Software implementations carry significant risks, including budget and duration overruns and implementation failures. Often, these risks can be mitigated with proper planning at the beginning of the project. Instead of making decisions based on fear, you should feel confident you’re addressing the potential pitfalls of ERP projects.
Here are six ways to mitigate risk before beginning the software implementation process:
Understand Your Business Strategy Objectives
Clarifying your business strategy requires collaboration among all stakeholders. During these discussions, define what customer success looks like and determine what’s working and what’s not. Most importantly, clearly articulate your objectives – do you want to create new business models or generate new revenue using ERP software?
These discussions will help you achieve organizational alignment. Ultimately, executives and middle management should be aligned around what changes are needed to improve your organization’s competitive advantage. With organizational alignment, you can reduce the risk of selecting the wrong software system. When you know your long term goals, you know what technology your organization needs.
Set Realistic Expectations
ERP failure is often caused by unrealistic timelines and budgets. Understanding what benchmarks are realistic for your industry and company size will help you set realistic expectations. While you may need to adjust expectations throughout the project, starting with a realistic estimate will make these adjustments less surprising to executives.
ERP vendors may not have a realistic view of the resources and internal requirements necessary for a successful software implementation. It’s up to you to create a realistic software implementation plan based on your organization’s unique situation. This is an area where independent ERP consultants can be helpful.
Prepare Employees for Organizational Change
It is human nature to resist change. Change resistance causes implementation delays, quality problems and reduced productivity. If employees don’t adapt to change, your digital strategy will not lead to lasting business transformation.
Obtaining buy-in from executives first is a good way to obtain buy-in from team members and employees. If executives are excited for change, this attitude will be contagious. You can obtain buy-in from all stakeholders by communicating the nature of upcoming changes and the reason for change. Communication should be guided by a change management plan, which is informed by readiness assessments and user acceptance testing.
If your employees aren’t using new software day to day, you will have to postpone go live until they accept change. However, if you obtain buy-in early, you reduce the risk of project delays. The sooner employees start using software, the sooner you’ll realize business benefits.
Optimize Your Business Processes
An ERP implementation is a good opportunity to optimize your business processes. While most back-office processes can be optimized based on standard software functionality, some processes should be redesigned independent of software. Processes that provide competitive advantage shouldn’t be constrained by an ERP vendor’s “best practices.”
Optimizing your processes before ERP selection minimizes risk because you’re ensuring you select software that meets your current and future needs. Optimized processes help you develop demo scripts for ERP vendors to ensure they focus on your unique needs. If you were to select an ERP system without knowledge of your future-state processes, the software might require extensive customization.
Why bother with business process reengineering? Employees at most organizations work in silos and have different ways of performing similar processes. This creates duplication of effort and makes it difficult to gather and analyze data. Improving the customer experience via software implementation requires real-time data, so you should break down silos as much as possible.
Plan for Data Migration
With every software implementation, there is the risk that ERP software will not enable the organization’s strategic objectives. To mitigate this risk, reliable and actionable data is essential. As soon as you select a software application, you should start preparing for data migration. Most legacy data is not ready for new systems. Data is usually spread across multiple sources with various structures and formats.
To account for this complexity, you should document and establish a data strategy. For example, you will need to cleanse data to resolve duplicate data and other common data quality issues. You also should define future nomenclature for items, item descriptions, units of measure, etc. Successful data migration requires involvement from four key groups: data owners, the functional team, the data migration team and the project team.
Limit Software Customization
Once you start down the path of software customization, it’s difficult to stop. You might receive customization requests even after you’ve made it clear there will be no further changes. After the final round of customization, you should only approve customization requests that truly benefit your competitive advantage.
Strong project governance and project management ensure the implementation team doesn’t over-customize the ERP software. Investing in business process reengineering also is a good strategy for limiting last-minute customization.
Technology-focused Projects are Inherently Risky
There is a distinct difference between technology-focused and business-focused projects. Technology-focused projects neglect activities that align people and processes with new technology. Business-focused projects, on the other hand, focus on change management and business process management. Guess which type of project is less risky.