In my previous post, I reviewed why answering “Why?” is critical before starting an ERP implementation project. Many companies fail to meet their objectives because they don’t set any. It’s hard to achieve value if you don’t know what you want to accomplish. Once you determine why your organization should move ahead with an ERP implementation, you need to consider very carefully what exactly you need to change.
What do we need to change for our ERP?
During this step, many companies try to take on too much. Once they’ve decided they need to change, they assume that the best thing to do is to change as much as possible – especially since an ERP license typically comes with a lot of functionality options included. Companies make the decision to implement the many options available to them, rather than critically considering what needs to change on a systematic basis.
More scope does not necessarily mean more benefit – just like more ingredients in a meal does not mean it will taste better. Moreover, added scope in an ERP implementation almost always results in more costs, time, and risks for an organization. Rather than try and implement every possible module associated with an ERP solution, companies should have a guiding principle to achieve the “minimal viable scope” – the minimum solution needed to achieve the value a company desires. By looking to achieve the minimal viable scope, a company can align a solution with its desired outcomes while reducing risks associated with implementing added capabilities that are not needed or required.
The best way to determine the minimal viable scope is to consider the Value Cascade, as depicted in Figure 1. The business outcomes identified at the top of the figure set the tone (focus) for the rest of the cascade. In order to achieve the desired outcomes, companies should define the list of business capabilities which are necessary and sufficient.
Further, to achieve each business capability, companies should identify all the necessary functional capabilities (i.e., the process capabilities needed to deliver each business capability efficiently and effectively, the technical capabilities needed to automate or enable the processes, and the people capabilities needed to support both process and technical capabilities). Once each of these has been defined in an ERP implementation, the company will be able to define the scope of the technology (in this case, the ERP solution) needed to deliver to the technical capability requirements.
Making the tough decision of what not to implement right now may not be popular with those business stakeholders who are feeling some pain at present, but it is critical to ensure that each phase is as simple and lean as possible yet provides the components necessary to deliver the desired outcome of each phase.
It is important to remember that with ERP, it is usually easier to add more sophistication to a simple solution later on than it is to reduce the complexity of a complex solution. Furthermore, since not all business outcomes are needed right away, most companies can define the timeline desired or required to achieve the outcomes. This timeline also facilitates the phasing of the capabilities required to deliver those outcomes. We call this timeline the “capability roadmap,” which defines when we expect the various business and functional capabilities to be delivered.
For more about the keys to a successful ERP implementation, please check out our new thought leadership paper, Creating a Recipe for Success: Questions to guide the development of a first class ERP solution.