“ERP” should never be the answer

By Christer Wadman | Apr 04, 2016

All too often, executives and business consultants looking for a path forward provide direction in form of a system acronym hiding complexity to the point of sending an organization off in the wrong direction. The answer should never be "ERP," "SAP," "AX," or the name of another software vendor.

Of course, "ERP" is often a component of an overall solution or program to lift your business capabilities and win in the marketplace. However, simply equating "ERP" to the key system, business process, and information management capabilities required to improve or transform your business is a mistake.

ERP failures are still common

When "ERP" equals core strategy for a company it is a sign of problems. It may include not being specific about what really matters or the difficulties in selecting and implementing an ERP system in the company. A tangible credible return-on-investment perspective is often missing. Another example is biased solution vendors invited too early into the process. It is not uncommon that the vendor sales pitch becomes the go-forward strategy, sometimes even suggesting that "the cloud" will somehow transform a small manufacturer.

The usual pain resulting from these issues includes off-target expectation setting, ERP initiatives launching against the wrong target, and solution vendors scoping solutions poorly, among others. Ultimately, this translates into a benefit-cost risk equation nobody wants.

So, why do so many people suggest "we need ERP" without being able to articulate what that really means? The answer stems from the fact that the typical real-world manufacturing company is complex. Consider that all the components of business strategy, people, external parties, business processes, information, systems, and IT infrastructure are part of a larger multi-layered puzzle. With this puzzle in constant change, it is not easy to be truly market- and business-driven when outlining a well-balanced path forward to improve. Typically, the pressure resulting from high growth, operational inefficiencies, acquisition, and other major business impact exacerbates the difficulty to get things right. With this in mind, looking at an acronym as the silver bullet is tempting.

ERP implementation failures continue to be very common among both small and large companies -- and, counter to common belief, most issues are created before the implementation phase begins.

How to get it right

Smart leaders acknowledge the complexity of the multi-layered puzzle and address it using research and methodology that simplifies it. This simplification needs to be structured in a way that allows them to focus on what really matters to the organization and on what has a high risk of going wrong during the system implementation.

Small manufacturers use several systems to run their businesses. Large organizations may utilize hundreds of both integrated and standalone systems to win in their market. In this multi-system environment, there needs to be clarity on what system addresses what functions, what inter-system integration is worth it, where master data lives, where to improve data quality, and where to lean on spreadsheets. The targeted system landscape needs to include solutions that reflect what is practical and reasonable at given investment levels and timelines, or expectations will never be met.

Further, when designing the targeted puzzle, you need to look ahead. For example, how will your position in the supply chain change? Will you fulfill dramatically higher volumes of e-commerce orders? What acquisitions are on the horizon? Remember, the adoption of an enterprise system is typically a multi-year journey, and the targeted systems need to fit the business when they are turned on and later.

Beyond proactively detecting the real and future pressure points in the company, also identify and articulate the unique business-process and data needs. Pinpoint what standardized off-the-shelf business systems will be challenged with and compare these views. Benchmark your industry and make sure to gain consensus on this perspective because it is what makes (or should make) the difference in software selection.

A company signaling a pending system purchase or upgrade attracts lots of third-party attention. It is difficult to recognize who should get invited to help and when to invite them given that almost all players are either biased, IT-only focused or inexperienced. To outline the business-driven path forward, prioritize outside help around methodology assistance and industry research. Look only for very experienced resources. Unbiased is always better.

Make sure to hold system implementation partners and software vendors accountable to deliver within the defined scope of your targeted puzzle. Make them specifically address what's challenging, critical and unique to you -- and not what is easy for them. These expectations must be crystal clear before you launch into the implementation phase.

Don't make "we need ERP" your answer. Instead, learn from others and recognize that successful mobilization of an ERP-centric project is as important as executing well on the implementation phase. Plan, deploy resources, take action, and prepare the organization accordingly.

Christer Wadman is a strategy consultant with Teccelerators focused on the intersection of business and technology in manufacturing and distribution.
Contact him at christer.wadman@teccelerators.com.