Interview with Danish IT media: How to avoid ERP failure
ERP projects can easily cause restlessness and frustrations among CIOs. In fact, ERP projects come in last in a recent study on Technology Risk-Reward made by Computer Economics. High risk, high costs and low value sum up the experiences by companies when implementing ERP. How may companies avoid risks and maximise value of their investment? The Danish IT media Version2 has interviewed Poul Kjaer, former CEO of Pipol, on the subject. This text is an English summary of the published Danish article.
Having worked intensely with international ERP through the past 20 years, Poul Kjaer acknowledges the study findings. ERP is extremely complicated and expensive if projects are not prepared, launched and managed properly, he argues.
What goes wrong, and how may companies turn ERP implementation into a joyful experience?
According to Poul Kjaer, ERP is the heart of any company. It drives business transformation and digital transformation and is much more than an IT solution. Therefore, he advises companies to:
- Reckon that ERP is not a CIO project, although the CIO is often the first to blame if things go wrong. ERP is a business project. Business management must drive the project, and the CIO facilitates the project. The distinction here is important.
- Focus much more on the ERP users and the business processes instead of technology. If nobody asks users how they actually apply ERP, or look into what processes can be automated and improved, it is very difficult to obtain the strategic benefits of ERP, i.e. business transformation and increased competitiveness. Technological features may be hugely interesting – but you should never start with discussing technology. Always start with the business’ needs.
- See ERP as an opportunity to adapt their business processes to a changeable world. Just as business management must deal with constant changes in the outside world, the ERP system must be able to adapt accordingly.
When Poul Kjaer was employed at Navision in the late 1990s, there was no strategy for international ERP. In practice, this meant that a company had to apply different partners in each country for all their subsidiaries. He founded Pipol to introduce a different approach: One global partner with Pipol as project lead and local partners to drive local implementation.
’We established Pipol, because customers wanted to be able to consolidate data from the various subsidiaries and implement best practices in each, individual country. If we entered a Group CFO’s office, and Excel spreadsheets were hanging on the walls, we knew instantly that this was an interesting customer opportunity,’ he quotes in the article.
To identify how ERP best can help a company become more competitive, Poul Kjaer recommends that companies follow a 3-step process which consists of a Readiness Assessment, Organizational Change Management, and a Sustainability Workshop.
- Readiness Assessment clarifies the goals and vision of an international company. Are goals anchored at all levels in the organization – and, most importantly, in the subsidiaries? Very often, ERP projects go wrong because the recipient organization has resistance towards or lacks knowledge on the new solution and the benefits. The readiness assessment phase ensures 360 degrees alignment and identification of business potential.
- Organizational Change Management ensures that the organization is ready and motivated to handle process and organizational changes. This is not an easy task. There will be surprises along the way, and perceptions have to change. Therefore, this has to be done in collaboration with the organization and specialists.
- Sustainability Workshop is a critical walk-through of the solution and presentation of new functionality and industry practices. The ERP solution must not become a static system. Business processes should always be adapted to the outside world, and the ERP solution should at any time support the right business processes.
‘There is no point in having a static approach to your business management and business processes. You have to build something that allows continuous change. If you do not do that, your investment is lost. And then you become quite dissatisfied with your ERP’, quotes Poul Kjaer in the article.