In dynamic business markets, companies need to boost their speed to value — the speed at which they move from idea to revenue.
Speed to value depends on many systems and processes. In many organizations, those systems and processes are limited by some old inefficiencies.
“I’ve done a lot of solution implementations where a company’s existing systems were 20 or 30 years old,” said Grant Thornton Technology Modernization Advisory Services Principal Greg Davis. “Since that point, their business has grown or diversified — but they're still dealing with a baseline of technology that creates a delta from anything they could grow to.”
The gap between these outdated systems and the way the business works today can create a delta that’s difficult to untangle, and even harder to overcome. Change is the only constant. “Companies have to start by understanding where they are today, and how they are changing as they grow,” Davis said.
Yet, those old systems can be part of an ERP implementation that once required a large investment of time over multiple years. So, companies are afraid to move away from those systems — and they’re afraid to start that process again.
Mindset of yesterday
There’s a reason that traditional ERP implementations required a large investment, and today’s companies risk failure if they apply the same mindset to new implementations.
“They used to say, ‘Design to last’ when implementing an ERP,” said Davis. “That’s what ERPs were meant to do, when you try to put all of your operations into one system and then you tried to limit system integrations as much as possible. That’s a way of the past.”
Tech capabilities have improved. “Now, integration is easy. You can have several tools in your arsenal if there is value-added,” Davis said. It is truly more about having an application platform that provides the flexibility to change or grow. Business priorities have changed, too, now emphasizing the agility that companies require in dynamic business environments. “Your system has to be designed to change. If your system is only designed to last, it becomes immediately outdated when there's disruption in the economy or the supply chain.”
So, many companies feel driven to replace their ERPs, and most are in a position where they need to modernize their software tools. But they think they can’t afford it — or they take the wrong approach.
C-suite leaders want growth, and most understand that they need to address their technologies. But they don’t want it to take years and cost a fortune. They want to change within months, not years, and they still have a mindset that ERPs are risky initiatives requiring a large implementation and a structure that will never change. When companies apply that mindset to a new implementation, they often look at their current system as a design they need to replicate but enhance. That sets them up to inherit inefficiencies which were designed into their old system decades ago.
When new systems are designed to replicate old systems, the end result is a lingering delta between the new system and the way the business actually operates today. Transformation is not achieved in this scenario. “What you need to do is eliminate that delta,” Davis said. “That's how you mitigate that risk: You design your software tools to grow with you. You enable growth with a methodical approach to modernizing your technologies.”
The key is targeted and efficient preparation. “If you don't do the right preparation before your implementation, then you'll perpetually be addressing preparation issues as you implement your software,” Davis said. “And you will always have a delta between your target operating model and the tools that support your business. That is a big reason why companies always blame their systems for being a hindrance or a constraint. It's because there's a difference between their operating model, or target operating model, and their toolset capability.”
This difference drags down a company’s agility — and it can crush a company’s innovation. “Many companies are stuck in a rut, perpetually just trying to address issues. They find themselves being expediters rather than visionaries,” Davis said.
Updated business analysis and strategy
To close the delta between your current business and the technology solutions that empower it, you need to make sure you understand particular aspects of your current business.
“What kind of company are you now, as opposed to when you designed your old system?” Davis asked. “What’s different about your industry and what are the metrics that matter to you and to your competition?” Even if you have leading practices, what are the KPIs that you're reviewing, or that you need to review, and how are you going to track them?
Most companies have a growth strategy, and every company should. Whether it’s going public, international, acquisition, product diversification, or hire and grow, you will not achieve growth without transformation. So, once you have a strategy, you need to ask, “What transformation is required to enable our growth strategy?”
- Operational efficiency
- Improved customer experience
- Enhanced user experience
- Identification of new or alternative revenue models
- Create capacity in previously constrained parts of the organization
- Develop agility and change readiness
- Advance your technology capabilities
We are now living in a digital world where all business is constrained or enabled by technology. You must have a technology platform that can not only enable your back-office operations, but all facets of the supply chain. Accept digital transformation — if you don’t, you will get left behind.
Your metrics for performance and growth will literally define the success of your enterprise solution or enterprise application platform. “You have to define ROI levers ahead of the project,” Davis said. “Then, make sure that the things you do as a part of the implementation tie back to one of those ROI levers. Make sure you’re tracking that as you go through the project.”
Track whether your project is achieving the transformations you identified, like improving the customer experience, and then track how that contributes to ROI and drives your growth strategy. “Make sure you’re not just getting a new system that’s different — make sure you’re getting the business transformation you need,” Davis said. Once you know how to align an enterprise solution or platform to your business needs and growth, you need to make sure that your implementation will succeed.
Structured preparation
If you fail to prepare, you are preparing to fail. To get new enterprise solutions and platforms up to speed without cost-prohibitive multi-year implementations, employ a proven methodology that includes a preparation phase before it moves into execution.
“The insurance policy you have for a successful implementation that minimizes the cost and time required is that preparation phase,” Davis said. “It addresses all of those things on the periphery of the tool. Most companies go into the implementation of the software tool without preparing.” They pay for it in perpetual maintenance — and they probably did the same thing in their previous implementations.
In particular, companies often struggle to understand their reporting needs. “To have effective financial and operational reporting, you need to look at your measurement strategy — the metrics that you need in order to operate and proactively govern the business,” Davis said. Second, you need a data strategy that supports those metrics. And, ultimately, you need a reporting strategy that defines the reporting tools users will access for financial, operational and ad hoc reporting. Reporting is just one of the essential aspects that companies address in the preparation phase.
The classic Plan/Design/Test/Deploy/Support implementation is easy to choose, but it doesn’t get you to ROI, modernization or other goals unless you’re strategic and methodical about what you put through those steps.
Preparation drives transformation — otherwise, you will be stuck in an endless implementation. Apply focus in these critical phases to ensure preparation, so that your implementation can be as quick, cost-efficient and effective as possible:
Critical technology modernization phases
- Preparation
- Data management
- Operating model
- Governance (Business and IT)
- Organizational change management
- Reporting strategy
- Measurement (metrics that matter)
- Data
- Reporting
- Implementation ROI
- Execution
If you have the right tools, implementations and other changes can be time-and-cost-efficient — but tools and other factors have changed in recent years.- Gradual delivery (iterative, achievable, logical releases)
- Design to change
- Innovation platforms
- Transformation management
- ROI levers
- Organization change management
- Sustaining the change
- Measure value
- Innovation powered by governance
- Enterprise operating model
To improve your implementation’s efficiency, look at how to take advantage of the tools built into the platform. These tools are often tailored to particular industries, business needs or other factors and can help you ensure both alignment and flexibility to your current and future needs.
With the proper preparation, your execution phase can be aligned to deliver quickly — and help you quickly deliver future innovations, too. Business leaders want change that can be delivered in days or weeks, not months or years. The market demands this level of agility.
Speed to value in execution
If you have implemented a solution addressing the items in the preparation phase above, then you can achieve true speed to value — you can react to changes in the market or your growth strategy quickly. If you don’t complete the preparation phase before your execution, you will have to navigate how to address these items in conjunction with making the changes. That usually doesn’t end well.
“Today, you need to have environments that encourage innovation and creativity,” Davis said. We’ve all heard that change is the new normal — so if you’re not prepared for change, then you’ll never be in control.
That’s why it’s important for your execution phase to empower innovation environments that let your teams create, test and drive new ideas with efficient speed to value. “You need to have sandbox environments where you inspire innovation and creative solutions. What if the supply chain drops tomorrow? What are you going to do? With digital transformation, you might have new and alternative revenue models. How can you launch these capabilities quickly?”
In competitive markets, businesses need to be able to shift which products and services they provide or how they provide them. “It might take six months to a year to implement a big change to your business model in the traditional ERP world, by the time you set it up, test it, implement it, put it into production,” Davis said. “With today’s solutions, CEOs and CFOs should be able to receive new business capabilities in weeks or a month. That's why you have to offer these innovation environments, where you can quickly go from ideation to realization and easily make changes.” Initially, you implement. Everything after that, you make changes with innovation powered by governance.
The execution phase also needs to address the governance, transformation management and sustaining activities that help daily operations and new innovations succeed. “You have to keep measuring how you’re doing, with people who can support the solution over time,” Davis said. If you have a team focused on potential changes in the market, industry, economy and supply chain, and you have a system that supports innovative solutions, then your team can be modeling what-if scenarios and potential solutions to provide agility. “That's design-to-change, not design-to-last.”
Implementation for success
Your solutions and processes define your speed to value — and the success of your solutions is often determined by your implementation and management. “The way you own, operate and govern solutions ultimately contributes to their success or failure,” Davis said. “Some people think that it's too costly and time-consuming to implement enterprise solutions and platforms. It doesn’t have to be, and shouldn’t be. It’s pretty simple — pick the right tool, prepare for it, and govern it.”
“The amount you spend on your implementation typically has little to do with the cost of the software,” Davis said. “It’s more about how you prepare for and execute the project.” With today’s leading technologies, you can have a new enterprise solution up and live in six months, he said, especially if you use the leading platform tools and capabilities that help expedite implementations.
Invest the time to address where you are today and understand your growth strategy. Prepare for the implementation to ensure that it’s a transformation. “If you can do that,” Davis said, “you mitigate the risk of poor tool implementation and you maintain the agility to make quick changes. You can also eliminate that delta — the difference between your business operating model and the tools that support your business.” From there, you’ve paved a path to growth.
Contact:
Greg S. Davis
Principal, Technology Modernization Services
Grant Thornton Advisors LLC
Greg Davis is a Principal within Grant Thornton’s Advisory services and a leader in the Technology Modernization practice. In addition, Greg is the global leader of the award winning JD Edwards Practice at Grant Thornton.
Kansas City, Missouri
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