Nike. Vodafone. Revlon. Those are just a few big-name brands that have failed spectacularly in the implementation of a new enterprise resource planning (ERP) tool — leading to irate shareholders, fines from regulators, and even drawn-out legal battles. The ERP landscape is peppered with enough “disasters, dust-ups, and disappointments” to fill the annals of business school case studies for decades to come.
Though smaller companies are less likely to find themselves the subject of splashy headlines, they are not immune from the same traps that these famous ERP failures illustrate. Less than a third of ERP implementations are completed on time and under budget, according to research by The Standish Group. The resulting data chaos, lost time, and missed revenue can be incredibly painful for CFOs, harming their credibility and standing within a company.
In this article, we will cover five common reasons behind ERP failures and tactics to prevent them. Plus, we will share tips and strategies for bringing a failing ERP implementation back from the brink.
The reasons behind ERP failures (and how you can prevent them)
1. Rushing at the start
Once you have decided you need a new ERP, it is human nature to want to speed through the implementation. But paradoxically, in order to move quickly, you need to slow down.
Where teams often go wrong is when they rush the selection process. In my work as an ERP consultant, I once had a client who bought an ERP based on one demo and not a lot of other research … two years prior. We were able to help them finally mobilize their ERP on their second attempt, but the process would have been much faster (and less painful) if they had taken the time to assess their needs first, before signing on the dotted line.
Imagine you were a doctor diagnosing a patient — if you rush through the examination, you are more likely to miss something important and prescribe the wrong treatment. Similarly, being methodical in your own examination of your business needs is key to preventing pain and expense later.
2. Abdicating responsibility to your vendor
Another mistake I see clients make is expecting that their vendor will take care of everything for them. Even if your system implementation partner assigns a project manager on their side, it is still important to designate your own internal project manager. Yours will oversee the entire program including the systems implementer, internal resources, and other third-party vendors. When you do not have someone doing this work, there is no one to take responsibility for all the tasks your vendor assigns you. If you are not keeping on top of things, you will continue to find open issues, derailing overall progress.
After you choose an internal project manager, you might consider releasing this person from some of their normal day-to-day responsibilities (or even hiring someone to cover their role for a few months). Expecting someone to project manage your ERP implementation on top of their normal responsibilities tends not to work — their attention is fractured and because they cannot keep on top of everything, inevitably resulting in painful delays. See what is possible in terms of freeing your internal project manager up so they can give their full attention to your ERP project.
3. Not clearly defining roles and responsibilities
Beyond designating an internal project manager, it is also important to define — as early in the process as possible — how you and your implementation partner are going to divide roles and responsibilities. Decide upfront who will:
- Coordinate third-party vendors
- Convert data
- Develop training materials
- Communicate progress
- Schedule meetings and due dates
- Handle any other tasks you think will come up
Designating these roles is an important first step, but it is also crucial to ensure that your internal functional leads feel empowered to make decisions. Sometimes functional leads feel unclear about their decision-making power and continually run things by the project owner. This lack of clarity turns your project owner into a bottleneck and ends up slowing the whole project down. To combat this kind of decision paralysis, be explicit with your functional leads about what they are allowed to decide, or designate a forum like a Teams channel or recurring meeting where you can make decisions as a team.
4. Procrastinating on data conversion
Data conversion is one of those tasks that tends to be neglected until the last minute. People often think they will tackle it right before their migration, but you really should start thinking about your data right at the beginning of your project.
One mid-market business made this mistake when moving from a specialized customer relationship management (CRM) tool to an ERP with a built-in CRM module. They thoroughly tested the system’s features and were satisfied it would work for their team, but did not start looking at their legacy data until three days before they were supposed to upload their production database. They discovered that many of the fields they would need in the new system did not exist in their old database. And these were not default values — they were unique to each opportunity. Suddenly, they had some 30,000-odd records to manually convert on a very tight timeline.
Even if they just spent five seconds on each record, with a 30,000-row spreadsheet, this would still take 42 hours — more than a full work week! The team had to drop everything to conquer this project. Fortunately, they had an excellent, dedicated team who was able to get it done in time, but it was a tremendous drain on people’s energy and in most circumstances, would have presented a substantial risk to the business.
If the team had started thinking about their data at least six weeks prior, they would not have needed to resort to these kinds of heroics.
As you start your ERP implementation project, make sure to assess the health of any legacy data and discuss your parameters for data conversion. This includes:
- How many years’ worth of data you’re bringing over
- How you plan to handle historical information
- Your approach to consolidating information from multiple sources
- How you plan to normalize your data
5. Not testing enough
While running fewer tests might seem like a way to save time, it can actually cost you a lot of time in the long run if and when (and it is likely when) you run into unexpected issues. Many companies are guilty of simplifying their testing cycles. A lot of popular implementation methodologies only include one test cycle — but this can leave some pretty significant gaps.
I recommend doing at least one functional test and one integrated end-to-end test. In the first, you are testing all of the core features of your specific ERP system, and in the second you are doing end-to-end business process testing, making sure you can hand over from one part of the process or one from one system to another. For instance, if you are integrating a standalone CRM system with your ERP, at what point does a contact in your CRM transform into an order in your ERP? How does that handover work? Define where those processes end in one system and where they start in the next, to avoid gaps.
It is also important to note that the test scripts you get from your implementation partner are probably not tailored to your process. They are a good starting point, but you still need to customize them for you. For instance, instead of just checking to make sure you can create an order, you need to make sure you can create an order for all the scenarios you have (e.g. an order created by a salesperson, one that is phoned into your office, and one that comes in through a web form).
ERP SOS: How to save your project from the verge of ERP failure
If you have fallen prey to any of the traps listed above, don’t despair. There is still time to turn your ERP implementation around. Take a breath, then follow these four simple steps to salvage your project.
1. Take stock
Before you do anything else, assess where you are. What has been completed? What is currently in progress? What is still on your list of open items? What tasks are truly go-live critical, and what are things that you can grow into after your mobilization?
2. Reduce scope
Wherever possible, you want to reduce the scope of what is required for you to be able to go live so you can move faster and reduce risk. Some things are necessities, but there are others that you can bring in over time. For instance, maybe you can live with manual data uploads for a few weeks and then set up your integrations after launch. At least you can get some gains for other teams who can start using the system in the meantime.
3. Reset your project governance
Salvaging your ERP implementation often comes down to making sure you have good governance structures in place to make these tough decisions. If you have not already, designate an internal project manager, select functional leads, and implement regular management processes and reporting to govern key decisions, deadlines, and resource allocations. If possible, release your core project team from their day-to-day responsibilities to help get your project over the finish line.
4. Keep the lines of communication open
Most importantly, it is critical to be patient with the process and your team (and sometimes your systems implementer), and to keep communication lines open. Designate a forum like a weekly meeting or a Teams channel where people can share their concerns and feel heard. The worst thing to happen is for people not to raise potential issues because they are feeling too stressed or overwhelmed.
Be patient with the process
These are difficult projects, so remember to be kind to yourself and your team. Some of these projects just take the time they are going to take. As an ERP consultant, I have seen some teams aim for four-month implementations, but even the most aggressive plans usually end up taking six or eight. But by avoiding the traps above (and by performing an ERP SOS, if necessary), you should be well on your way to a successful implementation.
And remember — even if everything goes wrong, if you manage to stay out of the headlines, you are still doing a lot better than the likes of Nike or Vodafone.
Citrin Cooperman’s Strategy and Business Transformation Practice is here to help you avoid these common ERP failures. Contact us today so we can help prepare you for a successful implementation.
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