In my latest post, I wrote about Microsoft’s new ERP system, Microsoft Dynamics 365 and what changes this release will mean to ERP projects. The question at hand is; how should you run future implementation projects of modern ERP systems?
What problems do we encounter in ERP projects today?
Today there are many examples of ERP projects that are not successful. One of the reasons is that the project is not given the right prerequisites from start. Typically, the company has an older legacy system that needs to be upgraded or replaced with a more modern solution. That is often how the project is defined and so also the project goal i.e. a technical IT project. A project team is put together with members of the staff that have the best knowledge of the current system and processes. Thereafter the process of replacing the old system with a new system begins. The prerequisites are set for implementing a new ERP system that resembles the old one.
The project is initiated with an analysis phase where a series of workshops are conducted to analyze the business processes and routines, often based on the setup in current legacy system. Based on the information gathered by the consultants, the partner designs and develops a system solution to meet the customer’s business requirements. The solution is setup in a test environment where the customer’s project organization tests and verifies that it in fact meets the business requirements (often with the current legacy system as norm). Thereafter the system is deployed.
The effect is often a highly customized ERP solution that does not perform efficiently. The system will also be expensive to maintain and upgrade. Most importantly, the change process is missed, the effect of challenging old inefficient processes and eliminate waste that are often the result of limitations in the current legacy system.
How should modern ERP projects be run?
Instead if the IT project approach discussed above, a change project should be defined with the purpose of streamlining business processes, communication flows and organization based on the possibilities that a modern ERP system brings. The goal should be a well performed change project with measurable efficiency effects on business processes, communication flows and organization. The implementation of a modern ERP system will become a means to achieve defined efficiency goals, not the project goal. Another effect will be that an important step in the digital transformation process that will be required by modern businesses is achieved.
If the business or organization is not ready for this kind of change project, it should not be initiated. To perform an ERP project is a big business risk and it will increase if performed without the right prerequisites. At the same time it is important to analyze why the business is not ready and what the consequences are of waiting. How does other parties in the market place act? If not now, when is a good time? Maybe there is a need to prepare the organization before initiating a large change project.
How should a change project be run internally?
In an implementation project of a modern ERP system like Microsoft Dynamics 365, the process will be quite different from the one describe above. Here you should not put a lot of effort into analyzing processes in the current legacy system. We can assume that the processes in the new ERP system will be so different that such an analysis will bring little value going forward. Instead you should start performing the key business processes in the new system and thus verify that the system supports them directly. LCS supports this approach. The potential GAP: s that are encountered will be documented in LCS to be handled later. Defined GAP: s should first be challenged to see if a more efficient process can be defined. Secondly solved by using add-ons (ISV-solutions, aps or web solutions). To customize the solution should be the last solution to a defined GAP (see more on why this is important under System maintenance below). Here a clear change management process backed by management is a key success factor.
This more agile way of running ERP projects will bring more focus on finding new possibilities in the new system that today where there is more focus on differences from current legacy system. It will also mean that that the customer organization will be more involved earlier on in the project. The more streamlined project process will also result on more efficient project performance and reduced project time.
To succeed in this change project, new requirements need to be met. Management involvement and support is key. This is a change project and it will affect the business and the entire organization. A project team must be defined based on new criteria where knowledge of current system and process or seniority is of less importance. Required skills are instead; ability to change, initiative and innovation. The project team will drive the change process and act as internal evangelists. Change management must be in focus throughout the project. The business will be subject to change and process streamlining. Built-in in errors and waste will be eliminated.
Once the system is deployed and the project closed, the system will be maintained and this phase is a also subject to change with Microsoft’s new solution. A modern ERP system like Dynamics 365 will be upgraded frequently which is a challenge for system maintenance. In the example above with heavily customized systems an upgrade means a complicated process which involves preparations and test before an upgraded system can be deployed. Current customizations must be evaluated and possibly customized to fit the new functionality in the upgraded system. This drives tome and cost, internal and external. To maintain a modern ERP solution in a cost-efficient way, the system architecture must be planned carefully. Customizations of the standard ERP solution should be avoided in favor of add-ons (as mentioned above). You can use a smartphone as a metaphor. If you want more functionality in your smartphone, you find an app that solves your problem, you don’t customize the smartphone’s OS or standard apps. A smartphone’s OS is frequently upgraded and you are seldom required to test and verify the upgrade before performing it, you just tap “Upgrade”. Once the upgrade is done, the app providers will provide upgrades to their apps.
There will not be solutions to all your business requirements in standard ERP functionality or in available add-ons. There will always be challenges in terms of local legal demands, customer specific demands etc. But the message is clear, avoid customizations, evaluate other solutions and focus on the change process. This change project should be executed in order to improve the business, not just changing ERP system.