The enterprise technology landscape is riddled with ¬ERP failures from the last twenty years. Some are more extreme than others, but all have stories behind them. More importantly, they all contain important lessons that can help us in our digital transformations going forward.
Overview of ERP failures
I used to dislike writing about ERP failures. My tendency is to write about case studies from current successful clients or focus on minor lessons learned. But it seems that my articles about failures generate much more interest than those relate to successful deployments.
It all started when a friend and colleague sent me a text suggesting that I write about the SAP failure at Lidl. I didn’t like the idea when I heard it, so ignored it for a few weeks. I figured I had better things to write about than a German retailer that didn’t manage its SAP implementation so well.
Then, one day I had writer’s block. I have religiously written at least one blog per week for the last 14 years, so it is quite unusual for me to be at a loss for words. With a looming deadline from our marketing team and nothing better to write about, I referred back to that text from my friend. To this day, my article about Lidl’s failure is by far the most read, shared, and liked blog that I have written.
The other problem with writing about failures is that there are so many to choose from. We have all heard about Hershey’s, Waste Management, and other high-profile failures, so just choosing one to write about can be difficult. Further complicating things is the fact that I have served as an ERP expert witness for some of the highest profile lawsuits in the industry, so I have court-mandated confidentiality orders that I need to abide by.
Ranking the biggest ERP failures
With so many to choose from, it was difficult to rank the biggest ERP failures of all time. By applying the following criteria, we were able to assemble a comprehensive list of the biggest to choose from:
- Overall price tag and magnitude of implementation time and cost overrun
- Severity of post-implementation disruption to the business operations
- The degree to which many of the failures could have been avoided
With these criteria in mind, we created a ranked list of the biggest disasters of all time. Some are clients that we served as either an expert witness and/or ERP project recovery consultant , while others are not clients of ours. In both cases, we do not reveal confidential information. Instead, we reveal only information made public by other media outlets, public court filings, or financial disclosures.
It should be noted that the criteria above tend to skew toward larger organizations. Many of us heard about Hershey’s when they couldn’t ship candy after their SAP failure, but many of us do not hear about the local, lesser known companies that didn’t experience failures of this magnitude. But even smaller organizations are not immune to the challenges outlined below.
Here are a few of the transformations featured in our top 10 ERP failures list, which you can view in its entirety by watching the video below:
Hershey’s SAP ERP failure
After Hershey’s suffered an SAP ERP failure, the company was incapable of processing $100 million worth of Kiss and Jolly Rancher orders, even though it had most of the inventory in stock.
Hershey’s made a textbook implementation mistake in relation to project timing. It first tried to squeeze a complex ERP implementation project into an unreasonably short timeline. Sacrificing due diligence for the sake of expediency is a sure-fire way to get into ERP implementation trouble.
Hershey’s made another critical scheduling mistake: it timed its cutover during its busy Halloween candy holiday season. It was unreasonable for Hershey’s to expect that it would be able to meet peak demand when its employees had not yet been fully trained on the new systems and workflows. Even in best-case ERP implementation scenarios, companies should still expect performance declines because of the steep learning curves.
Waste Management ERP failure
Waste Management spent approximately $100 million on its ERP failure. The project started in 2005 and SAP promised it would be done around 2007. SAP had promised Waste Management that they would have net annual benefits of $106 million to $220 million a year. With the plan not materializing as promised, Waste Management is stuck with trying to find a suitable ERP system for their business processes.
“From the beginning, SAP assured Waste Management that its software was an ‘out-of-the-box’ solution that would meet Waste Management’s needs without any customization or enhancements,” a public statement from the company reads. “Unfortunately, Waste Management ultimately learned that these representations were not true.”
Waste Management said product demonstrations by SAP prior to the deal employed “‘fake software environments, even though these demonstrations were represented to be the actual software.” The company ultimately settled out of court with SAP.
Nike’s ERP failure
In an attempt to upgrade its systems for the modern age, Nike spent roughly $400M in its ERP failure. The net impact on its operations were profound: it couldn’t properly forecast customer demand and get the right products to the right customers at the right time, which is a big problem for a large consumer products company like Nike.
Due to result of the improper handling of its ERP implementation, Nike lost sales of $100M dollars and saw an additional decrease of 20% of its share price. The company had to invest another 5 years and millions of dollars more to overcome the problem and to get the software working properly.
The rest of the biggest ERP failures of all time
These are just a few of the case studies featured in our top 10 list. These aren’t at the top of the list, and there is much more to be learned from the remainder of the list as well. You can also read more about some of these failures in past articles I have written, such as ones about the SAP failure at Haribo and the more recent ERP failure at Revlon.
You can learn about the rest of them by watching my YouTube video here. Those at the very top may surprise you – and chances are that you weren’t aware of many of them.
Lessons from the biggest ERP failures
The intent of this list is not to celebrate ERP failure. Instead, it is to understand and learn from those that have made some of the biggest mistakes ever seen in this industry. In some cases, ERP vendor hoaxes and other questionable economic biases were the culprits. In others, the client themselves were largely to blame. In many cases, it was a combination of both.
The biggest takeaway? Your ERP implementation is your transformation – not your vendor’s. Even if you are getting “Accentured” by your ERP systems integrator or being sold a bill of goods by your ERP vendor, it’s your job to fix it. Sticking your head in the sand – as many in this list clearly did – will only make matters worse.
Below is a free online ERP implementation risk assessment tool to determine your risks and to provide customized recommendations to mitigate those risks:
Please feel free to contact me to brainstorm ideas on how you might identify and mitigate the risks that pose challenges for you and your team. I am happy to be an informal sounding board as you continue on your digital transformation journey in 2020 and beyond!