The prevailing standards of implementing ERPs have inherent flaws that prevent companies from achieving new growth. The forefront of the new generation of ERP renewals is business-centricity, where the system is designed for enabling the company’s future business growth.
Failed ERP reforms are like birth stories of the business world: everyone has heard of the dramatic examples of unsuccessful system renewals that don’t lack drama. They take a long time, cost a lot, and tie up key personnel for years while resulting to a system that merely ensures business continuity.
The current way of planning and implementing ERP renewals simply does not work. According to research company Gartner, as many as 70 percent of ERP projects do not achieve their business objectives. A quarter fail catastrophically.
Poorly executed ERP renewals are slowing down economic development
While the ERP horror stories have a tendency to spread fast, we have a bigger problem at hand. It is the silent mass of poorly implemented ERPs. You know: The ones that drain companies of focus and money. The ones that exhaust the best people. The ones that somehow slip overnight into a gigantic IT and technology project.
According to Gartner, Finnish companies spend 10 billion euros annually on ERP projects. What if an increasing portion of this budget were instead used to lay the groundwork for future competitive advantage and customer value, rather than just ensuring continuity, such as functional financial management?
Smooth, progressive, inspiring – this is what the new generation of ERP transformation looks like
If the existing way doesn’t work, it’s time to re-invent.
The forefront of the new generation of ERP reforms is business-centricity aimed at future growth. These ERP systems are comprehensively designed from the perspective of the company’s changing needs and scalable future growth.
The project simultaneously ensures the company’s continuity and future. In practice, the financial ERP is swiftly put in order with minimal customisation. The largest investments are placed in practices and systems that enable building a competitive advantage, creating customer value, and thereby achieving profitable growth.
How to design an ERP renewal that addresses the future business needs?
The key is to identify and manage these strategic questions:
- How are our business and markets evolving in the future?
- What requirements does this development bring to our business model?
- What will customers expect from us in the future?
- …and ensure that the planned processes and systems adapt to these needs.
In practice, the ERP entity is built on three parts: financial ERP, competitive advantage ERP, and value creation ERP. The central role in the reform is the management of the entity from a business perspective, data, and people.
Upper management and the board hold a significant role in making or breaking the ERP renewal
In an interview with Kauppalehti, I discussed ERP reforms with Kalle Sipilä, Director of Equipment Business at Normet. In the interview we talk about how to successfully complete a demanding enterprise resource planning (ERP) project and deliver the desired competitive advantage.
Our shared observations relate to recognising the crucial role of leadership and the board, as well as wise criticality and foresight:
- Leadership and the board must have a clear understanding of what the ERP should deliver to the organisation and then guide the project towards those goals.
Business continuity is a hygiene factor: it is simply not sufficient or acceptable for a multi-million euro, years-long project to leave behind only business continuity. The everyday operations must include new, value-creating, and improved processes. I.e., something must change for the better.
A truly successful ERP project helps the organisation propel itself towards scalable future growth. It is essential that leadership and the board do not outsource the responsibility for managing and renewing the entity to the IT department or a technology provider.
- This brings us to the idea of cut-throat wisdow – which also is a leadership issue.
It is difficult to save an ERP project that has already gone off track. At the same time, forcing an ERP project that has gone astray to completion is not a good solution either. So, what to do?
If the ERP project has encountered difficulties, there must be the courage to call a halt and, if necessary, even start over. In ERP transformations, path dependencies are dangerous and must be proactively monitored.
- Money does not grow on trees, but an under-budgeted ERP is an investment too heavy to finance
Our observation is that ERPs are often under-budgeted, while their schedules are overly optimistic. Not the ideal combo.
A poorly executed ERP project is like a sponge. It absorbs everything that falls under it: people’s enthusiasm, energy, and creativity. The allocated budget, slightly over it, and also the euros reserved for development activities.
So, see your ERP problems from afar and focus on the benefits gained from the ERP rather than its price tag: allocate a sufficient budget, start early, involve people, and focus on competitive advantage and value creation in addition to continuity. These are all critical success factors – and also those whose inadequate addressing in a moving ERP train is difficult, even impossible.
What if renewing your ERP system didn’t have to be a long and expensive project that drains your organisation’s ability to innovate and adapt?
Gofore Future Business Core offers a new way to lead the renewal of core business processes and systems: the majority of the investment is directed towards solutions that enable future competitive advantage and support the creation of customer value.
