recent high profile Updates from two well-known retailers regarding losses associated with challenging ERP implementations have clearly highlighted how South African companies are wasting billions on large ERP projects.
Simply reading these updates is likely to raise the concerns of top executives across the country. However, by understanding why projects fail, we can chart a path to avoid similar pitfalls and embark on much more successful projects. projects and implementations.
There is no strict definition of what constitutes a failed project or implementation. The most obvious issues include budget overruns, time overruns, and re-scoping (or re-scoping), as well as the adverse impact on people.
Not all companies react in the same way. Some companies, after a long period of trying without tangible results, decide to “call it off” by archiving the project, so that they can pick it up again at a later time and write off the loss. The irony is that, in many cases, companies that are still working would do better to hit the pause button, reassess, and regroup, rather than continue throwing money down the drain.
To illustrate this, let’s consider an 18-month implementation project. It’s usually about a third of the way, six months, that noticeable delays and mounting costs are experienced. There are many reasons for this. One of the most common is that additional requirements are often picked up within the first six months that were not within the scope of the RFP. Having defined the scope of a particular project, this now creates the need to charge for the changed scope and/or requirements.
Another common problem that arises within the first third is realizing how poor the quality and understanding of the data is. This is avoidable and we will see it shortly. Every project is unique, and every business is unique. However, there are some common themes that inevitably lead to failed ERP projects. These are:
1. Problems addressed from a technology perspective first
This is back to front. Of course, technology is evolving and has immense power to improve and change business. Recent trends suggest that, in the near future, every company is likely to have either an AI chief or a data chief. Within five years, the capabilities of advanced technology that relies on machine learning and artificial intelligence, as well as the power of API integration, will make commercial technology almost unrecognizable from just a few years ago. This is all well and good, but it’s important to land on the right technology for your business only after you’ve fully understood the context and needs of your business.
2. Companies don’t spend enough time understanding their processes
This is one of the biggest things that can change the perspectives of an implementation project. You need to understand where you are, or where you need to move from. Business leaders often see mapping their processes and systems as a waste of time, preferring to focus their investment of time and money on what they want to buy. This is a mistake. Only once you have mapped your current context, i.e. the people, processes and the technology currently available, can there be a common understanding across the business of the problem that needs to be solved, which will help its implementation?
3. Companies do not solve the problem of resources in advance
In many failed implementations, there has simply not been significant effort or focus on replenishment (ie, replacing business subject matter experts with temporary staff). Delays caused by resource issues increase exponentially as time goes by. Often, companies will seek external help to deliver their projects, hoping that this will solve their resource problem, which is not the case. The company’s resources are the agents that will promote and implement the change. All of this needs to be considered long before an RFP process begins and vendors are committed.
4. Underestimating change management effort
Perhaps a better way to see the cause of a failed implementation is to appreciate the need to leadership change. Who is leading the change from within? Who understands change and why it’s necessary, and who is prepared to navigate uncomfortable waters where tough decisions must be made? Who will carry uncomfortable messages to senior management? Often, we see companies appoint someone like the CFO or CFO to take the lead, regardless of whether this person has experience in a significant change initiative. There absolutely has to be a focus on the person or people leading the change, as well as their team.
5. Companies overlook governance
This is one of the easiest places to cut costs, but doing so is a mistake. There should be structures in place to govern the journey from planning, business case development, risk management, and broad stakeholder engagement, to effective project management methodology and reporting. Failing to lock down governance can lead to all sorts of complications.
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This brings us to the question: what is the best advice for a company to avoid incurring exorbitant costs with massive time overruns on an ERP project? If a business C-suite could make one decision today, what would it be?
Invest in understanding your full context now. In fact, in the ideal situation you would be doing this for up to a year before you hit the switch. Invest in understanding processes, technology and people. Develop a comprehensive understanding of your business as it is. The reason behind this is that you will have a much clearer understanding of where you are, what your needs are to get to the desired state, and what the right solution should be. You will also appreciate that any solution implemented will need to augment or integrate with existing systems and processes.
Working closely with companies of all shapes and sizes, Analyze specializes in process improvement, technology implementation and leadership change. As one of the most niche management consulting companies In South Africa, we pride ourselves on solving complex business challenges powerfully and efficiently with our tried and tested partner approach and methodologies.
Get in touch by calling +27 21 447 5696, email info@analyze.co.za, visit www.analyze.co.za or plug in LinkedIn.
- The author, Liesel Grobbelaar, is a Senior Consultant at Analyze Consulting
- Read more Analyze Consulting articles on TechCentral
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