ERPs – Can’t live with them – Can’t live without them!

A CIO.com article and a blog, both by Thomas Wailgum, caught my attention this week. The first, Why ERP is Still So Hard, and the second, The United Nations ERP Project: Is SAP the Right Choice?. Both caused me to reflect on ERPs – in many organizations now themselves legacy applications.

The first article opens by saying that:”After nearly four decades, billions of dollars and some spectacular failures, big ERP has become the software that business can’t live without–and the software that still causes the most angst.” Interestingly, when we wrote The Information Paradox, the major IT investments at that time were ERPs, and that is where most of the problems where. It appears that not much has changed.  The article goes on to make a number of points:

  • ERP projects have only a 7 percent chance of coming in on time, most certainly will cost more than estimated, and very likely will deliver very unsatisfying results. In addition, today’s enterprise has  little better than a 50 percent chance that users will want to and actually use the application.
  • CEOs and CFOs are still trying to wrap their heads around the financial aspects of your standard ERP package, a most unusual piece of the corporate pie: the licensing, implementation, customization, annual maintenance and upgrade costs. A CFO Research Services study of 157 senior finance executives, found that a typical company will spend an average of $1.2 million each year to maintain, modify and update its ERP system.
  • Manjit Singh, CIO of Chiquita Brands International, makes a key point that the reality CIOs face when synching business processes with those in ERP applications leads to “internal arguments over how we are going to define something simple as a chart of accounts. So all of the sudden, what looked like a very simple concept has exploded in complexity, and now you’re into trying to get some very powerful people aligned behind one vision. In some cases, you can; in some, you can’t.”
  • In a  first implementation, Taser International customized its chosen ERP package to meet the business processes that it already followed. In a subsequent upgrade, they decided to “…get rid of these customizations and go back to the best practices and recommendations out of the box”. Taser International CIO,  Steve Berg, acknowledged that the upgrade took longer than expected: Testing and training issues, as well as certain customizations that were unavoidable, complicated progress along the way.

In summary, the track record of ERP implementations continues to be spotty at best, costs are not well understood – nor are benefits, change management is a huge issue – not to be underestimated, and there needs to be an appropriate balance between “out of the box” and rampant customization.

So, let’s now look at the UN situation. My first reaction was one of relief that I did not have to do this. Not that it isn’t most likely needed, and could contribute to improving the UN’s efficiency – which is certainly a noble goal – but that it appears to a close to impossible  challenge. What are the chances of the now $337 million project actually coming in on budget – it’s already 4 months behind schedule – and delivering the expected benefits? If this is being considered a “technology project” it will almost certainly fail. If it is really an “IT-enabled change programme”, it will likely cost much more and still be challenged. To extract just a few points from Thomas’s blog:

  • “History tells us that the greatest odds for success with SAP ERP are at organizations that run lean, disciplined shops where change doesn’t have to involve translators or global resolutions.” He then goes on to quote from the UN draft report (released in an article by Fox News – not my usual source of information!) on the progress and scope of the project: “A substantial number of its administrative processes are largely based on practices from the 1940s and 1950s and supported in many cases by technology from the 1980s and 1990s…. There are at least 1,400 [non-integrated] information systems currently in the United Nations Secretariat but in many cases they are used to support or track paper-based processes. Very often, documents are printed from these systems, signed, manually, routed, photocopied and filed with associated costs in time and money. Furthermore, paper documents are usually the source of trusted information, casting doubt on the reliability and acceptance of data existing in electronic systems. The result is that we often have several versions of ‘the truth.'”
  • He acknowledges that “The implementation team…is well aware of the challenges.” Again, from the report: “[The project] is not just about implementing a new system; it is about implementing new and better ways of working together. To meet this challenge, [the project] must improve staff attitudes and skills, align processes, policies, and organizational structures with known leading practices and standards, and deploy a new global information management platform.”

It is encouraging that the implementation team does recognize that this is indeed not a technology project, but an “IT-enabled change programme”. However, the report also say:”…based on the process analysis and requirements review done to date and assuming the organization’s ability to adapt, no customizations to the core SAP code have been identified.” Given the nature of the UN, this would seem to be the mother of all assumptions. The danger here is that while starting with this understanding, the challenges will be so daunting that the “programme” will be scaled back over time to a “technology project” with significant and expensive customization, and erosion of anticipated benefits.

As Thomas concludes: “…if there is one thing that will surely doom the project—because rest assured that the software will eventually run, whether it’s by 2013 or beyond—it will be the ill-equipped users tasked with actually changing the day-to-day of their jobs to fit the strict parameters of this foreign software.”

