Wednesday, 3 July 2019

Who has heard of ERP Strategy?


In my work as a consultant I am often asked to help devise strategy for businesses. Particularly the development of an ERP strategy to support the overall, business strategy. As regular readers of my newsletter will know, I believe one of the key reasons for ERP failure is the lack of alignment of the implementation project to the corporate strategy. 

Companies often undertake these projects with the wrong WHY. A common mistake I find is that many executives don't see these projects through a strategic lens, they see them as simply an IT project. This mindset results in insufficient effort being undertaken up front to clarify the business case for the project often resulting in the fact the underlying principles required to ensure a successful project are not considered or put in place.  In many cases, projects are undertaken because the current version of the software is no longer supported. This is particularly relevant now with the advent of cloud platforms and software vendors pushing customers onto their new subscription based platforms and business models.
A key challenge when running strategy development sessions is keeping executives focused on the distinction between strategy and tactics. All too often discussions in strategy development sessions runs off on tangents and generally these tangents are a deep dive into tactics. 

For example: the strategy might be to broaden the market in which the company will compete only for the discussion to turn into one of whether the company can deliver to those markets, whether a new manufacturing plant will be needed etc. I often find myself reminding the group of the distinction between strategy and tactics. In simple terms strategy looks at “Where” the company will be in 5 - 10 years (or whatever strategic horizon you work with). Tactics look at “How” we get there. The transportation network or manufacturing plant required discussions are tactics not strategy.

As a result, ERP is often dropped into the tactics bucket because a new system will help the company
develop the efficiencies required to service the new target markets, help produce the new products to be released or support the new competitive advantage the company is taking to market.

But within that, there is a strategic view or lens one can apply to ERP as well. This strategic view is often tagged with the new buzzword, digital transformation, and can encompass the use of AI, and other new technologies. This new technology certainly opens up new conversations around where the company wants to be in relation to customer service and operations. It opens up new opportunities for strategic thinking.

For those companies thinking of updating, upgrading or replacing their systems I believe a slight pause is called for, before you reach out to any software providers including your current provider, in order for you to undertake the following tasks first:

  • Undertake a strategic review of your digital positioning including the role ERP plays.
  • Have a robust discussion around how ERP supports the broader company strategy.
  • Undertake a detailed and disciplined business case review and clearly articulate why the company needs to change systems.
True independent advice can assist here by providing:
  • An honest and independent point of view, free of corporate political pressure.
  • Proven capability of facilitating the conversations needed to achieve the right result.
  • A proven methodology for success with ERP.
  • Support to executives so their risk is minimised.
The biggest challenge I have working as that independent advisor is getting involved in the conversation early enough. My experience is many of the biggest and most impactful mistakes are actually made in this early phase. As such, remediating these situations and resetting expectations amongst the key executive team is more painful than it needs to be. The earlier the right conversations are held, the better. I strongly urge you if you are being told by your software vendor you need to migrate to the cloud version, then you need to start these conversations now - before you engage with software vendors.

This is something I can help with, so if you or anyone you know is looking;
  • To improve the way their business operates;
  • To improve the way they leverage their current system;
  • To replace their current system;
give me a call for a confidential discussion on the best way to achieve this.

Until next month ...

Sincerely,

David

P.S. A big thank you for those readers who reached out to me this month to check in with me on the passing of my wonderful mum. Your efforts and thoughts were much appreciated.

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