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ERP Project Planning – Getting Real (Part 1)

February 28th, 2010 by

Planning success formulaWhen the client is not heavily involved, expect plenty of project surprises and no ownership in the planThe ingredients for optimal success require active client participation at every stage of the project – from project planning to project closure.

Anyone that has been around ERP long enough understands meaningful client involvement in the project is critical for success. However, it never ceases to amaze me how many implementation projects start with the software consultants behind closed doors developing a project plan in a vacuum. They later unveil the plan as some artful piece of work and present it to management for sign-off.

Interestingly enough, even some of the best software consultants are guilty of this, and there are two big problems with this approach. First, it prevents the client from getting heavily involved to take more ownership of their project from the start. Secondly, it involves a blind leap of faith in your software consultants, which is never a good idea. No matter how much analysis consultants do, they will never be aware of all the subtle aspects of the organization or project that could have a major impact on the validity of the plan. This is one reason why ERP projects “fail to meet expectations” in the areas of software, time and cost.

ERP Project Ownership and Business Participation

The fundamental problem is “blessing” something is very different than “owning” something. When the consultants develop and present the plan (with only token client input), it is now the consultant’s plan, not the clients. This is often reflected in senior management’s message to consultants; “great, go forth and make it happen” and by the way, hurry up.

Though the plan is endorsed by senior management, in the meantime the internal project manager, project team, key managers and employees in the trenches are not buying it. The reason: They have legitimate concerns that no one cares to hear or address. This has very real consequences, not only in the quality of the planning deliverables (plenty of project surprises), but also from the standpoint of managing change and internal commitment to the project. In other words, we have cut out of the process key people within the organization that play a big part in implementing the plan!

First, many confuse the sales proposal (from the consultants selected) as a project plan (fixed price contract or not). As ridiculous as this may sound, it happens all the time. No doubt, it will contain statements of project objectives, scope, responsibilities, schedule, resources, risks, consulting cost, assumptions, etc.  However always remember, the acceptance of the sales proposal signifies the end of the sales process and it is just that; a sales pitch not anything close to a project plan (we can actually use or believe). At this stage of the project the sales pitches are over, it is now time to deliver!

Also keep in mind when some consultants develop a project plan (project charter, etc) they use “templates” and then attempt to fill in the blanks. Nothing wrong with templates as a starting point, but the plan could end up a lot of hollow words, pretty gantt charts and formality, with very little substance. This is about lack of project management experience and templates will never make up for that.

ERP Project Scoping and Planning Phases to Refine Project and Implementation Plans

Once consultants are selected and the client project team somewhat formalized, every project should have a separate and distinct “scoping and planning” phase with specific deliverables. This represents the opportunity to analyze the business processes, scope, current systems, and many other aspects of the organization in greater detail. I am by no means recommending “paralysis through analysis”, but you must do your homework or pay the price later in the form of rework, delays, and cost overruns.

The consulting project manager can help lead and facilitate the planning process working closely with the client team. In fact, if the consulting project manager does not add value in this area, he or she will probably not add value anywhere else. When done correctly, the benefit is getting the client project manager, executives, and the entire client project team heavily involved and more committed to the plan. In the end, this improves the quality of the plan and ability to execute it.

A good project planning process results in a final “baseline” for project scope, schedule, budget, etc. that reflects project objectives, reality, and is understood by all key stakeholders. In other words, it is now a plan we can believe and support. It also becomes a tool to measure progress and a “handle” to manage and control the project. A bad project planning process results in a plan that is tossed out the window and we are now operating in the blind or with a totally different reality. Worse yet, we start making dumb project decisions to “catch up” to a schedule that was bogus to begin with.

It has been my experience the project planning deliverables of scope, schedule, and the consulting budget have the most influence is setting the wrong project expectations. Therefore, in my next three blog entries I address these topics with the goal of helping the client avoid the subtle pitfalls while becoming more knowledgeable and engaged in the ERP planning process.

The next ERP Project Planning blog topics in this series include:

Part 2:  The Twelve Dimensions of Project Scope

Part 3:  Developing a Project Schedule (We Believe and Can Support).

