Improve Your Business

Fixing ERP System Erosion to Unlock Business Value

2023-05-22T08:43:00.007-05:00

Implementing an Enterprise Resource Planning (ERP) system, such as SAP, JD Edwards or Oracle Netsuite, is a significant financial investment, particularly if the implementation is global in scale and involves multiple business units. While the benefits of an effective ERP system can outweigh the high cost of implementation, challenges invariably arise when companies grow via mergers or acquisitions or into new markets. In such situations, achieving short-term commercial goals is often prioritized over ERP considerations.. This can lead to system customizations and process workarounds that meet short-term objectives but that erode the original benefits of the ERP implementation by adding additional costs and complexity. These workarounds eventually become codified in standard operating procedures, additional technology is built upon the existing foundation, and the technical debt compounds rapidly, eventually outstripping any efficiency gained by the ERP system in the first place.

Companies end up with complicated, disparate product, customer and vendor master data that result in complex or ineffective offline operational and financial reporting. This may also result in “data silos" by business unit, further undermining the benefits of an integrated ERP. So, how do companies maximize their investment in these large ERP systems, while realizing the commercial benefit of new business integrations? How do companies unravel established workarounds and system customizations without risking a negative impact on the business?

In order to undo this “system erosion” of poorly executed integration projects, companies must adopt an approach built on Lean and Continuous Improvement principles that consider both process requirements and installed ERP system capabilities. This approach is supported by a measured, phased program methodology focused on delivering business value by considering ERP system capabilities - integrated across all (new and existing) business units of the company.

Continuous Improvement is a management / operational framework whereby organizations, business units, and individual teams methodically and routinely analyze and refine their respective operations to ensure that they align with and support the overarching strategic objective of the organization to the greatest degree possible.

Lean is a formal Continuous Improvement practice that focuses on eliminating waste and maximizing efficiency in business processes. Some of the specific Lean principles that apply to this approach are:

Value: Identifying and focusing on the value that the ERP system can bring in simplifying and standardizing processes and data across the organization. Examples: Rationalizing master data to reduce duplication; automating workflow to simplify processes across functions.

Flow: Identifying and eliminating any bottlenecks or delays that impede the flow of information and processes across the organization Example: Ensuring all data have a single system of record; application interfaces with the ERP are seamlessly integrated.

Pull: Prioritizing and implementing changes based on the needs and priorities of the business and customers. Understand business rules and ensure these are configured in the ERP.

Perfection: Continuously identifying and addressing inefficiencies in processes and ERP technologies. Continually assess system performance against business objectives.

The Lean model for ERP improvement projects is built on these 3 key steps:

Define Areas of Improvement

Gather information from process experts to understand the problem to be solved
Understand business requirements in terms of functional specifications and business rules
Understand the ERP capabilities related to these requirements so that technical requirements are specified

Execute Improvement Projects

Prioritize the identified opportunities with defined business objectives
Create a program plan for delivering sustainable improvements
Ensure agreed targets are met

Create Culture of Continuous Improvement

Obtain executive sponsorship and leadership around these projects
Dedicate the necessary resources to deliver improvements
Organize around value creation from existing system capabilities

Fixing ERP system erosion cannot be addressed by fixing one-off issues based on the loudest voice pushing support tickets through the IT Support group. Fixing ERP system erosion sustainably relies on following the approach of Lean / Continuous Improvement described above. This approach guarantees that fixes are permanent and that business value is front and center of prioritizing system improvements. Over time, your ERP system will become fully utilized to drive the business benefits that were promised when it was first implemented!

Be the Digital Change Agent for your organization

2020-08-03T09:52:00.003-05:00

Businesses in the 21^st Century still straddle the great digital divide. Even before this pandemic, we had workers on one side of the line working 24/7 from virtual offices, while others were working in factories and offices in jobs that depended on having a human interfacing directly with other humans or with machines. On one side, we have companies with processes that are highly automated, while on the other side of the divide we have manual processes. The global pandemic has only exacerbated these digital divisions.

In this ever competitive job market, the ever growing use of digital tools and the internet-of-things to increase connectivity and productivity, Change Agents are driving transformation in how we do business. Change Agents are often early adopters of digital trends. Many will start as advocates for specific technologies and, over time, develop into experienced business transformers. They recognize the impact of digital transformation and are driven to help their organizations adapt. Digital Change Agents are naturally passionate about, and interested in, technology and how it can transform the way we work.

Are you a Digital Change Agent in your organization? And if you are, how do you succeed in adapting your organization and business processes to leverage digital technologies? One way of doing this is by building your Digital Change Agent Network. When building your Digital Change Agent Network here are the characteristics to look for:

Desire to help others as part of the team
Capacity (time) to help
Respected by peers
Expertise in subject/functional area or system

Some nice-to-have characteristics: existing superuser; knows the organization/ industry well; seen as a go-to source for help; fast learner; strong communicator; and/or training/coaching/listening skills.

Where do Change Agents come from? Change agents should be members of the stakeholder groups who will be receiving or implementing the strategy, project, or change. Change leaders typically reside in the business (as opposed to IT for technical projects). Change agents can also be external to the company, such as advisors who have expertise in the business area or system. These external change agents can also bring specific expertise in business transformation management techniques, tools and processes.

How do you achieve digital change?

