Many Enterprise Resource Planning (ERP) installations fail to meet their objectives.Some take far longer than planned, some cost a lot more than planned, others don’t deliver the expected benefits and others don’t deliver the expected returns. Or a combination of these.
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The question is “why not?”
Is this a software problem? Is the architecture of ERP systems wrong? Do they straight jacket you into something you don’t want? Do organizations have unrealistic expectations? Is there deliberate sabotage that undermines the project? Are organizations so complex that a system like ERP is doomed to fail? Is there a lack of leadership? Is there a lack of management understanding and commitment?
It is clear that all projects are different. All companies are different. At different stages of development with different cultures and values. They are a hybrid of mission, politics and self-interests.
Are these the reasons why so many ERP projects fail?
Most business people would agree that employees, together with software and technology, are key elements of operational excellence and business success. Every aspect of growing business value requires exploiting the best available technology to support and automate improvement.
It seems simple. The basic functions of a business have not changed. From finding a customer to providing them with a service, or a manufactured product, to collecting the money. With these transactions recorded in a set of books.
For the majority of businesses that implement ERP the core modules are common. Some will have different degrees of importance and in some cases may not even be required.
Over time these core modules have been enhanced to meet more and more individual industry requirements. Not driven by the limitations or demands of the ERP software but by the needs of different types of organizations.
The history of ERP projects
In the 80’s during the early days of Material Requirements Planning (MRP) and Manufacturing Resource Planning MRP2 there were many arguments and disagreements about whether industry specific or generic systems was the way to go. Different industries believed that as they made different products, or provided different services, and that these differences required an industry specific system.
Questions were being asked, “how could a system that uses a simple object like a bicycle in the demonstration also be applicable in a vertical textile plant?”.
In textile manufacturing, there were no finite relationships. Yields varied. There were different elements of cost. The diehard technicians and industry buffs were firmly convinced that this type of industry definitely needed its own system.
Industry specific process control systems were hanging modules, like inventory control and simple planning, onto their already complex systems. “How would an MRP system manage these industry-specific process related issues?” Simply it couldn’t. That was not what it was designed to do.
Generic or industry specific systems
Against this argument of “uniqueness” was the generic argument. Supported by the financial systems analogy. Financial systems all had the same main elements and these worked for a wide variety of businesses.
The conclusion: at their core, companies that install ERP systems, have more in common than in difference. A generic manufacturing or service delivery system should work most times. And these days there are many industry specific systems available.
However, despite their functional and technological innovation over the last thirty or so years they still fail to deliver to expectations.
If it is not the system itself, then it must be the age old problem of poor company leadership? Deciding on a business intervention and then not leading it. Not clearly defining the objectives and not driving the installation.
So what are the solutions?
“Often the problem lies not with the ERP concept. But in the demand for quick fixes and rapid cures to underlying structural problems.” e-Business Roadmap for Success ~ Dr. Ravi Kalakota and Marcia Robinson
- Ensure that there is meaningful project leadership. The systems that the ERP system replaces already exist. Although usually in a hodge podge of legacy Excel or manual practices which are not integrated and provide inconsistent and often incorrect information.
- Limit lengthy consultations with people in the company who have limited knowledge. There should not be long discussions with departments or managers who “don’t get it.” Supply them with a best practice solution.
- Identify and eliminate any entrenched parochial interests. A strong business project leader should be able to recognize these and move them aside.
- Make the overall project timeline as short as possible. For example, if a proposed project implementation is 9 months the company’s response should be something like “what needs to be done to make the 9 months into 9 weeks?” Long implementations are just a lucrative source of income for consultants but the project loses momentum. People have their day jobs to do and when the project drags on and on they lose interest.
“The goal should not be to fail fast but to learn fast” ~ Ray Wang
- The project should be managed and run by a manager who understands business. Not by a technician or an IT consultant.
- The final installation should be out with old and in with the new. This will require defining clear accountabilities at the highest level in the organization. There should be one all-out effort to install. No parallel running of the live system as any concerns should have been resolved in the pilot. At this final stage all efforts should be concentrated on making the system fully operational as quickly as possible.
- Define clear accountability and responsibility for all elements of the system. There will be problems and issues to overcome. The root cause is not usually the system it’s the poor leadership.
“Good people can make a bad system work; bad people can’t make a good system work.” - The Reengineering Handbook ~ Raymond L. Manganelli and Mark M. Klein
- Appoint an “internal expert” who takes a key role and has the required authority in the development and implementation of the system.
Pick the right people and your ERP installation will successfully meet the expectations. The failures of ERP installations to deliver to expectations is a failure of the people, the planning and the implementation … not the software.