ERP Investments – Special Attention to 5% of the Spend Can Double Your Return

The road to Business Transformation enabled by ERP is paved with good intentions. However, many of the journeys end in not achieving the desired benefits. In fact, recent studies have shown that more than half of all programs launched achieve less than 50% of the benefits planned.

No organization goes into an ERP enabled Transformation of that scope, cost and importance without being pretty darned confident in its plan and the resources marshaled to oversee it. Companies that succeed with their programs stay focused on the benefits by incorporating steps within their programs to capture and ensure the return. These steps account for <5% of the total program costs but can lead to a doubling of return.

It is easy to lose focus on benefits over the long course of an ERP transformation effort. Managing these programs consumes a great deal of energy with attention required on configuration, cost management, risk management, testing and training. For each of these elements there are any number of methodologies to track and control the implementation process. The same level of rigor can be applied to ensuring and capturing the benefits by creating an active business case and formalizing the value extraction process. 

Suggestions for creating an active business case:

  • Treat the Business Case as an Active Document – The business case should be well circulated, acknowledged, controlled and easily available.
  • Identify Ownership of the Business Case through Specific Targets – The business executives and goals / targets explicitly related to the achievement of the business case must be identified.  
  • Link Process Capabilities to the Business Case – The process capabilities that must be in place to achieve the business case should be clearly defined. These process capabilities should then be clearly identified in the scope of work for the system integrator (SI). In addition to the capabilities required to achieve the business case, there should be clear documentation identifying existing capabilities which cannot be lost.
  • Define Formal Renewal / Approval Process – This process should be linked to program milestones and provide continued confirmation that the program is moving forward while renewing commitment to achieving return.
  • Track Benefits in a Formal Method– Clearly document the process to track and report on progress against targets. The methods to track and report should be included in the scope of the implementation.
  • Align the ERP Service Provider Contract with Business Case Achievement – Create provisions that are contingent on business case achievement. Link maintenance payments or additional software license buys to value reviews, not to utilization. Link value confirmation reviews to bonus payments or condition of start on next phase.

Suggestions for formalizing the value extraction process:

  • Sequence the Implementation to Accelerate Benefits and Generate Cash –Typically, IT departments will focus on lowering the total cost of implementation and not on maximizing the potential business value. Fix this by developing a clear understanding of the business case. This enables you to think through the implementation strategy to throw off cash potentially in Accounts Receivable or Working Inventory, allowing you to pay as you go.
  • Link Executive Performance Plans Formally to Benefit Capture. – This should not be simply a nod to ownership, but clearly defined goals and expectations of contributions for success.
  • Exclude Capabilities Not Linked to Business Case – Properly vet the scope document to exclude those items that are “nice to have” where there is not a formal plan to capture benefits. Nothing comes for free. There is always training, ongoing maintenance, and future integration to be considered. If new business capabilities are going to be available, there should be a detailed plan to capture the future benefits.
  • Engage the Program Team Lead as Responsible for Benefits Capture – This is the position on the program team whose primary focus is the administrative aspect of reviewing the business case, documenting formal capture process, and reporting on status. This is typically a component of the project management office or project controller office.
  • Track Compliance – This is one area that does not receive enough attention.  Process adherence is typically vital in achieving benefits. Without a formal mechanism to track compliance it is difficult to diagnose points of potential failure in achieving and exceeding goals of the program.
  • Institute a Business Intelligence (BI) Strategy that supports the Key Points of Interest you are Tracking – Understanding how you are going to track benefits and compliance provides a clear roadmap to supplement your BI strategy. Making it easy to retrieve the metrics associated with the program increases the likelihood they will be properly utilized.
  • Formalize the Process Renewal Program – Double down on your potential benefits through the deployment of a process renewal. A significant number of advancement ideas will surface that previously could not be justified. With the scale of the enterprise in one ERP, however, these small investments will yield substantial returns.

While the above work seems obvious to achieving success, many programs sacrifice these steps when the pressure is on to deliver. Don’t let the distractions of testing, data, training, and deployment divert your focus from the ultimate goal. The comparatively small investment in rigor aligned with capturing value will yield significant returns.

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