Get executive support – This is pretty much a prerequisite to any transformation initiative. If you’re in IT, it will help to have allies from the business side. The C-Suite can add weight behind your strategies, and your peers in marketing, sales, finance, etc., can help you “sell” them to your internal customers.
Interact with people – Technology experts tend to be introverts. If you’re one of them, you’re going to have to break out of your comfort zone. There is no substitute for talking to the people who will be using the technologies you deploy. It’s the only way to gauge the level of their resistance and address the underlying causes.
Speak their language – Working across the digital / technical divide means that you need to adjust your communication style. Remember, Jane in finance may be brilliant in her area, but if you start speaking in acronyms and cryptic terminology you may lose her quickly – and maybe even permanently.
Have a plan – Share your vision for what digital transformation means to the organization and how it will help you achieve your collective goals.
Keep it doable – Help your internal customers understand how your path to digital transformation will affect them personally. How will they still be able to do their job faster with less hassle? Make fewer mistakes? Spend less time at the office?
Address their concerns – If you start talking artificial intelligence and machine learning, people will think “layoffs.” Help them see that doing more with less is about helping everyone perform their role to the best of their abilities and not about scaling back.
Go slowly at first – You need to assess the organization’s openness to change and then create a plan that lets people set a comfortable pace. With system implementation projects, and Agile approach is recommended.
Choose a champion – There’ll be at least one end user in the business that shares your passion for change. They can be instrumental in helping others manage the transformation. Champions are typically natural teachers, other-oriented, and well-liked by their peers.

Companies need to value Change Agents and have solid retention plans for these individuals. Agents can become targets for poaching, by internal groups and by other companies. Change Agents need to have a development plan that provides a plan for increasing responsibility to encourage change agents to remain in their role. This journey should lead the individual, post project, to a senior role in the organization or the company's permanent continuous-improvement group. This can be a much bigger incentive than cash for Change Agents. Having Change Agents in regular exposure to senior leadership for coaching and development is also a huge motivator for these types of individuals.

Finally, using an external Change Agent often helps solve problems by simply bringing in a new perspective and approach to organizational change. A Change Management consultant can help illuminate problems and find solutions before they begin affecting the workplace, and in the process help develop internal Change Agents and Champions that will drive sustainable performance improvement and efficiencies.

"Touch, Pause, Engage" - a lesson for business from Rugby Union

2015-09-17T12:52:00.002-05:00

With the Rugby Union World Cup this year in Japan, I thought that a blog entry with a rugby flavor would be appropriate.

"I prefer rugby to soccer. I enjoy the violence in rugby, except when they start biting each other's ears off." - Elizabeth Taylor (1972)

In the game of Rugby Union, play is restarted after a minor infraction by a scrum. During the scrum the forward pack of 8 players will engage with their opposing pack to win the ball. These forward packs weigh close to 2000 lbs (~ 900 kgs), and so these scrums are a test of power and strength of these players, as they compete to win the ball back for their teams. Before 2007, there were not may rules around how these packs engaged, resulting in many serious spinal injuries due to collapsed scums, and the violence of the contact. In 2007, the rule changed to require that each pack 'crouch', 'touch', and 'pause', before they 'engage', as the referee calls these instructions out. Crouching allows the packs to correctly 'bind' and set up for the scrum. At 'touch', the front row players reach out and touch the opposing line - this ensures that they are at the correct distance before engaging. 'Pause' ensures that they wait for referee to control when the packs engage.

How does this translate to your business? We all love sports analogies, and so I am suggesting this rugby analogy to help you with your next Business Planning cycle. The three phases of strategic Marketing Plan are Analyze, Plan and Execute. And so this example from the sport of Rugby provides a framework around which you can build a Marketing Strategy for engaging your competition.

Touch/ Analyze

Know your market and your competition's products/ services, pricing arrangements and terms, promotional campaigns, people and organization.

Gather feedback from customers, partners and others in your sales teams. Know the opposition's 'weight' in your market.

Know the gap between you and your competitors. What differentiates you? What are your relative strengths and weaknesses?

Pause/ Plan

Develop a strategy and tactical plan for engaging with your competition.

Assess risks and opportunities in the competitive environment.

Make sure that your team is prepared and aligned on your plan. Align individual targets your market strategy. Is the team well 'bound', and set to execute?

Engage/ Execute

Execute the plan as a team.

Adjust on the fly to remain aligned with your strategic objectives.

Win the ball!

Engage!

Trust as a Leadership Attribute

2015-04-06T13:05:00.000-05:00

"If people like you, they'll listen to you, but if they trust you, they'll do business with you." - Zig Ziglar

We can all understand that it is easier to do business with someone you trust. Think of why you go back to the same mechanic for your car, or like using a certain contractor for home improvements. If you don't trust the mechanic or contractor, you will take your business elsewhere until you find someone you can trust. In the military, all team members are mutually interdependent. They each have a job to do, and trust each other to do that job. In that organization, trusting your coworkers and leader can mean the difference between life or death.

However, in your organization, how important is the trust that you place on your coworkers, subordinates and managers on the effectiveness of your organization? As a leader, do you trust your people? Or do you focus more on being trusted? The effective manager and leader understands and appreciates trust at both the personal and the organizational levels. Trust is a two-way street.

"Trust is the glue of life. It's the most essential ingredient in effective communication. It's the foundational principle that holds all relationships." - Stephen Covey

According to the Ethics and Policy Integration Centre, trust is one of the four key components of Ethical Leadership. The ethical leader manages with a clear Purpose, Knowledge, and Authority. To be effective in this, the ethical leader inspires TRUST in her organization. Without this, people are afraid to exercise their authority.

The best managers I have known provide clear direction on the "what' and set clear targets around this. Then, they trust their people to execute the 'how'. These organizations are empowered to take the necessary risks to achieve their organizational objectives to be successful. Furthermore, in challenging times, people in these organizations hang in there to make things work. Strong trusting managers attract strong leaders into their organizations, and are able to retain people. These types of organizations also provide a good mentoring environment for people; and tend to be more agile and effective in their markets.

The least effective managers I have worked with micro-manage their people, because they don't trust that their people can execute the 'how' effectively. Generally, these weak leaders are also poor at setting clear targets and in inspiring trust from their employees. These are generally leaders who depend mainly on their organizational authority and power to get things done. It is hard to retain good people in organizations like this. Successful people in these organizations have to be 'yes-men' to this type of leader.

