IMPLEMENTINGENTERPRISE RESOURCEPLANNING:LESSONS LEARNED FROMTHE FRONT

SAP INSIGHT

Table of Contents

Executive Summary 1

What Are the Key Best Practices in ERP Implementations? 2

What Practices Are Found to Adversely Affect an Implementation? 3

What Specific Best-Practice Tactics Can Companies Use to Make 6

Current and Future Implementations More Effective?

Conclusion 11

IMPLEMENTINGENTERPRISERESOURCEPLANNING:LESSONS LEARNED FROMTHE FRONT

by Greg Tomb

SAP has implemented enterprise resource planning(ERP) systems in both the commercial and publicsector for more than 30 years. From theseexperiences, four important principles stand out, asfollows:

� Successful implementations start and end withthe involvement and contribution of seniorexecutive leadership, providing the governanceand management necessary to achieveorganizational buy-in throughout the processand ensure that goals are achieved.

� Success also requires confidence thatimplementing ERP software achieves true valuefor the organization - value measured insubstantial process improvement.

� Implementation has a life cycle, with some ofthe most important phases at the start -requirements gathering, business casedevelopment, and solution design. The businesscase quantifies the desired processimprovements and provides the organizationwith the goals necessary to carry it through therough times.

� Implementation programs with the set goal of"replacing systems" - without mentioningprocess improvement - are doomed to failure.

Best practice indicates that a successfulimplementation can, in fact, force an organizationto reevaluate its business practices and processes,focus on clearly defined goals and objectives, createa higher understanding of the need for dataaccuracy, emphasize time-phased material planning,and enable a more effective data-sharingenvironment. However, such high-level benefitsrequire a new approach to project implementation,one that applies the lessons of the past to reinventthe systems of the future.

The following point of view draws lessons aboutwhat has been done well, what has yet to be donewell, best practices from large commercial companyimplementations, and best practices for thegovernance of implementations that achieve theresults and benefits foreseen.

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EXECUTIVE SUMMARY

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Best practice indicates that a successful implementationcan, in fact, force an organization to reevaluate its businesspractices and processes, focus on clearly defined goals andobjectives, create a higher understanding of the need fordata accuracy, emphasize time-phased material planning,and enable a more effective data-sharing environment.However, such high-level benefits require a new approach toproject implementation, one that applies the lessons of thepast to reinvent the systems of the future.

WHAT ARE THE KEY BEST PRACTICES IN ERPIMPLEMENTATIONS?

� Senior executives who develop a vision forthe ERP implementation with supportinggoals and objectives based on improvingspecific capabilities will achieve success inimplementation.

� In each specific IT implementation,leadership must provide the necessary high-level support and back-up, which protectsfunding and removes organizationalroadblocks. In one example, a public sectorproject, the project teams received supportfrom senior leadership as project managersworked to resolve the many difficult andcomplex issues. Senior managers in thisorganization insulated the implementationteams from distractions to allow them to focuson the tasks at hand.

� In some IT implementations, the use of SAPexperts to advise and assist has beenencouraged and allowed, and theirinvolvement helped avoid many typicalimplementation pitfalls in key areas. Inanother large ERP implementation, SAP expertshelped validate key concepts, but moreimportant, educated the corporate programoffice members about the new software -enabling them to better work with thecommercial systems integrators. Thecombination of product design, thoughtleadership, and practical experience hasdemonstrated the right partnership model forall of the organization's programs.

� As projects unfold, implementationpartners have the necessary authority toelevate and resolve immediate issues havebeen elevated and resolved in real time,without delays. Functional experts, in turn,are available to handle project manager requestsin real time, again.

� At each level of the IT implementation, theimplementation team takes the seriousnessof the project to heart, showing realdedication to duty and demonstratingexemplary productivity. The implementationgroups are motivated, and resourceful, and dowhat ever it takes to get the job done. Finally,senior management provides the rightincentives so that the implementation team canmaintain its momentum over the sometimesvery long implementation cycle

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At each level of the IT implementation, theimplementation team takes the seriousness ofthe project to heart, showing real dedication toduty and demonstrating exemplary productivity.

