The last year has been a difficult one for digital transformations and ERP implementations. After high-profile digital transformation failures at Lidl and National Grid, we now have news of SAP transformation problems at Haribo.
Long story short: Haribo is a German candy manufacturer that manufactures gummy bears and other candies. In late 2018, they began going live with SAP and quickly began experiencing supply chain disruptions. This ultimately affected sales, causing revenue to decrease after go-live.
Unlike some of the other highly publicized and dramatic failures, the problems at Haribo are in some ways subtler – and much more common. For this reason, there are more lessons to be learned from the SAP transformation problems at Haribo.
Here are the key lessons from the SAP transformation problems at Haribo:
Operational disruption is the #1 hidden cost and risk of SAP and ERP transformations
Much has been written about the SAP failure at Lidl, the National Grid v. Wipro SAP lawsuit, and other high-profile failures. In these cases, hundreds of millions of dollars were spent and the damages were catastrophic. But the average company’s transformation difficulties are typically subtler.
Haribo may not have spent hundreds of millions on their SAP implementation or taken legal action against their system integrator (at least not yet). But supply chain disruptions and lost revenues can cripple many businesses, and my team’s research over the years has shown that roughly 50% of organizations experience material operational disruptions after their digital transformations. This is a cost and risk that most organizations don’t plan for or adequately mitigate.
Business process management is critical to SAP transformation success
The fact that business processes were broken after go-live suggest that Haribo either a) did not focus enough time and energy on their business process management, or b) didn’t know when business process management should occur during their digital transformation. In order to avoid failure and ensure success, organizations need to clearly map their future state business processes to ensure alignment with their overarching operational model.
SAP and ERP transformations need to align with an evolving business model
Just as business processes need to be clearly defined, an SAP or any other ERP transformation needs to clearly align with your future-state business model. In the case of Haribo, they were expanding their international manufacturing and supply chain operations – something their SAP transformation may have been misaligned with. Rather than paving the cow paths of how business has been done in the past, your digital transformation needs to enable your future-state business model.
System testing is often overlooked during SAP and digital transformations
I find it difficult to understand how Haribo could have gone live with the software without discovering the supply chain problems in advance. Effective system testing and conference room pilots should uncover potentially major disruptions such as these well before go-live. If not, then something is wrong with your testing strategy. Be sure to understand the importance of ERP system testing prior to your digital transformation.
Executive leadership and project governance can mitigate SAP transformation problems
Lidl spent hundreds of millions of dollars prior to pulling the plug on their SAP transformation. Haribo and others need to have strong executive leadership, engagement, and project governance to ensure the project doesn’t spiral out of control or negatively impact your operations. Ultimately only you can ensure the success of your project – not Deloitte, Accenture, Capgemini, or another system integrator.
Conclusion: Apply the lessons from Haribo to your digital transformation
As we pointed out in our digital transformation mandates for CXOs in the coming year, it is time for executives to step up and take ownership of their digital transformations. Leverage best practices, lessons from others, and independent third-party digital transformation consultants to put your organization in the best position to succeed.