The truth is that most managers fall somewhere between the best and the worst of what I have described above. So how to you move your organization to the more effective type where there is mutual trust?

Do you focus as much on trusting your subordinates or co-workers as trying to get them to trust you?

How do you earn peoples' trust?

As a manager, do you provide clear purpose and ensure that it is understood for your organization (even to the level of ensuring that individual objectives are aligned with this purpose)?

Do you have the organizational, business and other necessary knowledge for your area that inspires trust from people? And do you actively share this knowledge?

Do you have the trust from your managers to make decisions and act on them?

Would your managers, subordinates and coworkers answer the above questions in the same way as you?

If not, what can you do to change this?

_____________________________________________

If you are in a small business, this trust that you create in your organization, and the empowerment that this generates with your employees is more easily observed by your customers than in a larger enterprise. For a small business, it is this trust with your customer that builds the customers' relationship with your organization and the connection with your brands. This is the competitive edge that drives repeat sales and growth of your business.

When IT Projects get in the Way of Business Transformation

2010-07-31T17:08:00.001-05:00

IT projects are initiated when business identifies a need to change or improve their processes. Many process improvement or business transformation initiatives have an IT component. A company I worked with recently that was looking for an IT solution to help them drive improvements in their global procurement group. The key driver was a need to make operations more efficient to support aggressive business growth objectives. Essentially this was a business transformation project. The IT component in this case was a key part of the success of the project. The IT project would deliver more effective transaction system for procurement and better information for decision making.

Given the potential benefits to the business of these projects, it is not hard to get business support and sponsorship, as well as engagement of resources from the business side. However, expectations are normally high, and a clear understanding by the business of the rigor and methodology around IT projects is not always understood. The implementation of an enterprise IT system of this scale needs to follow a methodology that ensures that the rest of the systems are not impacted, and that good IT and project governance is followed.

So what happens when the requirements imposed by good IT governance slow down the delivery of the benefits of the business transformation project? Furthermore, how often do we see IT procedures and policies used in the name of good IT governance, that do not make sense from a business point of view? Does project methodology constrain business process improvement?

Good project governance around IT projects reduce risk. At the same time, they transfer some of 'ownership' of the solution from the business to IT; reduce the level of engagement of business; and extend project timelines and cost. Balancing business expectations with IT governance is a challenge.

Here are some of the key project aspects that we addressed to tackle this challenge on our project.

- Employed an iterative project approach. This ensures that small successes can be delivered to the business, and subsequent work can build on each project deliverable.
- Clear communications and business engagement. This manages expectations realistically, as well as ensures that project team stays close to business needs.
- Well defined and communicated project milestones supported by a well maintained project plan.
- Strong functional team leads who understand business processes and requirements; the technologies being deployed; and good IT governance, methodologies and tools.

Making the Business Impact Matrix the foundation of a Change Management Program

2010-05-11T22:40:00.002-05:00

What is a Business Impact Matrix (BIM)? The BIM is the output of a thorough assessment of change impact on the business processes, people/organization and systems. Defining change means documenting the current situation and the future situation, then assessing the change that this means to each impacted group. Proposed actions for making this change successful means understanding the risks of not making the change. These actions need to occur to manage risk of change. The BIM assessment should also idntify the opportunities for the business of each change.

So the Key Elements of the BIM are:

Defined Change.
Identified Impacted Groups
Risks of not Changing
Actions to address Risks
Opportunities of Change

Actions will translate into a Organizational Change Management Plan that include communication, solution design reviews, user acceptance testing, user documentation, end user training, and user support. In a multi-phase project, these actions need to be aligned by project phase.

Opportunities will support the Value Proposition that needs to be part of the communication around the change. The BIM will help guide the Value Proposition by impacted group, making communication to specific audiences more effective.

When Operational Technology and Information Technology Collide

2008-12-16T16:34:00.004-05:00

What happens when business units acquire or develop new technologies that support more efficient business practices, without the involvement of the IT department? What may start as a good idea, and not initially seen in the domain of 'traditional' IT, may very quickly result in islands of technology with all of the characteristics of taditional IT - but owned and supported by the operational business unit.

For example, I recently helped a client in the utility industry that had developed innovative technologies that would drive tremendous value to their consumers, the industry and their own top line. However, these technologies included infrastructure, applications and networks that overlapped those systems that were in managed by the IT department. This situation had resulted in organizational silos; political tensions; and waste due to duplicated processes with a negative impact on the company bottom line.

CHALLENGES

Little integration between corporate IT and business technology strategies.
Multiple accountabilities and responsibilities around technology
Corporate IT not seen as agile enough to adapt to maturing systems that support new business technologies.
IT change request process perceived by business as too slow and bureaucratic
Potential loss of intellectual capital and tribal knowledge due to losses in personnel through retirements and natural attrition.
Lack of consistent project management discipline across technology projects.
Security responsibilities split between IT and business units. At the same time, higher risk exists to system via more access points to new wireless networks.

KEY OPERATING PRINCIPLES

We quickly determined that we needed to establish a framework which the C-suite could agree on, before any solution could be found. These key operating principles were:

Corporate CIO is responsibile for establishing a technology governance model that should standardize technology policies, practices and procedures and communicate openly and often with the business.
Corporate CIO needs to have overall oversight accountability for all technologies.
The IT organization needs to be strategically and tactically aligned with business requirements to be flexible and responsive to changing needs.
Business unit leadership needs to be accountable for support of operations-specific applications and should be closely aligned to the corporate CIO
Technology infrastructure needs to be centrally managed throughout the company to help ensure standardization.
Technology security (cyber and access) needs to be centrally managed across company.

