Digital – A Perspective

Digital’s progress is signified by six trends we have witnessed in the recent times. Digital initiatives in turn influences these trends to become mainstream.

The terms ‘Digital’ and ‘Disruption’, either independently or combined with each other or combined with other terms (‘Digital Economy’, ‘Digital Quotient’,  or ‘Disruptive Models’) can be found in the top  bracket of the business lexicon now-a-days and so much so that if the usage trend continues these will possibly stake claim for the ‘word(s) of the year’.  In the recent times, there have been many definitions, point-of-views and scholarly discussions on ‘what’ and ‘how’ of Digital. We also see some early actions as service providers rush to their clients with their digital offerings and claim break-throughs in deals and CIOs indicate digital as their top priority justifying the hype.  However,  there is still a lot of mystery surrounds these concepts and the fact remains that the businesses are still unsure of what is in it for them though there are making attempts to explore and learn from the early forays of the peers.

If we read through some thought leadership articles, hear what CIOs have to say or go through the service offerings of vendors, Digital seems to mean different things to different people. More content gets added every passing day. In such a situation, adding more substance may possibly add to more confusion; alternately if we think positive such content may also help get more clarity. Hence, here is a stab at unpacking Digital and the impact it may have on the businesses.

This perspective is influenced by six trends we have witnessed in the technology domain in the recent times. These trends have caused considerable shifts in the way technology is perceived and used and may have played a role in shaping the advancement of Digital either independently or collectively.  Before we look at these trends, it may be worthwhile to share what we consider as the basic tenets of digital. There seems some agreement on these tenets in the industry albeit at a high level. One, digital is not a technology or a set of technologies but ways of running the operations efficiently with technology at its core; two, it is not a pre-defined template that is applied to business problems but an approach to anticipate and avoid problems; three, it is not just automation of customer processes but ways of converging the organisation towards better customer engagement and experience and finally it is not a goal or a destination but a journey to achieve sustained growth.

Working from this premise, we can see how these trends have influenced the advancement of Digital which in turn is transforming these trends into mainstream and thus the evolution becomes iterative.  There is nothing like a project or a method when completed would make a company Digital. However, riding on these six trends may make an organisation become more digital.

  1. Technology powered business models

result-1In the past, technology was seen as an ‘enabler’ that supports the business goals and solves problems.  The problems could range from managing large volume of customer accounts for a bank or making inventory visible across the supply chain for a manufacturing firm or bringing transparency in contracts for a government. The demands of the business would determine the choice of technologies and for the choice to be proper, the specifications have to be clear. Thus IT always followed the business and enabled the requirements.

There has been a role reversal in the recent times in that the technology can determine the business. The advancements in technology have powered new business models that are entirely technology driven. The growth of e-commerce and the emergence of new age companies like Uber and Airbnb are prime examples of the role reversal.   The term ‘disruption’ is associated with these companies and rightly so. These companies had technology define their businesses and went further to change the way people interact with them. To book a taxi through Uber or a room through Airbnb, the customers would need to use a technology. The success of these enterprises can be expected to rub on to traditional companies in many ways than one and may prompt them to look at technology with a different perspective to see if there is an ‘uberization’ opportunity.

  1. IT in the Board

If you pore over the organization structure of yesteryear companies, you will find IT represented as a box possibly buried under finance or operations rarely making it to the top layer reporting to the CEO. In these organizations the CIO was never a ‘CxO’ , a label normally reserved for top management.

Cut to today, with technology gaining more traction, playing a more crucial role in running the businesses, IT  has moved out of the box and is longer a function or a department but has become a partner in business to the other functions. CIOs are more frequently seen in Board deliberations and slowly gaining the role of advisor to the business, a major shift from the past where he/she was taking orders from the business.  Traditional consumption of IT was largely in the areas of Finance, Production, Procurement and Sales where transaction processing was crucial. Increasingly we see functions like Marketing becoming major users applying IT to customer profiling, campaigns and promotions. Digital Marketing, Social Media integration and automated campaigns are routinely discussed by the Marketers with their technology teams.

