The world is going digital and the trend is unstoppable. In the kingdom of bites, big data and algorithms, businesses have reached the point where Excel spreadsheets are old-school; they aren’t only sufficient but also inefficient. This is where postmodern ERP (Enterprise Resource Planning) softwares comes into play.
In this article, we talk about the importance of postmodern ERP systems, their advantages and how to get them running. Like in life, everything in business calls for a balancing act, and that’s why we also address the challenges they pose to businesses and practical ways to deal with them.
What is a postmodern ERP? (Or ERP in simple terms)
An ERP isn’t a stand alone application, but a category of business software comprising several modules, each one addressing a specific business requirement. In simple terms, ERP systems collect and organise key business information, helping companies run automated, clean and transparent processes and operations the smoothest way possible.
ERP provides internal insights through a central database that compiles information from every department, such as finance, sales, manufacturing and the supply chain.
Once the necessary information is collected and stored, leaders have the cross-departmental visibility necessary to analyse the processes and suggest and implement improvements. This could translate into cost savings and higher levels of productivity as people spend less time hunting for the right data.
ERP systems bring people, processes and technology together across a business, as mentioned in this article.
However, an ERP software isn’t something a business can simply buy as a package and put it to work. No, in this case, there is no “one size fits all” either. It needs to be tailored to meet existing specific business needs while taking into account future business development paths and expansion. The idea is to buy a solid and reliable solution that can be implemented and used long-term.
With the growing need to be data driven meaning data gathering and data processing, the automation of processes and the increase of business efficiency and effectiveness, the question is no longer whether to invest in ERP but rather what’s the best way to go about it.
How to adopt an ERP system: Key considerations
When a business is inclined to adopt a new ERP system, there are a few key factors they need to consider along with possible challenges:
Have a clear business case. It’s crucial that businesses set their expectations when adopting a new ERP system, while having a clear understanding of the business needs and keep them on the radar. Leaders must consider carefully which functions can help the business gain a competitive edge, mapping out how to integrate and optimise an ERP system to suit individual business functions.
Re-think current business processes in a fit to standard approach. When considering this system change, businesses have an opportunity to re-analyse existing processes and possibly to eliminate the ones that are no longer up-to-date or no longer fit the needs. It opens the door to exploring the possibility of adopting more optimal processes with the ERP software.
Consider the added-value of the new processes (Adopt vs Adapt). An inescapable step is to consider how the ERP system will translate into benefits for the business. For it to be meaningful, an investment in such a system should add value by improving current processes and functions, cutting costs, mitigating risks and enhancing return on investment (ROI). Business leaders will have to choose which process(es) will bring more revenue while also how those optimised process(es) can give them a competitive edge in their market.
Calculate the time and cost. ERP systems need both financial investment and time. While they’ve grown more accessible to not only big companies but also medium and small businesses, there are several points to consider when it comes to cost, such as third-party software add-ins, implementation, maintenance, and initial and continuous training. Timewise, it will depend on the business and the strategy they adopt, and the urgency of the transformation. It’s important to note that such process transformations will also require a new operating model as the business moves from manual to automated tasks.
These four factors should always be in the minds of leaders when they begin to think of this transformation journey. One can never be too careful when considering every business risk and the possible ways to mitigate them.
To ensure the transformation process goes smoothly, the next stage is developing the best approach to implementing an ERP system and the steps to take to ensure a successful transition.
Four phases of strategising an ERP system implementation
Like in any other transformation endeavor, businesses need to cautiously map out all requirements to ensure a successful ERP implementation: think of how to best redesign the chosen processes to take full advantage of the system, configure the software to support those processes and test it thoroughly before deploying it to stakeholders, according to this article.
First phase: Business case and preparation
Even if a business is merely upgrading an already existing ERP system, it’s crucial not to skip this phase. It’s about diving into the details, considering the scoop, the advantages, the budget and setting realistic expectations of what the success of such implementation may look like. It’s also about the stakeholders. The teams who are directly affected by the implementation of a new system should be fully informed of its implications, and later on all the business stakeholders.
