The traditional motives for “doing ERP” are all about improving operational efficiency, cost reductions, and establishing a standard way of working. However, this can create tension when the business executives who need to decide on the resource allocation are focused entirely on the growth opportunities provided by digital business. ERP projects (and the CIOs that drive them) struggle to avoid seeming irrelevant in the minds of the executives who consider ERP to be more hygiene than value. Yet ironically, the only way to succeed with ERP is by creating strong management support. So what is a CIO to do when faced with an executive team unwilling to prioritize ERP?
According to Gartner, “CIOs must reframe their conversations, moving away from discussions of vendors, technologies, efficiency, and cost optimization to strategic storytelling, wearing the hat of the business leader responsible for the information and technology investment required to advance the enterprise agenda.” In a nutshell, Gartner’s advice is to improve communication by focusing on what the board wants to hear – not simply what the CIO wants to share. In many cases, this means focusing less on the technology and focusing more on developing a strong, clear business imperative for beginning with ERP.
To be fair to the management team, much confusion over the term ERP has arisen because it has been used ubiquitously for decades as a synonym for back-office systems. Additionally, ERP vendors and partners promote products as equivalent to the results that a well-implemented system can provide. Value doesn’t come from an application or a vendor partner; it comes from the adoption of new and improved ways of working, made possible by technology. To make matters worse, most board members have had one or many bad experiences with programs categorized as ERP, and these experiences almost certainly influence their thoughts about beginning a new ERP project.
To avoid getting caught in the “technology” trap (focused on functionality and widgets) CIOs need to bring the focus back to how ERP will support the overall business strategy. This helps to set the scene for ERP as a business- (not IT-) driven initiative. Additionally, CIOs need to have a well-formulated answer to the question – “what happens if we wait a year?” In spite of the unfortunate legacy that ERP has, most boardrooms will approach the initiative as a necessary evil, which means that it is likely that they will try to delay as long as possible. To avoid missing out on critical management support and resource allocation, CIOs need to be prepared to tell a convincing story about how the different sub goals that ERP will achieve, can be linked to the overall business strategy.
For example, "There are three key parts of our strategy that this program supports: 1. Expansion of our widget Z business into Europe by 2023, 2. Reduction of work in process (WIP) by $6 million by 2021, and 3. 30% of revenue to come from acquisitive growth products globally by 2025.” (Source: Gartner)
It is also worth noting that telling a story about how the current back-end technology is outdated is going to probably do more harm than good. With the speed of technological change in the back of their minds, no board is likely to sign off on a price new ERP package all the while knowing that the technology will be redundant by the time it gets implemented. Keep the focus on strategic business value and leave the technology piece out of the equation.
Getting Resources for ERP Demands a Clear (Well-Communicated) Business Imperative