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New ERP implementation: How to ensure value realization

C-level executives may not have much experience deploying a new ERP system, but a consultant can help them realize the benefits of implementation, Jeff Carr writes.

With innovation in the enterprise software space at an all-time high, many companies are coming to the realization...

that the lifecycle of their legacy ERP system is coming to an end. Although there is a great deal of trepidation when it comes to replacing an existing system, a new ERP implementation can deliver substantial value realization when properly executed.

The fact is enterprise software systems have come a long way since they were first introduced to manufacturers back in the 1990s. The benefits were immediately apparent, including improved quality and efficiency -- a hallmark of the technology. Collaboration increased, data was more synchronized and accessible, and better decision-making by upper management was the result.

However, any system can calcify and quit providing incremental improvements. With new technologies like the cloud, and mobile devices becoming all the more common, it's time for many companies to rethink their enterprise technology solutions.

When it's time to consider a new ERP implementation

Most companies don't understand what the journey to a new ERP implementation is like. They may have been involved with one, but most likely 10, 15 or even 20 years ago. At this point, not much institutional experience is left from the initial ERP deployment. As a group, many in the C-suite are unaware of what is necessary for a successful transformation to a new ERP system.

That's where a third-party consultant comes in. In a consulting role, you can help guide your customer through a series of activities that will build a solid foundation for a successful project.

Set the foundation for ERP deployment

The definition of a successful project is the realization of the benefits provided by a new ERP implementation. Too many projects are more concerned with achieving an on-time, on-budget result as opposed to achieving the real value a new system can provide. Many consultants walk away at this point, consider their work done, and leave it to the end users to achieve the return on investment (ROI).

The ideal way to achieve value realization is to have a proactive program that fine tunes the internal processes to achieve that desired ROI.

It all starts with an analysis of the existing systems and their inherent weaknesses. Eventually, the task of educating the customer on what is possible with a new ERP implementation -- and its corresponding future state -- must be based on the values the new system is expected to deliver post deployment.

Those values become the goals for the new ERP implementation. When those values are identified early in the project -- well before any discussions with solution providers -- the company then has helped define success and determined the value realization of the investment.

Engage business end users

Another critical component to ensuring a successful transformation is to engage the business end users. They need to understand exactly why a system change is necessary, and how it can provide buy-in for new processes. Illustrating the redundancies and wasteful processes of the current system will drive change and acceptance.

After the flaws of the current system are known and the future state is mutually agreed upon, the question is, "What's the value of a new system?" That must be answered prior to speaking with any vendors.

Many companies don't achieve a good ROI if they forgo those initial steps of analyzing the current state and anticipating the future state. Without that groundwork, projects fail to meet expectations because users are resistant to change and continue to work as they did with the old system. They don't understand how the new ERP implementation will help them and they revert back to old behavior.

The unfortunate reality is, companies that don't take the time to proactively plan the process before selecting the solution seldom achieve the success they desire or recoup the investment in the new technology.

Revisit value statements post-deployment

After the new system is installed, it's instructive to revisit the value statements that were described in the future state. They are a veritable wish list. In order to justify the investment in a new ERP implementation, the company may agree, for example, that the future state will call for improving inventory turns by a specific amount. Or increase the velocity of the production cycle. Or perhaps enhance the scheduling capabilities to reduce the time to delivery.

After evaluating the post-deployment results, it's not uncommon to find they have failed to achieve significant benefits, even with a modern, robust ERP solution. The main culprit is that the company never set the goals to begin with, didn't analyze the current system for weaknesses and flaws, didn't define the future state and failed to proactively engage with the business process owners and teach them how to properly use the new system.

Realize the value

For companies that have the foresight to engage properly, the value realization can be considerable. The change management necessary for success is difficult -- if not impossible -- to achieve without user and management buy-in.

The advantages are bountiful for companies that are well prepared for achieving value realization after a new ERP implementation. A new system should bring:

a speedier, more nimble process, which enables the company to quickly respond to changing market conditions; improved and productive collaborations among different business units; better decision-making by management because of access to a more comprehensive data set; and higher quality and less waste.

The majority of companies approach ERP deployments in a half-hearted fashion and think the solution will provide results without planning ahead. Those that do the initial heavy lifting with a well-thought-out implementation plan will reap the benefits the technology promises, and achieve the desired future state.

Jeff Carr is the founder of Ultra Consultants, an independent research and enterprise solutions consulting firm serving the manufacturing and distribution industries.

Next Steps

Learn about one consulting firm's cloud ERP deployment

Get the details on hybrid implementations of ERP

Gain insight into the use of ERP in the aerospace industry

This was last published in July 2017

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