  1. Empowered Customers

Businesses know that their customers have 24/7 access to information on the go thanks to proliferation of mobile and other pervasive devices. They also know that their customers are much smarter in using the technology and capable of doing research using multiple sources before making their purchase decisions. Social media has added another dimension where opinions/feedback are shared at will that greatly influence buying behavior of the customers.  An experience of a poor delivery or a bad service spreads fast in the virtual world that keeps the companies on their toes to track and address problems instantaneously.  With the market expanding and customers getting more options to source their requirements from, they become fickle minded and more demanding. On the other hand, companies make all out efforts to retain their customers, work towards brand loyalty and look to reach out to them in as many ways as possible. When the communication channels go up, customers expect to have the same experience across the channels thus forcing the companies to address the demands with cutting-edge technology.

  1. Data for Decisions

As the businesses go global and the competition intensifies for the same set of customers, data in various forms – structured or unstructured, from variety of sources – internal or external – become a powerful source in understanding the customers better. Analytics that crunches massive amount of data to see hitherto unknown patterns of market and customer behavior, has taken centre stage in most companies. Developments in the areas of Big Data have extended the scope of analysis and the insights gained from the analysis are fed into improving existing products and designing new products that are centred around the needs and aspirations of the customers. IT teams are suddenly augmented with new disciplines such as data sciences and statistics.

  1. Connected Devices

The ‘Connected Life’ is becoming a reality with the prediction that there will be an exponential growth in more and more devices getting connected on to internet. From industries such as mining to construction to customer appliances, plethora of devices can possibly store and transmit data providing multiple possibilities in managing the physical assets and using the data for variety of applications such as supply chain efficiencies in factories and health monitoring of individuals. Though early stages, companies are attempting to explore areas where they can bring in next level of automation and data convergence to make better market decisions. The significant shift will be when the data from the connected devices will be used for not just for problem detection but also for predictions, course corrections and risk mitigation.

  1. New Model Sourcing

Cloud computing, ‘As-a-Service’ delivery models Thumbs up in business or life indicating successhave provided companies  completely new methods of procuring and managing technology.  The benefits that come with such sourcing models such as capex-to-opex shifts, outsourced support and maintenance, demand alignment have already been proved in the market and these use cases have sufficiently moved from the concept stage into execution.   These services have direct impact on resource utilization of the businesses. Even today, a large portion of the IT budget is locked up for maintenance leaving very little for ‘future-ready’ technologies. With such cost saving services at their disposal, companies can look at their IT budgets differently, moving from single-minded focus on cost-cutting to revenue enhancing investments.

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The business environment is getting more complex and volatile and companies have come around to accept the ‘new normal’ in their respective domains.  Technology can play a crucial role in managing the complexities by helping companies become Digital.  These trends signify the shift to become Digital is multi-dimensional and as the adoption rate in these dimensions increases, we will see more developments resulting in strong technology driven organizations of the future.

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Wither IT Strategy?

Organizations need to shift to Digital Strategy from IT Strategy to create greater impact on their businesses through technology. The shift involves changes in traditional methods of IT investment planning.

motion gears -team forceInformation Technology has over the years become an integral component of managing an enterprise successfully.  Technology enabled organizations are found to engage with their customers better,   improve efficiency of their operations and practice better financial control. In the past, in order to bring in the right technology at the right time, organizations would rely on a formally developed IT Strategy. The aim of IT Strategy would be to identify and prioritize IT investments that enable the business to achieve the overall goals. The plan would cover what the companies need to do in the next 2-3 years, with clear description off initiatives, programs and timelines and would act as a reference for the CIOs  in their investment decisions. Technology partners or management consultants would be engaged to assist in this exercise who would understand the business imperatives and overlay an IT roadmap to align with the strategy.

There were a number of implicit assumptions that went into the such an exercise; that the business environment would be more or less stable, technology advancements would be predictable and organizations would benefit from a longer term investment plan. Cut to today’s times – businesses operate in an increasingly volatile and complex environment; the role of technology is changing and in certain cases driving the business models.

In such a situation, how should organizations approach their technology strategy? Can we hold on to these assumptions of stability? Can we still follow a hard-coded 2-3 year approach when the pace of change outside is drastic?

