SNw 037 Unlocking the TRUE potential of ERP -- 100 x the norm Created by James on 6/18/2013 3:56:40 PM
I constantly find myself faced with a disconnect between the value that I KNOW from EXPERIENCE can be unlocked with a really high value ERP implementation and the expectations of the industry
My methods have been developed and proven over 26 years and have, on a number of occasions, delivered exceptional outcomes -- recently a client of mine was able to increase turnover by 25% by securing a major, highly prestigious new international account as a consequence of strategic capability that I had conceptualized, designed and seen implemented -- the client was able to do things that none of their competitors could do
The competitive advantage was achieved by a modest investment in precision configuration coupled to a piece of "clever" strategic customization that enabled a standard module of the ERP to be used for a purpose that its designers had never visualized -- one implementer told me it could NOT be done :)
A few years ago another client walked away from such a potential opportunity because they claimed that I did not know what I was doing
After I recovered from the shock I increasingly came to realize that my methods WERE radically unconventional and NOT understood by the ERP industry at large and the majority of clients but continued to work with visionary clients who were looking for something different and better
In 2010, while undertaking a Pulse Measurement (short executive level diagnostic investigation -- email me for information) into a failed big brand ERP implementation I discovered to my surprise that niether the implementer fraternity NOR the Big Brand ERP Software vendor fraternity understood the concept of Precision Configuration, let alone its potential to add huge value to the client. Having shown a team in a walkthrough the second worst Chart of Accounts I had EVER seen I was told that "... (the name of the ERP) is so powerful it can handle that" -- with that the Vendor representative went on to assure me that their "best practice Chart of Accounts is NOT that much different" -- I asked to see this "best practice Chart of Accounts" and was shocked to discover that he was right -- it was NOT much better
At that point I finally realized that the ERP Vendors and Implementers really do NOT know how to implement their software to best effect
In that case I rated the implementation about 1 out of 10, the Vendor and Implementer rated it about 4 out of 10 -- slightly sub-optimal -- I concluded that my approach to configuration delivered an outcome that was about 3 x the value that they could unlock and that with my approach to strategic customization I might achieve 6 x their value
Over the last few years I have come to understand that I was WRONG
The TRUE difference is closer to 100 x the value if not more -- the vast majority of ERP implementations are massively pedestrian, mediocre, sub-standard according to my view of things and this is a DIRECT consequence of the methods and approach that are used
This article discusses why this is
THE FACTORS DRIVING ERP MEDIOCRITY
The following factors, in my experience, are driving ERP implementation mediocrity and need to be overcome in order to achieve high value outcomes:
1. DO NOT know it is possible
The simplest explanation is that executives and ERP professionals do NOT know it is possible. Executives sort of believe it because that is what they are dreaming of but most have been repeatedly disappointed -- this is behind the statistic of "19 out of 20 ERP Implementations do NOT deliver what was promised" reported by the Financial Mail some years ago. As a consequence most Executives now doubt whether it is possible. Most ERP professionals think that strategic value is unlocked with their technology and do not begin to comprehend the true competitive dynamics of a high value, competitive edge solution
2. Inappropriate Governance
The most significant critical factor giving rise to 19 out of 20 ERP projects NOT delivering what was promised is inappropriate governance -- the ERP and the ERP project report into someone other than the CEO who IS the custodian of the integrated view of the business -- ERP under the IT Manager (aka the CIO) reporting into the CFO, the model adopted in something like 70% of organizations, is one of the biggest sources of strategic ERP implementation failure -- visit:
https://attendee.gototraining.com/9j1k2/recording/1671905634347776512 for a presentation on this topic
3. Operational investment focus
The next hindrance to unlocking value is the almost universal emphasis in ERP investment cases (benefits realization, return on investment) on favouring second order operational benefits such as head count reduction and improved workflow control with complete disregard for strategic benefits like "enable the business to double in size in x years through ..." Head count reduction is a possible output of a well implemented system BUT dramatic strategic growth that creates employment for staff that would otherwise have been made redundant is a MUCH better option, As a simple rule of thumb, if you need to employ a consultant to tell you what your ROI is on an ERP investment the answer is there was NONE -- the ONLY litmus test of success is the private opinion of the CEO looking you squarely in the eye OFF THE RECORD
4. No concept of how to deliver strategic advantage
Listening recently to someone extolling the "strategic" benefits of "THE CLOUD" I realized that most technology people, including those who claim to be business solution focussed, do not BEGIN to comprehend how strategic value is unlocked. The ERP industry plays almost universal LIP SERVICE to "strategic" with absolutely NO concept or method to determine what that means, let alone achieve it -- this is the fundamental difference between the approach that I am advocating here (and which I apply) and the industry norm
