Installing ERP: Learn from Mistakes of Others - It's Cheaper

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I have made just about every mistake in installing ERP (Enterprise Resource Planning) software and systems, but I do some research from time to time to see if anyone has invented a new installation mistake so I can avoid it.  Mistakes are costly, but the most costly mistakes are those where you learn nothing.

So far the same four fundamental mistakes keep showing up and each confirms what I learned from my ERP mistakes. They may be characterized a bit differently in each article and some articles rank the causes by frequency of failures. The common thread to all of them, no matter what the rank, is that FAILURE and the seeds of failure are sown at the beginning of the project – they just show up at the later.

  1. Lack of Management Support – This shows up in a couple of ways:
    • Lack of Financial Support – Common thinking about the cost of software is based on the size of the check to the software developer.  The cost of the software is insignificant to the costs of an effective installation AND the costs of a failed one.  

      Within reason, don’t shop for software based on the cost of the software.  Make software selection based on your company’s needs now and in the future.  You can’t do that without spending some time and money to find out what those needs are.  The costs of planning, needs and gap analyses (the difference between software functionality and your specific needs), identification of existing business practices and design of new ones to adapt to the new system, gathering data to populate the new system, training, disruption to operations…  All those costs are about the same whether you select a powerful software system or one that has no hope of meeting your needs.

      One of my standard practices is to review the most powerful software for a given industry early in the planning process.  That helps me learn about those things that are important to the industry and that I should look for in software that is affordable for my customer.

    • Lack of Committed Resources – Software installation is like any other project.  If you use your best resources you will get the best result.  Have you ever noticed that the busiest people in the office are the most effective ones?  That’s because everyone wants them on their project or team.

      Frequently the people assigned to ERP installation projects are the ones with the most available time (…hmmm?).  Even then the ERP project is in addition to their normal responsibilities.  ERP installs are big projects that consume lots of capacity.

      It is unrealistic to presume that an employee will be effective and cooperative as a team member on a project that adds significant hours to their workday for several months all for the same compensation.

      Assign the best people, relieve them of enough of their regular duties so they have capacity, and produce consequences – positive and negative – commensurate with the success or failure of the project.

  2. Lack of Planning – ERP systems are a requirement for small to medium-sized businesses (“SMB’s”) who want to stay competitive.  That means the companies who have not had access to these powerful tools (or are living with antiquated technology) are beginning to look to software to help identify some of their business problems so they can be resolved.

    The tendency is to install an ERP system the same way they would utility software, like a word processor or spreadsheet – load it up and start using it.

    The difference between utility software and an ERP system is this:  word processors and spreadsheets don’t change your business processes.  They only become more effective tools for already existing processes.  Word processors make writing documents easier than a typewriter, but letters and documents are still written; spreadsheets don’t change the reports prepared, they just make them more efficient to produce.  Because reports are easier to produce and share with spreadsheets than those prepared on green columnar paper, you probably have a lot more of them, but they are still prepared manually.

    The ease of installation and use of office product software suites have put unrealistic expectations in the minds of management and users.  If the leader of your ERP installation team has never used, installed or designed business processes using these powerful tools… well, you can always tell a pioneer by the arrows sticking out of his back.

    ERP systems will change the way you do business.  They will affect every business process.  Some manual processes will be automated, you’ll want and get information about your business you could never afford before, and you’ll communicate with your employees in ways that were not possible – if you know what is possible, have the vision to see the end results and plan in advance for all those things to happen.

  3. Failure to know your existing business processes and the reasons for them – Business owners and executives make front-line employees responsible for performing certain tasks.  Sometimes employees know why, sometimes not.  Typically, a new employee gets a little training in the basics from someone who has done it before and then they are left to make it work on their own.  Changes are handled as they come. I am continually impressed by the ingenuity of front-line staff to get the job done with little or no direction.  

    The last person to ask how a process is done is the manager of the department.  They may know how it should be done, but unless they observed it yesterday, it’s a good bet “how it should be” is not reality.

    Business processes evolve in reaction to a breakdown or to accommodate business changes, but upstream or downstream practices affected by the new processes may continue as always.  Business practices that were “no big deal” for a couple transactions a month become major costs when those transactions grow to hundreds a month and more employees to process them.

    Humans are resistant to change and in reaction to their biology, they want a new system to function just like the old one.  You need to know existing business practices, why they are performed, what business purpose they serve and how a new system will take care of them.  Don’t make ineffective business practices permanent in a new system.

    Some of the later ERP systems support business process management with service oriented architecture and automated work flows.  That all means that the software is much more flexible to accommodate user (rather than programmer) changes in the software to fit business process improvement.  That capability can shorten the installation process by handling certain processes the same in the new system.  It can ease the culture shock of the new system, but the temptation will be to rush to get the system up and running using ineffective practices and never make needed changes after the initial install.

    Competitive advantage comes from continuous improvement.  “Good enough” is never good enough.

    Your software developer will be valuable help in the installation process.  They see a lot more installs than you do.  However, their time budgets for installation are based on gathering data to “populate” your business information like customers, vendors, inventory, and employee information; and training.  They can help with their observations of “best practices” used by others, but they can’t get deep enough into your business to know your company culture, the things that are important to you and your customers.

  4. Lack of Communication – People can’t stand an incomplete story.  When we don’t know the whole story, we make stuff up about how the story will affect us.  Did you ever notice that when people don’t know the whole story the end result of the story they make up is bad?

    Do you remember when computers took hold in the 1970’s, many people were in fear that their jobs would be replaced by computers?  Some jobs were replaced by computerized machines, but not many people were thinking about the number of jobs that got created as the result of computers.

    Management needs to have regular, open and complete communication with employees about company needs to stay competitive and the significant changes that will result from the installation of an ERP system.  If there are employees that will be significantly affected, let them know how they will be affected as soon as it is known, even if that means transition to a new position inside or outside the company and provide help in the transition.

Are you wondering whether an ERP install is worth the effort?  NYU, MIT and Georgia Tech studied the question: Which Came First, IT or Productivity? .  They wanted know whether IT (Information Technology) increased productivity or whether already-productive companies used IT.  They found that IT increased productivity and the virtuous circle of reinvesting some of the gains from increased productivity into additional IT produced significantly greater returns.

“Good enough” is never good enough for companies that want to keep their competitive edge.

I can tell you from personal experience that once the foundation of ERP is installed, and a culture of continuous improvement is adopted, the incremental improvements and integration with other software will produce greater continuing ROI (return on investment) than anything the business does, including its core business.

 

Grant Getman is the founder and CEO of Enterprise Design Group and a subject matter expert for ETSZONE and member of the ETSZONE Network.