Why your ERP is not deliveringand how to fix it

ICTM ConferenceFebruary 2010

Dr James A Robertson PrEng

I.T. versus bridges

Engineers do NOT design bridges to stand up

Engineers design bridges NOT to fall down

Angus Struan Robertson

Vision

Experiencing failure

Experiencing failure

Experiencing failure

What is strategy?

Strategy – Doing the right things

Tact

ics –

Doin

g th

ings

righ

t

What is strategy?

Thrive

Strategy – Doing the right things

Tact

ics –

Doin

g th

ings

righ

t

What is strategy?

Thrive

Strategy – Doing the right things

Tact

ics –

Doin

g th

ings

righ

t

Survive

What is strategy?

Thrive

Strategy – Doing the right things

Tact

ics –

Doin

g th

ings

righ

t

SurviveDie slowly

Die fast

What is strategy?

The right things done right

The essence of why an organization exists and how it thrives

Information technology

“19 out of 20 ERP (integrated business information system) implementations do NOT deliver what was promised”

An industry in crisis

Extreme failures

1. Seven years and half a billion dollars -- international chemicals company

2. $400 million -- multinational shoe corporation

3. Multinational entertainment giant -- $878 million

4. Major supermarket chain -- $195 million

Professor Rossouw von Solms

Deleting a building

Deleting a building

Deleting a building

Deleting a building

Deleting a building

"Attendees of Gartner's Business Intelligence Summit in London last month were not surprised to hear that most enterprises are still failing to use business intelligence (BI) strategically. Gartner's survey of over 1300 CIOs returned some unimpressive findings about the state of BI implementations: Gartner's vice: president of research summed up the situation nicely by saying:

“Most organisations are not making better decisions than they did five years ago”

An industry characterized by failure

BUSINESS INTELLIGENCEArticle published in Computer Business Review Africa.

There is a need for a new approach

What is NOT an engineering approach?

What is NOT an engineering approach?

What is NOT an engineering approach?

There IS great opportunityERP can and should add value

Different view of ERP / IBIS(Integrated business information systems)

Common view of best practice

10

0

Different view of ERP / IBIS(Integrated business information systems)

10

0

Real potential of ERP software

– with high quality

taxonomies

Common view of best practice

10

0

Different view of ERP / IBIS(Integrated business information systems)

10

0

Real potential of ERP software

– with high quality

taxonomies

Common view of best practice

10

0

10

0

The REAL opportunity–strategic configuration

Different view of ERP / IBIS(Integrated business information systems)

10

0

Real potential of ERP software

– with high quality

taxonomies

Common view of best practice

10

0

10

0

The REAL opportunity–strategic configuration

X 3

X 7

• Logical word (semantic) structure

• Conveys understanding of a particular subject area

• From one human being to another

• In a structured hierarchical form

• Essential to conveying information through computer systems

• Human beings experience as valuable, meaningful and informative

• Essential element of effective decision making supported by I.T.

What is a taxonomy?

WorldAsiaAfricaEurope

Germany...

...

Data engineering defined

The definition of information content

in a way that is structurally (taxonomically) fundamentally meaningful to human beings who understand the business

and the translation of this content into structured codes which faithfully and accurately reflect human understanding in a way that the computer can manipulate

with minimal human intervention

so that the computer system appears to be intelligent

drives configuration and integration

Strategically focussed, top down, fundamental first principles, precise, models the business and the real world

What is ERP?

What is IT?REALLY?

What is IT?REALLY?

What is IT?REALLY?

What is IT?REALLY?

What is IT?REALLY?

$

What is IT?REALLY?

$

What is IT?REALLY?

$

What is an ERP?Data tables

Entry screens

Executable software programs

Reports

Integration

Example of faulty integration“The system lost my data”

So…. What is an ERP?REALLY?

Delete (scrap) or refurbish?

Is IT moving so fast you cannot keep up?

Is IT moving so fast you cannot keep up?

Is IT moving so fast you cannot keep up?

