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Monday, June 24, 2019

Five 'Most Importatnt Things' in ERP Implementation?

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In his book 'The Most Important Thing' published in 2011, the legendary investor Howard Marks discusses 19 'Most Important Things' in investing. He says that during his discussions with customers, he has heard himself mentioning different 'things' as the 'most important things'

The idea is relevant to ERP Consulting too.  During my 20 years of experience in ERP Consulting, I have heard myself telling my team and customers about different things that I felt were 'the most important things' in ERP Implementation. Each of them was the 'most important thing' for the situation that we were encountering at that time.

Here are five 'most important things' that I have heard myself discussing at different points in ERP Implementation. These are not listed in any order of importance.
  1. Risk Identification:
  2. Accounting Configuration:
  3. Having the Right Consultant
  4. Data Migration
  5. User Training
1. Risk Identification is the Most Important Thing: Recently we heard news of few high profile ERP Failures This could become frequent as evolving technology acts as a disruptor I am sure that all these reported (and not reported) failures would have germinated as minor concerns in the mind of some stakeholder. This would have been ignored since there is no formal process to document these concerns. These concerns gradually grew into risks. 

Had there been a robust process of risk identification, these risks would have been identified, reported and handled earlier. thereby avoiding / minimizing the impact of the failure. In almost all the project, Risk Identification is the task of the Project Manager. It should not be. While the Project Manager will remain the 'Owner' of the risk, the task of Risk Identification should be the responsibility of every stakeholder. 

The Project Manager must put in place processes by which every stakeholder can document their concerns. These could be reviewed and upgraded as risk as applicable.  In my projects I ask my team members to identify potential risks as a part of their weekly reporting. Some of the risks they identified ended up becoming critical and timely identification helped save the project from certain failure.

In summary, Risk Identification is the most important thing. Not Risk Management, Not Risk Mitigation, Not Impact Analysis - plain and simple Risk Identification.

2. Accounting Configuration is the Most Important Thing:  In my blog post on 'Seven Mental Models for an effective ERP Implementation', I had mentioned Gestalt (German word for 'Completeness') as a mental model. Every transaction has an impact on the Company's Balance Sheet. The consultant has to configure the right accounts so that this impact is seamlessly handled.

Wrong accounting configuration has implications on the reporting process of the company. The reports could get delayed, by months and years in some cases (One implementation took about 7 years to stabilize, partly due to data migration issues), or the reconciliation may fail. In addition, there will be profitability mismatches since these reports are taken from General Ledger. Another challenge is control account reconciliation, for example, tallying the Inventory Value in General Ledger with the Physical Inventory Value in the Valuation Reports. 

Some of the examples of wrong configurations are tagging Balance Sheet Accounts where Profit and Loss accounts are required, tagging the same account for different types of transactions (some of which may reverse each other, the most common example if tagging Inventory and Receiving Inspection with the same account) etc.

Localization requires additional country specific accounting to be incorporated. 

With the wrong accounting configuration, you can be sure that CEO will not get the reports that he expects and hence he / she is going to be unhappy.Corollary is that the right accounting configuration is easiest way to a delighted customer. 

3. Having the right consultant is the most important thing: Earlier I mentioned a paradox about ERP Implementation failing despite having three decades of collective experience in such projects. This could only mean that the problem lies with the team that is implementing the project. An ERP Implementation is only as good as the weakest consultant in the Implementation Team. Having right consultant is the most important thing in ERP Implementation, definitely.

4.. Data Migration is the most important thing: Data Migration has a long-term impact on the success of a project. Projects often mistake Data Migration as another phase in a project. It is not so. Users are comfortable with their data. If they do not see the familiar data in ERP or if they see wrong data, they will immediately become cautious and dissatisfied with the ERP system. In some cases the impact of migrated data is irreversible, for example in Process Costing. Migrated data will impact every aspect of ERP Implementation including Transactions, Profitability, Cash Flow Planning, Cost Details and Financial Reporting. 

Another aspect of data migration is related to localization impact of the migrated data. If there is a mismatch between base data and localized data, this will impact taxation, audit and statutory reporting. This could have serious repercussions

In correctly migrated data will cause dissatisfaction in the mind of all stakeholders from CEO down.

Data Migration is the most important thing in ERP Implementation. 

5. User Training is the most important thing: The success of ERP is measured by User Adoption. And user adoption will increase if proper training is given to the users. In project, User Training is one item in the project schedule that the consultant has to deliver. User training is not just a classroom session. Even discussing multiple options for a critical requirement with their implications will act as a user training. If consultant spends a few additional minutes discussing the context of the problem before providing a solution, that will act as a user training. 

Inadequate user training leads to lower user adoption. Users will not want to accept that they have not been trained, so as Mr.Vijay Venkatesh pointed out in his article on ERP Failure in LinkedIn, they will couch their lack of knowledge as Software Issue, Consultant's ignorance etc. 

Corollary is that an empowered and well-trained users will act as an enthusiastic ambassador of the ERP application. As I mention in this blog post on Delivering Healthy Projects, the earlier the user is empowered, the more successful the ERP Project will be.

There is no question. User training is the most important thing in ERP Implementation

There are five more points that I have identified as the 'Most Important Thing' in ERP Implementation. I will share them next week.

Happy Reading. 

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