BUSINESS IMPACT TO WAYS OF WORKING

Without going into the details of the solution for this specific client, it sufices to note that the above design framework had a real impact on the "ways of working" across the organization. Any organizational tranformation initiative would include some or all of the areas below:

On Technology Governance. Establishment of clear levels of accountability and enforcement of technology standards and policies, as well as strong relationship between corporate and business technology groups.
On Project Governance. Establishment of strong working relationship with project managers across the company, in order to standardize project methodologies and tools, as well as develop the standards for project management across the company. If possible, leverage and build on existing project management and process standards.
On Portfolio Management. Development of processes to support project and application portfolio management; assessment and implement tools to support these processes; establishment of procedures to make this work across the company.
On IT Change Request Management. Migration of the current change request processes under a single group with all associated communications and clear, simple working procedures to ensure complaince while ensuring speed of change.

RISKS TO NOT CHANGING.
If this sounds like a lot of work, here are the risks of not making any changes.

‘Islands of technology’ will make integration of newer technologies with enterprise systems difficult.
Multiple technology strategies – not aligned to business strategy - continued waste due to duplication of processes.
No single accountablity around technology standards and policies - means no technology standards and policies.
Limited visibility across company of technology projects may result in poor leverage of learnings and benefits and higher implementation costs.
Multiple views and approaches to applying cyber security policies across company hieghtens risk to systems.
Multiple views of technology across company will limit decision making at all levels of organization.

Managing IT in a downturn: Beyond cost cutting

2008-09-23T10:42:00.004-05:00

According to the McKinsey report "Managing IT in a downturn: Beyond cost cutting", there are opportunities to drive business benefits even in a slow or bad economy. The authors state that economies around the world are slowing down, and companies are looking for ways to trim spending and improve the bottom line. Although information technology often represents a small fraction of the corporate cost base, senior executives inevitably turn their attention to IT budgets for substantial contributions.

Yet in some instances, IT investments deliver more value to a company’s top and bottom lines—by creating new efficiencies and increasing revenues—than any savings gained from traditional IT cost cutting.

The "sweet spots" for IT improvements during slowdowns include:

Manage sales and pricing. Develop insights into customer segments and improve pricing discipline to increase revenues without increasing prices.

Optimize sourcing and production. Rethink supply chains and logistics to improve the scheduling of deliveries and inventory management.

Enhance support processes. Improve the management and use of field forces (such as installers and field technicians) and of customer support centers.

Optimize overhead and performance management. Sharpen awareness of risk exposure and improve decision-making and performance-management processes.

How does Green Computing help your business?

2008-05-27T07:59:00.001-05:00

Green Computing has come out of multiple programs over the past several years around protection of the environment, corporate social responsibility & sustainability. Sustainable development was defined by the Brundtland Commission as "development that meets the needs of the present without compromising the ability of future generations to meet their own needs."

Green Computing is driven by technological developments, as well as by implementation of tools and processes that make more efficient use of computers. Some of these are simply "common sense" things that we can do to reduce consumption. Reducing power consumption saves money as well as the load on our resources - is a key factor in the strategic sustainability "triple bottom line" of people, planet and profits.

As the need to capacity and processing power increases, so does the need to cool down these more powerful processors – and increasing consumption of energy. Major initiatives are underway to address this issue, and over the next few years we will see newer cooling technologies being introduced that will reduce our reliance on noisy and power hungry fans on PCs. The Economist recently ran an interesting article how this issue can impact us closer to home.

These and other technological advances are fundamentally changing the way we use computers so that Green Computing becomes a reality – supporting sustainable development. HP has a range of energy efficient solutions built around their ProLiant Servers, while Dell have developed programs and policies around energy efficient computing. Intel too have multiple initiatives underway around Green Computing – from specific targets to reduce CO2 emissions with energy efficient processors to building lead-free and halogen-free devices. Sun Microsystems have created solutions around their Sun Eco Innovations around the ‘greening’ or data centers.

Applications that are run over the web as services (Software-as-a-Service or SaaS) also contribute to Green Computing, if they are built to support the following key principles:

Provision of centralized processing and shared services. This reduces the need to infrastructure on the client side, and thus less decentralized processing power.
Building of green SaaS data centers. Centralized data centers mean that the innovative technologies, processes and policies can be effectively applied.
Greening of the software development process. Using ‘lean’ coding processes like Agile Software Development, means simpler coding processes, faster delivery and fewer energy consuming processor calls.

Here are some of the many blogs where you can find more information about how Green Computing is supporting sustainability efforts around the world.

Applying LEAN to ERP System Implementations

2008-03-08T21:05:00.001-05:00

"The speed of the boss is the speed of the team" - Lee Iacocca

LEAN methods have been applied to software development. LEAN methods, or Agile methods use development iterations during software develoment. These methods minimize risk by developing software in short pieces over short periods. These short development project pieces, or iterations allow for logical pieces of functionality to be developed; the bugs to be ironed out; and for project priorities to be re-evaluated.

