Adaptive Growth - market focused strategic planning

There are virtually volumes of surveys and statistics regarding why ERP implementation projects fail. A prominent company in this area is The Standish Group, which has done several of these types of surveys. One survey done several years ago reported that approximately 85% of all ERP implementation projects fail to some degree. We all can do the math—only 15% succeeded. A more recent survey by the Standish Group showed marked improvement on these statistics. The survey reported that approximately 63% of all ERP implementation projects fail to some degree.

The principals of Adaptive Growth have been solution providers since the mid ’70s in what is now described as the ERP industry, in sales, in implementation project management, and in development. Our business, over the past several years, has evolved into providers of business analysis and project management for the successful acquisition and implementation of ERP systems especially for manufacturing and distribution companies.

The surveys continue to report on the high percentage of ERP implementation failures, which became the impetus for us to embark on a project to solve this problem. Instead of focusing on ERP implementation project failures, we focused on the successes. What we learned confirmed what our experience had taught us. The successful acquisition and implementation projects did not use the same process that the failures did. The unsuccessful projects used, for the most part, the traditional method of acquiring and implementing ERP systems. The method or process being the development of a request for proposal (RFP), done in-house or by an outside consulting firm, and submitting the RFP to a list of 15 to 20 ERP vendors. 

The expertise we have gained from the experience of having successfully implemented ERP systems for over 30 years, our involvement with the Project Management Institute (PMI) and the International Institute of Business Analysis (IIBA) became the impetus for us to develop a Guide that would insure the successful acquisition and implementation of ERP systems.  Our objective is not to publish another ‘how to methodology’ but an approach that uses proven business standards along with practical business experience to insure a company is doing the right things right in a project to acquire and implement an ERP system.

As the project, progresses we will issue blogs previewing the Guide’s content to elicit comments from anyone who wishes to contribute their views on:

·  Pressing problems in this area that need attention,

·  How their company or firm might have addressed the problem,

·  The benefits such a tool could provide, and

·  Their experience with a similar tool they had successfully used

Why Strategic Planning is Critical for ERP Acquisition/Implementation—Part I focused on the difficulty small to mid-size businesses (SMB) encounter when deciding to replace their current business software system. Part II addresses what is required to ensure the successful acquisition and implementation of ERP software.

In the vast majority of small to mid-size businesses (SMB) the process to acquire a new ERP software system usually starts with the vendor selection process. It is usually an IT person who begins the process by asking a very general question; what does the company require in a new ERP software system? Based upon the response he or she receives from the respondents the IT person will go out to the Internet and select from three to as many as 15 software packages to place on the company’s software evaluation list. The next step is to match the functionality of the selected packages to the company’s perceived requirements. Please note the word perceive because the respondent requirements are usually based upon what the current users of the company’s business system believe are the functional requirements for a new software system and that belief is usually based upon what they don’t like about the current system and what they need individually to make their day-to-day job easier. I would love to hear from those reading this blog if their last ERP acquisition process was too much different. The above process, which 85% of all small to mid-size businesses use is the major cause of the prolonged decision cycle (if one is ever made) and the subsequent disappointment in their ERP acquisition. The following lists the steps, based upon our 30 plus years of experience that should be followed to ensure the successful acquisition and implementation of ERP software.The ERP acquisition process must begin with executive and\or ownership commitment to an ERP Acquisition and Implementation Project. Step 1: A formal acquisition project championed by the President or CEO is put in place. Step 2: Selection of a Project Manager. Select an experienced person who is knowledgeable regarding the five project management processes. If one does not exist within the company contract for one from the outside. A consultant is not required. Engage a person who is experienced in project management and specifically in the process of ERP Software selection and acquisition. This person will coach the company’s selection team within the processes of a project tailored to the company’s specific requirements. This step is key in formalizing the project with a start and end date. Step 3: To effectively select an ERP software system the company must have determined where it is today, where it wants to go and how it will get there. These three determinations are documented in a Market Focused Strategic Plan. The plan provides the company’s market strategy for the next 5 to 10 years and becomes the basis for selecting a new ERP software system. Recent research by Accenture presented the potential of ERP systems to drive business growth. The research report showed that some organizations were achieving considerable value from their systems. They did so by following very clear-cut practices; they identified value drivers and realigned their processes accordingly. A value creating strategy (Market Focused Strategic Plan) is a directional statement that serves as a central theme guiding and coordinating integrated actions in the pursuit of a substantial competitive advantage. Step 4: Align the ERP software acquisition project to the company’s marketing strategy. The company’s Market Focused Strategic Plan defines the requirements for a new ERP software system based on a) Where it is today, b) Where it wants to go and c) How it will get there. The key benefit of having taken the time to do a market focused strategic plan is it provides the specific requirements for the functionality needed in a new ERP software system to enable the company to achieve its growth objectives. The company will select what ERP software to evaluate based upon the requirements it developed for its marketing strategy. Step 4 insures the company doesn’t turn the control of the selection process over to companies selling their software system as a functional fit for what they believe are your company’s business requirements. Step 5: Evaluating ERP software systems. The evaluation process is defined as an activity in the planning phase of the ERP acquisition project. The ERP evaluation task developed and documented the process the company will use to select a new software system. It becomes the script the selected vendors will use to map their software solution to the company’s business requirements based on its market focused strategic plan. The required mapping process will point out any gaps between company requirements and software functionality that may exist in the software system being evaluated.Step 6: ERP Software Acquisition. The next most important step after developing the market focused strategic plan to determine what software system will satisfy the company’s business objectives is the acquisition process. The purchase and acquisition planning process is completed in the planning phase of the ERP Software Acquisition Project.The purchase and acquisition planning process defines the implementation procedure as defined by the company—not a software vendor. The selected vendor will use their implementation methodology; however it will be mapped to the company’s implementation procedure as defined in the project’s purchase and acquisition planning document. The implementation procedure is provided to the selected vendor prior to their submittal of a proposal or agreements for signing. Having sold and implemented complex business systems for many years we would have welcomed a complete definition of the prospect’s implementation expectations prior to submitting our proposal or agreements.  This process will minimize the “you should have known” or “you didn’t tell us” sessions that ultimately result when a company’s expectations are not being met during the implementation of its new software system.  The result is usually a significant increase in the cost to implement software, or objectives not being realized, or abandoning the project totally (you’ve heard the stories).  The only way to ensure the successful acquisition and implementation of ERP software is to put the acquisition process within a formal project that adheres to accepted project management standards. There simply isn’t another way for the 85% of companies that are considering the replacement of their current ERP system. We welcome your comments and feed back!