WHAT PRACTICES ARE FOUND TO ADVERSELYAFFECT AN IMPLEMENTATION?

� Bureaucratic processes and organizationalstructures can slow and complicate thesuccessful completion of ITimplementations, and dampen the naturalenthusiasm of the users for newtechnology, despite overarching leadershipsupport. In the case of one large organization,the system of architecture compliance andcertification is too complex -- and encouragesusers to find ways around the system. This same"IT creativity" can work against a large systemsimplementation.

� Companies embark on too many individualIT and transformation projects withoutconsidering how they overlap, or whetherthey are all strategically necessary, and, as aresult, use up too many resources.Functional organizations tend to retain theirolder processes, thereby maintaining workloadfor themselves, while they develop systemsrequirements based on current processes. Withlimited senior governance and no overarchingauthority, some implementations might be leftto be managed as individual projects, with noattempt to connect them, learn from them, orin any way treat them as the fundamentalmachinery of change that they actually were.

� Inaccurate estimates for project scope canhold back progress and cause delays atcrucial points along the cycle ofimplementation when the scope expands. Inone project, for example, the original scope

planned for 11 systems/interfaces, 9 conversions,and no enhancements or custom reports. Whenreality hit, the team found the project requiredmore than 40 systems/interfaces, 9 conversion, 6enhancements, and 5 custom reports. Thischange in scope added more than 12 months tothe implementation cycle.

� The organizational culture can affect theduration of an implementation. Forexample, if the organizational culture takespride in individual competence and capability,problem solving in the field, and creativity ingetting a job done - then implementations cantake longer. The reason: such an emphasis onindividual competence - and in some cases,individual team competence - impedes progress.As a team or an individual tries to solve aproblem independently, time is wasted, andwhen the call for help finally goes out, theproblem is often greater than it first appeared.

� Many large corporations and organizationstreat IT implementations as technicalprojects, requiring technical skills toimplement - and forget the need toestablish business goals. In one recentimplementation, for example, emphasizing thetechnical aspects of the system blinded theteams to the need for cross-team collaboration.More important, because management did notcompletely articulate the power of the new,integrated information, team members becamedistracted putting out other "fires" and

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Bureaucratic processes and organizationalstructures can slow and complicate the successfulcompletion of IT implementations, and dampen thenatural enthusiasm of the users for new technology,despite overarching leadership support.

management missed the opportunity to use theadvent of enhanced functionality as a motivatorto push the teams into greater levels ofproductivity in implementing the system. Theimplementation dragged on for more than twoyears.

� Organizational leaders, untrained in thespecific capabilities or challenges of an ERPenvironment, often find it difficult to makecritical operational and functionaldecisions, even when committed to thelarger goals. Decisions are eventually made,but too slowly, often bringing progress to astandstill.

� Implementation consultants who do notadequately attempt to understand or workwithin the organization's culture canactually hinder progress. Some consultantsseem ready to lengthen the process ofimplementation, instead of creating the climatefor change necessary to accelerate the process ofimplementation and increase productivity.

� When the project managers in charge of ITprojects are technical managers whosecapabilities focus on the workings of ITsystems, the needs of the end user can beneglected. Without a team that combines bothpoints of view (the user and the technician),large implementations often fail to achieve thefunctional and technical goals set for them.

� Many organizations do not see the point ornecessity of achieving - and communicating- quick wins that showcase the benefits thatthe system would bring, even though doingthis has long been considered a bestpractice. Again, the organization's "can do"culture works against the need to "sell" thesystem; teams are expected to appreciate thesystem's potential innately, simply because thatis their job.