Digital disruptions we see suggest that organizations need to follow a radically different approach to formulating their technology strategy. Disruptive technologies have brought in new business models with the likes of Uber or Airbnb.   Convergence of devices, connectivity and information availability have greatly enhanced the way we see and use technology. These developments have far reaching impact on the role of IT in the organization and thus the approach to IT Strategy.

To navigate through the complex and dynamic environment, businesses would gain by shifting from developing an IT strategy to promoting a Digital Strategy. An important aspect of this shift is the recognition of the potential of technology in determining business direction, a radical change from viewing IT as a mere function of the organization.

Key Considerations for Moving from IT Strategy to Digital Strategy

Not business strategy driving IT but IT driving business strategy

In the traditional sense, IT was always considered as a business enabler which implicitly meant it would require business clarity that comes from business strategy. In other words, IT would trail business specifications. Well-defined processes and associated business rules were considered as pre-requisites for large IT investments such as ERP and CRM. A time delay in bringing appropriate IT was inevitable had its share of issues.

Digital strategy premise is that the boundaries between business and IT strategies have blurred.  They go in tandem and think of Uber or Airbnb,  technology may define the business strategy. Business specifications are not mandatory to select IT. Organizations may choose to follow processes defined by a business application or depend on a cloud service provider who provides business services built on strong technology.

Not long term hard coded but short cycle and dynamic

IT strategy would typically cover a 2-3 year plan providing a roadmap for IT investments with a provision to review on a frequent basis and re-word the strategy where required. It was easier for the CIOs to follow the plan, make suitable budget provisions and go through a justification and approval process. To a large extent, the plan remained static and execution would have the plan as the basis.

In the changing circumstances, a long term plan that is hard coded will have no meaning to organizations. While the planning will still have a multi-year visibility, CIOs need to be pro-active or react with agility to unforeseen business situations. Towards this, they may need to plan and execute for the short term and ensure that such plans all tie-up to provide long-term benefits.  Such situations would correspond more to market actions – either providing an additional service to customers or quelling a competitor’s actions and may span tactical and transaction levels. For instance, a bank may completely overhaul customer on-boarding process not envisaged initially,  taking care that such unplanned programs tie-up to the overall customer engagement process.

Not prove and adopt but adopt and prove

Chess-2IT initiatives typically would follow a pilot implementation and a larger roll-out taking lessons from the pilot. The IT plan would cater to such a flow.

In the attempt to stay ahead in the existing business environment, businesses cannot afford a time consuming pilot-prove-roll-out flow, instead they need to develop and implement applications on the fly and link up such applications to provide a seamless experience to the users.

Not comprehensive bulky but focused lean

Traditional IT strategy would cover all aspects of IT – applications, hardware, other infrastructure like networks and IT teams – that would be required to enable all areas of businesses, tied up vertically and horizontally to present a comprehensive plan. The dependencies would be laid out and hence investment decisions would cover all the dependencies.

Digital strategy is aimed at focused aspects of business such as customer services or backend logistics or regulatory compliance. These business areas can be seen as independent components and decisions taken as per the demands of these business components.

Not CIO centric but business centric

The custodian of an IT strategy would be the CIO in most organizations. He would own the plan and initiate changes when required. The requirements from the business would queue up in the CIO’s office and prioritized as per the plan document.

The digital strategy need to follow a more inclusive approach where the plans would be drawn up in close coordination with business and even customers or vendors. In progressive organizations, the involvement of business would also extend to execution where they may be allowed to take investment decisions (operating under an overall governance structure)  that may span selection  of applications, infrastructure and service providers. We see this change already in effect. In a survey conducted by McKinsey on IT strategy, more than 83% of IT executives indicated that their company’s IT strategy was developed collaboratively between IT and business.

Conclusion

A shift from older methods of IT strategy to a radically different approach of Digital is vital to the organizations operating in the ever changing markets to take full advantage of the advancements in IT. The change impacts all areas of organizations and need to be initiated at the top. CIOs need to work towards getting the buy-in of the businesses through their close involvement and ownership in key IT decisions.