Part 4:  Ways to Estimate or Validate the Software Consulting Budget.

~~~~~~~~~~~~~~~~~~~~~~~~~

Author Steve Phillips runs a Blog entitled Street Smart ERP – Visit his site for more great insight and commentary.

 




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Changing the Direction of SAP, ERP, and IT Applications to Focus on the Customer and Innovation

February 19th, 2010 by

colored-drops 

This is the third part of an ongoing series on where the application technology market is today, including ERP vendors like SAP, Oracle, and others–, and where the market is headed.  The series provides insight on how to get ahead of the current trends and ride the wave that is building rather than getting swept away with it.  The current business trends and market forces for technology will reward the swift and adaptable who are able to address the key business areas that have been lacking in the technology space and it will severely punish those who lag behind. 

Today’s Technology Landscape and IT’s Alignment (or Misalignment) with Business Priorities

Far too long ERP and technology implementations have only focused on one of the 3 key value propositions, the pillar of “operational excellence” using things like process improvement or quality management.  This is a pure operational focus which ignores the critical components of business–, customers, and selling them the products or services they want.  From a business metrics perspective (or Operational business metrics and not Key Performance Indicators [FN1]) the focus on operations, automation, quality, and other business process management alignment with technology only deals with lagging indicators to business health and success.

Unless your products, services, or markets are commodity based, in the strictest sense of the word, this is a dangerous approach.  In the strictest sense it is like having tactics without a strategy.  In the end the consequences are usually disastrous.  They tend to be “knee jerk” and reactive rather than planned and proactive. 

The entire industry is filled with “consultants” and technology solutions to address current state business health and performance.  These only deal with lagging indicators that are “after the fact” and do not help business move forward.  Nearly all of today’s technology solutions, as provided by technology vendors and consultants, only address “operational excellence” propositions and do very little to address business value propositions or competitive pressures focused on customers and innovation.  With SAP in particular the functionality is available to address all of these business concerns but few consultants and even fewer vendors have any idea how to approach these key business areas.  They only work in the area and arena of business tactics, they have little understanding or idea of the business functionality related to competitive pressures, how to set it up, or even more basically, how to extract the key requirements from the business for scoping or blueprinting. 

“Tactics without strategy is the noise before defeat.” – Sun Tzu

Technology to Business Alignment Landscape – A Patchwork of Lagging Indicators is the Wrong Direction

Below is a graphic that shows the common CONSULTING DRIVEN application patchwork most CIO, IT Director, or IT decision makers are tasked with implementing and maintaining.  Notice that it is both a hodge-podge of systems, and creates a difficult to manage relationship that distorts the technology relationship with the business.  Notice that today most systems and technology work focuses on the lagging indicator side of the business, on the financial side, or on the cost control / efficiency side of the equation.  Current system integrator and consulting direction does not correctly align technology with where business is actually done–, at the customer facing points of interaction.  So, from a genuine business perspective can you see where the misalignment of technology is?

  • EC = Enterprise Consolidation – inter-company or multi-company financials.
  • APO = Advanced Planning and Optimization – advanced production and service planning, logistics, and supply chain capabilities.
  • ERP = Enterprise Resource Planning – integrated back-office systems for managing sales, procurement, inventory, financials, etc.
  • SRM = Supplier Relationship Management – vendor, procurement, and supply management including vendor marketplace bidding portals.
  • SCM = Supply Chain Management – sometimes another “flavor” or style of APO, or sometimes additional transportation and warehousing functionality.
  • BI (or BW) = Business Intelligence or Business Warehouse – data warehousing and reporting.
  • HR (HRM, HCM) = Human Resources, Human Resource Management, or Human Capital Management – HR processing.
  • CRM = Customer Relationship Management – usually a large contact management system the way most companies use them.

Notice that the current system integrator promoted technology solutions are not focused on correct [business and IT alignment], in other words, current approaches to technology are not “integrating technology and IT spend with business.” The current technology landscape that is promoted by software vendors, supported and implemented by system integrators, and understood by consultants contains only one area focused on leading indicators–, CRM.  In some instances, where the business insists, BI / BW reports may help to integrate data for meaningful leading indicator evaluation.  This only seems to happen when initiated by the business and not generally by the consultants.  And even in the area of CRM there are very few “consultants” who have any idea about customer acquisition or customer retention.  As a result most CRM applications are little more than glorified contact management systems.