How do we apply LEAN to ERP system implementations? Traditionally, a 'waterfall' approach is used on ERP projects. This means that you would design the solution first; and then configure the ERP software; and then test it. Using this traditional approach, project teams would have spent a lot of money and time before finding issues that may have required going back to changing the solution design, or system configuration.
But LEAN CAN be used to make ERP system implemenations more effective. This is how:

Spend time up front in getting requirements correct to avoid waste due to developing functionality that is not needed or defects.
Break down Design concepts by critical business subprocesses or functional areas that can be tested and validated against business requirements.
Plan iterative Design / Build / Test activities around these functional sub-system designs.
Creating Learning Cycles around the Build and Test activities. This will reduce training effort and better utilize people's time.
Align business processes around ERP system functionality – maximize asset usage; avoid having to customize the system more than you need.
Avoid complex project plans. Use a milestone plan to drive achievement of project objectives. Use of Work Packages to breakdown work activities, if more detail is needed at that level. These Work Packages should be build around the iteration cycles that will lead to rapid deployment of the system.
Rapid deployment – design, build, test and review pieces of the solution. This requires user involvement during design, testing and review – knowledge transfer reduces training effort of traditional methodologies.
Document of design and review decisions – capture knowledge

LEAN in system implementation has two basic components:

a quick, interactive process to achieve flow in the development process, and
a knowledge capture process to improve quality, reuse, and repeatability of information developed in the interactive cycles

Relationship Selling - "Going for the Green"

2008-01-13T00:37:00.004-05:00

"Going for the Green: Selling in the 21st Century" is a "how-to-book" written in the form of a novel about golf. So, it can be read as this - a story of a single mother who, suddenly about to lose her job through no fault of her own, discovers a new world of unrealized opportunity.

Or, you can read this book as a learning tool about how to use your relationships within your organization and with your clients and vendors, to succeed in selling your products or services.

The author, Doug Peterson, uses golf analogies to keep the reader engaged in the process of learning how to deal with challenges in making sales numbers. He asks the questions, and educates the reader through the storyline, about the process of Relationship Selling.

The book includes some practical advice, which includes:

"Studying the Links". What do you need to know about your customer?
"Playing out of the Rough". Once you have gathered useful information about the client, how do you analyze and process that information to be successful?
"Changing your Game". Are you product-focused, or customer-focused?
"Course Management". How do you develop a relationship strategy in order to build an effective plan?
"Grip it and Rip it". Can you sell your solution within your own organization?
"The Approach Shot". How do you 'win' the opportunity?
"On the Green". How to manage the new strategy?

The book concludes with advice on getting "In the Cup" and "Turning Pro".

A good, and easy read - whether you enjoy golf stories, or want to learn more about Relationship Selling.

Building a Business Case for an Improvement Project

2007-11-23T10:33:00.002-05:00

“Write your injuries in dust, your benefits in marble.” Benjamin Franklin.

How many times do we go into projects without defining the measure of success? That is what we do when we do not think through the cost and benefits of any investment in an improvement project. How can we measure how we haev achieved our improvement goals, if we do not have these quanitified in terms of the time and expense we put into building the improvements?

Building a business case does not have to be an exact science, and is simpler that many think. However, it does take effort, and requires buy-in from the project sponsor or the person who is signing the check.

Building the Business Case for a project is most commonly done using Excel. You want to estimate the costs & benefits over time with all of the assumptions that you will need to make, so that you can define the key project metrics that will help you decide whether to go on with the project or not. Below I have listed the elements of this business case: the costs and benefits over time, and the metrics.

Types of Costs

One time costs to implement solution. Eg. project time & expense costs, hardware and software purcahses, etc.
Recuring costs. Eg. depreciation, training, licensing, etc.

Types of Benefits. Below are examples of typicial quantifiable benefits of an business improvement project

Increased number of customers
Improved revenue per customer
Improved customer retention
Reduction in sales discounts
Reduction in penalties, returns & credit notes
Software portfolio consolidation
IT maintenance cost reduction
Reduction in capital costs
Labor savings (by department)
Improved cash collections
Reduced stock holdings
Faster training
Other one-time benefits (
Other monthly benefits

Business Case Metrics

Payback. Payback period refers to the period of time required for the return on the project investment to "repay" the sum of the original investment. Calculating Payback Period using Excel
Net Present Value: NPV measures the excesses of shortfalls of cash flows over time in terms of present value of the cash. Calculating NPV using Excel
Internal Rate of Return: A project is a good investment if its IRR is greater than the rate of return that could be earned by alternative investments (investing in other projects, or even putting the money in the bank). IRR will be expressed as a percentage. Calculating IRR using Excel

ERP Systems Production Support's role in Continuous Improvement

2007-09-22T09:49:00.003-05:00

"As you wander on through life, whatever may be your goal,

keep your eye upon the doughnut, and not upon the hole."

Deborah Osgood, Chief Architect and Cofounder of BUZGate.org

I recently came across a good article on ITtoolbox Blogs entitled Building a "SAP Support Model". The author, Bob White, outlines a step by step approach for building an ERP support model. This article was SAP-centric. This model also aims to support and solve the technical issues that you would find. Great if you are looking to only support your IT investment.
The question is, having made such a great investment in your system, and then this ongoing cost of supporting your application, how can you sweat this asset to drive real business benefit and continuous business improvement?

The answer lies in understanding the Continuous Business Improvement cycle for ERP systems. This cycle of

Adopting (the ERP system);
Sustaining (customizing, implementing and supporting the ERP system); and
Exploiting (driving business benefit from your ERP system)

This is what aligns technology-based business improvement to business strategy. The illustration above shows this cycle more clearly. Once the ERP system has been implemented, and is stablised with an effective support model (as the article above describes it); then it is time to make System Support a cornerstone of initiatives to drive real business benefits.

How does System Support help drive continuous improvement?

Great support data gathered from users that will point to improvement opportunities.
Issues identified by System Support are related directly to the ERP system. Any changes to address these issues will exploit the system capabilities - 'sweat the asset'.
System Support team are often well positioned between Solution Managers who understand the system capabilities; the users who identify opportunities for improvement; and the deployment teams who can make the changes happen.

___________________________________________

How can you apply this to smaller businesses? Look into the capabilities of your current applications and the needs of your users to identify opportunities to drive productivity and improvement via automation in your business. No need to reinvent the wheel. Use what you have.Keep your eye on the doughnut around and not on the hole ...

Communication - The 5 rules of Orwell

2007-07-11T15:34:00.000-05:00

Communication is a critical part of running any business - regardless of it's size. Imagine running your business without any communication!

