August 07, 2019

Is Your ERP Strategy Obtainable?

Michael Sizemore
CEO and Managing Partner/Peak Cybernetics

Share This Post

Is your ERP Strategy Obtainable?

 

We help companies select and implement ERP software and each has unique needs and requirements. Some are looking for more of a strategic and complete digital transformation, while others are looking for a shorter-term effective fix. Some are looking for ways to standardize operations and drive business improvements, while others are simply trying to replace their outdated legacy systems.

 

Some companies are laser-focused because they are driven to accelerate growth and profitability, while others are displeased with their incumbent ERP solution, or are wanting to make a move to the Cloud. Every company’s needs and motivations are uniquely interesting and time-sensitive.

 

Below are some key things we commonly see companies seeking in their ERP systems and implementations:

 

Knowledge Transfer and User Adoption Success

 

Most ERP projects are filled with promises of software knowledge transfer from the consultants to the client. Yet once a project is over, in many cases, the client is clueless when it comes to making software configuration changes and may even struggle with performing basic transactions in the system.

 

In spite of all the lip service given to knowledge transfer, the problem is there never was a real strategy to make it more than just a pipe dream. When push comes to shove this once important concept of learning suddenly becomes something we worry about later (and of course, it never happens). This is similar to consultants building a spaceship to get you to Mars with the understanding we will not plan the return trip until after you get there. In other words, there are business consequences for assuming software knowledge will somehow automatically cross-pollinate.

 

Knowledge transfer is not a one-time event, but a project management “thread” that runs throughout the project cycle. It requires a strategy and attention to the execution. In other words, the consultants and the internal team must be managed with the objective of knowledge transfer and user adoption in mind.

 

Low tolerance for implementation time and cost overruns

 

The expectations of ERP’s impact on organizations are enormous, as well as the sum of investments involved. No executive likes to see an implementation take too much time, money or resources. They tend to have a very low tolerance for software customization, overly complicated software functionality, poor project management and other things impacting implementation time, cost and risk. Almost to a fault, they want to make sure their ERP investments are maximized and not distracted by what they perceive to be superfluous project activities or costs.

 

According to some industry specialists, extensive investments in information technology has failed to produce all of its transformation potentials, nor have they generated significant financial returns. The idea that complex problems can be rapidly resolved by investing in sophisticated machinery is quite seductive. However, at the heart of such notion lies an almost irrational belief that technology in general and information technology particularly will provide a cure for all evils. Therefore, time and cost overruns exacerbate the issue and decrease any chance for a potential financial return on investment.

 

Higher likelihood of opting out of “big” ERP Consulting Firms

 

Because of the lower tolerances for cost, time and risk overruns, companies are more likely to push for alternatives to “big” ERP Consulting Firms. While plenty of large, Fortune 5000 companies use these firms, most smaller companies are more likely to explore ways to get more bang for their buck at a lower cost point.

 

One common school of thought is the new system may be a shorter-term (but credible) enhancement until they sell the company to an acquirer, so they don’t want to spend too much time or money on a larger or more complex system. This often leads them to a niche consulting firm or smaller firm rather than one of the more common “big” names.  

 

Scalability of business processes and credible reporting

 

A primary focus is often to ensure their investment in new ERP systems can help scale for aggressive growth. This means they are more likely to stomp out inefficient processes, automate as much as they can and build a business process and technology framework that aligns. Delays or inefficiencies can directly impact profitability and momentum. This is where shared services models, common business practice, optimized business processes and other drivers of scale and precision are particularly appreciated.

 

Operating and reporting enhancements are another driver, such as credibly being able to report, capture and manage key performance indicators. This is an important tool for leadership to measure value, progress and predict cash flows.

 

The most sophisticated companies also recognize that managing organizational change management (OCM) will be a key enabler and driver of scalability and growth. A trend is to use the functionality the software provides, so the people and business processes must adapt to the new system and not vice versa. This reduces costly customizations and recognizes the impact on the people side (think business culture change). Experienced ERP consulting firms and Project Leadership offer detailed roadmap OCM solutions that can be incorporated with any ERP implementation.

 

Why is this important?

 

Many public and private companies are acquiring other companies with the intention of integrating them profitably, can learn from this post, as this information applies to multiple scenarios and company structures, including Private Equity (PE) Firms. The ability to achieve higher returns from your ERP investment or accelerate growth could benefit all types of organizations. Bottom line, underlying most successful enterprises is an effective, modern ERP system, successful implementations, and high user adoption rates, that can support the goal of the organization while maximizing resources. PE companies have opportunistically realized they can usually sell a company for a greater premium or valuation when equipped with an effective ERP system.

 

PE firms have a compelling reputation of a successful buy-to-sell focus that must yield superior financial results. This tends to focus them solely on running their businesses and portfolios, while strategically using outside experienced ERP consultants to help do the heavy lifting when it comes to changing or enhancing systems. This begs the question; is your ERP strategy obtainable? Why would you try to do this yourself without a core competency in ERP excellence?

 

Whether you have an ERP strategy or not, let’s talk about how Peak Cybernetics can help you realize this strategy successfully. If you don’t oversee your company’s ERP strategy would you be willing to recommend Peak Cybernetics to a friend or colleague that we could help?

 

Michael Sizemore

Peak Cybernetics, LLC

“It is easier to do a job right than to explain why you didn’t." (Van Buren)

Share This Post