Second phase: Design
This is when the business analyses existing workflows, design new, more efficient workflows and possibly other business processes so it can take full advantage of the system. Key users should be involved already at this stage as they’re the ones who have the most intimate understanding of current business processes. It’s also a way to get them introduced to the new system, giving room for a smoother transition.
Phase three: Development and testing
After setting clear design requirements, the development phase can begin. This part involves configuring and customising (when necessary) the software so it fully supports the newly redesigned processes. The team in charge of this transformation journey should also begin to develop a data migration plan, which can be complex since it should start with a data hygiene exercise. After filtering the data, the team should think of extracting, transforming and loading data from multiple systems, developing a procedure to deal with inaccurate information and duplicates. At the same time, they should also already create training materials to help new users adjust to the new system.
In reality, both the testing and the development phases take place simultaneously, as certain modules might be finalised while others are still being developed. The initial testing should include all the systems’ capabilities and basic functions, and involve stakeholders to test them for their daily activities. Documenting this exercise and the subsequent feedback is a good idea. The team leading the implementation wants to create an online troubleshooting with common questions to be launched together with the new system.
Phase four: Deployment and support
The faithful day the system goes live, the team should be prepared to handle unexpected issues while assisting the new users in understanding how the new system works. While the troubleshooting already provides a safety net, it may take time for users to adjust and fully accept this new “way of working”. An option to reduce the risk of being overloaded with issues and questions is to deploy first the high-priority ERP modules or processes, leaving the others for a later stage. Yes, cost-wise it is less of an ideal option for certain businesses so another solution could be to continue running older systems in parallel, allowing users to slowly move from one to the other.
After the deployment, it’s important to keep users happy and listen attentively to their feedback, adapting the system according to their needs.
It’s important to note that much like no ERP system is “one fits to all businesses”, the same happens with the ERP implementation strategy.
Sure, the above mentioned steps can be used as guidelines for most businesses but the choice of implementation will depend on the size of the business, its risk tolerance, the expectations of return on investment and how the overall transformation project costs.
Stakeholders are the key to ERP implementation success
Like every new digital solution, ERP systems have a learning curve. Stakeholders will need some level of training to learn how to work with them on a daily basis.
People are naturally resistant to change. Even if a system or tool is old and no longer fits the purpose or the long-term objectives, stakeholders are comfortable working with them. Their knowledge and experience provide them a feeling of safety and steadiness.
To successfully implement a new ERP system, employee experience is pivotal. It’s a given that if stakeholders are able to fully understand and adapt to new ways of working, the business will thrive. It translated into every member of the business having a common objective.
If businesses go the extra mile to engage with them, listen to their concerns and feedback, and ultimately show them how they can be part of the business change, they’re already halfway to success. For the other half, here are a few practical advice that business leaders can consider:
Establish a solid and transparent line of communication, informing stakeholders of the possibility of change before the start of the ERP implementation, including them in the design and development process. Leaders should be clear about the ERP system’s implementation objectives, the advantages of embracing the change and the possible challenges, while keeping stakeholders informed of the project status throughout.
Make stakeholders aware of the change benefits. It’s important that they are made aware of the benefits of the change, both internally and externally. Leaders or project sponsors should be able to explain how the new system will positively influence their daily tasks while also addressing possible concerns related to job loss.
Upskilling is the cornerstone of every ERP implementation. In a business, there will be both younger stakeholders who are quicker to embrace change and adapt to new technology, and older ones who will struggle to take on something very different in such a short period of time. Upskilling is a necessary tool to ensure a business can move forward in the digital age and take full advantage of the opportunities it brings. As the search for new and trained talent continues to be a challenge for all industries, upskilling continues to be the most viable solution to ensure business continuity and competitiveness. Not only for this, but it also helps to open the minds of stakeholders to change, new ways of working and design thinking.
What we think
Frédéric Chapelle, Partner at PwC Luxembourg
Implementing an ERP system is a transformational journey. Before starting a new ERP implementation, define a clear business case and achievable goals and assess whether the potential solution matches the business expectations and what it takes to keep it running. You don’t want to create a hole in the budget! When properly implemented, ERP systems are powerful and can be highly differentiating to support growth, and a success factor too. They help companies manage resources and information and reallocate talent from transaction driven to insight, and capital to areas that are key to the business, without sacrificing performance or quality.