HOW EFFECTIVE IS THE COMMUNICATION FROM, TO AND WITHIN YOUR BUSINESS?

The fundamental answer to this question does not lie in systems, or tools, or policies. Fundamentally, communication is based on language and the style of the language used.

Even though George Orwells "Politics and the English Language" has been around since 1946, I have only come across it recently. Orwell incapsulates these fundamentals of effective communication in English in 5 Rules which I have summarised below:

Never use a metaphor, simile, or other figure of speech which you are used to seeing in print.
This sounds easy, but in practice is incredibly difficult. Phrases such as toe the line, ride roughshod over, stand shoulder to shoulder with, play into the hands of, an axe to grind, Achilles’ heel, swan song, and hotbed come to mind quickly and feel comforting and melodic.
For this exact reason they must be avoided. Common phrases have become so comfortable that they create no emotional response. Take the time to invent fresh, powerful images.

Never use a long word where a short one will do.
Long words don’t make you sound intelligent unless used skillfully. In the wrong situation they’ll have the opposite effect, making you sound pretentious and arrogant. They’re also less likely to be understood and more awkward to read.
When Hemingway was criticized by Faulkner for his limited word choice he replied:
Poor Faulkner. Does he really think big emotions come from big words? He thinks I don’t know the ten-dollar words. I know them all right. But there are older and simpler and better words, and those are the ones I use.

If it is possible to cut a word out, always cut it out.
"Great literature is simply language charged with meaning to the utmost possible degree" - Ezra Pound. Accordingly, any words that don’t contribute meaning to a passage dilute its power. Less is always better. Always.

Never use the passive where you can use the active.
This one is frequently broken, probably because many people don’t know the difference between active and passive verbs. Here is an example that makes it easy to understand:
The sales target was missed. (passive) We missed the sales target (active).

Never use a foreign phrase, a scientific word, or a jargon word if you can think of an everyday English equivalent.
This is tricky because much of the writing used in business can be highly technical. If possible, remain accessible to the average reader. If your audience is highly specialized this is a judgment call. You don’t want to drag on with unnecessary explanation, but try to help people understand what you’re writing about. You want your ideas to spread right?

Bonus Rule: Break any of these rules sooner than saying anything outright barbarous.

And if the above rules are not easy enough to follow, just remember what Einstein said:

"If you can't explain it simply, you don't understand it well enough."

Lean Training - the "ILU" Chart

2007-03-30T21:59:00.001-05:00

Much of what the Toyota Production System has taught us, has now fallen under the "Lean" umbrella. There is a ton of great material on Lean Manufacturing, Lean Projects, Lean methodologies for all types of activities. Lean Cuisine for business! Yes - Lean is big!

However, do a search for Lean as it relates to people training, and you don't find much.

Two key principles of Lean are VISIBILITY and SIMPLICITY. When you apply these to people development and training, there is nothing leaner than the ILU Chart.

This is something that I learnt a long time ago, and have applied many times. Simple to understand, simple to implement and very, very effective. To explain the ILU Chart, you have to understand the idea behind the original ILU Charts. Think of a matrix with skills along the top and people down the side. The chart below is an example of what an ILU chart would look like to a work team that manufactures replacement panels for automobiles.

"I" (the first 'stoke' on the chart) indicates that the person has undergone training for the skill and can perform the task with some level of supervision.
"L" (second 'stroke' on the chart) indicates that this person can now execute this task solo within the standard time.
"U" (3rd stoke on the chart) indicates that this person is an expert at this task and able to train others.

In the above example, you can see that Mary has recently joined the team and is building up her skills. Kelsey seems to be the expert in the group, and is probably the team lead/ trainer.
The ILU Chart SIMPLY and VISIBLY shows where people's expertise and deficiencies lie.

How can you use the ILU Chart as a Lean tool in training / people development?

Quicker System Implementations – Quicker Benefits

2007-02-23T23:15:00.001-05:00

"If you want to get somewhere else, you must run at least twice as fast as that! " Project Management Proverbs.

Rapid Deployment and Lean Methodologies in application development are not new. These methodologies employ iterative cycles of designing, building and testing activities, to quickly validate requirements, and address development issues. In this way, defects and rework are reduced. This also gets requirements correct to avoid waste due to developing functionality that is not needed.

Even though these methodologies are not new, the execution of these methodologies in large ERP system implementations is not widespread as it should be. There could be several reasons for this. If you are a large consulting company with a big bench, it may not be in your interest to propose a shorter implementation with a smaller team!! However, I like to believe today the consulting industry is competitive enough so that businesses are smart enough to look around and get the best deal when implementing their systems.

I bigger hurdle to getting to rapid deployment with ERP projects is the planning for such a project. Rapid deployment/ lean approaches depend on breaking down the work into pieces that can be designed, built and tested in parallel. This requires a thorough understanding of business processes, business requirements, and of the ERP application – in planning the project! Project Preparation is therefore crucial in getting a rapid deployment project executed correctly. These pieces of the project can be defined as Work Packages or Learning Cycles. Some companies prefer calling these Learning Cycles, as that emphasizes the fact that the team needs to be continually learning through design, built and test to ensure the highest quality of the end product.

This approach requires early availability of system infrastructure for development and for testing / quality assurance.

This approach also requires early involvement of the user community in testing and QA activities. This supports early knowledge transfer, and thus reduces training efforts closer to go-live.

Key benefits of faster system implementations:

Leveraging what is there! Building on what we know. Not re-inventing the wheel = innovation.
Sharper requirements - stay focused on meeting business requirements. Less "fluff" in development.
Reduced rework through quick design-to-test cycles.
Learning cycles built into development - faster knowledge transfer.
Controlled scope = simpler project plans and lower overhead. Milestone plans drive project performance.

