Most organizations agree that replacing an old enterprise resource planning system with a new one can give them an essential competitive advantage. The prize is a great leap forward in functionality – 15 or 20 years of software evolution in one jump.
Unfortunately, it's a step too far for many companies. McKinsey & Co. estimates that digital transformations lead to sustained performance improvement only 16% of the time. Even digitally savvy industries, such as telecom, media and entertainment, the consultancy found that the success rate does not exceed 26%. Old-school industries, such as oil and gas and automotive, only succeed between 4 and 11% of the time.
How can you improve your odds? Ganesh Rajasekaran, Associate Vice President (Global) for HCLTech’s Digital Business – Oracle Practice, recommends a five-step program:
1. Make an assessment: You should begin with a very structured assessment of what kinds of changes you need to make in your ERP system and how ready you are to make those changes. Specifically, you need to take a close look at your current systems, your security and most of all, the readiness of your employees.
2. Align your stakeholders: You need a top-down push. That starts with a strong endorsement of the changes from the CEO. Other important stakeholders also need to support the changes. Digital transformations are stressful and uncomfortable. “We need to have the business sponsor and the IT sponsor two-in-the-box for the transformation. We make sure that as part of the governance that these people are on board with the program because without business sponsors, these transformations are doomed to fail,” warns Ganesh Rajasekaran.
3. Set your strategy: At this point, you will need to make a crucial decision: do you move everything to the cloud all at once — in a big bang — or should you proceed function by function? The right answer will depend on your situation. When you are ready to make your move, however, don’t take more than a few months to make the transition. "We recommend cutting over as soon as possible," says Ganesh Rajasekaran.
4. Select smart KPIs: The right KPI will depend on which software package is being implemented. "Say, for example, if you are doing a financials implementation, then one of the KPIs we generally take up is the month-end close – how long it takes to close the books," says Ganesh Rajasekaran. End-to-end processing times for key transactions, such as order-to-cash, are also often useful. But this is only the beginning of the possibilities: depending on your business, you may focus on payment accuracy, processing costs or reduced cycle times. Once you have chosen your KPIs, it’s essential to keep track of your performance on these measures.
5. Focus on the users: Innovation is never just a matter of new technology; it’s about the successful incorporation of that technology into a system. Often, an ERP transformation will require users to learn how to operate a new and unfamiliar interface and that's not easy. "Change management is crucial in a major upgrade," says Ganesh Rajasekaran. You will want to identify internal ambassadors who can encourage employees to learn about the new system. Finally, you will want to monitor your return on investment to help drive momentum.
Part of the change management challenge is overcoming resistance to a new way of working. This can be difficult, particularly if employees have used an old interface for as long as 20 years. The other part is training employees to use the new system. Successful adoption demands a structured training program led by change management consultants who are adept at creating job aids and training material. "We bring our training materials. These days, most of them are digitized,” says Ganesh Rajasekaran.
HCLTech’s Change Management Consultants are also on hand throughout the transformation to support business users as they adjust to the new system. "We stay through the post-implementation go-live for a couple of months to make sure the knowledge is transferred to the customers," he adds.
Easier steps ahead
Implementing new ERP modules is an expensive and time-consuming process. Making an upgrade to a new Oracle Cloud ERP system, for example, can take anywhere from 10 months to two years, depending on the size and complexity of the company. But Ganesh Rajasekaran argues that it’s worth the effort. Properly installed and capably operated, ERP modules shifted to a modern cloud-based system can yield more than a great leap forward now, they can prepare the way for smoother transitions in the future. Oracle adds new features to its applications every quarter, so employees can learn to operate them as they are rolled out on the cloud rather than wrestling with the infrequent daunting upgrades they have known in the past.