Far too often today I see and hear technology consultants advocate for process improvements.  As if somehow that last mile of automation, or that last small amount of incremental improvement is going to somehow make a breakthrough in your company’s market position.  If you believe that, I’ve got LOTS of swampland in Florida for sale in an area where home prices were never touched and are still rising at double-digit interest rates every day!  Keep in mind that this statement and criticism of the focus on constant “process improvement” comes from an insider, a “process expert” in the supply chain area around Sales and Distribution as well as Materials Management.  So this criticism is not from an outsider and it even affects the entire range of solutions I generally consult in.  However one key difference is that I try to bring a dimension of those business concerns to every project I do.

“[B]usiness executives said the top IT priority and most important business driver (cited by 53 percent of those surveyed) was acquiring and retaining customers. Yet how well did IT actually support that mission during the past year? Nearly 50 percent of the business execs judged IT’s performance as ‘fair’ or ‘poor.’ Another 5 percent said IT did not support acquiring or retaining customers at all. Business execs’ ratings of IT’s impact on managing customer relationships were equally bad.”  Thomas Wailgum, “Enterprise Software Unplugged,” February 20, 2009,  CIO Magazine online. http://advice.cio.com/thomas_wailgum/why_the_recession_is_marginalizing_cios

If the operational value proposition is not what the future holds, and if there are higher and higher costs but smaller and smaller returns on investment, where is the next big technology opportunity?  Think of it like this, if lagging indicators are like “supply” and leading indicators represent “demand” and you focus on improving the supply side but do nothing for demand you end up with a collapsing business model.

In other words, the process improvement or “operational excellence” model leads to lots of capacity and a need for more and more customers to fill that capacity.  As competitors across the board all have focused on these process improvements, and as they have all gained capacity, you must lower your prices to continue to fill the capacity pipeline.  This is the “supply side” of business when what is actually needed is the “demand side” where customer retention, customer acquisition, and innovative products or services are found.

The entire technology sector must focus on customers and on innovation, without customers there is no business and without innovation products and services are converted to commodities competing on price. IT has an opportunity for innovation and leading edge business solutions using technology, not technology solutions that use business.

[FN1]  Using Key Performance Indicators for Building a Strategy Focused Organization and Why Indexed KPIs are Critical for Business Performance and Success


Part 1:  What is the Proper Relationship for the CIO, CEO, and CFO?

In the first part of this series we looked at the changing business landscape and what it means to the CIO, IT Director, IT Manager, or other key technology decision makers.  From a high level the current global business competition, as well as economic issues are directly affecting the C-level executive requirements and the CIO – CFO – CEO dynamic.  This article reviewed how and where the CIO role is coming under tremendous pressure and how to change the current dynamic by more appropriately partnering with the CFO and the CEO.  This partnership is a critical business bridge between lagging business indicators of business financial and process health on the CFO – COO side of the business house and the leading indicators of sales and product or service pipelines on the CEO side of the business house. 

Part 2:  CIO, CFO, and CEO Alignment – Why ROI is Lacking from Today’s System Landscape

The second part was an overview of the current system landscape and its focus on business processes and the emerging trend of trying to focus on the customer.  This piece also looked at the future business landscape and how the technology focus and direction will be permanently changed no matter what happens with the economy and global competition.  Because the technology marketplace (business consumer) is becoming more sophisticated and more attuned to business / technology alignment, the IT dynamic is going through a structural change.  The whole technology sector is slowly moving away from the “operational excellence” value proposition to the “customer focus” and “innovation” areas of the business.  Very few of the consulting companies and few of the application vendors see this sea change and are doing little to address it.  This is the area of technology market winners and losers of the next 20 years.

Part 3:  Changing the Direction of SAP, ERP, and IT Applications to Focus on the Customer and Innovation