� Especially when a company's new projectsnumber in the thousands, the executiveleadership becomes concerned that keyissues and capabilities are being forgotten -resulting in micromanaging. Consequently,the implementations suffer from second-guessing and rework.

� Despite encouraging collaboration amongIT projects, sometimes program officesneither fund nor implement configurationsalready completed by another programoffice. Instead, organizational projectmanagement often tries to control integrationamong its divisions or to adopt standards, whichis done without seeking collaboration fromother project managers. This can result in an ITproject jam, especially if no thought is given tocreating an "extended organizational team" tohelp solve specific problems is or includinganyone else in the process of implementingchanges.

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Especially when a company's new projectsnumber in the thousands, the executiveleadership becomes concerned that key issuesand capabilities are being forgotten - resultingin micromanaging.

� The organization develops a structuredprogram to leverage vendor expertise orcapabilities, but the emphasis is off-base.The organization spends most of its effortsdriving custom vendor modifications, notleveraging the vendor's expertise to increase theproductivity of implementation efforts.

� Executives underestimate the difficulty andcomplexity of the data migration andconversion necessary to implement an SAPsystem. Organizations often do not establishinterim project managers to oversee the dataconversion process, or recognize the difficultyof migrating data into the new systems,resulting in missed deadlines and cost overruns.

� The development of interfaces takes toomuch time and effort, and createproductivity problems in reaching themilestones envisioned for the projects. Toooften, planners only evaluate the potential forinterfaces at the highest system level.Ifdevelopers do not also consider each of thetransactional levels, they may well add weeks ofdelay when the need for transactional interfacescomes as a surprise.

� The importance of end-user training isunderestimated. Organizations most often donot train core teams of end users in theintricacies of the new solution before the start ofthe project, and almost never involve these endusers throughout the implementation.

� Systems are implemented without firstinstituting process redesign. When theproduct team attempts to rework the system toaccommodate existing processes, rather thanfirst redesigning those processes, little isaccomplished in terms of real organizationalchange. This practice takes up too much timewith unproductive activity and cuts down onaccomplishing productivity goals.

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Executives underestimate the difficulty andcomplexity of the data migration and conversionnecessary to implement an SAP system.

WHAT SPECIFIC BEST-PRACTICE TACTICS CANCOMPANIES USE TO MAKE CURRENT ANDFUTURE IMPLEMENTATIONS MORE EFFECTIVE?

� Overwhelming evidence fromimplementations within large globalenterprises proves that success starts withsenior executive sponsorship and buy-in,followed by active participation in creatingthe vision and in overseeing a flawlessexecution. Experience has shown that ensuringorganizational acceptance of the ERPimplementation is paramount for achieving thebusiness goals set for it. As a result, seniorexecutives must participate from the beginningin setting the goals and communicating theimportance of the implementation fromexecutive suite to shop floor. Throughout theprocess, there are too many decisions to bemade, too many challenges to be met, for seniorexecutives to opt out of the process.

� In the same way, the decision-making/governance process must be clearlydefined and include all key stakeholders.Again, the key objective is organizationalacceptance. If the process owners are involved indecision making and help design the goals fortheir own process, for example, they'll have amuch stronger stake in the project's success.

� A well-constructed business casequantifying the specific processimprovements necessary to achieve long-term goals is an important ingredient. Whenan organization starts with a specific goal, theprogram is far more likely to succeed. Andwhen a large corporate transformation is theultimate goal, specific business-based objectivesneed to be cascaded to each of the ongoingimplementations. In that way, the connectionbetween these objectives and the broader goalssupporting the overall transformation are mostclearly articulated. All actions and decisionsaround organizational implementations shouldbe measured by how they will help thecompany achieve its vision.

� Best practice indicates thatimplementations should be pursuedaccording to an extremely aggressiveimplementation schedule that isaccelerated at every opportunity. Suchaggressive scheduling is important for tworeasons. First, it helps assure organizational buy-in and acceptance. Second, problems that cropup are more likely to be solved in real timeinstead of going undetected as attention turnselsewhere.

