Artūrs Gedvillo, “Gedvillo Consulting”
On a daily basis, I work with enterprises that want to implement ERP, warehouse management, CRM or other software, and I have noticed that most entrepreneurs are not able to answer the following questions:
1.What is the aim of implementing the respective software? How will you measure whether it has been achieved?
2.Are arranged and optimised business processes in place, in order to understand what exactly it is that is required from the respective software?
3.How will you measure whether the investment justifies itself for the project as a whole, as well as for every specific need / requirement / goal?
In this article, I will explain what these questions mean and why it is important to answer them before talking to software suppliers.
First of all, I would like to underline that the implementation of ERP, CRM or any other equally sophisticated software is a complicated process, which does not only require installing the software on computers, but also changing business processes, as well as duties and habits of employees. It means that this may turn out to involve the transformation of your entire business (nowadays it is fashionable to call this digital transformation), and it is certainly necessary to apply Change Management in a project of this kind.
Any transformation of such type consists of three critical cornerstones:
o business processes – determine how the employees of the enterprise work and how various technological solutions (software, equipment) function. Processes are created in order for the enterprise to reach the goals it has set;
o people – employees of the enterprise who act uniformly according to the defined business processes and use various technologies in order to fulfil the processes efficiently;
o technologies – software and various other technological tools, including ERP software, that ensure the automatization of the enterprise’s processes.
If one of these aspects is not taken into account, the project will falter and most likely not succeed (there will be issues with quality, terms, budget, business performance etc.). Sounds reasonable? Nevertheless, it is very rare that an entrepreneur thinks about all of the previously mentioned aspects while carrying out a project. Although they are of critical importance for the successful implementation of software!
Everyone knows – in order to achieve something, there has to be a clearly defined goal. If an entrepreneur is not able to provide justification for the implementation of specific software and the support it would provide to the achievement of the main goals of the enterprise, it would be advisable to take a step back and reflect. How do you define goals? SMART is the most common approach.
What do you think about these goals?
o Improving performance of the system
o Servicing more customers
o Making the interface more user-friendly
Goals like these are too broad, and it will be difficult to define whether they have been achieved after implementing the software. The goals must be precise, reachable, measurable, realistic and with a specific term.
Examples of measurable goals:
o speeding up the process of sales invoice generation by 50 % until the end of the project, in order to ensure the planned growth of the enterprise by 30 % over the next three years;
o making it possible for one seller to service 30 % more customers starting with August 2019.
By setting precise goals, it becomes possible to:
o create a common understanding regarding the meaning and direction of the project among all participants of the project;
o define software-related priorities at the start, as well as during the project;
o focus the project team on specific business processes (or parts thereof) and functionality.
Well-arranged and optimised business processes
Will you reach the goals set by automating your existing business processes with software? How do you know that? What makes you think that?
For instance, how can you be sure that CRM software will solve the issue of five different people preparing one sales invoice? It is sensible to ensure that the process is reviewed and optimised so that the invoice is prepared by only one person. New software may be required, however, it may also be possible to do this using already existing tools. Likewise, if you wish to use a warehouse management system to solve the problem of workers of the manufacturing department “borrowing” raw materials from the warehouse without being told to do so. Not everyone is aware of errors in business processes. Entrepreneurs sometimes fail to see that the problem lies in the whole process, not in tools or people.
It is primarily required to adjust the business process. It may even turn out that new software is not required, and adjustments need to be made to the already existing one and work must be performed with employees for them to follow the business process.
It should be noted that business processes cannot be examined and improved unilaterally, – it never works. All of the persons responsible within an enterprise should be involved (upper and middle management, for example, in the processing of a sales order it could be the board, as well as sales, production, warehouse, procurement and logistics managers).
