The Issue: Fewer than 20% of companies recently surveyed have the three critical elements necessary to ensure that their Enterprise Resource Planning (ERP) projects further the company’s top business transformation goals.
Information Technology (IT) groups continue to struggle to prove the value of their massive investments in ERP, but they have already lost the fight because if you are still trying to show the value, it’s already lost credibility in the eyes of chief executives. With 57% of companies rating themselves fair to poor in measuring IT costs and benefits, it’s no wonder that their leadership doesn’t see the link between IT spending and corporate goals.
Past spending is a sunk cost; now’s the time to plan for the future
Are your proposed ERP projects critical to changing the competitive posture of your company? Do they address a strategic goal of the company articulated by top management, or are they a random list of departmental requests? Do they just shave a few costs here and there--or worse, do they only address IT issues?
The most successful companies shared three key attributes:
A clear corporate vision emphasizing consistency and cooperation among business units
The value of a global ERP implementation comes from taking advantage of common customers, suppliers, materials, and business processes around the world. Companies need to change their past practices and execute consistently across business units to see the benefit. Executive management at the most successful companies we spoke to articulate a few simple, easily understood transformational goals for the company; goals that changed the company’s competitive posture. These common goals permeate the case for each business and IT project, establishing priorities and resolving differences of opinion. The CxOs saw ERP as a change agent and emphasized a “One Company” approach to ensure cooperation among business units.
One corollary: Decentralized companies and those that emphasized Profit & Loss (P&L) responsibility as their primary measurement of business units take longer to achieve and are half as likely to exceed their Return on Investment (ROI) expectations. Companies using a Balanced Scorecard to measure business unit leaders fared much better.
A dedicated group harmonizing and improving business processes
Getting business units to agree on common business processes is difficult for most IT or ERP project teams. Continuous improvement requires ongoing analysis in light of changing market conditions and a steady stream of improvement projects. We found 41% of companies with a dedicated process improvement group were highly satisfied with their ERP projects, compared to 27% of those that did not.
The best results, however, were reserved for companies in which the process improvement group was led by a senior executive, reporting to the C-level. Sometimes called Chief Process Improvement Officers (CPIOs), their seniority and access to top management gives them the clout to effect lasting change. The difference? 60% of this group is highly satisfied with their results.
A central financial analyst presenting a credible and transparent accounting of the costs and the business value realized
Executive management is skeptical of ERP and its benefits because they are hard to find in the income statement and balance sheet. A few companies are solving this problem by appointing a dedicated financial analyst to bring rigor to benefits accounting. These analysts do the following:
Unless you are in one of a lucky minority of companies that has all three in place, you need to understand what can be accomplished and what will be difficult to achieve. To improve your success, consider the following: