ERP implementation is a leadership challenge, not an IT project

Enterprise Resource Planning (ERP) systems have become notorious amongst business leaders for promising the world but delivering an atlas.

 

The software solution seeks to be the single source of truth for a business, a system that integrates all the information that flows through a company across every department, from finance, accounting, and human resources to supply chain and customer success.

 

But as every C-suite executive who has spent considerable time and expense to make this work knows, it’s never that simple. As companies grow, data becomes fragmented, bolted-on tools complicate matters, and ongoing efforts to maintain and update ERP systems eventually fall by the wayside. Even a powerful tool like AI can’t rescue a poorly implemented ERP system without clear instructions and the proper foundations.

 

Some of the blame rests with the complexity of rolling out the technology itself, which demands experience and skill. But the biggest problems cannot be explained away by technical complexity; they stem instead from poor leadership that fails to align ERP systems with the enterprise’s business needs. To use an old adage, it’s a bad workman blaming his tools.

 

Start with the end in mind

Leaders can’t just implement an ERP and expect the system to know what matters. Before doing anything, they must first understand what specific business process they want to improve. That can be anything from reducing manual errors to improving financial reporting.

 

Crucially, that means looking at the process from the business’s perspective, rather than defining its boundaries around what the ERP traditionally does. In other words, the tail shouldn’t wag the dog. A system may complete the task it was designed for while the underlying business process remains unfinished.

 

Financial operations are a good example. An ERP can track an order through delivery and invoicing. From the system’s perspective, issuing the invoice may mark the end of the process. From the supplier’s perspective, however, the transaction is not economically complete until the cash arrives, which could potentially be 30, 60 or 90 days later.

That gap should prompt leaders to question whether the boundaries they designed into their ERP still make sense, and whether the information the system already holds could help the business go further.

 

Turn operational data into action

The next step in a workflow doesn’t happen by default. Leaders must proactively define when the system should act and what outcome it’s supposed to drive. No amount of extra tooling fixes a poorly defined workflow. Otherwise, ERP becomes an expensive, labour-intensive record-keeping tool. A digital notebook.

 

This becomes particularly interesting in industry-specific systems, which often capture the moment when a real-world transaction is completed. For example, proof of delivery in transport, an approved timesheet in staffing, or a milestone sign-off in construction. These signals give the system reliable operational context it can use to enable additional actions or services.

 

Once the system has reliable evidence that a delivery occurred, a timesheet was approved, or a milestone was signed off, it can use that data to bring related decisions, such as payments or financing, closer to the moment the transaction is confirmed. The broader point is that leaders should be asking what additional value the data they already hold could unlock.

 

Evaluate, constantly

Once leaders have identified what else the data could enable, the inevitable question is whether to build the next step themselves or outsource it. But crucially, “can we build it?” is not the same question as “should we own it?”

 

Leaders often go wrong at this juncture in both directions, either by bolting on more internal tooling or by assuming that, because the data already lives in their ERP, it can do so as well. Neither is automatically right.

 

The litmus test is to weigh up whether owning something creates real differentiation for the business, or where the specialist partner will simply do it better. And that line moves as the business changes, so it isn’t a decision to make once and forget.

 

Get this wrong, and the cost isn’t isolated to the IT department. Finance will end up reconciling manually, operations will firefight exceptions, and sales will make promises it can’t keep.

 

Leaders drive ERP success, not technology

AI will keep being pitched as the thing that finally makes ERPs work. But it won’t by itself. Yes, AI can be a boon for automating specific, repetitive tasks in an ERP system, but beside the point if leadership hasn’t decided what the system is for. No algorithm can make that decision. Only a leader can.

 

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Clément Carrier is CEO and Co-Founder of Aria

 

Main image courtesy of iStockPhoto.com ismagilov