As we speak, our team is currently helping organizations throughout the world define their ERP and HCM strategies for the new decade. From a large apparel retailer in Asia Pacific, a manufacturing company in Europe, a multi-national construction firm in the Middle East, a government entity in North America – and just about everything and everywhere in between – our team’s experience helping some of the world’s best-known organizations with their global digital transformation strategies leads us to some common patterns.
There is no such thing as a one-size-fits-all ERP and HCM strategy, but there are some best practices that will lead you to the best approach for your organization. Below are the steps to define your ERP and HCM strategy for the new decade.
1. Translate your organizational strategy into ERP and HCM strategies and objectives
Before jumping into execution mode, it is important to first define what your ERP and HCM strategy and objectives are. We too often see companies that want to just “do something” before considering how it aligns with their overarching strategy and objectives. This is an important part of the ERP implementation readiness phase of any transformation project.
This begins with understanding your organization’s overall direction. What do you want to be when you grow up? What is currently standing in your way from achieving those goals? How can new technology help you get there? The answers to these and other critical questions will help define the ERP and HCM strategy that makes the most sense for your organization.
The key here is to define a strategy articulation map. This will help visually translate your corporate goals and objectives into specific objectives and parameters for your ERP and HCM implementation. Think of these as the guardrails for your overall transformation.
Once you have done this, it is time to set the goals and parameters for your transformation. These goals should provide further clarity around a variety of strategic variables. For example, we help many organizations define the following things, among others:
- Common ERP / HCM system versus best of breed systems
- Standard operating model versus flexible operations
- Big, quantum-leap changes versus more measured changes
- Phased rollout strategies versus more aggressive and faster deployments
- In-house management of the transformation versus outsourced to a system integrator or ERP consultants
These are just a few things that should be articulated in more detail as part of your transformation. This video provides more details:
2. Assess your current ERP and HCM strategy
Once you have articulated the goals and objectives for your ERP or HCM implementation, you will want to assess your current strategy. How well are we meeting your desired goals and objectives? What could we be doing to better support this longer-term vision?
We often find that we need not throw the baby out with the bath water. There are probably elements of your current ERP and HCM strategy that are working just fine. Others may need to be completely overhauled. Still others could benefit from more incremental improvements. The key is to identify with surgical precision where the opportunities reside.
3. Assess your alternatives (people, process, and technology)
This naturally leads to a short-list of viable alternatives. The good news is that we can immediately throw out alternatives that don’t align with our bigger picture goals and objectives. For example, if your strategy is to become more of a centralized and standardized company, a best of breed ERP model probably isn’t going to be a good fit.
We can instead focus on a small handful of options that best align with the bigger picture strategy. Think of these options as scenarios: potential solutions that address the people, process, and technology components of any transformation. Depending on the options, some of these options may be more weighted in different elements of transformation.
For example, it may be that one option under consideration entails an evaluation of the top ERP systems to replace your legacy systems. Another may entail more of an upgrade to your current systems with more of a focus on incremental process improvements and enhancements to the customer and employee experience. These may be two viable options, but with very different total cost of ownership, business benefits, and risk profiles.
We typically suggest analyzing a portfolio of options. As is the case with the ERP replacement versus incremental upgrade example above, evaluating options forces the decision of priorities and risk tolerances, all while objectively evaluating different options and driving internal alignment. The key is to conduct this evaluation in a technology-agnostic and objective fashion – facilitated by third-party experts that don’t have anything to gain by your decision (our team at Third Stage Consulting is one such example).
One more suggestion: in order to be completely objective when assessing alternatives, consider the pros and cons of each solution. No alternative will be a silver bullet, and each will come with risks. Be sure not to fall into the trap of ERP industry hoaxes and other biases that may result in a flawed or misaligned strategy. The video below provides guidance on industry biases to be aware of when navigating various alternatives:
4. Define our 3- to 5-year ERP and HCM roadmap
Part of the decision process entails working through the details of what each strategic alternative entails in terms of time, cost, resources, risks, business benefits, and alignment with the company’s strategy and culture. This is largely a combination of art and science. It is part quantitative and part qualitative.
As you narrow in on our preferred alternative, it is important to define the longer-term plan and roadmap in more detail. For example, the roadmap should include the following:
- Elapsed time and phasing
- Internal and external resource strategy
- Organizational change management strategy and plan (see step #5 below)
- Estimated ERP and HCM total cost of ownership
- Estimated business benefits
- Risk assessment and mitigation (every roadmap comes with its risks)
This should be enough detail to give the internal team and executive steering committee confidence and clarity to make a decision.
5. Create your ERP and HCM change management strategy and plan
I have yet to see an effective ERP and HCM digital strategy that wasn’t heavily rooted in organizational change management. In other words, the people part of the ERP and HCM transformation equation will likely be most critical to the initiative.
One way to think about change management is that it is the workstream that will truly enable the desired state of the transformation. At the end of the day, most of us don’t really want new technology or better business processes, but we do want a more effective business. Technology may or may not help enable that desired state, but change management is the “last mile” of any digital transformation.
Even though this step should actually be integrated with step #4, it is important enough to call out as a separate workstream. Too many organizations misunderstand and overlook this important skill set, which is one important reason why ERP failures are increasing. Objective and technology-agnostic ERP and HCM organizational change management consultants such as our change team at Third Stage can help.
In the meantime, this video provides some more details on how to define the best change management strategy and plan for your ERP and HCM implementation:
Will the 2020s be the best yet for ERP and HCM Implementations?
I occasionally find it frustrating to be part of an industry with a weak track record, biases, greed, and not enough focus on client interests. This frustration is the impetus for why we started Third Stage Consulting and are working hard to change the industry.
Until the industry whips into shape, I still remain optimistic that the 2020s could very well be the best decade the digital transformation, ERP, and HCM space has seen. By following the ERP and HCM strategy framework above, you too can be part of this success.
Please feel free to contact me to brainstorm ideas on how you to define the best ERP and HCM strategies for your organization. I am happy to be an informal sounding board as you start or continue on your digital transformation journey in the 2020s!