SNw 035 Reflections on 25 years of ERP experience Created by James on 6/12/2013 3:12:29 PM
My first experience of ERP related to what in those days (1987) we called an MIS -- Management Information System -- we designed it from scratch drawing on experience with an in-house developed system running on a Mini-Computer -- I Project Managed the Project and Architected some of the strategic elements -- the product went on to become a leading Industry Vertical ERP for the Consulting Engineering industry in South Africa
In 1989 I ventured out on my own with the rather ambitious goal of "bringing the disciplines of engineering to the IT industry" -- I am still working on this objective but am MUCH closer than I was then -- since then I have variously advised, facilitated and led various ERP implementations and undertaken diagnostic "Pulse Measurement " investigations into dozens of failed and sub-optimal ERP implementations getting involved in turning a number of them around
Based on this diverse experience and to celebrate roughly 25 years in the field I thought it might be interesting to summarize what I think are some key lessons -- so, here goes:
1. Virtually every ERP implementation out there has failed to achieve its true potential and has disappointed executives
I have yet to encounter an extant ERP implementation that meets all the criteria outlined below and I have consistently met frustrated and disappointed business executives who cannot get the answers they need when they need them and are constantly frustrated by technologists who think the answer to the frustration is another piece of technology
The bottom line is that the ERP industry does NOT know how to deliver on its sales promises -- this represents a huge opportunity for implementers and customer alike
2. CEO Custody is CRITICAL
The CEO IS the custodian of the integrated view of the business and, accordingly, in order to achieve a high value integrated business solution it is critical that the CEO is the custodian of any ERP related projects and of the operation of the ERP itself -- putting the ERP under finance or IT or under IT under finance is one of the biggest factors in sub-optimal ERP outcomes
CEO custody must be coupled to a strategic level facilitator / advisor / architect with comprehensive understanding of business and technology to guide the CEO -- note that it is the responsibility of ERP professionals to TRANSLATE their language into language the CEO and the business understand -- the CEO does NOT have to understand ERP other than at a high level practical -- "a database is just a filing cabinet" level
3. High value fixed price ERP implementations ARE possible
Many ERP projects run way over time and budget and fail to deliver promised value but with proper planning and a rigorous procurement approach coupled with appropriate strategic input it IS possible to scope and procure projects on a fixed price basis that DO deliver high value outcomes that meet or exceed client executive expectations
4. Successful ERP implementations are more about psychology than technology
Successful IT implementations generally, and ERP implementations in particular, are more about psychology than technology -- technology obsession is a MAJOR factor in failed implementations
A key element of this relates to the "abstractness" of IT solutions -- personnel work for days, weeks, months or years and there is little or nothing tangible to show for what they have done UNLESS specific communication techniques, walkthroughs and other devices coupled with executive support are used to raise visibility in order to ensure that what is delivered is what was ordered
Coupled to this is the widespread but TOTALLY mistaken belief that all approaches and all implementers are equal -- the difference in outcome between a high quality high value outcome and the traditional sloppy outcome can easily top a factor of one thousand fold difference in business value generated -- be extremely cautious about who you choose to lead your ERP implementation
5. A rigorous "engineering approach" is essential
A rigorous engineering approach with strong engineering influence and disciplines is essential BUT engineers are NOT good with the abstract and psychology and IT people are NOT good with engineering -- special techniques are called for and special experiential development of personnel
6. Precision configuration is THE fundamental deliverable
After all is said and done all that remains of an ERP implementation is the configuration of the software and the level of expertise or lack of expertise of the personnel who operate the system and consume its outputs
We live in a world of precision, we tolerate a gap between door and door frame of no more than about 5 mm, we expect ceilings and floors to be exactly level and walls to be exactly plumb but tolerate and even expect what I call "sloppy configuration" in ERP systems costing millions
A necessary prerequisite for a high value ERP investment outcome is finely granular, hierarchical precision configuration -- I have developed standards for this over 23 years with thousands of hours of unremunerated research and development -- reply to this email with "Taxonomy Manual" in the subject line to receive a copy of the manual that I have compiled
7. Fundamental and intuitive understanding of the strategy of the business -- the essence -- determines value
Having concluded in 1990 that it was necessary to be able to define strategy in one sentence and then measure strategic performance and translate that into measureable and actionable plans I eventually concluded that strategy is "the essence of why the business exists and how it thrives" and also developed a Critical Issues strategic analysis and design technique and tool set that stretches all the way through to Key Performance Indicators for personnel -- reply to this email with "Strategic SnapShot" in the subject line to receive a copy of the manual and spreadsheets
I have come to understand that a high value ERP implementation is one that fundamentally aligns with and supports the essence of the business in such a way that it facilitates high value, thrive, decision making -- one thrive decision at the executive level can gear an organization dramatically and one bad decision that compromises or cripples the essence of the business can destroy the business just as badly implemented ERP systems can DESTROY a business
8. Strategic configuration requires a finely granular strategically focussed hierarchical configuration