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Overwhelming evidence from implementations withinlarge global enterprises proves that success starts withsenior executive sponsorship and buy-in, followed byactive participation in creating the vision and inoverseeing a flawless execution.

� For implementations to work, the end usermust know he will benefit from the specificcapabilities of the solution from day one -through training, for example, or a familiaruser interface. Research has shown thatimplementations are far more likely to achievetheir goals when end users are given the propertraining to master the new solution at the startof the implementation. Those that involve theend user, even to the point of helping to designthe goals for process improvement, have agreater chance of succeeding.

� Including end users from the beginning ofthe project provides the best approach toachieving their buy-in and cooperation.This can be achieved in many ways. One veryeffective tactic is for senior management todesignate end-user champions or "super-users"who can clearly articulate user needs, assist inblueprinting, and explain the benefits of thenew system to peers.

� An Enterprise-wide program managementoffice (PMO) can coordinate across divisionsand implementations. The PMO mustsupport and manage the implementation ofconfigurations already accomplished as well asthose to come, providing the leadership anddirection necessary to develop the business caseand quantifying the specific processimprovements that must be made. AnEnterprise-wide PMO will help make the myriadof decisions necessary along the way and helporganizations avoid past mistakes.

� The Enterprise-wide PMO will provide thestreamlined governance necessary torapidly respond to issues, document theresponse, and make certain that issues donot escalate beyond the boundaries of thearea in which they are first observed. ThePMO must have the responsibility andauthority to make decisions that will besupported by the rest of the organization.The Enterprise-wide PMO can develop a singleintegrated work plan, critical-path focus, andbetter scope management. It can wield thedecision-making power necessary to eliminateinefficient practices, and provide the impetus torapidly respond to problems, document issuesand their resolution, and monitorimplementation progress.

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The Enterprise-wide PMO will provide thestreamlined governance necessary to rapidlyrespond to issues, document the response, andmake certain that issues do not escalate beyond theboundaries of the area in which they are firstobserved. The PMO must have the responsibilityand authority to make decisions that will besupported by the rest of the organization.

� Before the implementation begins, it isimportant to remove organizationalroadblocks such as a culture that is moreadept at "flying under the radar" or an ITcommunity content with the status quo.Once again, the Enterprise-wide PMO can helpchange culture by communicating the need forchange from the start - and continuing toupdate the organization on the types of changethat are needed. In the case of one globalorganization, for example, the SAPimplementation was not going well; once thecompany set up a centralized office in charge ofmaking decisions and determining the rightprocedures for the implementation, theimplementation went smoothly, and the projectwas able to achieve the business goals set for it.

� A life-cycle approach to the solution willhelp remove organizational impediments,as the solution is allowed to evolvenaturally. Implementation of SAP with a life-cycle approach (from inception throughsupport) helps guarantee success. The mostimportant phases with a life-cycle approachfrom inception of the life cycle from a valuerealization perspective are the initial phases -requirements gathering/business casedevelopment and solution design.

� Solution vendors must be part of theprocess from the beginning and theircapabilities leveraged to meet productiveneeds. While independent systems integratorsare absolutely necessary, they are sometimesmotivated by maximizing time and materials,which is not necessarily conducive to a quickand effective implementation. With SAPConsulting on board, specialists in SAP softwareprovide thought leadership on product designand in developing an implementation plan thatprovides a precise road map for success,including the creation of interim milestones,and the potential for interim victories, whichhelps create virtuous process.

� Process change must begin before the ERPimplementation and continue throughoutimplementation as an integral part ofconfiguration. All successful implementationsbegin with a business case that quantifies theprecise areas for process improvement - andthen sets up a tracking mechanism to makecertain quick wins are identified. In successfulimplementation, for example, the companystandardized business processes, applications,and the data center before proceeding with theimplementation.

