ERP projects are known for their complexity and significant risk of failure. However, this is not how an ERP project needs to turn out. We at Midagon have helped numerous companies to renew their ERP systems and related business processes successfully, reaching the planned targets. The good news for the business leaders currently planning or preparing for an ERP renewal is that many of the mistakes leading to failed projects can in fact be avoided with thorough planning, strong business commitment and focus on business benefits, clear governance, experienced team and continuous communication both inside the project and from project to line organization and other relevant stakeholders.
Let’s take a moment and think what the big five, essential cornerstones are according to our experiences for avoiding typical pitfalls and making an ERP transformation project successful.
The preparation before the actual project execution begins is crucial for success. One of the most common mistakes we see is ignoring the importance of preparation. Too often, organizations are in a hurry to skip the ‘non-value adding planning’ and jump right into the ‘real work’ of execution. However, preparing for an ERP project is just as crucial as preparing for a project of building a new house. There are lots of things that need to be clear and taken care of before placing the order for a packaged house, and the same applies to packaged software. The role of top management and leadership cannot be emphasized too much, as this is the golden momentum when clear and common project goals must be defined and aligned between different business units, areas, and functions. By communicating these clearly to the whole organization builds foundation for engagement and motivation to make the targeted change happen. Too often we see how organizations have started the execution before different areas of the business have even agreed on what the expectations towards the new ERP solution are, which current challenges it is expected to solve and what kind of an enabler the solution is expected to be for the business in the future.
Too often ERPs are understood or intentionally misunderstood only as technical systems owned by ICT and burdening the business. But the fact is quite different; it is the operational business that needs and benefits from ERP, and at the end IT has a maintenance role, ensuring business can comfortably and efficiently run in the house of ERP. This means that also the business needs and requirements can only be defined by business leaders and their organizations. Yes, this is a time-consuming task that requires focus, but there is no way around it. If the needs are not defined by business, they must be guessed by ICT. With the house metaphor there would be a similar situation and outcome if the constructor did not ask future inhabitants anything about their needs or requirements but make all decisions about the house on their own, based on guesses. How likely would it be that the people moving in would be satisfied with the house? Business involvement is needed throughout the project, not only in the beginning. To make the project work and the progress more visible, it can also be split into smaller projects instead of trying to achieve everything in one big bang. Each of the smaller projects can then be split into agile phases of reasonable length that show benefits along the way. This does not only require close co-operation between business and IT, but also rewards both sides by allowing them to see the outcome of their common effort, making sure what is being built meets the needs. And if this is not the case, it is fairly easy to take a few steps back and do some rebuilding, compared to a situation where you would see the whole house completed and only then realize it does not meet the needs. An agile way of working, regardless of explicit methodology, is an excellent way to reduce project risks. To ensure that the expected benefits will really be achieved, project progress and outcome should continuously be tracked from the business benefits realization point of view. Are we moving towards the right target? Have there been changes that would require us to review our targets? Do we continuously share a clear vision towards the target? In large projects, there is always a risk of losing that picture when the steam of execution starts to gather. If benefits cannot be materialized immediately, the project should at least feel relatively confident that it is on the right path to achieving them. In other words, simply following that project schedule, scope and budget stay within the frame is a good start, but not enough.
Every project deserves to have a clear owner and solid governance structure that supports decision making when issues or deviations arise. A clear ownership and governance structure ensures a healthy foundation for the project and guarantees its prioritization. Or would you prioritize an unstructured project without ownership or proper governance over some other business initiative? A clear priority status plays a significant role in keeping the teams motivated. It makes sure things get done as planned and everyone understands their role in the big picture. The project owner and company leadership must stand firmly behind the project and commit to its goals. If senior management does not show interest towards the project, how could we expect the rest of the project organization to keep up the spirit?
The project owner needs a project manager to lead the project from initiation to completion. The project manager oversees things getting done as expected. An ERP project must always involve resources from the company's internal organization, both operational and IT. In addition, external resources are always needed, since ERP projects have work streams for which the company's own line and IT organization very seldomly have the required experience, skills and availability. The external resources can take roles in business model and process design, as well as project-specific activities like data and migration management, test and cutover management. In addition, there is always the chosen main systems integrator and typically a number of other vendors. The project manager’s duty is to guard the interests of the company and business implementing the new ERP. It is not considered a good idea to outsource the overall program or project management to the systems integrator as they have conflicting interests and can only take responsibility for one subset of the project. Since ERP transformations are among the most complex projects an organization ever face, it is neither a good idea to have somebody practice ERP project management without any earlier exposure. Experience really counts.
ERP projects are known to be massive exercises with heavy work periods. This can be pressuring and tiring for the project team, and at times there is a risk of getting lost in the vast number of details and losing sight of the big picture and targeted goal. To reduce the risk of losing the big picture and the project taking the wrong track, it is vital that all everyone involved understand the project goals the same way and want to reach these goals. Therefore, clear and continuous communication and change management are also key ingredients when the target is to make the desired change in the business – system level is not enough, the change needs to happen also in processes and ways of working. To summarize, a successful ERP project is practically never just a technical solution implementation. If we do not manage to make all the important pieces fall in place, even the best of technical systems will fall short in delivering the expected business benefits.
Written by: Ilkka Töyrylä & Paula Aaltonen
Organisational change management frameworks, like Prosci and ADKAR, have their merits but also limitations. I acknowledge these methodologies' popularity and ...
Read moreThe year 2023 had lower-than-normal M&A activity. This was mainly due to the high interest rates yet still high company ...
Read more
One of the strategic objectives of Kontiotuote Oy (later Kontio) for the strategy period is "exploiting the potential of digitalisation". ...
Read more