30%

19%16%

14%

12%6% 3%

1. Mythology, hype & tradition -- 30%

2. Lack of executive custody, inap-propriate governance and policies -- 19%

3. Lack of strategic architecture, alignment, etc -- 16%

4. Lack of data engineering and poor configuration -- 14%

5. Soft issues and change impacts -- 12%

6. Lack of an engineering approach, lack of precisioin, etc -- 6%

7. Technology issues -- 3%

Factors causing ERP failure

30%

19%16%

14%

12%6% 3%

1. Mythology, hype & tradition -- 30%

2. Lack of executive custody, inap-propriate governance and policies -- 19%

3. Lack of strategic architecture, alignment, etc -- 16%

4. Lack of data engineering and poor configuration -- 14%

5. Soft issues and change impacts -- 12%

6. Lack of an engineering approach, lack of precisioin, etc -- 6%

7. Technology issues -- 3%

Factors causing ERP failure

30%

19%16%

14%

12%6% 3%

1. Mythology, hype & tradition -- 30%

2. Lack of executive custody, inap-propriate governance and policies -- 19%

3. Lack of strategic architecture, alignment, etc -- 16%

4. Lack of data engineering and poor configuration -- 14%

5. Soft issues and change impacts -- 12%

6. Lack of an engineering approach, lack of precisioin, etc -- 6%

7. Technology issues -- 3%

Factors causing ERP failure

30%

19%16%

14%

12%6% 3%

1. Mythology, hype & tradition -- 30%

2. Lack of executive custody, inap-propriate governance and policies -- 19%

3. Lack of strategic architecture, alignment, etc -- 16%

4. Lack of data engineering and poor configuration -- 14%

5. Soft issues and change impacts -- 12%

6. Lack of an engineering approach, lack of precisioin, etc -- 6%

7. Technology issues -- 3%

Factors causing ERP failure

30%

19%16%

14%

12%6% 3%

1. Mythology, hype & tradition -- 30%

2. Lack of executive custody, inap-propriate governance and policies -- 19%

3. Lack of strategic architecture, alignment, etc -- 16%

4. Lack of data engineering and poor configuration -- 14%

5. Soft issues and change impacts -- 12%

6. Lack of an engineering approach, lack of precisioin, etc -- 6%

7. Technology issues -- 3%

Factors causing ERP failure

30%

19%16%

14%

12%6% 3%

1. Mythology, hype & tradition -- 30%

2. Lack of executive custody, inap-propriate governance and policies -- 19%

3. Lack of strategic architecture, alignment, etc -- 16%

4. Lack of data engineering and poor configuration -- 14%

5. Soft issues and change impacts -- 12%

6. Lack of an engineering approach, lack of precisioin, etc -- 6%

7. Technology issues -- 3%

Factors causing ERP failure

30%

19%16%

14%

12%6% 3%

1. Mythology, hype & tradition -- 30%

2. Lack of executive custody, inap-propriate governance and policies -- 19%

3. Lack of strategic architecture, alignment, etc -- 16%

4. Lack of data engineering and poor configuration -- 14%

5. Soft issues and change impacts -- 12%

6. Lack of an engineering approach, lack of precisioin, etc -- 6%

7. Technology issues -- 3%

Factors causing ERP failure

The value of technology is determined by the person using the technology

Technology is only 5% of what causes failure

Technology is only 5% of what causes failure

Technology is only 5% of what causes failure

Technology is only 5% of what causes failure

Software defects CAN be prevented Take a stand

IT people who lie

Badly designed coding in Chart of Accounts

500528 Waste Material Consumed500530 Loss from valuation of external materials500540 Loss from valuation of own materials500550 Losses - inventory variance -consignment

sale500560 Safety Clothing500565 Safety Equipment500570 Sand & Stone500575 Scraper Rope500580 Scrapers500585 Services500590 Signs500595 Skips & Cages500600 Finished Goods Inventory Offset500605 Smelting & Refining500610 Production Order Settlement - Variance500615 Steel Other500620 Steel Sections500625 Steel Sheets & Plates

