Managing Enterprise Change to Drive Internal ROI

Implementation projects don't have to be painful for your company. Use these helpful tips to ensure that you don't waste time or money while making enterprise-wise processes more efficient.

A pharmaceutical company decides to implement a supply chain management system across the corporation, replacing its current unmanageable patchwork of disparate systems that provides no unified way to maintain assets (i.e., via procurement of maintenance, repair and operation (MRO) parts and materials). Having just completed a successful implementation of an enterprise resource planning (ERP) system, the project manager requests that his implementation team consist of experts from each of the company's locations.

The project manager, along with the "decision makers," receives continuous feedback from the designers and considers their recommendations in the context of purchasing/asset management best practices. At each site, the individual project "owners" take responsibility for successful implementation of the system. The corporate core team is supplemented by a large team at each site, as well as a subject matter expert for each component of the system. As a result, the project is considered successful at all levels of the corporation.

A manufacturing company decides to implement an enterprise-wide financial management and procurement system. In preparation for the event, the CEO and his team look strategically at the entire information infrastructure of the company.

They undertake a major study of the company's manufacturing process and the organizational structure of the company needed to support the next generation of systems (i.e., ERP, strategic asset management (SAM)) designed to maintain the strategic direction of the company.

The company hires a consulting firm to examine the way in which it makes decisions. As a result, the company adopts a process for strategic decision-making called the Decision Dialog Process (Allen, 2000; Matheson, 1998). It also designs an information technology (IT) support process that aligns the necessary resources for successful completion of projects.

Finally, a federal government support agency decides to take advantage of a system upgrade by implementing and training employees on best practices. A core team is established, but no charter or strategy is established for the implementation. Although the core team meets regularly to discuss tactical issues, there is no steering committee, and the managers who directed the implementation do not meet on a regular basis. Because support resources are strained and many involved in the process lack the time to be committed to a successful outcome, many of the core team members do not show up for the meetings. Thus, no decisions that have an impact on the project's return on investment (ROI) are made.

Eventually, a new director takes charge and decides to align the project for success. He determines that the core team needs a charter, and that managers should meet regularly with the core team to ensure the design of the new system is aligned with company goals. By structuring the supply chain to service the company's critical assets, the teams can determine key performance indicators (KPIs) and expected ROI.

Framing the Project

In all three cases, the implementation was considered in the context of the whole system. Management understood that the project would not reach the desired outcome of an actual ROI unless the people, processes and tools were aligned. What compounds the difficulty of a large-scale integration is the interfacing of new systems with legacy systems, and differing opinions on how best to move forward. Often, executives and senior managers find themselves in the middle of conflicts caused by the overwhelming complexity of a large project.

Many projects that lack this foresight face a greater risk of failure. Imagine a driver who is unable to see potential obstructions in the road trying to navigate a blind curve. With such an impediment, the view from the driver's seat is not "strategic" enough. Seen from 30,000 feet above, the view is "strategic" to an extent but, because of distance, lacks enough detail to safely navigate the road.

Clarity is achieved only when the driver sees the obstruction and can thoroughly plan around it. An overarching view is strategic only when it is taken in context; that is, the details must be explored and the strategy for aligning these details defined. This is similar for a project implementation: at too high of a level there is confusion, and often too much information.

Performance Indicators

Beginning with a clear understanding of the desired outcome.
In considering KPIs, some assume that drawing on an implementer's previous client experiences provides adequate coverage, and no further exploration is required for success. When focusing on measurable results, however, managers and executives should identify only those appropriate to their own company and situation. The successful implementation of any change in a company depends on many factors, including the measurements used to reach the desired outcome with what is being produced, the supporting culture and the understanding of proposed change at all levels of the organization.

Identification of performance indicators is important, but other factors that make these indicators add value to the company must also be considered.

Different reasons for implementation will cause executives to measure the outcome differently.
Suppose your investigative team spends one year writing specifications and business case scenarios for a new system implementation. You interview all of the vendors, run through all of the scenarios and secure agreement from the user community that the system selected is a good choice. You purchase solid software that supports your business processes from a reputable vendor with the latest technology. The vendor has built the package on the latest technology, and the flexibility of the solution allows you to implement the solution with modifications that tailor it to your business needs.

This process should seemingly guarantee success; however, while these are definitely the correct initial steps, they are only the beginning. Introducing change such as implementing a new system in an organization is always a challenge.

There are many reasons to implement a new system: a visionary comes up with a new idea, new government regulations, a business opportunity, better efficiency, a more effective operation. The list is endless. Often, after approval of the project, the original goal gets lost in the fervor of implementation. The approach then becomes purely tactical, with only a distant connection to the overall strategy of the initial charter.