Inherent in the previous point is the necessity of a STRATEGIC precision configuration -- a configuration that captures the essence of the business in finely granular strategically orientated hierarchical classifications of every possible attribute in the ERP together with the addition of every vaguely relevant attribute of every element of data in the ERP such that the business is equipped to obtain answers to "the questions we have NOT yet thought to ask"
An implementation that simply answers the questions we could NOT answer last year is obsolete before it is commissioned -- addressing this requirement requires a RADICALLY different approach to ERP requirements analysis and configuration design -- I will discuss some aspects of this in the first Webinar listed below -- including -- how do you configure your ERP so that you can answer the questions you have never thought to ask
Incidentally, strategic precision configuration PRECLUDES up-front business workflow mapping (i.e. Business Process mapping) at the start of the project and moves it to the end of the project to be prescribed by business executives as part of the fine tuning of the configuration -- process mapping up-front is one of the greatest and most common errors in the ERP industry -- process is fundamentally operational and tactical and NOT strategic -- this is distinct from STRATEGIC DISCOVERY which MUST take place at the inception of the project with appropriate executive interviews
9. Comprehensive, rigorous business simulation in the laboratory must proceed commissioning
Real world business simulation in an ERP laboratory custom assembled for the project and operated with senior personnel briefed to break the configuration until it cannot be broken any more using rigorously and meticulously selected statistically representative test data is a fundamental prerequisite to deployment
The system should ONLY be deployed once the configuration has been proven to be bullet-proof in the laboratory, a full suite of reports and business intelligence models and views have been created, processes have been prescribed, tested, configured and documented, training material, including Computer Based Training applications, have been developed and ALL operators and users have received comprehensive training in the laboratory -- this may add six months to the project but anything less than this is reckless experimentation on the business
10. A totally integrated business solution or IBIS based on the ERP should be non-negotiable
Implementing ERP as primarily a financial suite is common place and could be branded "a crime against the enterprise" -- the finance component is an important but relatively minor component of an effective Integrated Business Information Solution (IBIS) which addresses ALL aspects of the enterprise in a comprehensively, strategic, holistic integrated manner driven from the top down and supported by finely granular, strategicy, hierarchical precision configuration
Failure to address the entire installation from the start, under the guidance of a highly experienced, senior strategic solution architect is one of the major reasons most ERP implementations are fragmented and rely heavily on custom development, frequently in the form of myriad Excel spreadsheets, to attempt to produced required integrated business information for executives at the strategic level -- most sloppy configurations prevent this and drive multi-million Dollar / Rand / Euro inefficiencies that consume resources in perpetuity
11. Limited scope strategically aligned "clever" custom development is almost always required
The debate "to customize or NOT to customize" is generally misplaced, incorrectly focussed and delivers the wrong conclusions -- in a well configured ERP the amount of custom development will be GREATLY reduced (remember that most of your Finance Departments' Excel spreadsheets ARE in fact custom development)
Truly value adding custom development within the context of a comprehensive integrated strategic solution will provide functionallity that is NOT available any other way and that supports high value strategic outcomes -- in one case the client was able to gain 25% in turnover on the strength of capability delivered through a small investment in custom development riding on a comprehensive precision configuration -- the custom development coupled to the strategic configuration enabled them to do something that none of their competitors could do
12. Data warehousing with strategic business intelligence is integral to a high value outcome
Data warehousing coupled to precision strategic configuration as a foundation for strategically innovative Business Intelligence reports, models and dashboards is the key to enabling high value business decision support -- i.e. supporting THRIVE DECISIONS
In addition, history should NOT be brought forward into the new ERP, it will cripple it, the history should be brought into a custom compartment in the Data Warehouse and joined to the new data through a set of appropriate models and reports -- if your new ERP implementation complies with the standards described here the old data will generally be found to be massively deficient and will be rapidly discarded within a year or two for the most part except for certain summarizations at the Income Statement and Balance Sheet level -- many organizations spend a fortune bringing forward history that they seldom reference
It is my considered opinion -- based on 25 years of experience -- that if the above issues are addressed in the context of the "Factors Causing Failure" and "The Critical Factors for IT and ERP Investment Success" discussed in my book and on my courses (and now Webinars) that an extremely high value outcome can be achieved. Please reply to this email with "Send book" in the subject line if you would like a copy of my book
On the face of it many of the items discussed above will increase the cost of an ERP implementation BUT all they are doing is exposing the real cost AND the real cost of a sloppy ERP implementation is orders of magnitude greater when evaluated in the context of business damage, damaged employee morale and lost opportunities -- as in the example cited above -- it only takes ONE new order that increases turnover by 25% to more than pay for the entire investment done right and done wrong you will never know you lost the opportunity.
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