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Agility over Process Orientation in Digital World

Agility can be a great virtue for organisations to engage with their customers effectively and anticipate and respond to unforeseen business situations

That the business environment we witness is dynamic and volatile is given.  Organizations across industries face multitude of challenges in the market place; consumers, empowered by pervasive technologies look for immediate indulgence in products and services they wish to acquire and swiftly complain about a poor performance in the social media exerting pressure on the operations; competitors, getting better at market insights move quickly with new products or promotions gaining market share; start-ups, willing to take risks come with a disruptive business models changing market equations. Organizations differ in the way they tackle these challenges and that is reflected in their preparedness and responses. If we examine what qualities distinguish leaders from others, agility takes a prominent position.  For those who master the skill, it can indeed become a competitive advantage.

SONY DSC

However, agility is not something organizations have consciously invested in the last two decades. Instead there has been a high emphasis on process excellence to achieve business excellence. The question arises as to whether the process focused organizations are also agile or are these two conflicting approaches?

Process focussed organisations have well defined qualities about them.  They are characterized by two key qualities; standardization and efficiency. There is clarity on structure, roles and tasks to be executed. Their practices are steeped in transparency as all those involved clearly know where each one stands in the execution of the processes.  They tend to avoid any deviation from the established standards.  Any changes to the processes, triggered by business changes or as part of continuous improvement are normally taken up as projects that are subjected to well defined scope, timelines and budgets. Process groups staffed by experts would define standards enabled by world-class techniques such as Lean and Six Sigma. Information Technology would be seen as an enabler and be taken up as projects adhering to the established standards of the organization.

The process orientation has helped these organizations achieve standards of operations across functions and locations, measure performance against set goals, improved efficiency on a continuous basis and set benchmarks.

Agile clipartAgility, on the other hand, determines organizations response to market situations.  Agility can be characterized by two critical qualities; speed of response and flexibility. Speed of response helps them to spot and convert business opportunities, continuously develop or evolve products and services to meet changing market demands and anticipate and counter moves of the competition. Flexibility empowers their employees to make decisions on-the-go that may related to structure, roles or process changes that are customer oriented.

Thus, in an agile organization, a sales person may be empowered to structure differential pricing to customer segments or customize an offering to specific requirements though not defined as part of his job; a service engineer can be trained to not stop by merely servicing the product but can make a sale of a related product during a service call; a delivery executive may deviate and airlift a consignment for an emergency demand.

There are many differences between a typical process oriented and an agile organization.

Typical Process Oriented Organization

Typical Agile Organization

Clearly defined process standards, roles and responsibilities  generally with no deviations Broadly defined structure and roles – especially in the customer facing organization –  that changes as per business needs
Changes to procedures are time consuming due to design and validation Changes to procedures happen on the fly
Decisions typically more centralised Decision making decentralised
Typically rely on lagging and periodic indicators like Financials, process quality etc. Driven by real-time measures like social listening, customer experience  etc
Continuous improvement helps in reducing errors and improving quality of service Mistakes are looked at as means of learning to improve speed
Focus is on reducing costs Focus is on increasing revenues
IT seen as an enabler and lags process definitions IT is integral to business direction and determines the business process

Clearly, to meet the increasing expectations of the consumers and deal with heightened competition, organizations can no longer ignore agility but instead should look at it as a key driver for running their businesses.  However, the argument here is not for agility at the cost of process efficiency. It is instead for building the skill on a foundation of just adequately defined processes and not ignoring it in the attempt to improve process efficiency.

Organizations can balance the seemingly dichotomous objectives by going Digital.  Programs that can automate the predominantly manual processes or integrate all communication (emails, workflows) under a common platform or manage structured and unstructured data to assess performance or building a knowledge repository that is live and easily accessible can enable organizations to be agile and process oriented.  Thus, for a bank or a retailer, technology can help to design and deploy digital services rapidly still following all the regulatory requirements, for a logistic company or a manufacturer, it can help track consignments / inventory end-to-end while complying to Health, Safety and Environment norms and for a government department, it can facilitate faster procurement while being transparent.

Agility can be the need of the hour to survive and be successful in a rapidly changing business environment. By being responsive and flexible, two critical qualities of agility, and not obsessed with process efficiency, organizations can better handle market uncertainties, customer demands and environmental changes. Information Technology and digital programs can be leveraged to becoming agile.

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Role of System Integrators in Creating Digital Enterprises

System Integrators need to follow a radically different approach if they want to engage with the emerging Digital Enterprises. There are atleast 6 characteristics shifts they need to explore. 