In the case of a project required to produce an ROI, the team should determine in advance if the goal will still be reached after the product is launched. If it is found during the implementation that this goal will not be reached, the implementation should be realigned. The best-engineered system in the world cannot produce an ROI by itself; the whole system must be taken into account, including the culture, people and processes involved in producing the desired outcome.

As an example, a manufacturing organization decided to replace a patchwork of mainframe financial systems with a single ERP system. Several months into the process, the company started to realize that it was virtually impossible to replace the financial system and not address the current level of integration with the purchasing/procurement system. The project was well underway when the front-line employees at the plant started to complain about the lack of an asset management and maintenance system. Maintaining the assets at the plants was a major cost, largely due to the system supporting it. In other words, the plant could not separate the implementation of a procurement system from an asset management/maintenance system.

Often, once an executive makes a decision to move forward with a new system, the vendor or internal implementer is told to "make it happen" with little follow up or feedback. Delivery of a system might be contracted out to a third party without clearly defining the "in-house" responsibility. The client and the implementer should establish a partnership for the delivery of the product including a blameless culture with defined accountability on both sides.

Formative questions can be used to help and frame the project. Examples of such questions for framing a system implementation include:
* Who will design the system?
* Who will give the designers direction?
* Who will set the goals?
* What is the expected ROI? When is it expected?
* Who will measure the alignment of the project to the final ROI?
* What is the process for making adjustments to make sure that the ROI is realized?
* What is the financial effect of this effort (long term and short term)?
* Does the company have the fortitude and patience to ensure the ROI?
* Can long- and short-term performance benefits be realized? When? What are they?
* How will this effort be measured? When? Who will measure?
* What are the alignment measures?
* Who will take responsibility for the success of the implementation?
* Who will own the implementation after go-live? What role will the IT group play?

Getting Perspective

The right perspective for a project is critical. In one implementation, the initial vendor choice was reduced because the IT manager wanted a single operating system and platform. From his perspective, this was an easy decision: The company had invested a lot of money in training and had expertise in this technology. However, this decision had consequences in the long run that, after a lot of expense, caused the company to abandon the project.

The software industry itself was in a huge paradigm shift that could have been predicted, but was not, with some formative evaluation. Top-tier vendors for this particular application were overlooked because they were on newer-technology platforms. The selected vendor had not invested in research and development (R&D); therefore, the technology was obsolete before implementation, and the vendor went out of business during the process. The implementation was scrapped one year after go-live, and the cost was $1.2 million.

The most successful implementations are based on good, solid planning and a team that is focused on the "right things."
Blindness involves making a choice without clarity. If a company focuses on a single part of the picture, it remains blind to the details. If challenged to correct the problem, the company might begin with some incorrect assumptions. To get clarity, the right questions must be asked.

More often, this blindness shows up in organizations as follows: A particular choice is seen as the only one, without consideration of alternatives. Recall the case previously mentioned in which considering software from only one vendor was clearly incorrect in hindsight. An implementation team could be lucky; however, this did not prove to be the case.

To move from blindness to clarity, executives and managers must lead and take ownership of the project, ensuring that employees have access, from experience or education, to present the executive with possible solutions. This seems simple, but often business leaders delegate the tactical implementation of projects because they are overwhelmed with the choices. When they do this, however, they are increasing the possibility of failure. Only by relying on their own experts to guide them and provide reasonable alternatives will they be able to decide on the right solution, adjust it for changes (e.g., market, technology, additional requirements, etc.) and ensure its success.

Where to Begin

Homework should be the first step: Research and investigate the project goals and options. This is meant to clarify the main question to be asked of the experts, namely, "What are we trying to do?" The next step is to make a charter or a set of instructions for an appointed set of experts. The experts should then develop solutions to present to the executives, meeting with them as many times as it takes until a clear choice is made for going forward.

The most successful implementations are based on good, solid planning and the active participation of the "right groups."
When the teams meet to review the charter, the designers bring their own views into the mix. For example, a charter may address SAM, but the designers may reframe the charter to include specific supply chain or financial system concerns. A good design team can produce clarity that is aligned with the business, and therefore a positive ROI.

Executives should select the team with the understanding that every project faces certain barriers. In their book The Smart Organization, David and Jim Matheson point out that there are several barriers to successful implementations (Matheson p.89, 1998):
* reluctance to change
* power and politics
* secrecy
* lack of credibility
* lack of proper skills
* internal focus
* lack of resources

Support from the decision makers for the project and the project team is an important factor in breaking these barriers. How do you mitigate these factors? If you do not, your project can easily be derailed. One effective technique that can be used features one team made up of two groups: a decision-making group and an implementation design group.

