Extracting value from ERP is not about go-live - it's about the art and science of change

Profile picture for user Matt.Smith By Matt Smith November 14, 2019
The focus on ERP go-lives misses the point. There is no ‘go’ button. Successful ERP is about the art of change. Here's what Matt Smith of IFS has learned on achieving ERP business goals.

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There’s a truism that’s often repeated about change. Some people relish it; others dislike it intensely. In business, there isn’t any room for dislike. As Jack Welch famously said, “If the rate of change on the outside exceeds the rate of change on the inside, the end is near.”

The challenge isn’t only about change itself, but about making the right change at the right times, using the right processes in the context of the teams of people involved.

Change for change's sake is never appropriate. Using financial value work, grounded in data, to direct and shape change is always a more appropriate method. However, understanding or analyzing in isolated parts of the business is also problematic.

During an engagement with a large bank many years ago, I worked with a two isolated project teams, both improving their functions. As an independent party, I could see that although they both would reduce their operational cost by about five percent, they were going to damage each other’s operation, and inadvertently create a negative impact on the company.

Fearing change is also an issue. History is littered with examples of companies that held the future in their hands and yet worried that change would cannibalize their current revenue. As a famous example, Kodak filed the patent for the digital camera in 1977, yet its marketing department said that although it ‘could’ sell the cameras, it would cannibalize existing revenue – and so the camera never saw the light of day.

If we turn to the enterprise resource planning (ERP) market, the challenges of change can be significant. They come not so much in deciding change is needed and making the business case, but in getting buy-in for those that must undertake change and, of course, in the execution.

Bringing the art and science of change together

Running a business is both a science and an art. Gut instinct can help the best business decision-makers know the right time to act, but data and analysis must inform those decisions.

When people talk about digitalization or building a digital business, they are talking about more than simply using new technologies or entering new markets to become more competitive. I once spoke to a CEO of a company about digitalization and he explained that they were complete with this topic – they had put all their paper forms online, customers could download them, print them and post them back – hence they were digitized. Thankfully, this is a rare occurrence now. Most leaders understand we are talking about the very process of conducting business, of management and monitoring, often the complete target operating model of a company.

A recent diginomica article by IFS CEO Darren Roos discussed this in terms of our Six Box Model, a tool we use to ensure new software such as ERP is implemented with careful attention to engagement across the business. This means a fully shared understanding of methods and goals, all delivered within a framework of trust.

The role of the vendor

Using modern engagement methodologies like the Six Box Model™ allows businesses to look beyond the purely technical and bring all relevant elements from across the organization together to effectively – and successfully – implement change. So, to give just one example, a business needs to consider broad questions like how its internal skillsets might need to change in order to get best value from new technologies.

The need to address skills gaps is an obvious example. There will be other, more complex factors, perhaps much more hidden in the depths of how a business functions, which need to be teased out and addressed. This is a key role for the vendor. External expertise can root around and ask difficult questions, as well as help the business come up with solutions, including novel ones, more effectively than internal resource can, and for two key reasons. For example, our research shows that successful projects have six “mobilizer” type people pushing the change. These are the people that cause change to happen around them, the fast-operating, go-getter types.

First – the vendor is unfettered by organizational culture, and so can look at the business with fresh eyes. Second – the vendor should employ change expertise, not just technology expertise, but people management, communication, even team based behavioural psychology.

A progressive and structured approach

Harnessing this level of understanding and methodology helps to bring together expertise in both strategy and execution, ensuring there is constant flow of information between art and science throughout. It is inevitable that business cases will change during delivery but keeping both the strategic and execution specialists working together ensures companies don’t lose sight of this collaboration, and that implementation can flex as required.

Having worked with a General in the British Army recently, he shared some great wisdom. He told us that organizations had great strategists that were not execution-oriented and great execution people that were not strategic. The secret was to bring these two groups together and create a framework for collaboration.

To achieve the most business-aligned, collaborative and personalized implementation, businesses should take a scenario-based strategy to ERP procurement, making use of these collaboration frameworks. Too often the request for information (RFI), that is so crucial to selecting an ERP provider is technology focused, asking for specific features or functions – maybe even copying from earlier RFI versions.

Taking a business scenario-based approach that also combines a collaboration and a trust-based engagement model, rather than only a technology one, ERP providers can better understand what happens day to day. This allows them to configure a product from the get-go, rather than applying generic technologies and tweaking them later. It also facilitates that critical cultural alignment opportunity for all parties involved, something rarely covered in a request process.

Changing software or technology is at most only half of a successful ERP implementation and the software element should never be the primary focus. The best value comes from ERP that constantly evolves through an understanding of both organizational and technology requirements, seen through the lens of business objectives and cultural business acceptance. Simply put, the best ERP implementations are based on iterative, agile techniques that consider human decision making first and foremost.

Seen in this context, business leaders responsible for change don’t ever need to feel that stomach-churning moment when they push the ‘go live’ button on a new ERP project. There is too much focus these days on the moment of ‘go live.’ There is no ‘go’ button. Instead there is a blending of art and science, of strategy and execution and reflection, of technology and cultural change management, that form a continuous and flexible evolution towards the business goals.

Let’s all agree: culture is history, heritage and habit, all of which are highly resistant to change - these need to be addressed head-on. One of the most successful methods I’ve ever seen is when teams take a human behavioral psychology and change management approach. Apart from the technology itself, it is this critical, human factor that underpins any digital transformation revolution.