Gary Fink, Senior Managing Director, North America Finance and Risk Services for Accenture
Organizations undertaking major Enterprise Resource Planning (ERP) projects often find themselves looking through the wrong end of the telescope. That is, they focus on the technology—what it is and what it (supposedly) can do for the organization—rather than thinking about what changes need to be made within the organization and within the business model in particular.
"An element that heavily contributes to a successful ERP implementation is data quality"
When approached with a technology-centric focus, the anticipated benefits are often never realized. Without a clear identification of the challenges to be addressed, desired changes, and the target outcomes, it is very easy for an ERP implementation project to undergo various iterations—all well intentioned—until the final outcome is not at all what anyone originally envisioned.
By starting with the business model, rather than the technology itself, the focus becomes how best to use the software to drive needed changes and associated value. While that does not make the implementation easy—no complex, organization-wide effort is ever easy—it does make it more likely that the project will achieve its target objectives.
To keep the project on course, the team leadership needs to get the following five things right:
1) Commit the appropriate resources. Too many companies try to get major implementations done with too few people, many of whom are part-time, or with people who lack the necessary skills and experience. Leadership, including dedicated senior leaders, must be engaged and help drive, direct and govern the program; this is essential to achieving success. An ERP project is a major undertaking and internal staffing must be a priority, especially at the leadership level, from day one.
2) Leverage the right delivery methodology. There are a number of approaches to solution delivery, from “waterfall” and phase-by-phase to various agile methodologies that emphasize rapid iteration and fast testing to make sure that system requirements are not only understood but met. In reality, most organizations have progressed to using a hybrid methodology combining elements of waterfall and agile approaches. A key to success is to break the solution design elements into component parts and ensure rigorous end-to-end testing with strictly enforced “exit criteria” before taking the new solution live.
3)Properly engage with the chosen software vendor and integrator. Ideally, the interests of the software provider and the company buying the ERP solution should be aligned. The vendor should be engaged in such a way that keeps them accountable for helping to achieve the desired results; their advice—not just on the technology but on aspects of the implementation—can contribute significantly to the success of the overall solution. Selecting an integrator that complements the client team (leadership and execution), has “skin in the game” and focuses on outcomes and value, rather than providing capacity and skills, will often determine the success or failure of the initiative.
4) Carefully plan deployment and change management. There are a number of critical decisions to be made around the approach to solution deployment, especially if the enterprise is global and the solution will impact multiple functions and Lines of Business (LOB). Careful planning around the deployment strategy (in waves by function, LOB or geography) and how to handle the “interim state” between waves is often overlooked, which may cause delays, costs overruns and ERP horror stories. In addition, many organizations under-invest in change management or view it simply as a training and communications exercise. Many ERP projects fail to deliver value because change-resistant organizations make small compromises along the way, resulting in the automation of bad, old processes. Organizations must fully embrace change if they want to drive value.
5) Understand the business value equation. Guesswork and anecdotal evidence will not do; to get a clear reading of whether the ERP investment is paying off, the company needs an accurate value scorecard with core objectives and value points clearly spelled out. Quantitative and qualitative measurements are essential to being able to identify shortfalls along the way and address and course correct to deliver the target value, not just to explain the payback from the project to the board and other stakeholders.
Another element that heavily contributes to a successful ERP implementation is data quality. The implementation will not be a cure-all (in fact, it may not help much at all) if the data used by the new solution is inaccessible or of poor quality. We estimate that, in the course of an ERP implementation, only 25–35 percent of the work takes place “inside” the software itself. The rest is related to data quality, reporting and analytics, integration with other systems, and, of course as highlighted above process standardization, change management and organizational adoption.
In addition to the traditional challenges above, firms today need to consider the impact of digital technology advancements for ERP. Embracing the mobile, cloud and/or SaaS-based models is a must and while this introduces new complexities, it also drives significant simplicity and value. The expectations and capabilities that come with mobility introduce dramatic changes in process and access to information. Incorporating these solutions and capabilities into the upfront strategy and business case will be critical and will require a very different approach.
A successful ERP implementation can be a thing of beauty—providing organizations with great value, efficiency, and enhanced capability. Organizations can standardize and automate common processes as well as benefit from better information, analytics and insights. However, when launched with an undue focus on technology—and an insufficient understanding of all of the other factors that come into play in the course of a successful implementation—the results will likely fall far short of expectations. As an organization undertakes this transformation initiative, it should start with setting out the business objectives and determine how to drive change to achieve those objectives.
Getting the right commitment from leadership will help drive good decision making and, given the complexity and the need to sustain focus over the extended duration of the program, governance will be critical. Finally, the organization needs the right team in place, committed to changing the function and/or organization and optimizing and standardizing the future business processes around the technology. These key considerations offers organizations the best chance for success.