In this article, we will review cases that may cause an ERP failure, and also highlight a number of real case studies as references. The ERP implementation process can be challenging but steering clear of these 5 mistakes can ensure that your organization isn’t another casualty. Included in each section are the best practice recommendation that can help companies get ready for this difficult process.
Inadequate Strategic Planning
Emphasis on proper strategic planning cannot be overstated for an ERP implementation process, and failure to heed this advice can be devastating.
Some companies harbor the false notion that ERP is the ultimate panacea to all their problems, and so they often end up ascribing bad processes to the technology. This tendency to always react to issues can spell doom prior to the commencement of the implementation process.
For instance, in 2016, a departmental store named Woolworth’s Australia was upgrading to SAP from a 3-decade-old in-house system. As part of the upgrade to SAP, the company had to switch its data collection methods, but they did so without fully grasping the process. Ultimately, they suffered losses amounting to the tune of $200 million and couldn’t generate a profit or loss report for 18 months because the company’s existing business policies were not documented properly.
Companies must be fully acquainted with their existing systems, processes and people before starting any ERP implementation project. To further explain, ERP implementation projects must be treated as more than a mere technology shift or upgrade. Moving the focus first to people and processes rather than the technology will send the right impression across the organization.
Also, a post-go-live support provided by the implementation partner should be structured into the implementation process. This is in addition to knowledge sharing sessions and customized employee training. These will hopefully save the company from other serious challenges further down the line.
Wholly understanding these areas will help enhance the procedure for budgeting, timelines, goal setting, and other related activities related to an ERP implementation.
Poor Communication
The best strategic plan does not stand a chance if they are executed poorly, and effective communication is one of the key factors involved in meticulous execution. Inadequate or absence of communication can mar an ERP implementation process. Therefore, all relevant team members, both external and internal, must remain forthcoming and transparent. Thankfully, at The Seibert Consulting Group, we practice complete transparency with all our clients.
At every stage of the implementation process, insufficient communication is dangerous; however the risk of that danger is heightened at the requirements collection stage where the scope of the project is typically agreed upon. At this point, one major misunderstanding can derail the whole project, so proper and clear communication of both the needs and processes of the company is crucial. Besides, the implementation partner should not fail to seek clarification if there are any gray areas in the requirements or any other relevant areas of the project.
Open and common communication channels (through phone, emails, Slack, etc.) and routine meetings are needed to ensure that deadlines and expectation are as per schedule. All parties must also agree to specific measurables and benchmarks to define how efforts and results are tracked and quantified. Failure to implement this can be catastrophic.
In 2008, Waste Management slammed a $100 million legal dispute against SAP following an ERP mishap. The company accused SAP of taking part in fraudulent sales processes. But in their defense, SAP hit back with a countersuit claiming a breach of contract for failing to correctly and adequately state its business requirements.
Probably, the whole legal debacle may have been avoided if both parties had communicated properly.
Lack of Company-Wide Support
The aftermath of an ERP failure can affect the whole company; therefore, it is crucial that everyone keys into the project. Processes, systems and responsibilities may change following an ERP implementation, so taking proactive steps to avert any anticipated misunderstanding can contribute towards success.
When management is either oblivious to their responsibilities or refuses to own up to them can spell disaster for an ERP implementation project. The bulk of the crucial strategic and implementation roles are duties of the management, in addition to defining operating parameters and metrics.
The management team decides budgeting, strategy, timelines, resource allocation, etc. This group must also be actively part of the entire process since critical decisions taken at each phase can affect the whole process. In larger organizations, this kind of participation does make it easier to update the public, stakeholders and other relevant parties.
Similarly, non-management employees leading the charge from the frontline need to be fully aware of any changes as they happen. Again, effective communication is crucial, and “managing up” can be immensely beneficial in this case.
There is the possibility that employees may feel overwhelmed with multiple responsibilities during an ERP implementation process and thus may require help from management to help reduce their workload. Employees at the frontline should also be encouraged to relay feedback regarding the progress of the processes and also suggest more efficient solutions where applicable.
All groups involved in the ERP implementation must also commit to learning the new business process and ERP system. This will ensure a more seamless adoption and can keep the project on schedule.
A successful ERP implementation is a direct result of team effort.
Choosing the Wrong Implementation Partner
Choosing the right ERP implementation is probably the toughest decision you will have to make. Getting it wrong here can disrupt the entire process. Thankfully, if you ask the right questions, there are several good partners you can choose.
Any implementation partners you settle for should have relevant hands-on ERP experience and should also have ample experience within your company’s industry. This way, the company will instantly slot into the project without having to go through a learning process. Also, owing to their experience, the partner can provide valuable insight into how best to implement the ERP to suit the company’s need. Besides, if they boast of ERP end-user experience (like the Seibert Consulting Group), then that is an added advantage.
You must do your due diligence during the partner selection process. Apart from watching a product demo and asking the typical questions, requesting for customer referrals is also an excellent way to filter out incompatible candidates. During the latter stages of the evaluation process, the company should ask to talk to their potential partner’s current or recent customers to get a feel of their overall experience working with them. This can be the ultimate deciding factor that can help you make a final decision.
Choosing the Wrong ERP Platform
Despite having a great internal team and a good implementation partner, the ERP platform may be a mismatch. There are a plethora of ERP platforms, but they aren’t all compatible with your business. As mentioned earlier, the strategic planning phase should thoroughly review various ERP platforms.
A proper grasp of current processes and operations, alongside future targets, are fundamental to the ERP selection process. Ideally, an ERP tool should help further a company’s goal. During the research process, companies should carefully evaluate other ERP used by successful companies in the same industry. They are often highlighted in case studies or press releases by the ERP platform providers.
Generic ERP platforms that are often cheaper and require less upfront cost will usually require more development, maintenance and customization in addition to other issues as time goes on. This can considerably reduce your ROI and cause delays.
Conversely, larger ERP platforms can sometimes convince companies to subscribe for a larger bundle that they do not actually need. This can lead to unwarranted spending and may require that an organizational change is conducted before a company agrees.
Another possibility, similar to what happened with Revlon, a renowned makeup company is that the ERP platform may not be sufficiently advanced like SAP’s S/4HANA which in that instance, led to an ERP failure.
Due to the aforementioned reasons, we highly recommend NetSuite’s fully integrated ERP. NetSuite is the most trusted cloud-based solution across the globe and used by over 40,000 companies and their subsidiaries across the world. NetSuite features a modular design that can be enhanced as your business expands, and by default, it integrates CRM, HR, ecommerce and many more.
Feel free to get in touch with us if you have any questions regarding ERP implementation or would like to find out more information about NetSuite.