Using Web 2.0 to Improve your Business

2007-02-08T16:34:00.000-05:00

The growing number of user-driven, web-based appliactions is being called Web 2.0. We all have heard of the success stories around YouTube, MySpace, Blogger, eBay, and a plethora of other sites.

BUT, HOW CAN WE USE WEB 2.0 TO HELP IMPROVE OUR BUSINESS?

Driven by new applications and innovative use of existing applications, businesses are finding new and exciting ways to use Web 2.0 to grow their business.

I was recently sent a link to a site which I think will be of value to you in this regard: "The Entrepreneur's Guide to Web 2.0: Top 25 Apps to Grow your Business".

No doubt that this guide is already outdated :-)

Top Reasons to Upgrade your IT Systems

2007-01-30T17:06:00.000-05:00

We live in a connected and automated world of alphabet soup systems - ERP, SOA, CRM, etc - fueled by innovations in software and hardware of an unprecedent scale.

We want to beat our competion by leveraging technology, and technology vendors want our business, which in turn drives investment into better systems that we can leverage.

As your business changes, your IT systems need to be kept aligned with your processes to support your business objectives. In the same way, your business will benefit from taking advantages of improvements in technology. So you may be sitting on software that is a few years old and under pressure to upgrade. Here are 3 good reasons to upgrade your software:

Taking advantage of new functionality offered. Sticking to older version means needing to build custom code for desired features that were not incorporated into a product. The newer releases may have the desired functionality built in. While converting to a newer release is a painful experience because of the modifications, it reduces risk. Your code no longer has to be tested each time a patch comes out for the language you used or the operating system changes.

Maintenance costs increasing, or hard to find skilled resources in the older versions. So needs to get on the upgrade bandwagon. Often it is difficult to find support staff to support older versions of software. Most people want to stay at or near to the current releases. Finding someone that is competent to work with an old release can be difficult and expensive.

Older versions are not compatible with newer hardware and you are locked into old technology. The hardware or operating system is no longer supported by the software vendor. I've seen this one bite companies severely over the years. Software companies shed low sales volume operating systems and hardware platforms to reduce support costs.

Project Management for Dummies

2007-01-10T14:20:00.001-05:00

PMI Definition: A project is a temporary endeavor undertaken to achieve a particular aim and to which project management can be applied, regardless of the project’s size, budget, or timeline.

Further, as defined in the 2000 edition of A Guide to the Project Management Body of Knowledge (PMBOK® Guide), project management is the application of knowledge, skills, tools, and techniques to a broad range of activities in order to meet the requirements of a particular project.

Essentially, project management is comprised of five processes:

Initiating,
Planning,
Executing,
Controlling,
and Closing

These five processes are wrapped around the triple contraints of project management. These 3 constraints will define a project, and any changes to any of these will impact the project enough to require review and approval by the project sponsor(s).

TIME
COST
SCOPE

The Project Management Insitute has also defined NINE knowledge areas

Project Integration,
Project Scope,
Project Time,
Project Cost,
Project Quality,
Project Human Resources,
Project Communications,
Project Risk Management
and Project Procurement.

Project management is used globally by multi-billion-dollar corporations, governments, and smaller organizations alike as a means of meeting their customers’ needs by both standardizing and reducing the basic tasks necessary to complete projects in the most effective and efficient manner. As a result, project management leadership is a highly desirable and sought-after skill as intense global competition demands that new projects and business development be completed on time and within budget.

PM a nutshell: 3 contraints; 5 processes; and 9 knowledge areas.

RELATED BLOG ITEM:- Project Management Resources

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Imagine tracking net-profit by customer, by product - on demand!

2007-01-05T00:09:00.001-05:00

In a previous article, "Optimize profitibilty by managing value", I discussed the use of an application called ProfitFinder which allows you to analyze net profit by product AND customer along your value chains. This is an unique innovation around how profitibility is tracked and measured, that allows businesses to look at how value really can be managed to increase company net profit.

These would be the benefits of having this information at your fingertips:

Customers Net Profit – compare to today’s Gross Margin – you can then focus resources on more profitable customers and their buying patterns and manage the less profitable customers.
Customer / prospect costs – you can adjust the amount of sales activities and decide when to stop working on prospects when target marketing costs are reached.
Resource capacity utilization – giving you the capability to do marginal marketing to maximize utilization of your resources to lower the fixed costs and increase total profit.
Sales force effectiveness - track net profitability by sales person. This information allows you to better set sales targets based on profit, as well as allows you to manage sales accounts more effectively.
Supporting departments costs per Value Chain – the ability to adjust the different departments costs involved in the value chains related to the profit that the respective VC brings in.
Decision-making information by Value Chain from products/services/procurement through inventory/warehousing to customers/ markets, on a real-time basis or in batches on order.

RELATED BLOG ARTICLE:

Data rich information poor

Organizational Restructuring - Aligning People with Technology

2006-12-14T23:00:00.000-05:00

"Processes don't do work, people do." - John Seely Brown

I have been on too many technology implementation projects where Change Mangement, Organizational Transformation - or whatever you want to call it - is simply seen as "Training". Seeing Organization Change Management (OCM) during a system implementation as simply writing up new business processes, procedures and training people - is setting your new system up for failure!

OK - maybe 'failure' is a strong word. But doing by this, you are simply not maximizing your system investment.

Why spend a good percentage of your gross revenue on a great new ERP system, that hopefully has been built, configured and implemented using best practices, and then spend a fraction of this investment on the people who will make or break you new system? So, apart from training our people on how to use the system, what else can we do - you may ask. Well, here are a few things :

Involve the people who will use the system in the system design and configuration. In this way, you ensure that their requirements are baked in, AND they start understanding how their jobs will change. The sooner people understand this the better.
Develop 'powerusers' by involving them in system testing. These 'powerusers' will be your first line of system support, and will be key in establishing the new system as part of daily business.
Involve people in the design of new processes that must change with the implementation of the new technology. Understanding how their daily jobs will change is part of managing any resistance to change.
Avoid class-room style training.
HIRE people who understand the new technology and business processes!
MOVE people around as new skills are learnt and utilized.
Compentate people for these new skills - retain & develop your investment in people.

