Enterprise Resource Planning (ERP) systems have a promise of turning into the central nervous system of your business that will connect the data, simplify the processes, and give one source of truth. Effective deployment of an ERP can radically enhance operational efficiency, scalability, and decision-making capability. However, the statistics are bleak: it is regularly reported that the implementation of ERP fails, in most cases, more than half, even 3/4. Considering the huge capital investment and business risk, the knowledge of these traps is the key initial step to success.
Then, how come such large-scale million-dollar projects are frequently derailed? The solution is never the software. Three areas are usually crucial and inseparable in failure: The People Problem, the Planning Pitfall, and the Technical Trap.
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The People Problem: The Resistance to Change
ERP implementation is not just an IT upgrade, but it is a radical business change that compels employees to learn new styles of operation. When only the technology is addressed, the human aspect, which is the most important to be adopted, is sidelined, resulting in resistance, confusion, and chaos in operations.
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Absence of Leadership and Team Devotion
The implementation will need a solid buy-in and top-down participation to be successful. Unless the top management is beyond reproach and will designate an executive sponsor with a strong hand, the project will have no control mechanism to handle the conflicts that are bound to occur across departments and the conflicts that will arise over the allocation of resources. In addition, the main implementation team should also include the best and brightest subject matter experts of the company who can actually conceive the existing processes.
Full-time employment and 50 percent dedication to the ERP project without replacing their tasks would spell burnout, deadlines, and ill-advised design decisions that would undermine the utility of the system over the long term in the case of such high-value employees.
Lack Of Poor Training And Management Change
The main reason why employees do not welcome change is because they do not know the why, and they have not been well trained on how. Training must go beyond generic software training, it needs to be role-specific and tailored to a particular role (e.g., how a warehouse attendant fulfills an order, how a CFO balances the books). Change management is the process of informing about the value proposition of the new system, vigorously recruiting and countering anxiety among users, and creating feedback mechanisms. Omitting this vital component will inevitably cause end-users to write their own work-arounds and this will immediately recreate the data silos and inefficiencies that the ERP was designed to eradicate, nullifying the investment.
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The Planning Trap: Planning, Budgets and Schedules
ERP projects are usually initiated with a lot of optimism and soon become stalemated by strategic mistakes during the initial definition process that radically inflate cost and schedule leading to project abandonment.
Unrealistic Scope and Requirements
The toughest error is usually the inability to establish weak system requirements through incomplete analysis. A complete business analysis that includes the stakeholders of all the departments that would be affected by the system should be done before deciding on the type of system to be chosen to ensure that the ‘to-be’ processes are mapped and a list of all the mandatory capabilities agreed upon is developed.
The outcome of failure in this case is such an organization aligning the complex, unique processes to the software instead of aligning the software to the optimized business functions. In the absence of this benchmark on the requirements, the selected software may not essentially address the real operational requirement of the company, as it will have to make extensive, sophisticated and expensive customizations in future.
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The Scourge of Scope Creep
It is universally known as the major cause of overruns in the budget and timeline. Scope creep is whereby the project is constantly being enhanced with new features, customizations or integrations usually in response to new departmental requests or the discovery of gaps in the previous analysis. Although it is tempting to accommodate all the business wants simultaneously, such unplanned additions end up derailing the initial schedule and can easily lead to fluctuating budgets which are impossible to control.
The strict system of governance is thus necessary to control the expectations, block the non-critical additions, and put non-essential customizations aside to a later stage. The extreme levels of customization, especially, raise the long-term cost and complexity of maintaining and upgrading the system to incredible levels.
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The Technical Trap: Information and Implementation.
A few basic technical implementation weaknesses are enough to make the system crash at the go-live, and shut down business.
Dirty Data Migration
The data stored in an ERP system is as good as it is. Before moving to the new platform, companies usually fail to appreciate the hard work involved in data hygiene. It entails a careful process of de-duplication, standardization, cleansing and storing of old data of the legacy systems. Migration of dirty, incomplete or inconsistent data will result in operational problems that start immediately, cascading later after go-live, including inaccurate financial, insincere inventory and incorrect customer data. Such inability to be relied on quickly kills the trust of the users and makes the new single system virtually useless as a source of truth.
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Inadequate Testing
Leapfrog or neglect of important testing stages especially an integrated User Acceptance Testing (UAT) is a life threatening error that is usually necessitated by the need to hit the harsh deadlines. As in the warnings of unsuccessful rollouts, lack of cross-functional testing may lead to inability to get simple transactions to flow smoothly across the interconnected departments (e.g. between sales order entry and warehouse picking and final invoice production). The testing should be stringent and must include the everyday and the infrequent business situations in totality. This integrated piloting has the benefit of not only supporting a single department, but the whole inter-dependent business ecosystem, to avoid the expensive silent failures, where a transaction seems successful in one module and fails in the downstream.
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Getting It Right
All the major ERP failures are united by the element of the failure to conduct strict, disciplined implementation and neglecting the scope of the project. To succeed, you have to make your ERP project not a technology installation but an initiative by your top talent people as part of your strategy. Invest the time, resources, and management skills to specify what you need, scrub your data carefully, and test each of your single integrated processes to the fullest extent. Investments in these key aspects, namely people, planning, and process, will see you beyond the simple installation software and make your business succeed to an extent that you realize the greatest ROI.
