TxM 037 Section 4.2 The Power of an Executive with a Blank Sheet of Paper (Reprint from one of my newsletters) Created by James on 7/3/2013 3:09:36 PM
For many years I have encountered executives who when interviewed with regard to their sub-optimal ERP or IT investments say something to the tune of "Dr Robertson, I do not understand IT, I may be wasting your time."
In the last few months I have gained new insight into this statement AND how to rectify the problem.
1. "I do not understand – maybe I am stupid"
Many times when undertaking a pulse measurement (diagnostic assessment of an ERP or other IT implementation that is not meeting management expectations) I find in conducting executive interviews that executives make a statement to the effect that they do not understand IT.
This time I was sitting with the Chief Financial Officer of one of my clients and he made the statement about some work that I had done in the preceding weeks.
I had facilitated a series of workshops with him and his team and then undertaken one on one working sessions with team members.
The goal was a Chart of Accounts that would work for all divisions across the business.
I thought we were making good progress.
The Chart of Accounts did not make sense to him and he was almost embarrassed to admit it.
I wonder how many times this has happened before, work for days or weeks, think you have a good solution and the executive sponsor is too embarrassed to admit that the work done does not make sense – after all, IT is magic and he might expose his ignorance if he said anything!?
2. We stop here until this makes sense to you
This time though, I did something different – I said something to the effect of "that is important, I need to understand why you say that and we are not doing anything until I understand what is concerning you and we have a solution you are entirely satisfied with".
I actually had to talk quite hard to get him to agree with me.
He was convinced he was missing something and that if we continued it would eventually all make sense.
Problem is, I have learned that if it does not make sense today it is not likely to make sense tomorrow and, if the person it does not make sense to happens to be an executive, a solution that does not make sense is a recipe for executive opt-out (as opposed to executive custody) and that is a recipe for disaster.
So, I suggested we start with a clean spreadsheet and start from scratch.
3. The power of an executive with a blank sheet of paper
It was an interesting experience.
He pushed back hard, he was concerned he was wasting time and, by implication, money,
I pointed out that the work that had been done served as a brainstorm list and that we would go through the whole list in due course to make sure that all the information we had gathered was retained in the final design.
But I managed to persuade him to start with a clean slate.
I explained the principles of taxonomy design, the emphasis on strategic (thrive) decision support, putting the most strategically important information at the top of the list, aiming for about seven items at any level in the hierarchy -- and so we got going.
In one day we captured the entire high level structure of the key elements of the Chart of Accounts design and, most importantly, the client was enthusiastic about what we were creating.
He could now see how what we were creating would impact executive information and decision making long term going forward. His view of the business and strategic priorities were being accurately reflected.
He was excited!
4. What is a taxonomy? And why is it important?
We were creating a taxonomy, in this case a General Ledger Chart of Accounts, but the same principles apply to any classification scheme in your ERP or other IT system.
Examples of taxonomies would include your Product Class, Item Master, Customer Class, Supplier Class and all other drop down lists and validation lists in your system.
What IS a taxonomy?
It is a logical semantic (word) structure which provides a precision vocabulary of preferred terms which conveys understanding between human beings with relevant knowledge and experience.
An example of a taxonomy would be:
§ Domestic Cats
· Persian Cats
We take taxonomies for granted when we visit a library or use a product catalogue or similar but, for the most part, taxonomies are weak or entirely absent when it comes to the classification of information in ERP systems and other business information systems.
Once a taxonomy is linked to a precision code scheme it becomes the most important means of communication between a business information system or ERP and people. The creation of taxonomies is both an art and a science and at some level is quite obscure.
But once a well-designed taxonomy has been created it is obviously right.
With the correct facilitation it does not take long to create a high value taxonomy but that requires that the right people are in the room.
5. Executives are the custodians of the thrive (strategic) view of the business
Increasingly I am realizing that in defining the taxonomies for your ERP system implementation, it is the executives of the business who should be primarily involved -- assisted by the staff who report directly to them.
It is the executives who are the custodians of the strategic executive (thrive) view of the business and therefore they are the most important people when it comes to defining how the business is modelled strategically through the taxonomies.
Executives hold the integrated holistic view of the business, its customers and markets, its suppliers, its personnel, its future direction.
They are the people who know best how they want these items segmented in terms of the three, five or ten year view of where the business is going.
Accordingly they are the most important people to consult when it comes to developing taxonomies.
The MOST important output of an ERP or any business system is information that enables executives to make better strategic (thrive) decisions.
It is not difficult today to get technology to facilitate processes, enforce policies, etc but that is not enough for the organization to thrive. An organization will thrive if the correct decisions are taken by those at the top. So an ERP must facilitate the supply of the information that is required for such thrive decisions to be taken.
