ERP and the Business of Change

High inventory levels, part shortages, long lead times, bad decisions, high costs of maintaining legacy systems, and faulty information through the business are but some of the reasons companies embark in ERP systems implementation. However, the greatest value in most ERP implementations is the increased capability to manage change in the supply chain. A more nimble and flexible supply chain is critical for the survival and competitiveness of any organization now more than ever before. The trend seems to be in the direction of more frequent, faster, and more radical change than before. Change capability requires an “upgrade” in information systems and key business processes. It also requires an upgrade in the mindset and culture of the organization. The paradox is that for an organization to achieve greater change ability and the resulting superior competitive advantage, the organization itself must undergo a fundamental change process at three distinct levels.

Enterprise Change happens for one or both of the following reasons. First, during a change this large, complex and demanding, it is not uncommon for people to begin to wonder how the effort supports the business objectives and strategy or what the strategy is. The key task is to clarify and reinforce the business strategy and link key business processes and performance management to corporate objectives and strategy. A clearly defined and relevant strategy provides a much needed constant in an otherwise uncertain environment. Second, the cross-functional nature of most ERP efforts requires communication, coordination, and collaboration across the enterprise both internally and with third party providers, suppliers, and partners. Whereas communication and coordination are mostly management activities, collaboration is a byproduct of effective change and one that cannot be mandated but is critical to the success of such large project. In both cases, strong change leadership is vital — a cohesive coalition of business and technical leaders who get involved early and continue committed throughout the project.

Work Group Changes might include adopting a new practice, sharing information with others, collaboration across groups, change in the business process, new metrics, increased visibility, different decision making processes, etc. In every case, groups will tend to defend what’s theirs and maintain status quo as much as possible. For instance, in creating a common standard, each group might defend the virtues and advantages of their current practice and struggle to find consensus in a seemingly win-lose situation. Naturally, inter-group (and often intra-group) conflict and politics are common. Effective and early stakeholder involvement and communication are vital to address issues and to facilitate action. This requires a strong change champion who has enlisted key stakeholders (not just IT professionals) to develop ownership of the project business case and plan, and who effectively links behavior at the lowest levels of the organization to the key operational, business, and corporate objectives.

Individual Change is where the point of impact is and perhaps the most difficult to address because of the scope and complexity of the issues. An individual may be confronted with a new user interface, a new “best practice”, a different way to make decisions, or any number of new requirements. When this is the case, individuals will tend to experience one or more of the following five key factors: fear, anxiety, confusion, loss of control, or erosion of power or influence in the organization. The more an individual feels any of these emotions, the less likely they are to accept the new way of doing things. Lack of acceptance will diminish or delay the benefits of the ERP effort. The key imperative for individual change is to 1) address the root causes of the five factors that hinder acceptance, 2) create individual conviction through involvement and experience, and 3) enable action and behavior change through systemic support.

To successfully achieve supply chain flexibility requires the right ERP solution and a critical review of the key business and support processes throughout the supply chain. But both of these efforts will come short of the promised benefits unless the culture and mindsets within the organization support and drive the desired business objectives.

ERP initiatives are all about enabling the client organization deal with change and enabling it to grow. As ERP efforts spread across several industries, types of organizations, and sectors of the economy, one of the real differentiators might be those solutions which create not only the systems and business capability but also the leadership, organizational, and cultural capability to change.