If you’re about to start an ERP selection project, there are two questions you need to answer. Firstly, why are you undertaking this project, and secondly, what are you hoping to achieve with the transformation? Of course, every project should have clarity on these points, but what should this look like for an ERP project?
Preparing for your ERP transformation project
Any system investment should support the business strategy, so the first topic to consider is where the business is going. Followed by analyzing the project growth profile for the company over the next three to five years. Will it be organic growth at a similar rate to recent performance, or is the pace likely to change? Are new acquisitions in the works, and what will this mean to the scale of the business?
Is the company expanding operations into new locations? The ability to scale and support users and operations in new locations is fundamental to any successful systems strategy. Failing to think ahead can lead to an inability to meet the organization’s performance expectations, unnecessarily complex applications landscape and infrastructure, and increased IT running costs.
Plans for diversification
Will the nature of goods and services stay the same or change? For manufacturers, this may mean the servitization of existing products. For service-based organizations, it could mean increasing the use of digital technologies to support customer interactions. For the enterprise, it could cover the changes involving insourcing or outsourcing activities.
Systems that are a perfect fit now may not be a good choice when assessed against the organization’s main activities in three, four, or five years.
Plans for organizational change
For organizations that have grown via merger or acquisition, the question of process harmonization is often on the agenda. Larger enterprises may seek opportunities to implement new centralized functions or shared services.
The change management implications of harmonized processes, centralized functions, or shared services need to be factored into the strategy. Cost savings resulting from restructuring or improved efficiencies may be a significant driver in their own right and often dictate deployment priorities.
The common theme here is ‘thinking ahead.’ Don’t get caught out by failing to consider foreseeable future developments when planning your digital transformation or business systems strategy. Of course, for every organization, there will be other specific objectives, such as reducing costs, enabling more efficient business processes, and making better use of people’s time.
Risk mitigation
It’s all very well to think about where the business is going, but for most organizations, there are risks that may need to be addressed. The risks to examine here are those that potentially drive significant business risks, such as a risk to the ability to trade, a risk of reputational damage, or a risk of serious errors leading to financial loss.
Typical risks include systems that are at the end of their life or running on on-premise infrastructure that is close to expiration. Running business-critical processes on spreadsheets can lead to an error-prone process, duplication of data, inhibited reporting, and a host of risks for an organization that is overly reliant on Excel.
Over-reliance on key individuals often occurs in tandem with an over-reliance on Excel. Sometimes an organization has bespoke applications, in-house developed or from a small software development partner, with just one individual who knows how it works.
Poorly controlled business processes are another risk that many organizations face where errors could potentially be costly or risk damaging relationships with customers.
What are you hoping your ERP project will deliver?
Turning our thoughts to what we are looking to achieve, let’s look at some of the business benefits of investing in and implementing new systems. Start by identifying improvement opportunities and then identifying more specifically what the wins are. For each benefit, ensure it’s realistic to assume that systems could help deliver a solution.
Types of benefits
Strategic or high-level benefits are those that are related to the business objectives outlined in the strategy. Quantifiable benefits are those, financial or non-financial, that can be measured, for example, a top-line savings figure or improving a KPI. Finally, unquantifiable benefits are those that are difficult to measure, but that would represent a good outcome that is worth documenting.
It should be possible to create a list of benefits for each part of the business that’s potentially in scope. This is an important step, as whoever is responsible for each area should sign up for the benefits and agree that if you give them the right system, then they will be able to deliver the benefits that have been documented.
The benefits work doesn’t end at this point. Benefits realization should be an ongoing element right through the system selection, implementation, and beyond, regularly checking back to ensure the organization is on track to deliver.
Why are benefits important?
If you want to do a technical upgrade but make no changes to processes and implement no new features or functionality, you’re missing a trick. The majority of organizations are aiming much higher and looking to deliver a real return on investment. Ambitious organizations may have ERP as the central plank in a digital transformation strategy. Focussing on benefits realization and making sure that the delivery of planned business benefits is front and center is a core element of successful ERP projects.
The second reason benefits are essential is that they should inform the selection process and evaluate solutions for their ability to enable and support benefits. Having a clear view of the benefits profile can help you make decisions on the project scope. If there are many benefits, it could bolster the argument to include an area in the ERP scope, whereas if there are few or no benefits, it could mean an area drops out of scope.
And finally, articulating the benefits of your ERP project will help you gain approval to spend the money that needs to be spent on your transformation.
This is a sponsored article by Lumenia Consulting.
