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Implementing Enterprise Resource Planning: Lessons Learned from the Front
Enterprise resource planning (ERP)is also known as :
ERP Network,
Software Systems,
Integrated ERP Software,
ERP Solutions,
MRP Systems,
ERP Software,
Material Requirements Planning,
Manufacturing Resource Planning,
Enterprise System,
E-procurement,
ERP Modeling,
Service Management,
Information Technology Management,
Manufacturing Operations Management,
Management Information System,
Business Process Management.
Table of Contents
- Executive Summary
- What Are the Key Best Practices
in ERP Implementations
- What Practices Are Found to Adversely Affect an
Implementation
- What Specific Best-Practice Tactics Can Companies Use to
Make
- Current and Future Implementations More Effective
- Conclusion
Executive Summary
SAP has implemented enterprise resource planning (ERP) systems in both the
commercial and public sector for more than 30 years. From these
experiences, four important principles stand out, as follows:
- Successful implementations start and end with
the involvement and contribution of senior executive leadership, providing
the governance and management necessary to achieve organizational buy-in
throughout the process and ensure that goals are achieved.
- Success also requires confidence that implementing ERP software achieves
true value for the organization - value measured in substantial process
improvement.
- Implementation has a life cycle, with some of the most important phases
at the start - requirements gathering, business case development, and
solution design. The business case quantifies the desired process
improvements and provides the organization with the goals necessary to carry
it through the rough times.
- Implementation programs with the set goal of "replacing systems" -
without mentioning process improvement - are doomed to failure.
Best practice indicates that a successful implementation can, in fact, force
an organization to reevaluate its business practices and processes, focus on
clearly defined goals and objectives, create a higher understanding of the need
for data accuracy, emphasize time-phased material planning, and enable a more
effective data-sharing environment. However, such high-level benefits require a
new approach to project implementation, one that applies the lessons of the past
to reinvent the systems of the future.
The following point of view draws lessons about what has been done well, what
has yet to be done well, best practices from large commercial company
implementations, and best practices for the governance of implementations that
achieve the results and benefits foreseen.
Best practice indicates that a successful implementation can, in fact, force
an organization to reevaluate its business practices and processes, focus on
clearly defined goals and objectives, create a higher understanding of the need
for data accuracy, emphasize time-phased material planning, and enable a more
effective data-sharing environment. However, such high-level benefits require a
new approach to project implementation, one that applies the lessons of the past
to reinvent the systems of the future.
What Are The Key Best Practices In ERP Implementations?
- Senior executives who develop a vision for the ERP implementation with
supporting goals and objectives based on improving specific capabilities
will achieve success in implementation.
- In each specific IT implementation, leadership must provide the
necessary high level support and back-up, which protects funding and removes
organizational roadblocks. In one example, a public sector project, the
project teams received support from senior leadership as project managers
worked to resolve the many difficult and complex issues. Senior managers in
this organization insulated the implementation teams from distractions to
allow them to focus on the tasks at hand.
- In some IT implementations, the use of SAP experts to advise and assist
has been encouraged and allowed, and their involvement helped avoid many
typical implementation pitfalls in key areas. In another large ERP
implementation, SAP experts helped validate key concepts, but more
important, educated the corporate program office members about the new
software - enabling them to better work with the commercial systems
integrators. The combination of product design, thought leadership, and
practical experience has demonstrated the right partnership model for all of
the organization's programs. As projects unfold, implementation partners
have the necessary authority to elevate and resolve immediate issues have
been elevated and resolved in real time, without delays. Functional experts,
in turn, are available to handle project manager requests in real time,
again.
- At each level of the IT implementation, the implementation team takes
the seriousness of the project to heart, showing real dedication to duty and
demonstrating exemplary productivity. The implementation groups are
motivated, and resourceful, and do what ever it takes to get the job done.
Finally, senior management provides the right incentives so that the
implementation team can maintain its momentum over the sometimes very long
implementation cycle
What Practices Are Found To Adversely Affect An Implementation?
- Bureaucratic processes and organizational structures can slow and
complicate the successful completion of IT implementations, and dampen the
natural enthusiasm of the users for new technology, despite overarching
leadership support. In the case of one large organization, the system of
architecture compliance and certification is too complex -- and encourages
users to find ways around the system. This same "IT creativity" can work
against a large systems implementation.
