Fixing ERP System Erosion to Unlock Business Value

Implementing an Enterprise Resource Planning  (ERP) system, such as SAP, JD Edwards or Oracle Netsuite, is a significant financial investment, particularly if the implementation is global in scale and involves multiple business units. While the benefits of an effective ERP system can outweigh the high cost of implementation, challenges invariably arise when companies grow via mergers or acquisitions or into new markets. In such situations, achieving short-term commercial goals is often prioritized over ERP considerations.. This can lead to system customizations and process workarounds that meet short-term objectives but that erode the original benefits of the ERP implementation by adding additional costs and complexity. These workarounds eventually become codified in standard operating procedures, additional technology is built upon the existing foundation, and the technical debt compounds rapidly, eventually outstripping any efficiency gained by the ERP system in the first place. 

Companies end up with complicated, disparate product, customer and vendor master data that result in complex or ineffective offline operational and financial reporting.  This may also result in “data silos" by business unit, further undermining the benefits of an integrated ERP. So, how do companies maximize their investment in these large ERP systems, while realizing the commercial benefit of new business integrations?  How do companies unravel established workarounds and system customizations without risking a negative impact on the business?

In order to undo this “system erosion” of poorly executed integration projects, companies must adopt an approach built on Lean and Continuous Improvement principles that consider both process requirements and installed ERP system capabilities. This approach is supported by a measured, phased program methodology focused on delivering business value by considering ERP system capabilities - integrated across all (new and existing) business units of the company.

Continuous Improvement is a management / operational framework whereby organizations, business units, and individual teams methodically and routinely analyze and refine their respective operations to ensure that they align with and support the overarching strategic objective of the organization to the greatest degree possible.

Lean is a formal Continuous Improvement practice that focuses on eliminating waste and maximizing efficiency in business processes. Some of the specific Lean principles that apply to this approach are:

• Value: Identifying and focusing on the value that the ERP system can bring in simplifying and standardizing processes and data across the organization. Examples: Rationalizing master data to reduce duplication; automating workflow to simplify processes across functions.

• Flow:  Identifying and eliminating any bottlenecks or delays that impede the flow of information and processes across the organization Example: Ensuring all data have a single system of record; application interfaces with the ERP are seamlessly integrated.

• Pull:  Prioritizing and implementing changes based on the needs and priorities of the business and customers. Understand business rules and ensure these are configured in the ERP.

• Perfection: Continuously identifying and addressing inefficiencies in processes and ERP technologies. Continually assess system performance against business objectives.

The Lean model for ERP improvement projects is built on these 3 key steps:

1. Define Areas of Improvement
• Gather information from process experts to understand the problem to be solved
• Understand business requirements in terms of functional specifications and business rules
• Understand the ERP capabilities related to these requirements so that technical requirements are specified
2. Execute Improvement Projects
• Prioritize the identified opportunities with defined business objectives
• Create a program plan for delivering sustainable improvements
• Ensure agreed targets are met
3. Create Culture of Continuous Improvement
• Obtain executive sponsorship and leadership around these projects
• Dedicate the necessary resources to deliver improvements
• Organize around value creation from existing system capabilities

Fixing ERP system erosion cannot be addressed by fixing one-off issues based on the loudest voice pushing support tickets through the IT Support group.  Fixing ERP system erosion sustainably relies on following the approach of Lean / Continuous Improvement described above.  This approach guarantees that fixes are permanent and that business value is front and center of prioritizing system improvements.  Over time, your ERP system will become fully utilized to drive the business benefits that were promised when it was first implemented! 

Be the Digital Change Agent for your organization

Businesses in the 21^st Century still straddle the great digital divide. Even before this pandemic, we had workers on one side of the line working 24/7 from virtual offices, while others were working in factories and offices in jobs that depended on having a human interfacing directly with other humans or with machines.  On one side, we have companies with processes that are highly automated, while on the other side of the divide we have manual processes.  The global pandemic has only exacerbated these digital divisions.

In this ever competitive job market, the ever growing use of digital tools and the internet-of-things to increase connectivity and productivity, Change Agents are driving transformation in how we do business.  Change Agents are often early adopters of digital trends.  Many will start as advocates for specific technologies and, over time, develop into experienced business transformers.  They recognize the impact of digital transformation and are driven to help their organizations adapt.  Digital Change Agents are naturally passionate about, and interested in, technology and how it can transform the way we work.

Are you a Digital Change Agent in your organization?  And if you are, how do you succeed in adapting your organization and business processes to leverage digital technologies?  One way of doing this is by building your Digital Change Agent Network.  When building your Digital Change Agent Network here are the characteristics to look for:

• Desire to help others as part of the team
• Capacity (time) to help
• Respected by peers
• Expertise in subject/functional area or system

Some nice-to-have characteristics: existing superuser; knows the organization/ industry well; seen as a go-to source for help; fast learner; strong communicator; and/or training/coaching/listening skills.

Where do Change Agents come from? Change agents should be members of the stakeholder groups who will be receiving or implementing the strategy, project, or change. Change leaders typically reside in the business (as opposed to IT for technical projects). Change agents can also be external to the company, such as advisors who have expertise in the business area or system.  These external change agents can also bring specific expertise in business transformation management techniques, tools and processes.

How do you achieve digital change?

1. Get executive support – This is pretty much a prerequisite to any transformation initiative. If you’re in IT, it will help to have allies from the business side. The C-Suite can add weight behind your strategies, and your peers in marketing, sales, finance, etc., can help you “sell” them to your internal customers.
2. Interact with people – Technology experts tend to be introverts. If you’re one of them, you’re going to have to break out of your comfort zone. There is no substitute for talking to the people who will be using the technologies you deploy. It’s the only way to gauge the level of their resistance and address the underlying causes.
3. Speak their language – Working across the digital / technical divide means that you need to adjust your communication style. Remember, Jane in finance may be brilliant in her area, but if you start speaking in acronyms and cryptic terminology you may lose her quickly – and maybe even permanently.
4. Have a plan – Share your vision for what digital transformation means to the organization and how it will help you achieve your collective goals.
5. Keep it doable – Help your internal customers understand how your path to digital transformation will affect them personally. How will they still be able to do their job faster with less hassle? Make fewer mistakes? Spend less time at the office?
6.  Address their concerns – If you start talking artificial intelligence and machine learning, people will think “layoffs.” Help them see that doing more with less is about helping everyone perform their role to the best of their abilities and not about scaling back.
7. Go slowly at first – You need to assess the organization’s openness to change and then create a plan that lets people set a comfortable pace. With system implementation projects, and Agile approach is recommended.
8. Choose a champion – There’ll be at least one end user in the business that shares your passion for change. They can be instrumental in helping others manage the transformation. Champions are typically natural teachers, other-oriented, and well-liked by their peers.

Companies need to value Change Agents and have solid retention plans for these individuals.  Agents can become targets for poaching, by internal groups and by other companies. Change Agents need to have a development plan that provides a plan for increasing responsibility to encourage change agents to remain in their role. This journey should lead the individual, post project, to a senior role in the organization or the company's permanent continuous-improvement group. This can be a much bigger incentive than cash for Change Agents. Having Change Agents in regular exposure to senior leadership for coaching and development is also a huge motivator for these types of individuals.

Finally, using an external Change Agent often helps solve problems by simply bringing in a new perspective and approach to organizational change. A Change Management consultant can help illuminate problems and find solutions before they begin affecting the workplace, and in the process help develop internal Change Agents and Champions that will drive sustainable performance improvement and efficiencies.