The New ERP – Part 41

We are wrapping up our discussion of Sue Bergamo's article entitled "Is Your Implementation in Trouble?" Bergamo listed seven "high level categories [in troubled ERP implementations]…. in the order from the highest to lowest number of responses" from her informal LinkedIn survey. Here is her list:

1. A misconception of business expectations
   
2. The lack of top level leadership involvement in the project
   
3. Business processes were not correctly redefined and continued to be inefficient
   
4. The impact of the organizational change was not addressed properly and caused a major upheaval in the company
   
5. The vendor wasn't managed correctly and over-promised, then under delivered [sic]
   
6. Project management was weak and over-customizations lead to increased scope and time
   
7. The integration of diverse applications was harder than anyone expected
   (Bergamo 2010)
   

In the process of our review we are drilling-down on Bergamo's symptoms list and setting them in the context of the New ERP – Extended Readiness for Profit while contrasting them with traditional ERP – Everything Replacement Projects to see if using the New ERP approach would have mitigated the failures.

6. Project management was weak and over-customizations lead to increased scope and time

This is another no-brainer when it comes to traditional ERP – Everything Replacement Projects versus the New ERP – Extended Readiness for Profit. One simple reason is this: the amount of "real estate" to customize.

Think about it. If your organization is going through an Everything Replacement Project there are dozens – if not hundreds – of places in the new technology that could become a target for customizations. However, in a New ERP – Extended Readiness for Profit project, the effort is so targeted and so narrow in scope that there is just not much opportunity for "scope creep."

But, there is another reason as well.

If you will take time to go back (to prior portions in this series), you will discover that the vendor selection and "proof of concept" portions leading up to an implementation under the New ERP approach are likely to expose an requirements for customization early in the process. In fact, such customization or modification necessities will probably be revealed before the purchase agreement is consummated. This is as it should be.

7. The integration of diverse applications was harder than anyone expected

Even though this is where the New ERP – Extended Readiness for Profit should be most vulnerable, this issue is where the New ERP really shines unlike every other approach.

Why?

This is simply because the New ERP approach takes as its number one priority the matter of EAI (enterprise application integration). EAI is fundamental to the New ERP.

Since, under the New ERP scenario, your organization will not be tearing out the central technology engine (core accounting and related modules) and trying to re-integrate several – or even dozens – of necessary applications across the enterprise, the challenge becomes much less complex. The effort you undertake will be concentrated. Your resources will not be diluted. And the work can be planned and accomplished expeditiously.

Furthermore, looking again to the solution and vendor selection process (see earlier posts in this series), the question of integration of the targeted solutions being brought to bear through the New ERP approach – its ease or difficulty – should be and would be addressed prior to making a final decision on the solution(s) and vendor(s) to be employed.

In summary

In this series we have compared and contrasted traditional ERP – Everything Replacement Projects with the New ERP – Extended Readiness for Profit in addressing seven factors that have lead many organizations to failure or dissatisfaction with their ERP system and implementation as reported by Sue Bergamo in her article "CIO Update: Is Your ERP Implementation in Trouble?"

It should be clear to you and your management team now the many advantaged afforded you by applying the New ERP methods. This is a great way to avoid troubled ERP implementations.

©2010 Richard D. Cushing

Works Cited

Bergamo, Sue. CIO Update: Is Your ERP Implementation in Trouble? Feb 01, 2010. http://www.cioupdate.com/features/article.php/3862056/Is-Your-ERP-Implementation-in-Trouble.htm (accessed Feb 02, 2010).


 

The New ERP – Part 40

We are continuing our discussion of Sue Bergamo's article entitled "Is Your Implementation in Trouble?" Bergamo listed seven "high level categories [in troubled ERP implementations]…. in the order from the highest to lowest number of responses" from her informal LinkedIn survey. Here is her list:

1. A misconception of business expectations
   
2. The lack of top level leadership involvement in the project
   
3. Business processes were not correctly redefined and continued to be inefficient
   
4. The impact of the organizational change was not addressed properly and caused a major upheaval in the company
   
5. The vendor wasn't managed correctly and over-promised, then under delivered [sic]
   
6. Project management was weak and over-customizations lead to increased scope and time
   
7. The integration of diverse applications was harder than anyone expected
   (Bergamo 2010)
   

In the process of our reveiw we are drilling-down on Bergamo's symptoms list and setting them in the context of the New ERP – Extended Readiness for Profit while contrasting them with traditional ERP – Everything Replacement Projects to see if using the New ERP approach would have mitigated the failures.