But, does it have to end this way? Here are my thoughts on what the UN should do to improve their chances of success:

  1. Maintain active executive sponsorship – cascade sponsorship across and down through the organization.
  2. Clearly define the desired outcomes – both end outcomes and intermediate outcomes. Use some form of benefits mapping approach to do this (for more about this look at  Get With the Programme!). Develop relevant metrics – both lead and lag metrics and consolidate them in a benefits register.
  3. Assign clear accountability for all the outcomes – with consequences – align the reward system.
  4. Develop a realistic plan – schedule enough time – break it down into “do-able chunks” with clear outcomes from each.
  5. Recognize the full depth and breadth of the change – specifically cultural and behavioural change. Manage the process of change. Have a two-way communication plan – cascade it across and down to all stakeholders. Listen to the people who have to do the work – be flexible where appropriate. For more on managing change, look at Managing Change – The Key to Delivering Value.
  6. Invest in training – cascade the training using a train the trainer approach.
  7. Measure performance against the metrics – both lead and lag. Understand and act quickly and decisively on deviations.
  8. Be prepared and willing to change course – both the outcomes and the journey.
  9. Stay the course – but know when to fold.
  10. Plan for more change.

I am sure they are doing some of this today, but certainly not all, and likely not enough – if they are to avoid a costly and avoid highly visible failure, and realize real value from this significant investment they would do well to do more!

A Fool’s Errand

I referenced Stephen Jenner, the UK Government’s “rottweiler of benefits management” in an earlier post, Lies, Damn Lies and Business Cases. Stephen is also the author of a new book, Realising Benefits from Government ICT Investment – a fool’s errand, a copy of which he graciously sent me. It arrived just as I was heading off on a couple of weeks vacation which gave me the opportunity to read it without the usual interruptions. In reading the book, I can only agree with Donald Marchand’s testimonial in which he says: “Jenner provides very credible guidance and  methods on ICT project value realisation in the public sector. The book is timely, practical and a very good primer on contemporary “best practice” thinking in both the public and for-profit sectors.” Indeed, as I read it, I thought of it as a “field book” for benefits management, and certainly not one limited to the public sector.

Without giving away too much of the content of Stephen’s book, he starts with identifying three key elements that are required to manage value on an active basis – these are:

  • Planning effectively for benefits realisation by ensuring the benefits claimed in business cases are robust and realisable – eliminating “delusional optimism” and deception (“benefits fraud”) by:
    • classifying benefits;
    • validating benefits;
    • connecting benefits to organizational strategies/objectives;
    • ensuring a clear and shared understanding among all stakeholders of the benefits they will be accountable for, and the business changes they will have to make to realise the benefits; and
    • ensuring benefits are translated into real business value.
  • Identifying and capturing all forms of value created, including:
    • financial/economic, social, and political value;
    • value arising from cross departmental benefits;
    • the value of avoiding “things gone wrong”; and
    • the opportunity value of infrastructure investments.
  • Realising the benefits, and going beyond benefits realisation to value creation by:
    • ensuring clearly defined, understood and accepted accountabilities;
    • tying benefits to departmental and individual targets and incentives;
    • regularly reviewing performance throughout the full life cycle – encompassing the project and beyond;
    • going beyond reviewing to actively looking for additional benefits; and
    • continually optimising the overall portfolio of investments in IT and IT-enabled change.

The book is organised around these three elements, within which it provides many valuable  insights, and a wealth of practical methods and techniques, illustrated with examples, and peppered with some great quotes. (You’ll have to read it yourself to understand the “fool’s errand” bit.)

While the book covers a broad range of topics, what reading it really reinforced in my mind is the fundamental importance of having a complete, comprehensive and credible business case – one that:

  • operates at the program level – including not just the technology but all the business, process, people,organizational and other changes  required to achieve the desired business outcomes;
  • is supported by a benefits mapping process (be it Fujitsu’s Results Chain, Cranfield’s Benefits Dependency Modelling, or some other) to “connect the dots” and facilitate understanding and “buy in” of the those who will ultimately receive the benefits;
  • contains clear and relevant benefits metrics, both lead metrics for intermediate benefits and lag benefits for end or business benefits/value;
  • includes consequences by tying performance against metrics to the incentive/reward system;
  • is not a one time “grab the money and run” document but a living, operational document – updated and used throughout  the full life cycle of the investment decision; and
  • is regularly reviewed for completeness, credibility and comparability by an independent body, such as a Value Management Office (VMO), who can challenge assumptions, assure the quality of individual business cases, and ensure consistency between business cases.

As I have said before, it is the business case that lays the foundation for success or failure. A well developed business case, intelligently used and updated throughout the full life cycle of an investment decision, has an enormous impact on whether value is created, sustained, eroded or destroyed. The current view of business cases as a”bureaucratic hurdle” that has to be got through in order to get required financial and other resources, after which it can be ignored, other than possibly at the post-implementation review – often more akin to an autopsy than a health check –  pretty well guarantees significant challenges, if not outright failure. As long as this view prevails, we will continue to have trouble getting out of the starting gate when it comes to realizing the full potential of IT-enabled change.