It is most efficient to involve an independent external expert with whom all of the persons responsible may sit down at a table in order to draw up the business process and simultaneously coordinate and optimise it. The process may be drawn up and visualised in general or in detail. You may even draw up different variations of the process, and use modelling automation tools to calculate which is the most efficient one. But we will go through that in detail another time. The key thing is to always have the goals of the enterprise and the project in mind, find problems in the existing processes and find solutions to them.
New processes often foresee the reorganisation of staff or even the whole enterprise. Therefore, it is important to work on fear and resistance towards change expressed by employees (the already mentioned change management).
It is advisable to “think outside of the box” (habits, pressure from management / colleagues, technical limitations) and try to picture the perfect world when drawing up the processes. This is how innovative ideas come into being. And this is another thing that an external expert may help with, as he/she may have knowledge regarding another enterprise, technologies and trends of a specific field.
Hence, first, we define the goals that we want to achieve, and then we review the processes so that we can use them to reach the respective goals.
There is a belief that one must first choose the software and then adjust the business to the way it functions. This approach is suitable in very rare cases and it poses a lot of risks.
When the processes are ready, we may define business-related and technical requirements for the software and potentially also for other technologies (production lines, mobile devices, cash registers etc.). We summarise all of the things that we cannot include in the processes in a list with requirements (for example, what fields are needed on a customer card, what the marking of the palettes should look like etc.) and determine a sensible priority for every requirement (there are several methods for doing this).
Does the investment justify itself?
This is the most important question from a business management perspective, however, it is asked very rarely and calculated even less frequently. Suppliers often excuse themselves with it being a complex and inaccurate estimate, namely, not being possible. But is that really the case?
It is possible to carry out an approximate indicative return on investment calculation in the context of improving every requirement and process. Yes, it does take time, but not as much to refuse it, especially if there is a desire to invest large amounts of money.
For example, you include a new, well presented report in your requirements, with the investment for its development amounting to EUR 1,000. We can calculate that a report of such kind will save 10 minutes per quarter for a single employee of the enterprise. Does it pay off? Most likely not.
Or do you implement a procurement planning solution for EUR 5,000 (licences, software, configuration, training etc.)? As a result, you can decrease the number of procurement managers from 3 to 1. And what about this, does it pay off? Certainly, within a few months already.
The total return on investment of the project will also depend on how many requirements you have defined and what type.
What happens if you do not set goals, optimise processes or justify investments?
If you do not have goals, it is impossible to understand whether the project and the requirements have a purpose. If processes are not optimised and priorities are not set, you may not solve the problems due to which you decided to start the project. As a result, the project might fail.
What happens to a business after the implementation of software if you are not ready for it?
o no significant changes for the business are implemented – there are no benefits, the money is spent pointlessly and will not be regained;
o inefficient processes are automated – the business incurs monthly losses due to inefficient operations;
o a decline in customer satisfaction – if the system automates inefficient processes or unnecessary requirements, this may worsen the quality and speed of customer care even more;
o a drop in employee motivation – if the staff do not feel any benefits and improvements from the system, it will only be seen as a burden and will possibly demotivate the employees and decrease capacity.
Implementation of new software is an important strategic business decision, which has to be taken just as seriously as any other business-altering project.
o set measurable (SMART) goals;
o improve the existing business processes for them to be able to achieve the respective goals;
o define the requirements and their priorities for the new software and other technologies.
Now we know what we want and we can:
o carry out a supplier price survey;
o assess every offer and the return on investment of every requirement;
o select software and a supplier that is suitable for our goals and processes.
You might ask, is such an approach not too weighty and does it also suit small and medium enterprises? Yes, it does! As soon as you get an idea of implementing software, it may be performed in any type of enterprise. You just have to understand what the goal is for doing so, and whether the respective software will be able to achieve that goal.
And, yes – preparation for implementing software must also be performed for seemingly simpler software, e.g. CRM. CRM is a crucial part of business for most enterprises, and it must be linked with other business structures in a joint process.
Visit “RIGA COMM” this October to find out more.