Technology project executions rank high on CFOs’ most worrisome risks and enterprise resource planning system (ERP) projects are among them. Surveys regularly show that a significant number of strategic ERP projects fail to deliver expected outcomes, are delayed, and exceed budgets by a long shot. While most companies avoid catastrophic ERP failures, only a few wring out the most value. For top management, failing to deliver a strategic priority is rarely an option. Given a mature ERP solutions market place and mostly competent ERP installers, why do organizations frequently stumble?

1. SOLUTIONSTHINK DIFFERENT SERIES ERP 1
Our THINK DIFFERENT™ series focuses on key issues that top management of midmarket sized organizations encounter.
Solutions Beyond Numbers
Beating the ERP Implementation Odds
Pradeep Shakespeare, December 19, 2016
Technology project executions rank high on CFOs’ most worrisome risks1
and enterprise resource planning system (ERP) projects are among them.
Surveys regularly show that a significant number of strategic ERP projects
fail to deliver expected outcomes, are delayed and exceed budgets by a
long shot. While most companies avoid catastrophic ERP failures, only a
few wring out the most value. For top management, failing to deliver a
strategic priority is rarely an option. Given a mature ERP solutions market
place and mostly competent ERP installers, why do organizations
frequently stumble?
ERP issues are seldom due to inferior software; issues stem from degrees
of inattention to four integral activities, which results in costly and painful
rework: 1) Develop a clear vision, 2) Manage project outcomes, 3) Re-
align processes, and 4) Manage change – including political, emotional,
and user centric dimensions.
ERP systems are multi-faceted and complex to implement, given the
potential for integrating 10-20 business functions within an organization.
There are many decisions to make, from software selection, appointing
system integrators, forming an implementation team and structures,
among others. What can CFOs of midsized organizations do to ensure
project success? We, at Solutionsthink, offer an outcome-based approach:
Develop a clear vision – We believe an ERP
implementation should be handled as any other strategic
priority. Too often companies focus on the efficiency aspect
of an ERP implementation, without setting aspirational targets (for
example, establishing a scalable ERP system that can be deployed rapidly
when a new subsidiary is formed, or to unlock information from multiple
system silos). Whether management is considering replacing a legacy
system or an assortment of disparate systems, or installing a long overdue
software upgrade, the starting point is a high-level vision statement. The
vision statement is a board ready document, which is authored by the c-
suite with input from significant stakeholders. The vision statement
identifies and defines a few critical ERP objectives that will lead to a
number of favourable (and measurable) outcomes and challenges that it
will overcome. It is not necessary to provide full clarity on how it will be
achieved at this stage. Take the time to define these needs.
Next, challenge key stakeholders (including operations, finance, IT), those
that have the institutional knowledge, to expand and develop the value
statement into a set of explicit features2, immutable benefits and
outcomes. Encourage transformative change and fresh thinking over
incremental change – disregard attitudes that favour status quo and/or
indifference. This is not an easy exercise by any means but bypassing
these steps will lead to compromises later and a mediocre ERP delivery.
Involve ERP software vendors and system integrators, discuss and
shortlist potential ERP systems for further research. Once a software
package is selected, reference agreed upon outcomes, benefits and
targets in contractual agreements with the software vendor and the
system integrator (and include reciprocal client obligations). Negotiate
payment terms on achieving indisputable KPIs. Also, involve key
stakeholders and users by assigning responsibility owners for each
quantifiable benefit and outcome and hold them accountable – even if they
are hundreds of them.
Manage project outcomes – Managing an ERP
project is complex, due to its size and scale, as perhaps being
the largest initiative a midmarket sized organization may take –
involving multiple internal and external groups. Project success can mean
different things to different groups: the client, the software vendor, and the
system integrator. If these groups do not align their goals at the outset,
and fail to follow a coordinated and mutually beneficial approach, conflicts
of interests can arise and dilute expected outcomes3.
