ERP systems are in the dead end
A couple of years ago, when we helped a client in the Middle East to select the appropriate ERP and EMR system, we evaluated the big players such as Oracle, SAP and some niche players like Infor. Already by that time, the systems were big, monolithic and inflexible.
And it was not too long ago when we proudly moved the ERP system to a global single instance and some clients outsourced it to a managed cloud. It was a lot about standardization and cost savings, and today it is still about standardization and cost savings, however, these monolithic system nowadays cannot adapt to the real process and system requirements from the business. In addition, the complexity and data volume increases exponentially.
So on one hand the IT standardization seemed to be the right direction and the process adaption was underestimated. Spending more budget to standardize IT systems and migrate ERP systems to newer releases does not necessarily mean that the processes were improved because they did not reflect the changes through digitalization enough.
On the other hand, to replace an ERP system which has been implemented in the nineties with standardized processes is politically and technically difficult, especially when the company is using centralized and standardized systems and now needs to respond to a more agile and fast changing world out there.
CIO’s are now challenged with monolithic ERP systems: where can we add value and remain economically?
How do we transform our ERP landscape to enable an intelligent enterprise?
Let’s assume you define and develop ERP roadmaps in order to simplify, standardize and automate business processes and systems by leveraging industry and best practices. You do not replace and redo but you start about rethinking and redesigning your backbone of your company.
Where to start?
The first three questions you need to think about, despite any budget restrictions, is commerciality, role of your IT team and results.
- Where does our IT add value?
- How can we work as one team instead of a bunch of individuals?
- Results: do we deliver a profit at the bottom line? Where and how can we make our contribution?
In order to achieve this, you need to provide the quality of being trusted and believed in. It is all about credibility by making the right decisions on skills and capabilities of your teams.
The bridge to get there is to start with the data. What are we doing with the data? You need to lead by example, inspire your people that they could become better than they ever thought.
So you start from a new mind setting to go from a classic IT Service to a challenger role. If you compare to the past initiatives, which were often those mega programs which did not bring the expected results, you change the approach into smaller initiatives – becoming more agile, flexible and keep learning. Move skills fast and stay customer focused by setting a product to a service.
Fail fast and learn fast.
You must lead by example, otherwise you team will not follow you. Communicate the framework, ensure you invest in the right skills and trust your team and let them do.
However, breaking large IT initiatives into smaller pieces contains risks of giving up more control and needs a change in the mind shifts in order to respond faster to the outside changes. For example, if you consider the 3rd question about profit, you will face difficulties if you did not communicate the “why”. Leading by example means you need to provide purpose and gain the trust of your people you are working with.
Changing the perspective
To change the perspective, you need to understand where you are today and where you want to go. How are companies changing the way they work when the world has changed as we never seen it before and the way to implement the strategy as well?
How can companies applying the industry shift?
If we look at the challenges companies are facing today, a large number of them are in part due to the board and management not recognizing how an Industry is changing and what it will mean for their future.
Looking at the future, the approach taking place due to technology between industries mean that traditional ways of looking at competition and substitutes are not enough.
A starting point could be to look at different dimensions where you are today and where you need to transform towards developing new capabilities. This will help companies to make decisions moving in the right direction.
Dimension | Today’s analysis methods | Industry shift to innovation |
Mindset | Analytical, logical and linear | Creative and disruptive |
Ambitions | Logical | Offensive |
Future considerations | Stable, expected to be like in the present | Unstable, expected to be different |
People perspective | Rational | Purpose and Passion |
Business models | Preserve and fine tuning existing business models | Develop and test pilot projects of new business models |
Example of tools | SWOT
PESTEL Value chain Porter’s Five Forces framework |
Disruptive Innovation
Business Model Canvas Strategy Innovation Canvas Innovation Pyramid |
Level of change required | Difficult, expect resistance | Love to create it, make change happen |
Sources of Experts supporting this approach | Michael Porter
Harvard Business School |
Gary Hamel
Rita Mc Grath London Business School
|
This framework does not mean companies have to abolish every approach they follow today, it should help to highlight where to break the old thinking paradigms and provide a starting point for the transition towards creativity and innovation which are critical for responding to the new challenges.
Communicating the framework
Before communicating the framework, companies need to map their purpose, ownership, resource allocation, competencies, strategic and cultural fit, deal flow and assessment to the capabilities required to implement the change. This is lot about what companies expect, what they need and how they plan to go about getting it.
So what is this about the mindset shifts in an agile, flexible and learning environment?
Communicating the framework, you need to consider the following:
- How do we move from pure profit thinking to purpose?
If the purpose is clearly communicated, the profit will be more likely achieved because they know where to focus on.
- How to we move from strict and inflexible hierarchies to networks of collaboration?
This goes back to giving up full control, trust your people and let them do. It is actually giving more power to your departments, countries and affiliates instead of communicating orders from the head office. As a CIO you act more as a coach who enables people to become more stable in a challenger role instead of only being regarded as IT Service or other supporting functions.
- How do we move from a strict controlling to an empowering environment?
This is about overcoming the conflict between the powerful controllers and finance people, who lead by Excel, however it turns out to be counterproductive if people are not empowered to act agile, flexible and more independent. As a CIO, if you do not trust your people, you will not be able to empower them.
- How do we move from planning to experimentation?
In the times we live today, long term plans became obsolete and short term plans are difficult to predict. Believing in your people means to give them freedom to experiment, taking into consideration that they may fail. Just remember the rule: you can fail, but fail fast and learn fast. This is a part of the framework – we do allow to experiment but we watch carefully to interfere when it is time to stop, learn from the mistakes and move forward.
- How do we move from privacy to transparency?
I have often seen how head office people were hiding full information to their subsidiaries in order to protect their power. This behavior is contradictory in times where you will only succeed in empowering your subordinates in order to remain successful in uncertain and fast changing times. Transparency works on both sides. Your subordinates become also transparent, hence there is enough information to step in when a correction is required.