System Integrators (SI) specialize in connecting disparate computer systems  of their clients to make them work efficiently. Their forte is managing large and complex projects such as ERP or Core Banking implementations that are generally difficult, time consuming and resource demanding. They bring in technical expertise, right tools and techniques, trained resources and can co-ordinate with multiple vendors to deliver such complex solutions.

System Integration is one of the key offerings of many Information Technology (IT) service providers and for many this is the mainstay of their business.  Due to complex nature of the projects, the SI’s spend considerable time bringing clarity to the scope, pinning down the effort and planning for the resources. The contracts are made comprehensive, reviewed at multiple levels and agreed with the client before commencement of work.

The time tested methods of SI may be under threat if we position them in the context of Digital Enterprises that are emerging in the various sectors of the business. These enterprises go beyond the obvious and see IT as core to their existence. They deploy multitude of technologies that can help them understand their customers better, provide an edge over competition and navigate through ever dynamic and uncertain market conditions.  They look to assimilate these technologies rapidly and in most cases in short bursts as demanded by their business situations.  These are organizations in hurry and not risk averse and look for similar characteristics when they procure IT Services. If SI wish to play an active role in helping these Digital Enterprises, their watertight and pre-determined approach to providing technology services require a complete makeover.

There are a number of digital technologies that are on offer. Among these, strong business oriented applications such as such as Analytics, Big Data and mobility and infrastructure platforms such as cloud have increasingly become strategic priorities of organizations. There are others such as Internet of Things and Social Media integration equally vie for the digital investments.  While the adoption of these technologies show an increase,  they pose certain challenges in deployment.  A key among them, cited by the organizations, is the lack of talent within their resource pool and even among their collaborators.   This brings the spotlight on the SI and the role they can play in helping their clients become truly digital enterprises.

There are a number of implications for SI as they attempt to help their clients go Digital. Due to the purpose these technologies serve, they demand a good understanding of the business, different sets of skills among the team and faster pace of realization. The projects are not large-scale or necessarily complex.  Hence, SI need to follow a radically different approach from those practiced earlier for programs such as ERP implementations while retaining the strong technology expertise.   Six characteristics shifts that are interrelated can help the SI’s to effectively participate in their clients’ digital journey.

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Technology Integration to Business Integration

SI’s are conventionally technology focused as the title System Integration indicates. They can make different systems talk to each other, share data and processing capabilities.  To participate in the Digital agenda of their clients, they need to be more business oriented and focus on integrating the businesses especially those operating in silos than merely connecting the respective systems. This shift demands that the SI’s have better understanding of their clients’ business direction, the market imperatives and operational challenges. A more challenging shift is that the SI’s need to position themselves as a partner at strategic level than a vendor at the operational level.   This results in multiple levels of impact across their operations. They need to enhance their capabilities, methods and techniques, staff the teams with right mix of domain and technology experts and prepare to sell at Board level.

Project Focus to Process Focus

SI’s structure their work around ‘projects’ that are characterized by defined scope and timelines.  Digital initiatives tend to be ambiguous. These projects may not have a clear scope to start with and may require iterative approach to realize the objectives. Timelines may not be estimated accurately. Hence, SI’s should manage such ‘projects’ differently.   To start with, they should move away from attempting to clearly define the project with the usual elements of scope, roles and timelines to a more process oriented approach.  This however, does not mean that getting caught into an endless engagement. A process focus means that the SI’s establish a delivery process of interweaving the identified business process and appropriate technology solution, obtain feedback, deploy for use and move onto a next identified process.

Outside-In to Inside-Out

Digital programs need to be planned in an ‘inside-out’ manner, implying that the organizations need to evaluate technologies that are right for their businesses than what others are doing. The traditional services expect SI’s to bring their learnings from other clients for project execution to avoid re-inventing the wheel.  Towards this, SI’s would develop standard methodologies – which in turn would be refined by their industry experience – and bring them for a new project. While this approach has its merits, SI’s should realize that they cannot manage Digital programs with ‘one size fits all’ outlook or in other words follow an ‘outside-in’ approach.  They need to see the requirements from their clients’ perspective and only align those elements in their repository that will make a good fit.  In order to achieve the ‘inside-out’ model, SI’s need to integrate themselves with their clients’ teams  and look at the issues from clients’ perspective.

