What is the Third Stage of ERP Software and Digital Transformation?

Written By: Eric Kimberling
Date: April 21, 2018

Since my decision to part ways with my previous company to start a new independent ERP consulting firm, I’ve received questions about what exactly “third stage” means in the context of ERP software and digital transformation.

One thing that’s bothered me over the last 20 years in this industry is the failure of so many organizations (and their consultants) to reach that ideal state of a complex digital transformation. These initiatives are peppered with landmines and risks, yet few seem to know how to navigate them well – despite decades of history and lessons to draw from.

The answers aren’t that complicated, and they certainly aren’t rocket science. There are distinct things that make certain projects succeed and fail, and I reveal those secrets in my eBook entitled Lessons Learned from over 1,000 ERP and Digital Transformation Projects Over 20 Years.” In the meantime, below is a brief summary of the things to think about.

The Three Stages of ERP Software and Digital Transformation

There are three distinct stages of an ERP software project or digital transformation. Unfortunately, most don’t ever reach get past the first two:

  • First Stage: Project inception. Software is selected and an implementation begins. The project either never goes live with the new technology, or it is an unmitigated failure.
  • Second Stage: The implementation is completed – but usually just for a fraction of the expected technical functionality, scope, and benefits.
  • Third Stage: A full digital and business transformation is complete. Full technical capabilities are realized, business processes are optimized, and the organization is aligned with the future-state. Most importantly, business benefits and a positive return on investment are realized.

Much like a space rocket launch, the first two stages are important to get to the third, but optimal heights and speed aren’t possible until the third stage launch of the fastest and last-remaining rocket. The third stage booster can’t be bogged down by the inefficiencies and dead weight. Clear best practices and expertise are required to overcome the gravitational pull of the current state.

Common Traits of Third Stage Digital Transformation and ERP Software Initiatives

Those that reach the Third Stage of ERP and Digital Transformation don’t do so because of luck. They do because they’ve leveraged the “secret sauce” required for a successful implementation and transformation. They have figured out how to launch their initiatives to greater heights and success.

Here are the common traits of those that succeed in reaching the third stage:

Fast-track software evaluation and selection

. An effective digital strategy and ERP software selection process can be an effective way to gain alignment and chart a clear path forward, but it’s also easy to get lost in analysis paralysis. The most effective organizations don’t get bogged down in a cumbersome evaluation and selection process or hire inexperienced consultants with little hands-on implementation experience to guide them. Instead, they used experienced and unbiased resources to arrive at the best effective quickly so they can invest more time and money in implementation. (For more on this topic, see our recent blog post Unveiling the Truth About ERP Software Selection.

Intense focus on organizational change management

. Most people understand organizational change management at cursory level, but most don’t understand the nuts and bolts of how to effectively manage change. The best ERP consultants know that an effective Third Stage ERP implementation requires detailed change impact, organizational design, stakeholder and executive alignment, a benefits realization plan, and a host of other organizational change strategies that go well beyond assessments and pretty Power Point presentations.

Investment in business process improvements and design

. This is where the rubber meets the road. It is important to define your future state business processes, define potential business process improvements, and leverage best practices from your industry. As part of this process design, you should define your business processes, change impacts to your people, and identify opportunities to implement process changes even before new technology is implemented. An investment in these business process management activities early on will save time and money later on.

Planning for benefits realization optimization

. If you don’t measure it, you won’t achieve it. Be sure to set targets and measures not only for project justification purposes, but more importantly, to help manage business benefits going forward. Additionally, this benefits realization plan will provide a good mechanism for project governance during implementation.

Don’t leave your project’s success up to chance. Instead, focus on these and other Third Stage best practices to help you reach greater heights.

Eric Kimberling
Eric is known globally as a thought leader in the ERP consulting space. He has helped hundreds of high-profile enterprises worldwide with their technology initiatives, including Nucor Steel, Fisher and Paykel Healthcare, Kodak, Coors, Boeing, and Duke Energy. He has helped manage ERP implementations and reengineer global supply chains across the world.
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