Involving people in all aspects of a system implementation - even if it takes longer - will allow the new "champions" to shine, and to develop your greatest resource to ensure success after a system implementation.

RELATED LINKS

Optimize Profitibilty by Managing the Value Chain

2006-12-07T07:23:00.000-05:00

I recently came across an interesting innovation that actually drives product profitibilty. The innovation comes from a Sweden-based company called Scorebase. According to the founder, Börje Paulsson, what started as a technique for analysing business data to track profitibility at the various phases that the product goes from production to market, has developed into a powerful analysis tool which has become a valuable piece of software for his clients. The application is called ProfitFinder and is more than a profitibility analysis tool.

Gross Profit is defined as sales minus all expenses directly related to these sales. PROBLEM: GP does not consider fixed costs in production and marketing

Net Profit is defined as total revenue minus total expenses. PROBLEM: NP is normally measured monthly and is not easy to measure by customer/ product combination more frequently.

(Click on Picture)

ProfitFinder will allow you to see, based on actual production and billing, your net profit by product/customer combination - along the value chain!

Imagine what you can do with this information.

You can identify and reduce waste in your production process, & reduce direct costs;

You can understand and manage how indirect costs impact your product cost;

Quantify and manage your direct sales costs by customer. How much more are you paying in shipping for the same product for different customers? How much of a sale-person's time is being spent on marketing/ selling to a specific customer? Are yoru marketing dollars spent in the right area?

Indentify and manage how indirect marketing costs are being allocated to products.

Rank performance across market segements more accurately - better plan your marketing campaigns.

Not have to wait until the end of the financial period to know what you net profit is!

Assess your Business

2006-11-28T21:29:00.000-05:00

"Victorious warriors win first and then go to war, while defeated warriors go to war first and then seek to win."

Sun-tzu (~400 BC), The Art of War. Strategic Assessments

Businesses need to step back and assess how they are performing against plan and how to get to the next level. You need to take the time to step away from the business and look at the basics. Do your business numbers make sense?

Review your Market

Which markets, or market segments, are most profitable?
What plans do you need to attack new markets?
Are existing markets saturated?
Who makes up your markets
Are your existing marketing methods right?
How much do they cost?
How do you target potential new customers?

Review your Products & Services

Which are the most profitable? Why?
Which are the least profitable? Why?
Do you understand your how your product/ customer mix affects your company profitibility?
What issues do you have around price, service and quality?

Your competition

Who are they?
What are their strengths and weaknesses?
How do customers compare you and your competitors?

Assess your business performance.

How does your cashflow forecasting system work? Is it accurate?
What about your profit forecasts - do you keep them up to date and monitor performance?
Do you maintain tight budgetary control on financial matters?

Your suppliers

What are relationships like?
Do you work with them to improve their quality of supply to your business - and thus to your customers?

Assess People

Do you have the right people to achieve your business objectives?
Do they know what is expected from them in achieving those objectives?
Do you operate a training and development plan?
What are their strengths and weaknesses of your management team?

Assess Yourself

Do you know your own strengths and weaknesses?
Do you need training?

Assess Your Infrastructure

Will your premises cope with your plans?
Are they used to best effect?
Is your equipment up to date?

How will you find any improvements?

How the best differ from the rest

2006-11-21T07:23:00.000-05:00

"Only the mediocre are always at their best." Jean Giraudoux (French dramatist: 1882 - 1944)

Why is it that some companies perform better than others. Is it luck? Their people? Their products/ services? Their markets?

Some time ago, I reviewed the top-rated book "Six Disciplines for Excellence" . In that book, Gary Harpst defines five key reasons for why the best differ from the rest. Here's the top five - in order of their importance:

Strength of the Leadership Team. Top-performing organizations rated 155% higher than the lower performers. The two primary factors were the ability of leadership to define a clear vision for the company, and the appropriate involvement of leadership in leading and supporting projects that were strategic to the organization.

Ability to Attract and Retain Quality People. Top-performing organizations rated 142% higher than the lower performers. The best small businesses have found that success in this area all starts with recruiting.

Disciplined Approach To Business. Top-performing organizations rated 114% higher than the lower performers. Top performers are also good planners, but are practical and are disciplined about the commitments they make.

Strategic Use of Technology. Top-performing organizations give more emphasis to using technology to impact the business in strategic ways (114% more) than the lower performers.

Effective Use of Trusted Relationships. Top-performing organizations rated 100% higher than the lower performers in their ability to utilize the expertise and talents of external organizations.

Other factors contribute to top-performing organizations and how they differ from lower performers (i.e., work ethic/attitude, teamwork, commitment, etc.). The five described above highlight the areas of greatest difference.

RELATED ARTICLES:

Why do Start-ups Fail?

2006-11-02T07:10:00.001-05:00

“Once you've hit five years, your odds of survival go way up. Only two to three percent of businesses older than five shut down each year.” David Birch - MIT

The stats are scary! 50% of all businesses fail within 5 years. Why? I've listed 10 reasons below. Can you think of more?

1.Lack of experience
2.Insufficient capital (money)
3.Poor location
4.Poor inventory management
5.Over-investment in fixed assets
6.Poor credit arrangements
7.Personal use of business funds
8.Unexpected growth
9.Competition
10.Low sales

Here are a couple of books if you are interested in learning more:

Small Business Management, by Michael Ames

The Do It Yourself Business Book by Gustav Berle