Badly designed coding in Chart of Accounts

500528 Waste Material Consumed500530 Loss from valuation of external materials500540 Loss from valuation of own materials500550 Losses - inventory variance -consignment

sale500560 Safety Clothing500565 Safety Equipment500570 Sand & Stone500575 Scraper Rope500580 Scrapers500585 Services500590 Signs500595 Skips & Cages500600 Finished Goods Inventory Offset500605 Smelting & Refining500610 Production Order Settlement - Variance500615 Steel Other500620 Steel Sections500625 Steel Sheets & Plates

Huge impact on integration, reporting, etc

Badly designed coding in Chart of Accounts

500528 Waste Material Consumed500530 Loss from valuation of external materials500540 Loss from valuation of own materials500550 Losses - inventory variance -consignment

sale500560 Safety Clothing500565 Safety Equipment500570 Sand & Stone500575 Scraper Rope500580 Scrapers500585 Services500590 Signs500595 Skips & Cages500600 Finished Goods Inventory Offset500605 Smelting & Refining500610 Production Order Settlement - Variance500615 Steel Other500620 Steel Sections500625 Steel Sheets & Plates

Huge impact on integration, reporting, etc

Jumbled data

Jumbled data

Example of simple hierarchically

structured data table

From chaos to order

From chaos to order

Structure of strategically aligned Chart of Accounts

Investment

E...

D..

... operation

Processing

Marketing and sales

Operational support

Administration

Dividends, taxes, etc

MOBILE PLANT

LHD’s

Dump trucks

Drill rigs

Other off road

LDV’s

etc

Assets Assets owned Assets leased ... Dep’n assets owned Dep’n assets leased ...

LiabilitiesIncomeExpenses R&M assets Finance and insurance assets ...

Plant Maintenance

Materials Management

Provide for foreseeable growth

500528 Waste Material Consumed500530 Loss from valuation of external materials500540 Loss from valuation of own materials500550 Losses - inventory variance -consignment

sale500560 Safety Clothing500565 Safety Equipment500570 Sand & Stone500575 Scraper Rope500580 Scrapers500585 Services500590 Signs500595 Skips & Cages500600 Finished Goods Inventory Offset500605 Smelting & Refining500610 Production Order Settlement - Variance500615 Steel Other500620 Steel Sections500625 Steel Sheets & Plates

MOBILE PLANT

Loader’s

Dump trucks

Drill rigs

Other off road

LDV’s

etc

Mapping between modulesBadly structured

Lack of consistency in detail in Chart of Accounts, random mapping, difficult and costly to maintain, VERY DIFFICULT to report on strategically

Mapping between modulesWell structured

MOBILE PLANT

Loaders

Dump trucks

Drill rigs

Other off road

LDV’s

etc

MOBILE PLANT

Loaders

Dump trucks

Drill rigs

Other off road

LDV’s

etc

General LedgerRepair and Maintenance

Materials MasterPlant spares

Examples of failed ERP implementations

1. Medical insurance company

2. Contract secretarial employment company

3. Mining company

4. Wholesale chemical distribution company

When problems with your ERP cause you to lose customers your ERP has just become more expensive than you can afford

Factors for ERP implementation success

Factors for ERP implementation success

Factors for ERP implementation success

22%

20%

19%

17%

14%

6% 2%

1.Executive custody, strategic solution architect,accountability -- 22%

2. Effective change facilitation -- 20%

3. Strategic architecture, alignment, etc -- 19%

4. Data engineering and configuration -- 17%

5. Engineering approach, design against failure,precision, etc -- 14%

6. Business integration, training, processes, CBT --6%

7. Technology -- 2%

Factors for ERP implementation success

Factors for ERP implementation success

Factors for ERP implementation success

Factors for ERP implementation success

Technology

People

Performanceimprovement

People and technology alignment

After Dr Fritz Hölscher

TechnologyMethodsStrategic objectivesSystemsStructures and processes

People

Performanceimprovement

People and technology alignment

After Dr Fritz Hölscher

High risk

TechnologyMethodsStrategic objectivesSystemsStructures and processes

People

High risk

High frustrationPerformanceimprovement

People and technology alignment

After Dr Fritz Hölscher

• Empowerment• Commitment• Ownership• Experience• Knowledge• Participation• Consultation• Information