Software vendors and system integrators have a strong relationship,
stronger than their individual relationships with the client – resulting in an
asymmetry of information, which can set the client at a disadvantage.
Software vendors can help by expanding the dialogue with clients and
identifying superior alternatives that address the client’s planned business
outcomes, before meeting their sales quota. Equally, clients are best
positioned to confirm the system integrator’s understanding of the
organization and gauge if the project requirements are defined well.
Ability to ask difficult questions of top management and line managers and
having ‘healthy’ discussions and hammering out solutions, are key for
third party consultants for gaining respect quickly and establishing
requirements correctly. Consultants that work as peers rather than
vendors of clients, and are included in the project’s direction, better
imagine the big picture and generate solutions that fit.
ERP vendors and integrators are still not feeling the might of dissatisfied
clients that are dealing with business disruptions and associated costs of
bringing recently installed software up to grade. Typically, we encounter
project schedules with insufficient controls over readiness testing and
coverage of core systems – over routine events such as shipping goods,
issuing a cheque or emailing a customer invoice and many more. These
omissions can lead to interruptions in business operations, dent credibility
with trading partners, and if left for too long, erode working capital. If
these execution risks are not anticipated, expect emergency project
consulting for customizing business forms, report writing, outputs,
workflow, load balancing or you-name-it, to add to the project cost.
Re-align processes – Midsized companies can
consist of multiple entities that offer different products and
services and operate in multiple geographies. The core set of
"Twenty five or more years after ERP solutions entered the applications market, many ERP projects are still compromised in time, cost and more insidiously
in business outcomes," says Gartner, a leading information technology research and advisory company. "Organizations need to resist the temptation to
succumb to pressure from business leaders to get started before the enterprise is really ready (and without a business-agreed ERP strategy). Business
leaders must understand what it will take to ensure success. The blame for this, however, does not lie solely with end-user organizations that lack the
experience and expertise to avoid many of the pitfalls. System integrator (SI) and ERP vendors have to be accountable to their customers in this respect."
Press release, March 2, 2016

2. Beating the ERP Implementation Odds | SOLUTIONSTHINK DIFFERENT SERIES | ERP 2
Solutions Beyond Numbers
business processes of midsized companies are often equally complex and
resemble that of large companies. A good ERP implementation
emphasizes on the core set of business processes while also delivering a
sufficient approach to non-core processes.
Frequently, the ERP software purchase is motivated by discounted base
licenses rather than the suitability of a given ERP for achieving
management’s goals. Software architecture that is mismatched with
management’s intent can limit opportunities for optimizing business
processes. For example, some multi entity clients prefer a federated
approach by giving each entity its own ERP instance where autonomy and
independence are preferred; others install a single ERP instance to
support multiple entities and benefit from lower cost through standardized
business processes and IT support costs – not all ERP architecture can
handle both approaches.
Too often, business requirement gathering is limited to a group of users in
a boardroom setting, responding to questions from a questionnaire. This
approach foregoes valuable context and detail that are gained by
interviewing users in their own work environments and observing team
interactions, workflow and use of ancillary tools. Digging deeper than the
boardroom ‘tick the box’ exercise tends to reveal more opportunities for
automating processes across functions, and preserving unique processes
that provide a competitive edge; it also sparks creativity.
Benefits of process alignment and automation via a well-chosen ERP
system are many. Frequently missed opportunities to exploit key features
after an expensive ERP install include: a) continued reliance on monster
spreadsheet silos for significant accounting (e.g. revenue recognition,
fixed assets and equipment leases), b) not automating the 3-way match of
purchase orders, goods received and supplier invoices, c) not automating
inter/intra entity transactions, d) currency exchange/translation logic
mismatch with accounting rules, e) failing to speed up the financial close
cycle and the consolidation of results, and f) ignoring multi-entity planning
and forecasting, and g) ignoring automated controls included in the ERP.