5. Lack of a holistic Integrated Business Information Systems view (IBIS)
The majority of ERP implementations are glorifed accounting suite implementations with limited focus on industry specialty components. Since the accounting modules on their own will deliver only a limited strategic value it is apparent that a holistic end to end view of EVERY possible systems component to support the FULL scope of the enterprise is VITAL to achieving a high value outcome. Tight sharing of information (aka integration) end to end across the business, accomplished by highly structured common code schemes between ALL software modules coupled to human to human cooperation and communication are a VITAL requirement for a high value strategic outcome of any ERP implementation or operation
6. The CRITICAL role of the strategic solution architect
The role of the Strategic Solution Architect as a strategic advisor to the CEO with NO commercial interest in the services and software provided coupled to a deep and mature intuitive understanding of strategy, business AND ERP and the ability to communicate with the CEO and other client executives as well as with Implementer Executives at a peer level is absolutely critical and is NOT understood by the majority of implementers OR clients. The absence of this individual will cripple the possibility of a high value strategic outcome. This person MUST be able to quickly and accurately discern the essence of the business and how it thrives AND translate that into a high level system configuration and customization concept which they can then oversee through to a practical working solution. Clients doing it themselves without this person is ONLY valid if they have such a person in-house -- this is a "greybeard" -- someone who has done it repeatedly STRATEGICALLY
7. The commercial model of implementation is diametrically opposed to a high value outcome
Virtually the entire ERP implementation industry operates on a basis of what I term "the audit model" -- that is low cost, inexperienced "consultants" (bodies) placed on site 8 hours a day five days a week with limited supervision and billed flat out at rates which are exhorbitant relative to their salaries -- even when they are older most of these "consultants" do NOT really understand ERP OR business and they constantly look to client personnel for direction resulting in the continuous whine "but the client told me".
This contrasts with the critical role of very experienced, mature experts who provide limited input but clear direction into every aspect of an implementation. In the traditional model many times the "consultants" do what in practice senior client personnel SHOULD be doing IF the implementation was strategically focussed. This model relies heavily on client personnel to oversee and direct the "consultants" thus making it possible to blame the client for just about everything that goes wrong
8. The average rate approach
To offset the high rates charged for junior personnel Implementers frequently "discount" the rates of their senior people to "balance" the equation through an "average" rate approach -- problem is that the senior personnel only put in very limited amounts of time generally so that the Implementation is fundamentally strategically deficient -- it is vital to contract senior personnel and limit the use of inexperienced juniors. This average rate approach disincentivizes the Implementer organization from involving senior personnel UNLESS the client insists on contracting in this level of experience at the negotiation stage of the project AND is willing to pay appropriately for it
9. Process and "as is" obsession
Prehaps the single biggest obstacle to unlocking strategic value is what I have come to term "process (workflow) obsession" -- every ERP project HAS to start with detailed process mapping -- doesn't it?
Optimized workflow specification is an OUTPUT of an ERP project and NOT an input -- high level strategic DISCOVERY is an input -- an experienced consultant only needs a few limited interviews and demonstrations focussed on what the client does DIFFERENTLY to understand enough about the way the client business operates in order to give strategic direction. Interactively and iteratively developed precision configuration including hierarchical code schemes for everything from the Chart of Accounts to the Product / Item Classification / Group to a plethora of carefully strategically defined attributes on the Personnel, Customer, Product, etc master records IS a fundamental requirement at the start of the project TOGETHER with a five to ten year strategic view of how the CEO wants the business to operate in the future.
Documenting the "as is" is an exercise in total futility -- what is the point of producing detailed technical drawings of a building one is about to demolish? In addition process and "as is" focus attention on operational issues when it is STRATEGY that matters -- ONCE the solution is closely aligned with the strategy -- the essence of the business and how it thrives -- in simple, practical plain English the operational efficiencies will FOLLOW!
The ERP and IT industry is fraught with technobabble -- meaningless marketing jargon like "THE CLOUD" that causes executives to feel ignorant and inadequate and therefore back off and abdicate in favour of Technogeeks who totally bamboozle executives with meaningless gobbledygook. Recently, as I sat through a presentation by a techno lover extolling the virtues of their "cloud" solution I experienced a numbing intellectual sensation telling me I was an idiot until I challenged the speaker to explain to me in plain technical terms what he was talking about -- a message that he had great difficulty understanding -- eventually I found out that his company was offering a large hosting service in which multiple customers shared a common high end database so that they could see each others data -- thirty years ago that was called a "Computer Bureau"!!
