What Every CIO Should Know About ERP Implementations
As the president and chairman of an independent ERP consulting firm that guides organizations through ERP and IT software selection, implementation and organizational change initiatives, I often am in meetings with chief information officers (CIOs) nervous about embarking on an ERP implementation. Their concern is understandable; ERP implementations are complicated, expensive and risky. Even more nerve-wracking? A CIO’s personal job security might be negatively affected by how he handles the project.
After years of similar conversations and hundreds of implementations, I have amassed a top-ten list of what every CIO should know about ERP implementations:
1) ERP is about your business, not the technology.
2) ERP initiatives are very challenging.
3) Selecting the right software is the first step in a successful ERP implementation.
4) No ERP software is perfect. All have their strengths, weaknesses and tradeoffs.
5) A business blueprint is the second step to an effective ERP implementation.
6) Business-process reengineering should happen before, not after, you implement your ERP software.
7) Your project will fail without adequate organizational change management.
8) Executive buy-in and support is critical to ERP success.
9) There is no “one size fits all” ERP strategy.
10) In addition to planning, implementation also is about execution.
Hammering Home the Critical Points
While I don’t have room to expand each of these tips individually in this piece, it is helpful to hammer home a few of the more absolutely critical points. First, all ERP-software selection and implementation projects must start with a concerted effort to document and understand the business processes currently in use at the organization.
• What works, and what doesn’t?
• What “workarounds” have employees created to make the current ERP system (assuming there is one) fulfills their needs?
• What are the organization’s key priorities?
• Why is the organization implementing a new ERP system? and
• Who is in charge of what?
As tip number six above states, business process reengineering should happen before, not after, you implement your ERP software. This is key—no organization should dive into an implementation before spending a large amount of time understanding how people work within the organization, and how the organization itself actually works. No ERP software is so magical as to address these issues for you; you must take control and drive the reengineering so that the software you do select performs in the best possible manner.
Strategies for Failure
The second important point to remember concerns strategy. Not only do you need a clearly defined strategy, complete with deliverables that demand execution and the assignment of specific project leaders and executives to answer the tough questions regarding your ERP implementation, you also need a strategy that addresses ERP system failure. As Nicholas Carr wrote in the Harvard Business Review: “It’s unusual for a company to gain a competitive advantage through the distinctive use of a mature infrastructural technology, but even a brief disruption in the availability of the technology can be devastating. As corporations continue to cede control over their IT applications and networks to vendors and other third parties, the threats they face will proliferate. They need to prepare themselves for technical glitches, outages and security breaches, shifting their attention from opportunities to vulnerabilities.”
Carr’s idea is an interesting one: Companies that focus more on the gimmicks and hype surrounding an IT investment, and consider the investment a sure-fire to increase competitive edge, are focused on only one aspect of strategy. What he argues for, and what I agree with, is that companies must be strategic about the inevitability of their system failing. Perhaps the system won’t go down with a major flame-out (like the ones that managed to take down Amazon and Skype), but instead will slowly and consistently be eroded by employees who don’t like it, don’t believe in it or don’t think it matters if they use it properly. Maybe dirty data during the transfer to the new system will screw up inventory records or customer addresses. Or, maybe a natural disaster will wipe out your back-end servers. It’s been known to happen.
However, CIOs sometimes are reluctant to give IT failure the respect and credence it’s due. In fact, a recent study from software vendor CA Technologies found that “56 percent of organizations in North America and 30 percent in Europe do not have a formal and comprehensive disaster recovery policy.” This in light of the fact that 50 percent of organizations say that IT outages “damage their reputation,” 44 percent believe “IT downtime damages staff morale,” and 35 percent say it can “adversely impact customer loyalty.”
Our advice in this regard is als the same: Develop strategies that address disaster recovery and business continuity with clear instructions to staff on what is expected of them in the event of a system failure. And, make sure you do this before you implement anything. Take it from the dozens of public- and private-sector companies who have lost thousands of customers and millions of dollars because of ERP-system failures—you are more vulnerable than you think.
Organize for Change
I’ve already hinted at a third critical success factor: organizational change management (OCM). Panorama’s consultants all agree that this is the most fundamental—and easiest to screw up—aspect of an ERP implementation. So what is it? Simply put, it’s preparing, training and managing your staff so that your organization can actually achieve the business benefits it expects from its new ERP system.
You might be thinking, “Aren’t my employees supposed to do what I tell them, no questions asked?”
While this might once have been true in communist Russia, it’s certainly not true in today’s world, where your employees have opinions. And processes. And reasons behind their opinions and processes. It falls on the CIO, and other managers, to listen to and address these individual concerns, complaints and worries. If you don’t, and elect to just roll out the new system with tersely worded e-mails about compliance and boring training sessions, you run the risk of mutiny. Trust me—if you treat them poorly (or worse, imperiously), your staff will find a to undercut you, your strategy and your software. And that’s a real danger.Talk to them, explain your thinking, and focus on how the new system will benefit them. Provide training, and encourage them to ask for more training if they need it. Request feedback and respond to concerns. And be available, accessible and present. Your employees will look to their managers to bring them through this treacherous maze; grab the flashlight and lead. MF
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