Column: Clueless execs keep ERP from delivering value

A CEO once told me that IT is like dental work: "I know it's good for me, but it's painful." When it comes to ERP systems, we're well aware of the pain, but we often question whether the systems are good for anything.

Simply stated, an enterprise resource planning system is nothing but a set of integrated transaction processing systems. For companies whose legacy systems obstruct access to information, an ERP system has the potential to put relevant data in the hands of decision-makers. Decisions can then be made by the right people at the right time based on appropriate facts.

It is unlikely, however, that many ERP implementations will deliver on this promise. That's not because the concept of ERP systems is flawed. Nor is it because of limitations with existing software packages. The reason ERP systems will fail to generate significant benefits is because executives who sponsor ERP initiatives often have no idea what they're getting into.

Misperceptions about ERP systems come in three forms. In some cases, management believes that the company is merely investing in a new technical infrastructure. This view fails to recognise that the ERP system provides the foundation for a very different kind of business. Executives will concern themselves with where to park the car when they've bought themselves a spaceship. Ultimately, a company that implements an ERP system to replace a broken infrastructure is likely to find it still has a dysfunctional IT infrastructure.

The second misperception is that an ERP system will impose discipline and process integration on an organisation. ERP, in fact, provides an ineffective infrastructure unless an organisation is disciplined and cross-functional in its processes. Just as a new piano doesn't come with a guarantee that it will produce beautiful music, an ERP system doesn't deliver "best practice".

Finally, there is a widely held perception that ERP should yield improvements in baseline operating measures. On the contrary, ERP systems will have their biggest impact on processes that were never before measured -- things that fell between the cracks and had negative impacts on quality or cycle time. The battle cry for measurable outcomes that demonstrate a positive return on the ERP investment has focused attention on more easily measured but less valuable outcomes.

These misperceptions lead senior managers to underestimate their role in driving the benefits that ERP can support. Particularly dangerous are visionaries who believe that ERP systems can lead to fundamental organisational change but have no strategy for ensuring organisational learning to bring about that change. ERP becomes valuable when employees at all levels of the organisation take advantage of increased data visibility to make decisions that enhance the company's competitiveness. As they clamour for the data they need to be effective, they learn how to leverage ERP's capabilities. Management's role becomes one of creating a highly empowered environment and focusing everyone's attention on key initiatives.

It doesn't appear that managers at many companies have embraced this role or know how to perform it. Consequently, most organisations that embark on the ERP journey will feel only the pain. They won't emerge with a shiny new smile.

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