The third part in the series looked at current technology landscapes and how they are aligned and then looked at future technology landscapes.  A brief review of the supply side and the demand side of business shows that unless you have lots of customers (demand) to fill a bigger and bigger pipeline (supply) then your business model collapses.  While it is hidden during good economic climates, any disruption in those economic conditions which fails to fill the capacity pipeline points out the glaring insufficiency of the “operational focus” to technology.  During any economic disruption, or any reduction in demand from customers for your products or services the current technology model falls apart. 

Part 4:  Future Technology Landscape Alignment for the CIO, IT Director, or Key IT Decision Maker

The final part of the series looks at the emerging technology landscape and what the future holds.  It lays out an emerging technology landscape model which has some re-alignment and some components already in use by some of the world’s most successful companies.  A new alignment of technology with the customer facing processes, and the use of social or collaboration tools across the enterprise with a clear business objective is explored.  The driver for the future change will be because the business does not see the revenue generation prospects of technology–, they fail to see the possibilities of promoting customer retention, customer acquisition, innovation, and marketplace analytics.  The new technology model looks to change that dynamic.





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CIO, CFO, and CEO Alignment – Why ROI is Lacking from Today’s System Landscape

February 17th, 2010 by

The first part of this series looked at What is the Proper Relationship for the CIO, CEO, and CFO?  The CIO role is already challenging and gaining in difficulty in today’s business environment.  And by all measures it looks as though things will continue to become more difficult and complex as time goes on.  Today’s CIO must not only keep up with technology, and business process improvement with automation, but must also become a “mini-MBA” in applying technology solutions to forward looking business strategies including customer acquisition, customer retention, revenue growth and profitability.  Although it is a monumental task it is possible.

Where technology can achieve solid ROI and breakthrough results in the enterprise are in the two key value areas that have not been well addressed: customer focus (beyond CRM) together with product or service innovation.

Want ROI?  The Next Wave in ERP Will Occur by Changing the Focus from Process to Customer

The heart of the business is the customer, without them there is no business. Today’s technology initiatives, whether they are with ERP products like SAP, various CRM offerings, or a whole host of other technologies and packages focus more on processes and on technology than they do on the heart of the business.  I’m a fan of visual models.  They help me to think through, adjust, and understand complex ideas in a simplified and high level manner.  For example, the simple model below represents today’s package application technology landscape in terms of the 3 key areas of business. 

  • The large red bubble is the technology process focus on the value proposition of “operational excellence,”
  • the orange block are the technology tools and systems that are typically applied,
  • the smaller green bubble is the value area of “customer focus,”
  • and the tiny center of intersection between business processes and customers in the blue block is the value area of “customer focused innovation”.

That is the sad state of today’s typical technology environment.

Customer Focused Innovation at the Process and Customer Intersection is the Ultimate Objective of a Change in Technology Focus

Successful package applications and technology application over the next couple of decades will dramatically alter this dynamic.  They will focus more aggressively on the customer and the innovation intersection between the customer and business processes.  Business processes will necessarily get closer to the customer and technology will be focused on the integration of the customer into business processes.  By doing so customers will have a greater influence over the types, quality, and availability of products and services.  The following model shows what I believe the next twenty years will develop as the winning technology landscape of the future:

  • Although covered with technology, business processes become a secondary focus to the customer for technology.
  • To enable this the technology landscape shifts to encompass more of the customer interaction with the business, potentially leading to ideas such as “mass customization.”
  • The area of customer-centered innovation becomes much larger as businesses learn to integrate their customers deeper into their business processes.
  • The customer naturally becomes much more important to the application of technology like never before.

The current state of the economy and global economic pressures have created a disruption in the classic technology model of process improvement and process automation.  Together with global competition and a potentially permanent change in customer purchasing characteristics winners and losers will emerge in the new technology arena.  As customers take center stage and innovation becomes more important just for business survival collaboration will become more and more important as well.  The transformation of business and technology will require new collaborative technology tools to build bridges between business, customers, and the product or service development areas.