We have been solution providers to small and mid-size manufacturing and distribution companies for over thirty years. In the early to mid 1970’s these industries were introduced to affordable data processing, replacing accounting machines and such with “mini-computer” systems. The decision was easy for these small to mid size companies to make the leap from ledger processing or punch cards to the new and exciting world of “on-line, real-time, and totally interactive data processing” a few mini-computer companies provided at that time, because the benefits were so obvious.

The process of purchasing a new software system has certainly changed since then, and especially since the early 1990’s. The average decision cycle to purchase a new software system today is 16 to 36 months. The unfortunate fact about the buying cycle is that after spending the time and resources in the acquisition and implementation process for new ERP software 85% of these companies purchase and implement software that fails to achieve their intended objectives and expectations to some degree. Even worse, 25% of these companies never implement the software they bought. What happened in the last 20 years that has made the process of acquiring and implementing ERP software such a complex and expense process?

ERP systems, regardless of price, have become a commodity product, because they all must have the same functionality to be able to compete in a highly competitive market, whether they are classified as a general or vertical software system. It has become impossible for most companies seeking a new system to differentiate one from another, especially after 5 or 6 product demonstrations.  The result is most decisions to acquire new ERP software are based on price and/or comfort level with the software provider and/or the value added reseller (VAR), leaving 85% of these buyers with software that did not meet their current expectations or long term business goals.

Most businesses today are on their third and fourth software system. They are keenly aware of the disruption a new system will heap upon their company. They’ve heard the horror stories of failed implementations and the costs incurred by these failures. Unless there is a compelling reason for change a company’s executive management team will resist any suggestion by its employees that to grow or become more competitive they need to replace their current software system, which now has become an enemy of change and not an agent for change. Is there a process to ensure that a company, no matter what business they’re in, can acquire ERP software that will address not only their current business requirements but the changes that will certainly occur in the future to their market? We realize it has become trite to say “experience is the best teacher” but the experience of over 350 ERP implementations has defined, at least for us, why 85% of all ERP software purchases an implementations fail to some degree. The result of that experience offers our clients a process that ensures a good business decision when acquiring and/or implementing ERP software.

In the following blogs I we share with you what is required to ensure the successful acquisition and/or implementation of ERP software. There will be no great revelations to what you instinctively knew already, however after we go through the process it will certainly provide a, DUH, I knew that!

Welcome to the Adaptive Growth Inaugural Winter Survey of ERP Maturation and Implementation Issues. We’d like to solicit your help in determining how the IT management of manufacturing and distribution companies views maintaining and/or replacing aging ERP software. We currently have two primary (and, we feel, inadequate) sources of information about this. The first is the anecdotal scuttlebutt we are all bombarded with every day. We distrust it deeply. We think that in business, just as in politics, the answers you get depend on the questions you ask; and we in the ERP business space almost always ask the questions that are of concern to us. Our second source of information is of course our clients. We think we understand their concerns quite well, but they are hardly unbiased – after all, they chose to do business with us, at least in part because their own concerns coincide with our own. We’re not sure how representative they really are. In fact, we have sound reasons for doubting that they are very representative at all.