- Companies embark on too many individual IT and transformation projects
without considering how they overlap, or whether they are all strategically
necessary, and, as a result, use up too many resources. Functional
organizations tend to retain their older processes, thereby maintaining
workload for themselves, while they develop systems requirements based on
current processes. With limited senior governance and no overarching
authority, some implementations might be left to be managed as individual
projects, with no attempt to connect them, learn from them, or in any way
treat them as the fundamental machinery of change that they actually were.
- Inaccurate estimates for project scope can hold back progress and cause
delays at crucial points along the cycle of implementation when the scope
expands. In one project, for example, the original scope planned for 11
systems/interfaces, 9 conversions, and no enhancements or custom reports.
When reality hit, the team found the project required more than 40
systems/interfaces, 9 conversion, 6 enhancements, and 5 custom reports. This
change in scope added more than 12 months to the implementation cycle.
- The organizational culture can affect the duration of an implementation.
For example, if the organizational culture takes pride in individual
competence and capability, problem solving in the field, and creativity in
getting a job done - then implementations can take longer. The reason: such
an emphasis on individual competence - and in some cases, individual team
competence - impedes progress. As a team or an individual tries to solve a
problem independently, time is wasted, and when the call for help finally
goes out, the problem is often greater than it first appeared.
- Many large corporations and organizations treat IT implementations as
technical projects, requiring technical skills to implement - and forget the
need to establish business goals. In one recent implementation, for example,
emphasizing the technical aspects of the system blinded the teams to the
need for cross-team collaboration. More important, because management did
not completely articulate the power of the new, integrated information, team
members became distracted putting out other "fires" and management missed
the opportunity to use the advent of enhanced functionality as a motivator
to push the teams into greater levels of productivity in implementing the
system. The implementation dragged on for more than two years.
- Organizational leaders, untrained in the specific capabilities or
challenges of an ERP environment, often find it difficult to make critical
operational and functional decisions, even when committed to the larger
goals. Decisions are eventually made, but too slowly, often bringing
progress to a standstill.
- Implementation consultants who do not adequately attempt to understand
or work within the organization's culture can actually hinder progress. Some
consultants seem ready to lengthen the process of implementation, instead of
creating the climate for change necessary to accelerate the process of
implementation and increase productivity.
- When the project managers in charge of IT projects are technical
managers whose capabilities focus on the workings of IT systems, the needs
of the end user can be neglected. Without a team that combines both points
of view (the user and the technician), large implementations often fail to
achieve the functional and technical goals set for them.
- Many organizations do not see the point or necessity of achieving - and
communicating - quick wins that showcase the benefits that the system would
bring, even though doing this has long been considered a best practice.
Again, the organization's "can do" culture works against the need to "sell"
the system; teams are expected to appreciate the system's potential
innately, simply because that is their job.
- Especially when a company's new projects number in the thousands, the
executive leadership becomes concerned that key issues and capabilities are
being forgotten - resulting in micromanaging. Consequently, the
implementations suffer from second guessing and rework.
- Despite encouraging collaboration among IT projects, sometimes program
offices neither fund nor implement configurations already completed by
another program office. Instead, organizational project management often
tries to control integration among its divisions or to adopt standards,
which is done without seeking collaboration from other project managers.
This can result in an IT project jam, especially if no thought is given to
creating an "extended organizational team" to help solve specific problems
is or including anyone else in the process of implementing changes.
- The organization develops a structured program to leverage vendor
expertise or capabilities, but the emphasis is off-base. The organization
spends most of its efforts driving custom vendor modifications, not
leveraging the vendor's expertise to increase the productivity of
implementation efforts.
- Executives underestimate the difficulty and complexity of the data
migration and conversion necessary to implement an SAP system. Organizations
often do not establish interim project managers to oversee the data
conversion process, or recognize the difficulty of migrating data into the
new systems, resulting in missed deadlines and cost overruns.
- The development of interfaces takes too much time and effort, and create
productivity problems in reaching the milestones envisioned for the
projects. Too often, planners only evaluate the potential for interfaces at
the highest system level. If developers do not also consider each of the
transactional levels, they may well add weeks of delay when the need for
transactional interfaces comes as a surprise.