Modern technology has lowered the barrier to entry for new competitors by allowing international outsourcing, greater agility, quicker product design to market, and specialized focus on niche markets causing more market fragmentation and specialization. Customers have a wide variety of information from sellers and the Internet about products, design, services, options, pricing, and availability.  Things are more dynamic than ever.

Because of the pace of change, focusing on “best practices” and internal process improvement, or even extending processes is no longer enough. Business can rarely (if ever today) integrate, automate, and streamline to achieve marketplace success –, to one degree or another nearly every competitor is doing this or is quickly headed in that direction.

Business complexity and the breakneck pace of change turns yesterday’s breakthrough technology into today’s commodity; vendors are modestly integrated into the extended supply chain, all the way from raw materials to end customer delivery; customers are more sophisticated and have more options than ever through the Internet; competitors have worked to incorporate similar technology throughout their entire process chains by integrating, automating, and accelerating their processes.  As a result, business demand on technology simultaneously creates new opportunities and new struggles. 

Want BIG ROI for Your Technology Investment?

Maybe it is as simple as changing the focus of where you invest your technology spend.  After all, without some major breakthrough in process design or automation the “last mile” of process improvement has the highest cost with the least return on the investment.  If you want  a big return focus on where the business needs the investment, in the areas that affect customer acquisition, customer retention, and innovation.  Once you figure these out and apply your technology investment there you will be seen as a genuine partner to the business and less of a cost center and overhead.  And once you figure these out your technology department will become the real “rock stars” of your business.
 

Part 1:  What is the Proper Relationship for the CIO, CEO, and CFO?

In the first part of this series we looked at the changing business landscape and what it means to the CIO, IT Director, IT Manager, or other key technology decision makers.  From a high level the current global business competition, as well as economic issues are directly affecting the C-level executive requirements and the CIO – CFO – CEO dynamic.  This article reviewed how and where the CIO role is coming under tremendous pressure and how to change the current dynamic by more appropriately partnering with the CFO and the CEO.  This partnership is a critical business bridge between lagging business indicators of business financial and process health on the CFO – COO side of the business house and the leading indicators of sales and product or service pipelines on the CEO side of the business house. 

Part 2:  CIO, CFO, and CEO Alignment – Why ROI is Lacking from Today’s System Landscape

The second part was an overview of the current system landscape and its focus on business processes and the emerging trend of trying to focus on the customer.  This piece also looked at the future business landscape and how the technology focus and direction will be permanently changed no matter what happens with the economy and global competition.  Because the technology marketplace (business consumer) is becoming more sophisticated and more attuned to business / technology alignment, the IT dynamic is going through a structural change.  The whole technology sector is slowly moving away from the “operational excellence” value proposition to the “customer focus” and “innovation” areas of the business.  Very few of the consulting companies and few of the application vendors see this sea change and are doing little to address it.  This is the area of technology market winners and losers of the next 20 years.

Part 3:  Changing the Direction of SAP, ERP, and IT Applications to Focus on the Customer and Innovation

The third part in the series looked at current technology landscapes and how they are aligned and then looked at future technology landscapes.  A brief review of the supply side and the demand side of business shows that unless you have lots of customers (demand) to fill a bigger and bigger pipeline (supply) then your business model collapses.  While it is hidden during good economic climates, any disruption in those economic conditions which fails to fill the capacity pipeline points out the glaring insufficiency of the “operational focus” to technology.  During any economic disruption, or any reduction in demand from customers for your products or services the current technology model falls apart. 

Part 4:  Future Technology Landscape Alignment for the CIO, IT Director, or Key IT Decision Maker

The final part of the series looks at the emerging technology landscape and what the future holds.  It lays out an emerging technology landscape model which has some re-alignment and some components already in use by some of the world’s most successful companies.  A new alignment of technology with the customer facing processes, and the use of social or collaboration tools across the enterprise with a clear business objective is explored.  The driver for the future change will be because the business does not see the revenue generation prospects of technology–, they fail to see the possibilities of promoting customer retention, customer acquisition, innovation, and marketplace analytics.  The new technology model looks to change that dynamic.

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