When organisations embark on significant changes, it’s common practice for CEOs and their leadership teams to thoroughly prepare, analyze the situation, and collaborate with partners – all to ensure a seamless transition. They understand the importance of keeping all stakeholders aligned and on board throughout the process.
Surprisingly, this level of diligence often doesn’t extend to ERP implementations.
Despite their transformative potential, these projects are frequently seen as an IT concern – a perspective that significantly misrepresents its scope and impact, leading to missed opportunities, excessive costs and ultimately a failed transition.
But this misalignment is just the tip of the iceberg…
In this article, we delve into 10 critical mistakes that contribute to the failure of ERP implementations (and how to avoid them).
Let’s start with the basics first. Essentially, ERP (Enterprise Resource Planning) refers to a software solution used to manage day-to-day business operations, Finance and CRM, among other things. As such, an ERP implementation takes place when an organisation is switching to a new ERP system.
When done right, an ERP implementation can lead to tangible business benefits, and play a central role in streamlining operations, improving efficiency, and facilitating better decision-making within organisations by integrating and automating key business processes.
A pretty good deal, isn’t it?
So, let’s see why most organisations fail to execute their ERP implementation successfully. What are some of the most common ERP implementation challenges?
Usually, the entire process starts with an outdated system that is no longer supported by the vendor. And in most cases too, the IT department that notices this, takes it on. This is where the mistake happens: something that is supposed to be a business decision, starts, continues and is being solved solely from the perspective of the IT department.
An ERP implementation is a business transformation, not an IT programme.
That’s because a full ERP system touches every facet of your business: from customer engagement to product and contractual models. Therefore, the real magic happens when the business drives the ERP implementation.
So, set up a team that includes a representative from every department, including business analyst(s) to capture the complete end-to-end customer journey. This holistic approach encourages out-of-the-box thinking and ensures that the system supports the necessary collaboration to enhance the company’s strategic objectives rather than just upgrading its technology.
From here on out, you can start running the project.
Imagine a company operating in over 20 different countries…
As each country is using a different IT system, it’s difficult for the CFO to analyse their data. So, the CFO goes ahead and asks the IT department to create an IT backbone that can cater for unified finance reporting.
Instead of looking at the problem at hand, the IT department suggests opting for a full-fledged ERP implementation, which adds a whole new level of complexity. After several years of development, the system has only been deployed into a handful of countries – with none of them being satisfied with the solution.
As this scenario shows, a common pitfall of businesses during an ERP implementation is the failure to engage in comprehensive internal discussions about the need for a new system and the desired outcomes for their processes.
Businesses always talk in terms of WHAT they want, not WHY they want it or HOW it should work.
As a result, the transformation team makes all kinds of assumptions along the way, which could potentially derail your entire ERP implementation—or, at the very least, end up costing you a significant amount of money.
The answer will steer the project in the right direction. When you deeply understand the business there’s no longer a need to circle back for every question, because the project team knows how the Business wants their solution to function and why it matters to them.
Organisations tend to take ERP implementation planning too lightly; they make high-level plans and assumptions without delving into the specifics. This approach often leads to unrealistic timelines for the implementation process as these tend to have to make up for the previous lengthy development phase.
What I like to do instead? → organise a two-day deep dive session on the plan. Come together with the whole team to discuss all the dependencies, risks, and things we should cater to. And really take the time for everybody to understand the critical parts.
One (fun) way you could do this is by taking some brown paper, sticky notes, pins, wool lines, and visualising the entire plan on a wall.
Do this once at the beginning of the programme and repeat it every half a year if it’s a large programme. That’s how you set up a team for success! As it ensures everyone has the same reference when decisions need to be made. They know how part A affects part B and can anticipate the right actions whenever things don’t go as expected.
Often, sponsorship for ERP implementations sits too low in the organisational hierarchy. As a rule of thumb, your sponsor should be at least one level above the departments involved in your project. As such, the level of sponsorship required can vary depending on the organisational structure and scope of the programme.
For operational programmes, for instance, a first-line manager might be the appropriate sponsor. For ERP implementations, involvement often extends to the board level, as they impact various aspects of the business.
Moreover, it’s common practice for sponsors to delegate their tasks to someone below them. The problem with this, however, is that it’s not mandated. So, if something happens and you need a quick decision, the delegate gets called back by the real sponsor, because he/she doesn’t support the decision. That’s when you lose momentum.
So even when sponsorship is FULLY delegated, always make sure that your real sponsor is fully in the loop and knows about all the risks you’re anticipating.
You’ve probably felt it by now; the implementation of an ERP system is a significant undertaking, typically requiring one to two years and involving both IT and business teams.
As such, there’s always a conflict between running your business and improving your current processes. This might be a hard pill to swallow, but it’s key to temporarily and partially free up Business FTEs for the transformation. Their continuous involvement ensures that nothing gets lost in translation and that the project remains aligned with the business’s goals.
(Just a heads up, though, if you need all hands-on deck for a business emergency, you can pull them back. But remember, this will stretch out the time it takes to get your ERP up and running.)
When the decision is made to implement an ERP programme, it’s essential to begin by establishing the architectural framework and foundational principles, such as adhering to standard functionalities and minimising customisations—practices that are widely acknowledged but often overlooked.
To genuinely adopt an architectural approach and adhere to standard configurations, the organisation must be prepared and willing to embrace change. This readiness implies that all current capabilities and ways of working are up for discussion.
Comprehensive end-to-end scenarios must be run on the new architecture, on processes, IT, and information. These end-to-end walkthroughs, conducted on paper, must fulfill the desired outcomes for the organisation, portfolio, and customer journeys. Solid decision-making is needed when considering deviations, as such decisions may translate to costs in the future.
Like with any business transformation, there is resistance to overcome. People get very uneasy when they must use a new system. Everyone involved – including the team to support – should be aware of the level of anxiety that is always present for the end users.
This involves the entire process of aligning the various levels of an organisation with the ERP implementation.
Think of activities like:
When rolling out an ERP system, it’s a mistake to dwell solely on the technical bits without walking your team through the end-to-end business process. This oversight can lead to confusion and inefficiency when it’s time to put plans into action.
For instance, in sales, the goal is to quickly make offers. The need to fill out numerous fields or verify specific details, like signatory authorities, might seem unnecessary from a sales perspective. However, these steps are crucial for other departments, such as finance, which relies on accurate information for invoicing.
The solution therefore lies in clearly explaining how each part of the process affects the other. It’s not just about entering data or following technical steps; it’s about understanding the role this information plays in the larger business context.
This holistic approach has an added benefit; it builds a sense of interconnectedness within the organisation.
Create a change story that explains why you are doing this - tailored to the audience.
It’s critical to allow time for people to adopt, even after the go-live phase.
This is often neglected. People are usually given 2-3 weeks to get used to the system, but within that timeframe, they might only use certain functions once. Reducing support too quickly can lead to frustration and errors.
Continuous support, even after go-live, is what’s needed to get the comfort level up. This involves setting up a thorough support system with people online and on the floor, so everyone can get answers to all the “silly” little questions they might have.
Now, nobody can do it on their own. organisations typically lack the experience needed for an ERP implementation, because it’s not something they do every year.
So, the secret to success is to leverage the experience of others in the shape of external partners. There are two important notes to be made here:
This is the whole reason why LQ prefers to work in the partnership model with its clients, which is based on collaboration and shared responsibility. It’s the best of both worlds for ERP implementations, as you can leverage expertise without losing control or ownership over the project.
Feel free to reach out if you have any questions related to ERP implementations!
