It seems that ERP failures are becoming increasingly common in recent months and years. Lidl, Haribo, and Revlon are some of the more recent ones. Many of us still remember historic ERP nightmares such as Hershey’s, Nike, the US Department of Defense, and other well-publicized train wrecks (see the top 10 all-time ERP failures here).
Many assume that these disasters just “happen” to organizations or are a result of bad luck. But our experience helping companies recover their troubled ERP implementations and as ERP expert witnesses reveal that this couldn’t be further from the truth.
How do ERP failures happen?
Distinct patterns tend to separate successes from failures. In addition, successful ERP implementations tend to look a lot like other successes, while failures look a lot like other failures. And successes share some of the opposite traits as their failed counterparts.
In other words, success and failure is extremely predictable. In a recent keynote presentation at our annual Stratosphere conference, I reviewed the handful of patterns that separate ERP successes from failures. Some of them include:
- There is a clear digital strategy and alignment
- Business drives the technology – not the other way around
- Organizations and project teams have realistic expectations
- Teams don’t overanalyze technology decisions, but instead invest that extra time and money in their implementations
- They develop and deploy very effective organizational change management strategies
This video provides a view of my full 60-minute presentation on the topic:
Top challenges of ERP implementations
In addition to understanding these common patterns, it also helps to understand the biggest challenges that executives and project teams faced in their recent digital transformation and ERP projects. This provides real-world insight into what CIOs, executive steering committees, and project teams struggle with during their deployments.
Some challenges are more severe than others. Some are symptoms of deeper root causes. But all highlight some of the areas of your project that you should pay close attention to. These indisputable facts also expose some of the ERP industry hoaxes and myths that so often mislead project teams down paths that lead to failure.
This data from our 2020 ERP Report shows the top 5 challenges that organizations said they faced during their recent digital transformations:
Defining a clear vision and strategy for your digital transformation and ERP implementation
It is also critical that your organization and project team clearly define what your digital strategy really is. In other words, is this a technology upgrade or lift and shift? Or, is it more of a true business transformation to overhaul business processes and your culture?
The answers to these and other questions need to be clearly defined and understood. Often times, companies don’t have a clear vision of what they want their projects to be, so they end up shooting in the dark and guessing as to what the right answers are. Or worse yet, they defer too much to their systems integrators, who don’t necessarily understand their business or have their best interests in mind.
In other cases, executives may have a vision for one type of project, but the project team is not aligned with that vision. For example, executives may indicate a desire for moving to a shared services or standard business process model for certain functions. But when it comes to their ERP strategies and implementations, they end up underinvesting time and money in a way that does not adequately account for those complexities.
It is important to first have a clear vision for the project. This slide from my recent presentation (and discussed in the video above) highlights the differences between the two sides of the continuum:
Implementation readiness is a critical juncture in determining success vs. failure
The patterns and findings described above are often determined during the all-important implementation readiness stage of transformation. This is inflection point during the transformation where the technology is chosen until the implementation begins in earnest. The problem, though, is that most organizations skip over this critical phase.
In some ways it is understandable. Companies and teams are often excited and riding a lot of momentum after the ERP software selection phase of their projects. They see light at the end of the tunnel of their old, outdated systems – and vendors and systems integrators will often apply pressure to start sooner than later – so it is no surprise that organizations overlook this step.
The result of this oversight plants the seed for failure later on. Here are the steps of how rushing through the implementation readiness phase typically unfolds:
- Vendor and SI assure you that there is no need to prep for their arrival – they can start as soon as next week.
- The meter starts running on a large number of expensive resources.
- The functional and technical team are ready to start building stuff, so they start asking questions about how you want the software to be designed.
- Your team has no idea how to answer the questions and quickly realize that ERP best practices don’t exist.
- Meanwhile, the meter is racking up project costs (and delays) while you try to figure out what you want to be when you grow up.
- The technical consultants end up moving much faster than your team is capable of moving.
- As a result, people, process, and technology gets severely misaligned throughout the implementation.
The end result from this sequence of events is often underwhelming at best:
- The project ends up costing more and taking more time than expected.
- The systems integrator ends up making many of the decisions for you – since you weren’t ready to begin with.
- The overall transformation is misaligned with the initial vision and intent of the project.
- The project fails to effectively incorporate critical workstreams, such as organizational change management, data migration, process improvement, and quality assurance.
- Your team becomes overdependent on the systems integrator and fails to build the necessary internal competencies.
In other words, a failure to focus on implementation readiness leads to losing control of your transformation. A common trait of successful implementations is that they do in fact invest time and resources in the ERP implementation readiness phase of their projects. They aren’t afraid to push off the expensive systems integrators while they figure out what they want to be when they grow up.
Conclusion: the difference between ERP success vs. failure isn’t rocket science
ERP implementations are never easy, but they aren’t rocket science, either. Successful projects simply do things similarly effectively as other successes and avoid many of the same mistakes that plague failures. They key is to understand and act upon those patterns and differences.
Please feel free to contact me to brainstorm ideas on how to make your ERP project successful and to mitigate failure. I am happy to be an informal sounding board as you start or continue on your digital transformation journey!
