Prospective ERP customers are often fascinated by ERP failures, and they want to hear about the lessons from ERP failures but quite often they don’t spend enough time looking at how failures can be avoided and what things can be done to mitigate risk in ERP implementations. We are going to discuss things that are critical to ensure that you avoid ERP failure in your digital transformation initiatives. We get into the details of ERP failures in change management by taking a hybrid kind of approach. We will focus on the success factors of ERP but we also talk about the things that cause companies to fail. We will explore the things you can do differently to avoid becoming one of the casualties in the ERP list of failures.
The one thing that we have learned in our experience as project recovery consultants and expert witnesses in general implementation is that ERP failures are not a coincidence. They don’t just happen to organizations at random and for obscure reasons. It’s usually for the same set of reasons or at least a very similar pattern of reasons that cause projects to fail. We outline the big takeaways from failures that we have witnessed, and the ERP implementation projects that we have worked on.
The biggest thing that companies do wrong in their implementations when they fail, is that they do not adequately manage or identify or foresee the potential risk. When the risks are present, they do not see their presence and expect them to not occur. These risks are most often damaging and disrupt the organization. Bringing us to the number one underlying theme that we see with the ERP failures: inadequate risk management.
A majority of organizations that we have surveyed and worked with identified that they went over budget and took too much time to implement their ERP systems. About 50% of organizations had trouble at the time of go-live with operational risk and material operational risk i.e., they couldn’t ship the products or close the books, etc. We must define what risk and failure are to us and how can we mitigate those failures.
The first thing we need to think about as we go through ERP implementation is, and this may sound a little counterintuitive to the objectives of ERP implementation, is to stop focusing on avoiding failure.
Consider this analogy: In sports, teams that typically win with a good defense strategy as opposed to a good offense strategy have different outcomes altogether. It is pretty rare to see teams winning only with defense strategies as they cannot score enough to win without incorporating offensive strategies.
It’s the same with ERP implementations i.e. If we are just focused on not failing, we’re still going to fail because we’re not focused on the things that are going to make us successful. Therefore, the first thing is to curb the mindset of only focusing on mitigating risk, avoiding failure, and only focusing on setting the bar so low that we are going to fall well short of the possibilities of this project. It is therefore vital and advisable to add offense to that defensive mix and we shall discuss briefly here, different ways that we can add offense to the mix.
The second thing is organizational change management that companies do not focus on. The organizational either fails to understand its criticalities or falls well short of executing.
Within organizational change management, executive alignment is at the crux of it all. i.e. making sure that the top level executives are aligned with strategic change management items like the vision, goals and objectives of the project. It is vital to understand that the change management impacts understanding how much people need change and must also change to adapt to the new systems. It is important to make employees understand that their very jobs are going to change with redefinition of roles and active training that communicates the objectives with clarity. This is at the very core of fundamentals of change management.
Another part of it is just executing a comprehensive change management plan and too often companies think of change management as just training employees well. The plan should factor in low-hanging fruits that are also high priority, like training and communication as they impacts the overall stakeholder assessment, stakeholder analysis, and their alignment in a crucial sense.
We have yet to meet an executive who said that they invested too much or even enough in their organizational change management efforts. Even for the more successful projects we’ve been involved with there’s still an underlying feeling that they could have done more to make the project more successful from effective change management. Change management is possibly going to be a lot harder than one can think and hence, planning well and thoroughly for change is at the center of ERP implementation success.
Once we have identified a risk that we haven’t pursued or a risk that we haven’t addressed, that gives us an offensive strategy to get ahead of it, to start to remediate and improve. In benefits realization, we aim to extract the best value out of the implementation. Instead of setting the bar low and only attempting the “let us not fail” strategy, “let’s not fail, but also, let’s make sure that we get as much as we can out of this investment”. With massive investment in time, money and effort at stake, ERP implementation must avoid failure as well as embrace risk, to set businesses up for success.