Reactive Approach to Pro-active Approach

The solutions SI’s provide are generally towards solving certain existing problems – such as redundant or unused applications, duplicate or insufficient data, incompatible infrastructure etc.  The solutions thus tend to be reactive in nature and try to solve past issues.  The digital enterprise will require a pro-active approach, defining and implementing solutions for future needs, even if the current needs are adequately supported by the existing systems.  SI’s need to anticipate the future requirements even while being engaged in current projects and attempt to convert those requirements into future projects.  This again brings the focus to skills of the team members who need to follow a consulting-led approach to their client engagements.

Complex Solutions to Simple Niche Applications

A key agenda for Digital Enterprises is to continuously improve the ways of managing customers and rallying the entire organization towards that goal. This may require deploying applications that can instantaneously bring improvements in customer management or any service related operations. For instance, it could relate to an easier way of processing customer orders or personalizing the offerings to customer specifications. Such applications could integrate with back-end enterprise applications for execution. SI’s need to cater to such requirements by being more agile and responsive.

revenue-1

Cost Control to Revenue Enhancement

The IT agenda for a Digital Enterprise is moving away from being merely cost reduction to revenue enhancement. SI’s mandate used to be delivering solutions at the lowest cost possible and hence their approach and project costing would cater to such requirement.  However, in the changing scenario, SI’s need to consciously evaluate solutions that can result in enhancing the revenues for their clients.

Conclusion

The competition to SI’s is not from other SI’s but from specialists and smaller firms.  These firms are more focused and can respond to requirements quickly. They may not have the fineness of the processes SI’s have, but are more result oriented. Hence, in such a changing competitive landscape, SI’s need to bring about these shifts as early as they can while making sustained investments over a period of time in structure, people and processes.

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Measuring Success of An ERP Implementation

ERP implementations involve high investments in terms of funds and effort though in recent times we see a number of ways ERP vendors attempting to reduce both. Having incurred large sums of money, businesses would like to know whether the implementation can be termed a success and if so what have been the returns of the investments. There can be a number of methods to assess the impact of the implementation. We may look at whether there has been better control of inventory or if there is more conversion of sales enquiries to order.

 

Here is a set of 10, completely different kind of measures, though off-beat, provide a good indication that the effort has indeed been rewarding. An advantage of these measures is that they can easily be observed.

  1. The CEO (and CXOs) conduct their operational review using reports generated from ERP

This indicates the system has been fully tested and at that level, the leadership has faith in the system. Rest of the organization would be expected to follow suit.

  1. People in Finance function leave on closing hours and don’t come on weekends

In islands of systems, finance function takes the entire load of integrating the data as Finance is the destination system. In an integrated system like ERP, the finance would get all the transactions by design. Hence, finance function may suddenly find they have lesser load.

  1. Users find ERP functionality not adequate

When users get the benefit of the system to support their regular issues, they normally find the functionality inadequate because they tend to solve more work problems than the system is configured for.

  1. Users don’t argue over correctness of data

A poorly implemented system would result in data integrity issues leading to unnecessary effort in reconciling data and inevitable blame game on who have lost the control on data.

  1. Target-blog-2XL no longer used as parallel recording / reporting system

The affinity to XL for those who are familiar with it does not go off easily. If users perceive some gaps, they would try to fill that using XL – these could be in the form of some additional transactions, calculations or reports.

  1. IT folks learn more from the users than the other way

Due to continuous usage, users pick up more knowledge about the product than the IT follks who may not have seen all scenarios.

  1. Review meeting has more of business representation and less of IT folks

When there is no confidence in the system, the business review meetings would tend to have IT folks who understand the system for just in case situations – where IT folks would try quick fixing problems that get reported.

  1. ERP vendor frequently asks for referral visits

There is no better marketing tool than sharing user experience. If users feel comfortable they may be flooded with requests for referral visits / calls from the ERP vendors.