- The importance of end-user training is underestimated. Organizations
most often do not train core teams of end users in the intricacies of the
new solution before the start of the project, and almost never involve these
end users throughout the implementation.
- Systems are implemented without first instituting process redesign. When
the product team attempts to rework the system to accommodate existing
processes, rather than first redesigning those processes, little is
accomplished in terms of real organizational change. This practice takes up
too much time with unproductive activity and cuts down on accomplishing
productivity goals.
What Specific Best-Practice Tactics Can Companies Use To Make Current And
Future Implementations More Effective?
- Overwhelming evidence from implementations within large global
enterprises proves that success starts with senior executive sponsorship and
buy-in, followed by active participation in creating the vision and in
overseeing a flawless execution. Experience has shown that ensuring
organizational acceptance of the ERP implementation is paramount for
achieving the business goals set for it. As a result, senior executives must
participate from the beginning in setting the goals and communicating the
importance of the implementation from executive suite to shop floor.
Throughout the process, there are too many decisions to be made, too many
challenges to be met, for senior executives to opt out of the process
- In the same way, the decision-making/ governance process must be clearly
defined and include all key stakeholders. Again, the key objective is
organizational acceptance. If the process owners are involved in decision
making and help design the goals for their own process, for example, they'll
have a much stronger stake in the project's success.
- A well-constructed business case quantifying the specific process
improvements necessary to achieve long-term goals is an important
ingredient. When an organization starts with a specific goal, the program is
far more likely to succeed. And when a large corporate transformation is the
ultimate goal, specific business-based objectives need to be cascaded to
each of the ongoing implementations. In that way, the connection between
these objectives and the broader goals supporting the overall transformation
are most clearly articulated. All actions and decisions around
organizational implementations should be measured by how they will help the
company achieve its vision
- Best practice indicates that implementations should be pursued
according to an extremely aggressive implementation schedule that is
accelerated at every opportunity. Such aggressive scheduling is important
for two reasons. First, it helps assure organizational buy in and
acceptance. Second, problems that crop up are more likely to be solved in
real time instead of going undetected as attention turns elsewhere.
- For implementations to work, the end user must know he will benefit
from the specific capabilities of the solution from day one - through
training, for example, or a familiar user interface. Research has shown
that implementations are far more likely to achieve their goals when
end users are given the proper training to master the new solution at the
start of the implementation. Those that involve the end user, even to
the point of helping to design the goals for process improvement, have a
greater chance of succeeding.
- Including end users from the beginning of
the project provides the best approach to achieving their buy-in and
cooperation. This can be achieved in many ways. One very effective
tactic is for senior management to designate end-user champions or
"super-users" who can clearly articulate user needs, assist in
blueprinting, and explain the benefits of the new system to peers.
- An
Enterprise-wide program management office (PMO) can coordinate across
divisions and implementations. The PMO must support and manage the
implementation of configurations already accomplished as well as those
to come, providing the leadership and direction necessary to develop the
business case and quantifying the specific process improvements that
must be made. An Enterprise-wide PMO will help make the myriad of
decisions necessary along the way and help organizations avoid past
mistakes.
- The Enterprise-wide PMO will provide the streamlined
governance necessary to rapidly respond to issues, document the
response, and make certain that issues do not escalate beyond the
boundaries of the area in which they are first observed. The PMO must
have the responsibility and authority to make decisions that will be
supported by the rest of the organization. The Enterprise-wide PMO can
develop a single integrated work plan, critical-path focus, and better
scope management. It can wield the decision-making power necessary to
eliminate inefficient practices, and provide the impetus to rapidly
respond to problems, document issues and their resolution, and monitor
implementation progress.
- Before the implementation begins, it is
important to remove organizational roadblocks such as a culture that is
more adept at "flying under the radar" or an IT community content with
the status quo. Once again, the Enterprise-wide PMO can help change
culture by communicating the need for change from the start - and
continuing to update the organization on the types of change that are
needed. In the case of one global organization, for example, the SAP
implementation was not going well; once the company set up a centralized
office in charge of making decisions and determining the right
procedures for the implementation, the implementation went smoothly, and
the project was able to achieve the business goals set for it.
- A
life-cycle approach to the solution will help remove organizational
impediments, as the solution is allowed to evolve naturally.