5. The vendor wasn't managed correctly and over-promised, then under delivered

This exposes another important advantage of the New ERP – Extended Readiness for Profit over traditional ERP – Everything Replacement Projects: namely, that the New ERP takes several specific steps to minimize such an occurrence –

Traditional ERP – Everything Replacement Project	The New ERP – Extended Readiness for Profit
Since the vendor in a traditional ERP project is going to touch so many facets and functions in the enterprise, this fact allows the vendor great latitude to make promises about the benefits and gains to be made without ever declaring the specifics about those gains. The benefits to the organization are frequently stated so broadly as to remain essentially without a corresponding metric for evaluation.	The New ERP, in contrast, requires that the executive and management team of the organization determine in advance the three critical matters we have already mentioned several times: What needs to change – That is, to identify what very specific functions in the enterprise are keeping the firm from achieving its goal of making more money tomorrow than it is making today. What the change should look like – The management team must determine in advance what the changes in the specific functions (identified in item 1 above) should look like in order to assure that, after the change is made, the enterprise will, in fact – or with a very high probability – make more money tomorrow than it is making today. This should be measurable in some manner. We have previously used the example (see earlier portions in this series) of an increase in the number of orders that could be picked, packed and shipped with the same number of personnel working in the warehouse. How to effect the change – This is the one area in which the technology vendor may play a part. They may offer suggestions about which technologies to apply and how these technologies should deployed to achieve the greatest effect. Note that if this approach is taken, the management team of the buying organization is setting the specific performance standards expected. This leaves little room for the vendor to exercise his "bragging rights" and thus "over-promise." The vendor either can meet (or exceed) the stated standard or performance, or it cannot. It is as simple as that.
In most cases where traditional ERP is undertaken, there is no up-front establishment of performance standards with the vendor. And, of course, in the absence of a specific and measurable standard, how can one effectively "manage" the vendor. By what measure are you managing them? If the traditional "project success" standards are applied (i.e., on-time, within the budget, and of acceptable quality) then, I suppose, you can count your project a success. However, if that "success" does not result in your company's ability to make more money tomorrow than it is making today – if there is no measurable R.O.I. (return on investment), then that is a hollow victory indeed.	Since the New ERP begins with the executive management team establishing and articulating clearly to the vendors the measurable results expected from them, then "good management" of the vendors means achieving those results that have been predetermined to deliver increased Throughput, reduced Inventories or demands for new investment, and/or lower Operating Expenses while sustaining significant growth. Such an approach greatly reduces the likelihood that a vendor will be incorrectly managed.
Most traditional ERP projects include "demonstrations" of the software. In many cases, such demonstrations are even carefully scripted. However, if you look at the section of this series that references product demonstrations, you will see that product demonstrations rarely constitute proof of concept tightly focused around metrics correlated to critical functionality.	On the other hand, the New ERP required participating vendors provide, not only proof of concept, but also a budget to achieve that proof of concept in the production environment. Furthermore, that budget is compared by your executive management team with the estimated benefits (changes in Throughput and Operating Expenses) to help assure that the projects planned ROI is likely to be attained as a result.

 
This side-by-side comparison of traditional ERP with the New ERP should make it abundantly clear that the "incorrectly managed vendor" failing is far less likely to occur when organizations adopt the New ERP as their method for evaluating both improvement projects and the vendors they hire to supply and implement technologies for them.

[To be continued]

©2010 Richard D. Cushing

Works Cited

Bergamo, Sue. CIO Update: Is Your ERP Implementation in Trouble? Feb 01, 2010. http://www.cioupdate.com/features/article.php/3862056/Is-Your-ERP-Implementation-in-Trouble.htm (accessed Feb 02, 2010).