TechnologyMethodsStrategic objectivesSystemsStructures and processes

People

High risk

High frustrationPerformanceimprovement

People and technology alignment

After Dr Fritz Hölscher

• Empowerment• Commitment• Ownership• Experience• Knowledge• Participation• Consultation• Information

Laboratory

A location where the real world is simulated on a statistically valid representative basis

ALL possible scenarios thoroughly tested

Leadership

Leadership

1. Executive custody is critical

-- 50% leadership

2. “Business systems department” instead of “IT department”

Data engineering principlesCase study

1. Presented with the client at a public conference – most powerful form of testimonial

2. Dramatic increase in management information

3. Reduction in head count

4. Dramatic reduction in audit time and cost

5. Unqualified balance sheet first time in 15 years

Remediating failed and sub-optimal ERP projects

1. Critical examination – investigate all factors causing failure

2. Plan a project which takes account of all factors for success

3. Precision strategic data engineering / taxonomies, configuration, integration are critical – plan accordingly

4. Design new taxonomies

5. Create mappings from old to new data

6. Either map new taxonomies outside the existing installation in a business intelligence tool

Or

7. Clean slate re-implementation

Characteristics of a successful team

1. Design against failure -- constantly top of mind – 22%

2. Know and apply the critical factors for success, manage against the factors causing failure, manage principles for success, stages, critical human foundation, etc -- 20%

3. Strategy is the foundation on which the solution is built – strategic leadership, right things well, coupled to CEO leadership – custodian of the integrated vision -- 18%

4. Change facilitation and other soft issue services, competence modeling, psychometrics, etc -- 14%

Characteristics of a successful team

5. Precision data engineering, cubic business model as basis for integration, associated software and code maintenance services -- 12%

6. People -- critical issues methods, disciplines, engineering rigour, multi-disciplinary, hard and soft components, high focus, high energy, motivated, loyal, quick attack approach -- 10%

7. Standards, documented methods, tools, standard operating procedures, reference documents, standard practices, policies, etc -- 4%

Strategic alignment

Strategic alignment

1. Essence of why the business exists and how it thrives

2. Model the business in the configuration from a precise, real world, strategic perspective

Summing up

1. Precision

Summing up

1. Precision

2. Real world, practical modelling of the organization

Summing up

1. Precision

2. Real world, practical modelling of the organization

3. ERP is NOT magic do NOT abdicate your intellect

Summing up

1. Precision

2. Real world, practical modelling of the organization

3. ERP is NOT magic do NOT abdicate your intellect

4. Design AGAINST failure

Summing up

1. Precision

2. Real world, practical modelling of the organization

3. ERP is NOT magic do NOT abdicate your intellect

4. Design AGAINST failure

5. You DO understand ERP slow ERP down to your speed!

Summing up

1. Precision

2. Real world, practical modelling of the organization

3. ERP is NOT magic do NOT abdicate your intellect

4. Design AGAINST failure

5. You DO understand ERP slow ERP down to your speed!

6. Align ERP with the essence of your business (strategy)

Summing up

1. Precision

2. Real world, practical modelling of the organization

3. ERP is NOT magic do NOT abdicate your intellect

4. Design AGAINST failure

5. You DO understand ERP slow ERP down to your speed!

6. Align ERP with the essence of your business (strategy)

7. There is a great opportunity to make a difference

If you do not act within 48 hours you probably never will – act TODAY!

What is your single most important insight from this presentation?

What is the single most practical action that you can take tomorrow to apply ERP more effectively?

If you do not act within 48 hours you probably never will – act TODAY!

What is your single most important insight from this presentation?

What is the single most practical action that you can take tomorrow to apply ERP more effectively?

Design ERP solutions like bridges ...To last and not fall down

Finding the missing pieces of your I.T. and strategy puzzles

Thrive through strategic use of ERP

Questions?

Dr James Robertson PrEng

Email: James@JamesARobertson.com