Implementation of SAP with a lifecycle approach (from inception through
support) helps guarantee success. The most important phases with a
life-cycle approach from inception of the life cycle from a value
realization perspective are the initial phases - requirements
gathering/business case development and solution design.
- Solution
vendors must be part of the process from the beginning and their
capabilities leveraged to meet productive needs. While independent
systems integrators are absolutely necessary, they are sometimes
motivated by maximizing time and materials, which is not necessarily
conducive to a quick and effective implementation. With SAP Consulting
on board, specialists in SAP software provide thought leadership on
product design and in developing an implementation plan that provides
a precise road map for success, including the creation of interim
milestones, and the potential for interim victories, which helps
create virtuous process.
- Process change must begin before the ERP
implementation and continue throughout implementation as an integral part
of configuration. All successful implementations begin with a business
case that quantifies the precise areas for process improvement - and
then sets up a tracking mechanism to make certain quick wins are
identified. In successful implementation, for example, the company
standardized business processes, applications, and the data center before
proceeding with the implementation.
- Regular strategic meetings
should be held to review the achievement of benefits and other goals
and ensure alignment between the end user and the implementation. All
involved parties must be represented to understand what is required (end
users, implementers, and software vendor). Once the goals for process
improvement are articulated, they must be monitored and refined
throughout the implementation.
- If one of the goals for the implementation
is the elimination of legacy systems, it is imperative to plan for it
via a systems realignment and closure process. Such a plan will help
determine the most appropriate way to integrate the new system with the
old, enhancing the capabilities of the legacy systems without ripping
them out.
- It is important to get the right people involved in design
and test and to make certain that key process owners "own" the
solution. In the process of developing the business case, the process
owners must identify the key areas where improvement is necessary. In
that way, the organization guarantees that the users who will benefit
from the solution actually help design the system implementation and
"own" the results from the start of the project.
- Organizational
alignment and stability create smooth implementation. When the
business case articulates key areas of process improvement, it goes a
long way toward creating the organizational buy-in necessary for the
changes that must occur. In that way, the organization anticipates and
prepares for change, and is not disrupted by it. Organizational
disruption creates difficulties for the team implementing the system.
- Successful implementations always include direct access to senior
decision makers by IT project managers. Senior management commitment
is the only thing that is universally understood and accepted as an
imperative for successful IT implementations.
- Senior level management
must have a clear understanding of the discipline required for an
integrated system. Too often, senior executive leadership participates in
the strategic discussions leading up to an implementation but do not
keep the implementation of the new IT system on their radar screen
throughout the project. Certainly, they know and care about the
strategic goals for such systems. But once the decision to invest is
made, too often they move on to other important problem, and hand over
complete responsibility to the CIO or IT project manager. Senior
executives must realize that a large ERP implementation is a
major transformation project, which will change the way an
organization thinks and acts about a certain process. As a result, they
must involve a team of senior management, functional and technological
experts to resolve issues in real time and make the right decisions along
the way, always considering the long-term strategic impact. When
senior executives recognize the difficulty of implementations, they
provide the leadership and resources necessary to make them work.
- The learning curve is the life of the system; overtraining is impossible.
Research and experience proves that training the users of the system -
before they must use it - is essential. Each ERP implementation
establishes a foundation for the future - and as such, changes and
evolution are a natural offshoot. To be prepared for change, users must
start with a solid understanding of how to use the new technology, and
the organization must expect to provide top-notch training before,
during, and after every implementation or upgrade.
- Using a proven implementation methodology is the best way to keep the
project on track. A proven methodology is the
wisest course of action, using tools and techniques that have demonstrated
their effectiveness over countless other profitable implementations. The
SAP methodology begins with a business case development and transitions
into system design, and is carried out by experts with solid experience in
large, complex projects.
Conclusion
"Participation" is probably the best way to summarize the prescription for a
successful ERP implementation. In short, everyone must play a role. Lessons
learned after countless implementations point to the crucial part that executive
leaders must play in setting goals and properly funding the project, the
importance of stakeholder involvement, the necessity of end-user buy-in, and the
key contributions to be gained through the expertise of the solution vendor.
While the far-reaching impact and long-term value of this type of organizational
transformation is undisputed, the journey is not to be embarked upon lightly.
Making sure that everyone is on the same path - and understands the rewards of
reaching the destination - is the best way to get there