 

The New ERP – Part 26

Vendor demonstrations

It is an unfortunate fact that, if our foundation is wrong, chances are the rest of the building will not be too great either. This is certainly the case as we come to the matter of vendor demonstrations in a traditional Everything Replacement Project. Consider the typical steps that have been taken to get the firm to the "vendor demonstrations" stage in traditional ERP:

As we have been discussing all along (see prior posts), none of these steps, when undertaken in with traditional ERP in view, are designed to focus the effort on those few things that need to change in order to make the enterprise more effective at producing profit. Instead, an almost egalitarian approach is assumed in which the "concerns" expressed and "requirements" supplied by department X carry equal weight with those expressed by department Y. After all, it is only fair.

This remains precisely why traditional Everything Replacement Projects so seldom deliver really dramatic results in terms of increase profit. And, when they do, it is mostly serendipity that delivers the improvement. Likely it was because three or five things that actually needed to change got some or all of the change they required, and the remaining several hundred things that also changed in the traditional ERP effort did not do enough harm to overwhelm the benefits delivered.

When we, then, extrapolate this lack of focus down from "requirements gathering" through "software selection," and "vendor selection," we arrive at the prospect of sitting through vendor demonstrations that are equally unfocused. People from several – perhaps dozens – of departmental silos are invited down to view essentially redundant demonstrations of how the proposed new software will replace the way they presently execute the same basic tasks.

Vendor demonstrations in the New ERP – Extended Readiness for Profit

If you and your management team have been following along with us (see prior posts), then you will immediately see that preparing for vendor demonstrations in the tightly focused environment of the New ERP would be and should be dramatically different. Rather than sitting through long and (usually) somewhat boring vendor demonstrations of how General Ledger, Accounts Payable, Accounts Receivable, or Purchasing works, or even generic (though somewhat more exciting) demonstrations of how the warehouse will operate with the new software in place, the management team in our example company has laser-like focus on crystal clear and measurable objectives. For this team, the vendor demonstrations are not generic, at all. Instead, the vendors are called upon to demonstrate "proof of concept" around tightly-defined metrics.

Rather than giving the selected vendors a 32-page "demo script" that covers elements of every module to be part of the traditional Everything Replacement Project, your well-prepared executive management team has handed off "Proof of Concept" requirements to the selected vendors. A "Proof of Concept" requirement might read something like the following (in our example company):

• Demonstrate how your bar code printing solution can be integrated with our existing inventory system and how bar code label printing will be performed in connection with receipt of goods and manufacturing production operations. Explain how leveraging your existing APIs (application program interfaces) will hold the cost of development and deployment of your bar code printing solution below $X.
  
  
• Demonstrate how ASNs (advanced shipping notices) will be automatically generated via integration with our existing technologies. Furthermore, demonstrate how ASNs will be transmitted to the appropriate destinations by retrieving data from our existing back-office accounting and sales order entry software. Explain how you will leverage your integration engine to hold total cost of development and deployment below $Y.
  
  
• Demonstrate how your combination of hardware and software will lead to essentially paperless pick-pack-ship operations. Further, demonstrate how your solution will permit us to process (on average) N orders per hour through the entire pick-pack-ship process. Show how you will keep the total cost of development and deployment below $Z.
  

Notice that the goals of discovery for vendor demonstrations under the New ERP are two-fold: results within budget. Of course, this implies something on the part of your organization, as well. You should note, for example, that there is no "touchy-feely" language in these "Proof of Concept" requirements. This lack of UI (user interface) formulation suggests that, if you can get to the results you require within the budget you have established – based on return on investment (ROI) – then your organization is willing to adapt their business processes to the demands of the new technologies.

This really makes superabundant economic sense from a business perspective. You and your management team have already identified what needs to change and what the change should look like using the Thinking Processes (see earlier posts). You have also set rational budgets for Investment (I) based on the ROI formula. Now it is up to the technology vendors to demonstrate how they intend to effect the required changes within the Investment budget.

Once your management team has reviewed the "proofs of concept" offered by the vendors, you can make determinations if any adjustments need to be made in the benefit or ROI calculations. Such adjustments, however, should be relatively minor – not a major overhaul of the intended target.

[To be continued]