As Donald Marchand concluded in his testimonial to the book: “The big question is will public sector managers and executives have the “will” to put the book’s prescriptions and methods into everyday practice with ICT projects?” History would suggest that we still have much work to do before this happens – and not just in the public sector. Much of what I and others have been espousing over the last 10 – 20 years, and what Stephen presents in his book, is common sense – unfortunately, common sense is still far from being common practice!

Managing Change – The Key to Delivering Value

Whilst the availability of frameworks such as Val IT, and others, can help enterprises implement or improve their value management practices, at its core, any initiative to implement or improve value management is about organizational change. Over the past couple of decades, many enterprises have undertaken programs to improve corporate performance, yet many of these have failed. The underlying cause of these failures is that most failed to persuade groups and individuals to change their behaviour.

Here, even the use of the term “organisational change” can set false expectations by overlooking the emotional aspects of change. George H. Sejits and Grace O’Farrell of the Richard Ivey School of Business in London, Ontario wrote “One of the more important reasons that change efforts fail is that the idea of ‘organisational change’ is an illusion. Organisations do not change. It is the individuals within organisations that change their behaviours. Unless the need to change is perceived as an effort to create positive outcomes including…the expansion of personal power and a more interesting job, individuals can be expected to resist the initiatives that are part of the overall change effort.” In the context of value management, this can be even more difficult as it is individual board members and executives that are being asked to change their behaviour – behaviour that they may feel has served them well in the past.

Effecting change requires a well-defined and disciplined change management program. Such a program depends upon a number of critical success factors. One is strong and visible executive championship. Another is a clear and realistic vision of the future state. Another is adequate resources – change almost always requires an investment in expertise, funding, and infrastructure over and above the normal costs of conducting ongoing business operations. Management of the program must also be flexible enough to change the journey and, possibly, the destination as more information is known and/or internal or external circumstances change.

A critical element of any change management program is communication – a change-related communications plan should address the following four elements—as defined by William Bridges in his book, Managing Transitions :
• Purpose: Why are we doing this?
• Picture: What will it look like when we get there?
• Plan: How will we get there?
• Part: What will be my role, both in getting there, and when we get there?

While all four of these elements are important, it is the last one—What is my part?—that is typically the most challenging. Make sure that not only is the question “What is in it for me?” answered, but also, and perhaps even more importantly, recognise that resistance to change, whether calculated or unconscious, is a common challenge when working with both individuals and groups. Naturally, people question why change is necessary and wonder whether it will hurt them – it is “loss” which most people fear most of all from change. The initial reaction to change is “What am I losing?” Take the time to understand and acknowledge what benefits, rights, privileges or freedoms key stakeholder groups believe they are losing – again, don’t forget that individual board members and executives are human beings with emotions too – they will also be feeling this way, possibly more than others.

Don’t forget the reward system. As another colleague of mine once said “The good thing about reward systems is that they work – the bad thing about reward systems is that they work!” Align the reward system with the desired future state. Provide incentives for change. Define how achievements will be measured. And link these objectives to outcomes within the scope of each individual’s responsibility.

As Albert Einstein said, “The definition of insanity is doing the same things over and over again and expecting different results.” Introducing change is never easy – but it is necessary if we are to realize the full value of IT-enabled change.

Can IT solve the electronic health records challenge?

An interesting article in InfoWorld by Ephraim Schwartz that relates back to a number of my earlier blogs, including “Will Obama get IT right?”, and discusses the challenges of implementing a “universal” EHR system – in this case in the U.S. – but the same issues exist elsewhere. They include:

  1. Aligning the reward system
  2. Scalability (among other technical issues)
  3. Standards (we’ve never had a shortage of those – if only we could have one!)
  4. Privacy
A vendor comment near the end captures the essence of the challenge here:
“…deploying an EHR system is just like implementing any big enterprise application, only the enterprise in this case is bigger, and the stakes are higher.”
Given the track record of enterprise systems in much smaller and less complex environments, and the history of health systems such as the UK NHS National Program for IT , I would describe this as an overly optimistic understatement.
While this is undoubtedly the right thing to do, how it is done will be the key to success or failure. If it is managed as the huge organizational and behavioural change programme that it is, it will have a chance of succeeding – if it is managed as a technology project, it will fail.
As the article concludes:
“...the challenge of orchestrating and satisfying so many stakeholders remains…to make it happen will require a great deal of cooperation, innovation and investment…this shift will likely happen at a less ambitious level than the political rhetoric suggest…