  1. There is no loaded truck waiting at the out-gate due to system issues

A common occurrence of a problem system is during despatch, a truck would be physically loaded with goods for transportation, but the transaction would not be completed – invoice cannot be generated or the system would show wrong goods – delaying the departure of the goods.

  1. CIO spends most of his/her time with business than with IT

An indication of good implementation would be less of fire-fighting on maintenance and upkeep issues. A CIO spending his/her time more for business would mean less of maintenance issues and more focus on planning.

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A Benefit Oriented Approach and the Role of Benefit Realization Manager for ERP Implementations at SMBs – Part II

Graph-Blog-1

In this second part of the blog, we will discuss the process to be followed in a benefit oriented approach to implementing ERP at SMBs. Appointing a Benefit Realization Manager (BRM), the role we discussed in Part I, and following the process recommended in this edition can help SMBs realize better returns to their investments in ERP.

Generally, ERPs will be expected to bring in a more disciplined approach to conducting the business with their ‘single source of truth’ premise and integration features. However, these benefits may not necessarily result in business value – measured in terms of revenues, costs or customer service – that commensurate with the high investments of such initiatives. Hence, SMBs, embarking on these programs, need to ensure that their efforts, significant in most cases, are influenced by business outcomes than technology gains right from the planning stage through the succeeding stages.

Planning Stage – Preparation of Business Case

Companies would typically require a strong business case to proceed with ERP investments. The document would include inter alia the need analysis, investments and the benefits expected. However, in most cases the benefits stated tend to be more qualitative like improve operations or achieve data integrity. However, in our approach, the Benefit Realization Manager (BRM) would need to document the benefits with reference to the outcomes and measures. Such outcomes and measures should be aligned to company’s business goals and agreed with the management.

Let us consider a company which is seeking revenue growth and operational efficiency. The benefits expected and the related measures could be illustrated in the following way:

A Benefit Oriented Approach-1-Chart

These could be further detailed out along additional business goals and if required, made specific to business units or regions. The business case document would then serve as the baseline requirements document during the implementation stage.

The BRM may need to document the current performance of the company against the listed measures to facilitate a pre and post ERP evaluation. Additionally, functional areas that need re-orientation in terms of process simplification or delegation in decision making could be marked at this stage and taken up for specific considerations during the implementation stage.

Implementation Stage – Solutioning and Acceptance Testing

During this stage, the BRM would need to communicate the business goals and expectations to the implementation team and get a commitment on aligning the solution to these goals.  He / She should participate in solution reviews and ensure that the focus continue to remain on the benefits. Any change in the approach should be analysed on its merits and auctioned upon without compromising on the benefits sought. Print

The product experts would then be expected to design and configure the solution to support the stated processes and measures in the ‘Build’ stage and in the acceptance stage, the BRM would need to orchestrate the testing of the configured solution for various business scenarios and related measures by the business teams.

Post Implementation Stage – Benefit Realization Reviews and Course Corrections

After the system stabilizes with continued usage which may be for a period of 6 months, the BRM needs to conduct a comprehensive review of the system against the intended outcomes and measures. The review could cover the four areas indicated in Part I of the blog; business outcomes, process simplification, people empowerment and IT Costs. The measures can be compared against those taken earlier to see possible improvements. The review should ideally be repeated after another 6 months where the ERP would have processed a year’s transaction and results compared with the earlier ones. Changes should be analysed for course corrections if any. Such corrections may require additional functionality to be built or further simplification of the processes.

As conclusion, SMBs would gain by following a benefit based approach than a technology implementation and   would do well by entrusting such a responsibility to a Benefit Realization Manager – a senior professional in the organization. The BRM would need to work closely with the implementation team, communicate the benefits expected and follow a rigorous process of testing and review to ensure that the solution is indeed tuned to achieve the desired outcomes.

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A Benefit Oriented Approach and the Role of Benefit Realization Manager for ERP Implementations at SMBs – Part I

Business-Blog-1

SMBs should follow a benefit oriented approach to ensure they get the maximum returns on their ERP investments and avoid the project being dictated by technology demands. Part I of the blog discusses the role of a Benefit Realization Manager and Part II, the process to be followed for in such an approach.

