In this blog, we examine the circumstances that can lead to an ERP failure, and several real-life case studies are referenced as background. Every ERP implementation comes with different challenges, but avoiding these 5 pitfalls can help any company improve its situation. Each section also includes best practice recommendations on how companies can better prepare for this complicated undertaking.
Poor Strategic Planning
The importance of strategic planning for an ERP implementation cannot be understated, and failure to do so can result in a catastrophe.
Some companies think of an ERP as a cure-all for their problems, but they end up wrapping bad processes around the technology. This reactionary mindset can get companies in trouble before the implementation process starts.
For example, a department store called Woolworth’s Australia was upgrading from a 30-year-old in-house system to SAP in 2016. The company changed data collection procedures to accommodate the new SAP system, but it didn’t fully understand it’s own processes beforehand. Improper documentation of existing business procedures resulted in data loss, so the company couldn’t generate profit-and-loss reports for nearly 18 months. This ERP failure cost the company $200 million.
Companies must take stock of existing processes, people, and systems before entering into an ERP implementation. To take it a step further, ERP implementations can be viewed as a business transformation rather than just a technology project. A focus on processes and people before the technology will help set the right tone across the entire company.
The strategic planning process should also include post-go-live support from the implementation partner, along with customized employee training and knowledge transfer sessions. These will help better protect the company from needing a project rescue or other complications.
Fully understanding these aspects will streamline the process for goal setting, budgeting, timelines, and other activities associated with an ERP implementation.
A strategic plan is only as good as its execution, and proper communication is the connective tissue keeping everything together along the way. Ineffective communication can easily derail an ERP implementation, so it is critical for all parties, internal and external, to remain transparent and forthcoming. At SuiteCentric, we practice TransCAREncy.
Communication challenges can emerge at any stage of implementation, but they can be the most damaging during the requirements gathering stage as the needs and project scope are discussed. One misunderstanding has the potential to shift the entire project off course, so clear articulation of needs and requirements by the company is paramount. In addition, the implementation partner must admit if they are unable to translate requirements or if there are any lingering questions.
Open lines of communication (via Slack, phone, email, etc.) and regular check-in meetings are common to ensure expectations are met and timelines are on track. Both parties must agree on benchmarks and measurables to define the results of their efforts. Failure to do this can be costly…
Garbage disposal company, Waste Management, was involved in a $100 million legal contest with SAP over an ERP failure in 2008. The company claimed SAP participated in a fraudulent sales scheme, to which SAP replied with a separate lawsuit claiming a violation of the contract for “failing to timely and accurately define its business requirements.”
One wonders what would have happened if the two parties communicated better.
Lack of Company-Wide Buy-In
The ripples of an ERP failure will be felt across an entire company, so it is important to have buy-in from everyone. Systems, processes, and responsibilities change after an ERP implementation, so taking steps to minimize potential friction is imperative to achieving success.
If management is not onboard or actively engaged throughout the process, then the implementation is destined for failure. Management plays the most critical role in the strategic planning process as it sets the parameters within which the implementation team and implementation partners can operate.
Strategy, resource allocation, budgeting, timelines, etc. are all dictated by the management team. This group also must remain actively involved throughout each stage because certain decisions can impact core processes, and might have implications for the future. For larger companies, this level of involvement will make it easier to communicate updates to stakeholders, the public, or other interested parties.
Employees in non-management roles are on the frontline and need to fully grasp the gravity of the changes taking place. Communication is vital, and “managing up” is incredibly useful in this scenario.
Some employees could feel as if they have multiple roles simultaneously during the ERP implementation process and will need assistance from management to help balance their workload, and set expectations. The frontline employees should also feel empowered to provide feedback on how to make processes more efficient or to find workarounds that are scalable.
All groups need to commit to the necessary training to learn the new ERP system and business processes. This will help with adoption and can streamline the overall project timeline.
Successful ERP implementations are the result of total team efforts.
Picking the Wrong Implementation Partner
Picking an ERP implementation partner can be stressful because the stakes are high. It can feel like you’re mortgaging your company’s future based on the abilities of a stranger, but, luckily, there are a lot of great partners available.
Implementation partners should have relevant real-life ERP experience, and they should also have experience within a company’s specific industry. These partners will already have a working understanding of the challenges a company faces, and there will be less of a learning curve. The partner’s expertise can be leveraged throughout the implementation process, and they will be able to shape the ERP around the company’s requirements. And, if they have ERP end-user experience (like SuiteCentric), that is an added bonus.
Due diligence is imperative to the partner selection process. In addition to asking the standard qualifying questions and watching a product demo, getting customer referrals can be helpful to rule out unworthy candidates. In the final stages of partner evaluations, companies should ask to speak with the would-be partner’s customers to get a sense of the overall experience. This can be revealing and might push the scales in favor of one partner over the others.
Picking the Wrong ERP Platform
Even if a company has all its ducks in a row internally and its implementation partner is top-notch, the ERP platform can still be a bad fit. There is a wide variety of ERP platforms in the marketplace, but not every platform is right for every situation. The strategic planning process mentioned previously should include evaluating different ERP platforms.
Understanding current operations and processes, along with future goals, are pivotal in the ERP selection process. An ERP is a tool that should help a company achieve its goals. When conducting research, companies should see which ERPs are used by other successful companies in their industry. These are often mentioned in press releases or case studies by the ERP platform providers.
More generic ERP platform options with lower upfront costs typically require additional customization, development, ongoing maintenance, and have other long-term challenges. This can cause longer deployment timeframes and will reduce the overall ROI.
Alternatively, the larger ERP platforms can, on occasion, force companies to purchase bundles or other systems that are not needed at that specific time. This can cause unnecessary expenses and may force a company to make organizational changes before it is ready to do so.
A third possibility is that the ERP platform is not fully mature like SAP’s S/4HANA that caused global makeup company Revlon to have an infamous ERP failure.
For the reasons mentioned above and more, we recommend NetSuite’s fully-integrated ERP. It is the world’s most deployed cloud-based ERP solution, and it is trusted by more than 40,000 organizations and subsidiaries around the globe. NetSuite ERP has a modular design so it can grow with your business, and it natively integrates with CRM, ecommerce, HR, inventory management, and much more.
Please contact us if you have questions about an ERP implementation or if you’d like to learn more about NetSuite.
Also, feel free to download the NetSuite ERP PDF below!