The decision-making group is often referred to in many projects and organizations as the steering committee. In a perfect scenario, this team would meet up front to decide the "what" and the "who:" what needs to be done, and who needs to be involved in the design of a solution. The group is responsible for identifying the initial need and determining who should be involved in the design based on the initial perceived needs. The decision-making group should work with the design group to establish metrics and measure the progress at regular intervals. These alignment meetings should include a coach who understands the dialog process and can schedule intervals for the review meetings.

The implementation design group is made up of the "experts:" those with credibility in the organization that understand the "nuts and bolts" of what needs to be done. An important aspect of the effectiveness of any design team is to make this job their primary focus for the duration of this project. It is necessary to select people who understand the tactical needs of the implementation, and who also believe in themselves and in the necessary success of the project. The group is responsible for meeting with the coach to review the project and charter, and these meetings can be intense. The group is asked to leave their prejudices at the door and not advocate a solution; they should understand the instructions given to them by the decision-making group and refine this with feedback. At this point, they should try to add clarity to this frame. The design group will have an initial meeting with the decision group to accept their charter, and then meet among themselves to break the charter into detailed needs and debate the issues. They will then develop solutions and "alternatives" to present to the decision group. After the ideas have been presented and feedback has been collected, the design group will refine the design. This process is repeated at regular intervals until there is an effective solution or outcome.

The two groups within the implementation team are very important. At the decision-making level, the makeup of the team is comprised of decision makers that have the overwhelming advantage of being able to enforce and implement the solution once it has been decided. At the design level are people who have the respect of their peers, superiors and subordinates as people who will give the correct advice along with alternative choices. Having choices is important: There are always lower-cost, more efficient and more effective alternatives. The design team will not always agree, and the presentations to the decision-making group will give these members feedback as they proceed.

The Final Word — Systemic View and Systematic Process for Implementation

When putting together a project team, it is important to realize that not everyone has the same picture in mind when viewing an enterprise-wide deployment. In any given organization there are many differing views of the situation at hand, and assembling those with divergent opinions is a good idea. Having a framework in place that sets the rules for managing this discussion is a better assurance of a productive dialogue and a successful project.

Many organizations miss the mark by not considering the fact that any change must be systemic. The organization must be careful not to assume that any single solution can address the needs of the entire organization. The decision-making and implementation design groups combined into a single team is a good way to put the structure in place for a successful project implementation. This process, when effectively used, addresses typical reasons for project failure and mitigates problems, including lack of discipline, lack of strategy, misused metrics and the tendency to oversimplify. Best practices to ensure successful supply-chain management solution changes are as follows:

1.) Establish a partnership including all parties responsible for a successful implementation.

2.) The paying client or "stakeholder" must take an active role in defining the desired outcome. Involvement should be broad on the client side and include representation from all that will be responsible for making the product work. In the long term, this ensures support of the delivered system by all parties involved.

3.) The "sponsors" of the project should make sure to define and communicate the desired outcome. This concise description of the goals should be promulgated in the project charter. This charter will be the marching orders for the design group.

4.) Establish your team, with a design component and a decision component. They should meet on a regular basis to make sure that they are aligned. The interaction between these two groups will help to mitigate many of the causes for project failure.

5.) Establish a process for the measurement of results and alignment with the charter. For the project, these measurements should be considered formative. By measuring along the way, the project may be changed or realigned based on the outcome.

6.) Do not skimp on resources. Make successful implementation a primary job of the design and decision components of the team.

7.) Establish a good project management strategy. Project management itself can be complex, depending on the size and duration of the project. A clear understanding of the language that will be used among team members is required.

8.) Establish a communication process that can be used to keep the process aligned and allow it to adjust to changes in the business strategy or conditions along the way

9.) Do not outsource your responsibility. The experts should provide advice, but the client should take responsibility for making the implementation successful.

References:
Matheson D, Matheson J. (1998) The smart organization: creating value through strategic R&D Boston: Harvard Business School Publishing.

Allen, Michael S. (2000) Business Portfolio Management: Valuation, Risk Assessment and EVA Strategies. New York: John Wiley and Sons, Inc.

Dean, Peter J. (1999) Performance Engineering at Work. Washington, DC: International Society for Performance Improvement.

Stolovitch Harold D. & Keeps Erica J. (1999) Handbook of Human Performance Technology. San Francisco: Jossey Bass Pfeiffer.

About the Author: Al Crain is a managing principal consultant at MRO Software, a certified performance technologist and a member of the International Society of Performance Improvement.

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