6. The most important requirement – answer the questions I have not thought of
By extension this means that the ERP must be able to answer the questions that executives have not yet thought of.
That sounds crazy, doesn't it?
After all, traditional ERP and other business systems implementations spend days, weeks or even months on user requirements workshops specifying all the reports that are required and now I am saying that is not required or not enough or both?
Well, at the start of an ERP project what matters is what the outcome will be in five or ten years' time, NOT what the outcome will be at go-live.
The issue is answering questions executives and managers have not thought to ask.
How do you do that?
Firstly, ASK, what the business will look like in five or ten years' time – what expansion, what acquisitions, etc – executives do not necessarily have all the answers but at a headline level they have CLEAR views of where the business is going WHEN you ask them and WHEN they think about it.
But most of the time IT and ERP implementers never ask the question. They ask lots of operational and tactical questions but they seldom ask the really important questions and so they start off the journey going in the wrong direction based on the right answers to the wrong questions.
And then, what questions will you ask that you have not thought of yet?
No, I don't think you will find the answer that way!!
7. Model the business accurately – large numbers of small bins
In order to answer that question there is something else you must do.
Ask them to identify ALL the possible attributes of the components of the business, the products, the customers, the suppliers, the staff members, a widget, etc.
You goal is to classify every attribute that can realistically be identified because, IF you have all the attributes that they use consciously AND unconsciously to define a product or whatever you have the information that is required to answer most, if not all, of the questions they might ask in the future.
And, if you configure or customize the software in such a way that all these attributes are available, with drop down lists configured with carefully thought out taxonomies AND you make provision for additional fields to be added, you are likely to have a lot of the building blocks in place to answer those difficult questions sometime in the future.
Then, in addition to this, make sure that the level of detail in your taxonomies is sufficiently fine that the taxonomy divides your products or whatever into a large number of small bins (categories). This means that the data can be added up just about any way you want.
And, if you do this at the design stage it costs almost nothing to make provision for this.
The relevant metaphor is screws in a hardware store – if you go to a hardware store to purchase screws you expect to find them stored in little plastic sleeves or bins neatly organized by length, diameter, head type, etc – in other words, you expect to find a taxonomy.
If the screws were all dumped in one large bin that you had to scratch in you would go to another hardware store.
This is often why companies replace their ERP systems, they are frequently configured with large haphazard bins with little or no taxonomic logic with the result that the systems are clumsy to use and do not package the data in such a way that intelligent analysis is possible.
So, the obvious conclusion is that we have bought the wrong ERP -- not so?
No, the problem is almost NEVER the software, it is the way the software is configured and implemented!
In such a case there is frequently an opportunity to reconfigure and re-implement the same software or fix the data in the Data Warehouse.
8. Use the technology appropriately to its full potential appropriate to the business
Re-implementing your ERP is frequently a major consideration in achieving the full potential of the software.
Another aspect of getting the full potential of the software AND of ensuring that the scope of an ERP project is correct is to apply the same principle – a blank sheet of paper – to the specification of the requirements for an ERP project.
In simple terms a key element of the requirement for an ERP project should be "implement this software in a manner that fully exploits the capabilities of the software to add real value to the business in a practical manner" – in other words, do not expect the business to tell you what it wants, other than a highly effective and efficient (thriving) business, understand the business, understand the software and then identify ALL possible synergies that will enable the tool properly used in the business to add value.
Rather than expending massive amounts of time trying to understand the "as is" condition of the business, understand the essence of the business and what causes the business to thrive (the strategy), understand the full potential of the software and then facilitate the EXECUTIVES of the business to define the high level requirement based on how the software can best be utilized to assist the business to thrive.
This could give rise to a three year or five year implementation plan during which the functionality of the software is progressively mobilized to support the business in achieving its strategic objectives.
Do NOT constrain the executives or the business by spending detailed time on what they currently do, they KNOW THAT, focus on where they are going and what they need to get there.
The most important aspect of all of this is to capture this information in strategically (thrive) aligned taxonomies (SEPT) throughout ALL components of the ERP.
Build all taxonomies according to the blank sheet of paper principle using the fundamental principles of ERP taxonomy design in terms of number of levels, spacing of levels, etc.
And, remember, you can ONLY build all the taxonomies in your ERP from scratch IF you re-implement your entire ERP – or do this in your Data Warehouse and then trickle down the new taxonomies into your existing ERP configuration over a period of years.
If you do, you will unlock huge value.
If you cut corners you will achieve a major loss of value.
Do it right first time.
I would be happy to discuss how we can assist you to implement effective taxonomies and give a new lease of life to your existing ERP or create a platform for unlocking exceptional value from your new ERP.
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