Manage change – Any transformative change
initiative requires unwavering commitment and tone set by the
c-suite. Top management support for desired ERP attributes
should be continuous throughout the implementation, and be in plain
sight. A collaboratively written value statement and a competent
implementation team isn’t enough; It also means preparing the
organization for consultants to work quickly and setting up suitable
structures for training (e.g. arranging assistance for users being trained,
and avoiding work pileup in their ‘day jobs’). It also means monitoring
outcomes and benefits with military-like precision and acting decisively
when unplanned events occur. For changes to be sustainable invest in
tools for preserving key learning after the consultants depart. Also, invest
in on-going support, and a maintenance plan with reputable third parties,
and stay current on critical ERP software updates.
We realize that the leadership and governance efforts we are describing lie
with the CFO, the CIO and their appointed project leader, rather than,
through an ERP implementation committee and a program-management
office. Results are greater when top management are connected directly
to the front line and truly understand their perspectives and frustrations.
When clients wait until the ‘conference room simulation’ (i.e. a practice run
of the ERP system), to realize that the ERP as configured is too basic or is
laden with poorly migrated data), it is often too late to course correct.
There is no recipe for the perfect ERP install, but ERP teams that
underestimate people centric issues, create significant project execution
risks: it is better to address the ‘what’s in it for me’ more than mandating
compliance, promote people based on capability and not their current
position, and setup bonus structures that reward line managers and end
users for over delivery.
Achieving maximum gain – Despite panoply of
sophisticated ERP packages and mostly competent system
integrators implementing them, business benefits of installed
ERPs are underwhelming. Project teams struggle with transformative
change due to many constraints, not just tight timelines and budgets.
These constraints lead to a series of small yet sub-optimal decisions,
rather than a single one that dilutes benefits; for the unfortunate few,
these decisions accumulate and create headline grabbing business
consequences after the implementation. If instead, organizations
recognize dissimilar motivations of different project stakeholders and
target mutual benefits, they are charting the course for success. Senior
leadership should go beyond setting the tone for the project, and be
advocates for the results they expect. Envisioning an end state and
assembling a great project team are a great start; and building structures
to communicate, remove roadblocks and ensuring outcomes actually
emerge, create a great finish. Motivating key users rather than
demanding compliance is a smarter play for ensuring alignment and timely
project execution. They need to alleviate people issues and ensure the
changes do not roll back. Neutral project leadership are pivotal for
achieving maximum gain across the organization. Organizations that
weave these approaches into their ERP projects avoid compromising on
speed, cost or business results. Instead, they can, and do, beat the odds
and achieve a successful ERP implementation.
Pradeep Shakespeare is the president of Solutionsthink, a neutral management consultancy based in Ontario, which helps clients with transformational change such as
ERP/specialty technology implementations, group financial close-consolidation-and-reporting, M&A integration, process re-engineering and IFRS adoption. He has more
than 20 years of experience in public and private companies, delivering strategic mandates such specialty software rollouts and customer facing technology. Pradeep is a
MBA, a Chartered Global Management Accountant (CGMA) and a Chartered Management Accountant (ACMA). Pradeep can be reached at +1.905.609.4105 or
pshakespeare@solutionsthink.com
Endnotes
1 CFO Signals, Q3 2016, Deloitte CFO Program, September 2016.
2 Independent on-line tools are available that allow technology buyers to evaluate and
2 Independent on-line tools are available that allow technology buyers to evaluate and
short list ERP systems.
3 Exploring the Devil's Triangle, Michael Krigsman, ZDNet, September 7, 2009.
"The poor practices of the past and the associated excuses for suboptimal business outcomes won't hold water any longer. The focus of postmodern ERP
is on improved business agility and flexibility for example, through deployment of solutions and services that are better targeted at the business capabilities
and address other needs such as user experience," says Gartner. "It really is time that the significant investments enterprises make in ERP solutions reap
real benefits. ERP vendors and system integrators (SIs) must raise their game on implementation approaches, renovating and revisiting their own
implementation methodologies for speed and with greater emphasis on the benefits realization activities." Press release, March 2, 2016