column for CIO Update.

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