ERP Systems constitute the core of the IT landscape of many businesses now. For a long time, due to the high costs, they were largely a prerogative of large companies in India. That situation may be changing now as we find a number of SMBs (small and mid size companies) opting for these solutions. There could be several factors for this shift. The important among them may be the realization at ERP vendors that they are losing out on a large market base and as a consequence rushed to occupy that space with quickly rustled up stepped-down variants of their products. These were priced lower than the original versions and came with reduced scope that seems adequate for SMBs. To some extent, the advancements in technology such as cloud and falling hardware costs have also contributed to higher adoption. Further, the expanding vendor base of ERP developers, re-sellers and implementation agencies have come together to provide meaningful choices to SMBs to select the best fit ones that suit their businesses.

SMBs that are currently evaluating or in the process of implementing ERPs would do well to learn from the market experience to avoid certain pitfalls and issues faced by their predecessors.  As they normally operate in tight resource conditions, investments in projects such as ERP that involves large outlay in terms of costs and effort, need to be thoughtfully planned and executed towards aiding than testing their already constrained resources. However, for every success story we find more than one horror stories which narrate instances of costs and time overruns and disruptions to businesses leading to loss of revenue and reputation. It may seem that by and large, ERPs have not delivered value to the businesses commensurate with the investments. A number of studies have been conducted on this subject and critical success factors have been propounded to aid an effective implementation. Management oversight, scope and schedule management, data accuracy, experienced implementation team and user education and training find prominent mention among them.  While these are indeed crucial for the success of the implementation and should be looked after, one of the key success contributor that does not come out as strongly as it should is an approach that is grounded on extracting the most in the form of business benefits from ERP.

A benefit oriented approach would require right decisions to be taken at every succeeding stage of the project -planning to implementation to post-implementation- that are directed by expected outcomes than technology demands. Such an approach will need an owner responsible for ensuring that the benefits are realized and a supporting process that is closely aligned to the business outlook of the organization.

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The benefits that can accrue to an SMB or even for the larger organization can be classified into 4 areas:

  • Business outcomes – which can be measured in quantitative terms. While the measures at a high level are simply revenues, costs or customer service, those role up to these measures need to be targeted in an ERP implementation. Metrics such as forecast accuracy, inventory holding, on-time-in-full deliveries or receivables are some.
  • Process effortlessness – The benefits in these areas are related to ease of completing a task such as invoicing or finalizing the monthly accounts shortly after month closure.
  • People empowerment – Due to ERP, people should have access to accurate and recent data that can enable them take proper decisions in accordance to their levels and as expected by the management.  They will be expected to spend more time on analysis to improve their divisions’ performance than compiling data for decisions.
  • IT Management and costs – While the investments in ERP can be high, SMBs can expect their ad-hoc IT costs and spending on repairs and reconstruction of IT applications to come down. The maintenance costs should more predictable and hence planned much in advance. The support to the users would follow a more structured process whether it is maintained internally or outsourced to a vendor.

In order to ensure the expected benefits are accrued across all these areas, the responsibility of achieving these may be vested with a ‘Benefits Realization Manager (BRM)’. The BRM role is different from a Program /Project Manager in that the latter would be more concerned about the completion of the project within agreed costs and time while the former will focus on extracting the maximum benefits from the ERP investments. One may argue that such benefit orientation should rightly be expected from the next level project team members, but in reality we may find them so immersed in trying to understand and share the process and system intricacies that they tend to lose the sight of benefits.  A BRM can fill that gap and for an effective ownership, he/she should preferably be an ‘insider’, someone from the senior management who understands the organizational objectives and barriers and knows what can solve them. The BRM would form an integral part of the initiative right from the beginning, interact with various functions for inputs on expected benefits, assemble them in a coherent way, direct the project teams with right inputs and ensure they buy into the imperatives.  He/she may seek additional support from a consultant if required, but needs to ensure that the consultant has a good understanding of the domain and organizational issues.

As said earlier, to achieve the desired benefits, the BRM needs to follow a structured process that with right level of interventions at each stage of the project. Such involvement would cover preparing a business case, measuring the current and deciding the target performance indicators, ensuring the solution is designed and built accordingly and later after when the stable state on the system is attained, conducting a review on the benefits accrued.

In Part II of this blog, we will discuss more on the process to be followed in the benefit oriented approach.

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