In selling our own services, our emphasis is on risk management as it relates to ERP implementations. Naturally, our client base tends toward companies that rate risk management very highly. Though you’ll never convince us that risk management shouldn’t rate at the top of everyone’s list of concerns regarding ERP implementations and modifications, it is manifestly clear that it doesn’t. The statistics for failure amply prove that, but these statistics simply offer no clue about why that is the case. What are people thinking, when they’re not thinking about what should matter most to them? In particular, we are interested in the role that the IT function plays in the critical early decisions that (in our view) largely determine the outcome of ERP implementation and modification projects.

Although we’ve been in what is now called the ERP marketplace for decades, we have never been very far from the IT side of the industry. We’ve worked for software companies, huge and tiny, as salespeople, developers, implementers and project managers. Our ability to work closely with the IT function has been largely equivalent to our ability to survive. And we have never seen a time, going back to the early ‘70’s, when the IT function has had less choice in the matter of what systems it will be charged with deploying, and how it is going to deploy them. (There: we’ve stated our bias. Now go ahead and disprove it!)

The survey below is designed to remedy at least some of our own ignorance about the true drivers of companies’ behavior in acquiring, implementing, modifying and, eventually, abandoning ERP software. We are under no illusion that we will find any kind of pervasive, overall pattern. We expect we’ll see many contradictory themes emerge, but we can’t even be sure of that. One thing would surprise us greatly, though: to hear that the IT function is very often the instigator of change (or of inertia!) Beyond that, we have no more than over-informed speculation to go on in estimating the range of IT’s influence in these projects in industry as a whole.

We hope to have a more coherent picture by mid-January. We’ll collate the results, draw what conclusions we can, and distribute the full results to everyone who participates. We’re aiming for the end of January but, depending on the response, it could be sooner or later. We’re not going to cut this off prematurely while we’re still getting good input.

Please note that spread throughout the survey are optional comment blocks. We don’t expect anyone to use all of them, but we do expect people to straighten us out when we’ve asked a dumb question, failed to ask one that needs asking or have left out the best answer. We promise, we’ll read everyone and include all the printable comments in the final results. Please also indicate (near the top of the survey) whether your comments should be attributed to you or anonymous when published.

Click Here to take survey

Welcome to the Adaptive Growth Inaugural Winter Survey of ERP Maturation and Implementation Issues. We’d like to solicit your help in determining how the top management of manufacturing and distribution companies views maintaining and/or replacing aging ERP software. We currently have two primary (and, we feel, inadequate) sources of information about this. The first is the anecdotal scuttlebutt everyone working in the ERP space is bombarded with every day. We distrust it deeply. We think that in business, just as in politics, the answers you get depend on the questions you ask; and we in the ERP business space almost always ask the questions that are of concern to us. Our second source of information is of course our clients. We think we understand their concerns quite well, but they are hardly unbiased – after all, they chose to do business with us at least in part because their own concerns coincide with our own. We’re not sure how representative they really are. In fact, we have sound reasons for doubting that they are very representative at all.

We tend to doubt that our clients are representative of all manufacturers and distributors for a somewhat paradoxical reason. They are primarily concerned with the high level of risk associated with ERP acquisitions and implementations (roughly a quarter of which fail entirely, and fully three quarters of which experience some significant degree of disappointment). Because we are in business to help mitigate the risk of project failure, we find a natural fit with them. But they can’t be typical, simply because the figures for failure are so high! Managing risk is mostly a matter of focused awareness of the factors that cause risk, and if most companies were aware of these factors, then most companies would succeed – which, unfortunately, is not the case of ERP implementation projects. So factors other than risk management are driving most ERP implementation efforts, and this survey is designed to elicit them. Your reward for participating – aside from the sheer fun of it all – will be to receive a copy of the completed survey, which we anticipate will be available by the end of January. It should be an eye opener for all of us. You’ll notice that we ask for some detailed, written answers. We plan on putting some serious work into this, and we plan on distributing everybody’s input to everybody who offered any. We think you’ll be glad you participated.

Click Here to take survey

It is a truism that in any complex activity, the critical, defining decisions should be made as early in the process as possible. In ERP implementation projects this principle is routinely undermined by the nearly universal practice of separating acquisition and implementation activities into separate projects, performed by separate teams operating under separate control. This causes any number of critical decisions that ought to occur in the earliest phases of acquisition planning to be deferred to the implementation phase, where they are then made by the wrong people for the wrong reasons, well out of the sight of those who have the most at stake in them. These stakeholders have, in fact, needlessly surrendered control of the project to outsiders in the usually unquestioned but always mistaken belief that technical proficiency and product knowledge trump their own needs and abilities in all matters relating to system implementation.

Learn more about ERP System Acquisition & Implementation Viewed as a Single Project at Adaptive Growth’s website.