Having dragged an explanation that I understood out of the speaker I did not think to ask him what would happen if my clients competitors were ALSO hosted in this "cloud" and a disaffected Bureau staff member gave them access to my clients data which was now so accessible! This is just one of endless examples of how the ERP and IT industry generally confuse executives into major expenditure out of fear of looking stupid. It IS possible that remotely hosted shared servers and databases ARE potentially to the strategic advantage of certain organizations BUT do NOT use jargon to sell it
11. Sloppy configuration
Take a few minutes to look at the master data in your ERP (or your accounting system), probability is that it constitutes what I term "sloppy configuration" -- a poorly structured or even completely unstructured list that makes NO practical sense from an executive summarization and reporting perspective -- email me for a copy of my Taxonomy Manual and other newsletters to better understand this term. Sloppy configuration is validation data that does not bear any logical structured relation to the real world, requires massive intellectual effort to memorize (you CANNOT make sense of it) and creates employment for hundreds of thousands of IT and ERP contractors around the world on an ongoing basis. Precision configuration was what created the platform for the 25% growth example I cited above once coupled to "clever" strategic customization.
Sloppy configuration is what makes the ERP support industry go round so profitably. Sloppy configuration is why CEO's complain to me "Dr Robertson, I have spent millions on this system and yet IT tell me they cannot give me the answers to my questions even though I KNOW that the transactions are being processed". In the absence of executive level strategically focussed highly structured configuration ERP operation is FORCED to degenerate to operational support only and because of the LACK of a structured TOP DOWN design approach every silo in operations hacks their bit together the way that suits them
12. Confusion regarding valid customization
Once one has set foot on the sloppy configuration path -- which is the vast majority of ERP implementations -- one has, perforce, set foot on the road to sloppy customization -- all sorts of little bits and pieces OUTSIDE the ERP to compensate for the things that the sloppy configuration has made necessary -- in this context please recognize that EVERY SPREADSHEET constitutes custom development -- Excel is an EXTREMELY sophisticated software development platform almost universally used by badly trained and badly disciplined programmers the majority of whom frequently sit in the accounts department -- large organizations run their financial consolidation and reporting in and out of Excel and many a CFO has built an empire based on Commerce and Accounting Graduates who maintain and operate large informal customized software solutions in Excel because of sloppy configuration.
I have met powerful CFO's whole rule their empire with a rod of iron and are regarded as indespensible as a consequence of the massive amounts of customization they have originated through their inappropriate implementation decisions.
In contrast, valid customization comprises carefully designed and expertly built, limited scope pieces of software that harness the intelligence in the precision configuration tables in ways that create high value solutions that are unique to the client organization and which truly CANNOT be accomplished any other way -- this is how I opened the door to the 25% increase in turnover mentioned above
13.Lack of awareness of the benefits of strategic customization
Because of the almost universal experience of chronic mediocrity in ERP implementations there is an equally almost universal lack of awareness of the power of the point just made. A strategically configured and implemented IBIS (ERP+) that includes ALL the systems required to run the business with harmonized code schemes across the ENTIRE software platform creates the opening for small pieces of what I call "strategically clever software" to be designed and built. These pieces of software may only take a few days to conceptualize and specify and a few weeks to build but, by harnessing the FULL power of the ERP and other software elements, they open doors to strategic opportunities that most clients and ERP implementers do not even begin to consider exist -- although, as mentioned above, many executives DID once dream of these things only to have their hopes dashed by the grossly inefficient ERP implementation industry
14. Sloppy CONTRACTS with no accountability
Coupled to all the above the ERP implementation industry is rife with sloppy contracts where "change of scope" and massive budget and time overruns at client expense are the order of the day. There ARE rigorous processes that can be followed to take the business and bidding Implementers through a robust and rigorous procurement process that will result in a fixed price, enforceable, high value outcome contract that WILL deliver -- central to this is a highly experienced strategic advisor to the CEO. A well balanced contract will share risk equitably between the Implementation Contractor and the Business in such a way that experts can manage each aspect of the contract to achieve a successful outcome
15. Unconscious incompetence is EVERYWHERE
The last and, perhaps the most serious problem, in this whole mix is the massive level of unconscious incompetence that occurs throughout the industry -- clients think they can implement huge integrated systems using own staff and without involving experts on the software and implementation methods -- Clients AND Implementers think they can tackle huge projects without the necessary high level independent strategic advisory guidance -- Implementers KNOW they can hack it and get away with it nearly all the time and take it with good grace when they get caught out now and again -- when you don't know what you do not know ... well, you don't know what you do not know so HOW do you expect to achieve a high value outcome? -- staffing a project team with the the people most knowledgeable about the business and the people most knowledgeable about the software together with a skilled translator and facilitator to ensure a HIGH VALUE meeting of minds is THE ART of high value ERP implementation
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