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Solution vendors must be part of the process from thebeginning and their capabilities leveraged to meetproductive needs.

� Regular strategic meetings should be heldto review the achievement of benefits andother goals and ensure alignment betweenthe end user and the implementation. Allinvolved parties must be represented tounderstand what is required (end users,implementers, and software vendor). Oncethe goals for process improvement arearticulated, they must be monitored and refinedthroughout the implementation.

� If one of the goals for the implementation isthe elimination of legacy systems, it isimperative to plan for it via a systemsrealignment and closure process. Such aplan will help determine the most appropriateway to integrate the new system with the old,enhancing the capabilities of the legacy systemswithout ripping them out.

� It is important to get the right peopleinvolved in design and test and to makecertain that key process owners "own" thesolution. In the process of developing thebusiness case, the process owners must identifythe key areas where improvement is necessary.In that way, the organization guarantees thatthe users who will benefit from the solutionactually help design the system implementationand "own" the results from the start of theproject.

� Organizational alignment and stabilitycreate smooth implementation. When thebusiness case articulates key areas of processimprovement, it goes a long way towardcreating the organizational buy-in necessary forthe changes that must occur. In that way, theorganization anticipates and prepares forchange, and is not disrupted by it.Organizational disruption creates difficulties forthe team implementing the system.

� Successful implementations always includedirect access to senior decision makers by ITproject managers. Senior managementcommitment is the only thing that isuniversally understood and accepted as animperative for successful IT implementations.

� Senior level management must have a clearunderstanding of the discipline required foran integrated system. Too often, seniorexecutive leadership participates in the strategicdiscussions leading up to an implementationbut do not keep the implementation of the newIT system on their radar screen throughout theproject. Certainly, they know and care aboutthe strategic goals for such systems. But oncethe decision to invest is made, too often theymove on to other important problem, and handover complete responsibility to the CIO or ITproject manager. Senior executives must realize

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Regular strategic meetings should be held to reviewthe achievement of benefits and other goals andensure alignment between the end user and theimplementation. All involved parties must berepresented to understand what is required (endusers, implementers, and software vendor)

that a large ERP implementation is a majortransformation project, which will change theway an organization thinks and acts about acertain process. As a result, they must involve ateam of senior management, functional andtechnological experts to resolve issues in realtime and make the right decisions along theway, always considering the long-term strategicimpact. When senior executives recognize thedifficulty of implementations, they provide theleadership and resources necessary to makethem work.

� The learning curve is the life of the system;overtraining is impossible. Research andexperience proves that training the users of thesystem - before they must use it - is essential.Each ERP implementation establishes afoundation for the future - and as such, changesand evolution are a natural offshoot. To beprepared for change, users must start with asolid understanding of how to use the newtechnology, and the organization must expectto provide top-notch training before, during,and after every implementation or upgrade.

� Using a proven implementationmethodology is the best way to keep theproject on track. A proven methodology is thewisest course of action, using tools andtechniques that have demonstrated theireffectiveness over countless other profitableimplementations. The SAP methodology beginswith a business case development andtransitions into system design, and is carried outby experts with solid experience in large,complex projects.

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Senior level management must have a clearunderstanding of the discipline required for anintegrated system.

CONCLUSION

"Participation" is probably the best way to summarize the prescription for a successful ERP implementation.In short, everyone must play a role. Lessons learned after countless implementations point to the crucial partthat executive leaders must play in setting goals and properly funding the project, the importance ofstakeholder involvement, the necessity of end-user buy-in, and the key contributions to be gained throughthe expertise of the solution vendor. While the far-reaching impact and long-term value of this type oforganizational transformation is undisputed, the journey is not to be embarked upon lightly. Making surethat everyone is on the same path - and understands the rewards of reaching the destination - is the best wayto get there.

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"Participation" is probably the best way tosummarize the prescription for a successful ERPimplementation.

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January 2006

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