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Reconciling ERP and Digital Transformation

I once heard someone say, “There are 2 kinds of companies: companies who are disruptors, and companies who are being disrupted.”  I wish I could remember who said it, because I would love to give them credit for it.  In any event, this maxim seems to keep proving itself true, especially in today’s age of rapidly evolving technology, especially ERP.  In fact, it seems like the only thing evolving more quickly than technology are the buzzwords that describe the evolution of technology.  The buzzword that I have been hearing most recently is “Digital Transformation”.

What is Digital Transformation?

Simply put, this term describes the idea of business processes and business models that are changing rapidly to fully take advantage of digital technologies.  There can be several drivers of this trend including customer demand, competitive pressures, a need for more productivity, or new innovations in business that are founded on digital tech.  Whatever the driver is, CEO’s and senior execs need to be paying attention, lest they be relegated to counting themselves among the disrupted.

Digital transformation feels like change management on steroids.  If you know what it is like to try to get everyone in the organization pulling in the same direction on a project, try to imagine that experience reshaped and repeated on a daily, weekly, or monthly basis, with goals that are a constantly moving target.  The disruptors in a given industry have figured this concept out and adapted their organizations to thrive on chaos.

How does ERP fit in?

One of the big challenges I can see in all of this is how companies will be able to make their ERP systems keep up with this pace of change.  Especially at risk are those companies who have had their ERP systems heavily customized or modified by the ERP vendor in an effort to “make the system work like we do”.   This is very shaky ground going forward.  ERP systems are often on a six to twelve month release cycle, but business is transforming daily…how do you reconcile one with the other?

What should I do?

There are a few things I think you can do to bridge the gap between the speed of ERP and the speed of business and hopefully you will find something in here that is of value in your organization:

  • Close the gap between the business leadership and IT.  These two groups have to be able to communicate.  Put a “Tech to English” translator one one side of the equation or the other.  Leadership has to be willing to commit the resources needed.  IT has to be willing to listen for comprehension.  Then they must translate ideas into action at a pace quicker than they would normally be comfortable with.
  • Simplify. Start looking for opportunities to strip custom features out of your ERP system. Then you make it as easy as possible on your team to upgrade to the latest release.  Also, don’t upgrade just because a new release is out.  ERP upgrades consume resources, so make sure there is ROI for installing the upgrade.
  • Extend your platform.  Ideally, everything you want to do would fit nicely into your ERP system.  Chances are this is not going to work out.  Business is moving at a much faster pace.  Have another technology platform(s) that enable you to rapidly prototype.  Then you can deploy functionality while you wait for ERP to catch up.  This can be a huge difference maker.  Analytics is a perfect example.  You want analytics to be as flexible as possible since the metrics and KPIs for your business will evolve and change at a very fast pace.  If your ERP system has a robust API, you are probably in a good position to take advantage of this.
  • Lead from every direction…listen.  Innovation can come from any level in the organization.  It is highly likely that your company’s contingent of Millennials has ideas for how to improve productivity and get the job done in much less time.  Take advantage of it.  In case you missed it, wage inflation is real.  You are going to have to improve labor productivity if you want to thrive in the future.
  • Finally, realize that this is a cycle.  There is no destination on this journey, per se.  Done well, you should be prototyping and deploying quickly, then discarding the technology just as quickly when it is obsolete.  Retain the data you collected and move on to the next iteration.  This puts a premium on a simple, intuitive user experience.  Make the new tech easy to use.  A quick adoption rate is much more useful to the organization.

Closing Thoughts

Eventually, I expect ERP vendors to adapt their models to compress the development cycle.  However, I think there will always be some gap between ERP and the speed of business. If you can bridge that gap quickly and effectively, you are creating competitive advantage!

 

Posted in Change Management, General and tagged , .