April 1998 FAQ: It is obvious that ERP (Enterprise Resource Planning) is the big thing in technology enabling solutions. Why are so many companies still reporting marginal results after implementing such systems?

Well, yes, we agree that ERP is a "big thing" in technology enabling solutions for organizations that want to do a better job of serving their customers at a lower cost. We have seen many of our clients eagerly adopt these technologies as a means to either lead or stay up with competition. And rightly so, in many cases. The ERP (or Enterprise Resource Planning model) allows a company to work in an integrated fashion across many of its non-core business processes. ERP's, like SAP, PeopleSoft, Baan, Lawson or a half dozen more, provide

• cross company integration of data and information and,
• a set of imbedded business processes that promise to get a lot of non-core company work done more effectively and inexpensively than before.

So sure we agree it sounds good ... right? But unfortunately, we also continue to hear about cost and schedule overruns. So how do organizations capitalize on the potential benefits without running the risks of budget-busting delays in implementation? We have been working with our clients and some big systems implementers to develop a way to more successfully implement these systems on-time and on-schedule ... so that when they are fully implemented, the organization is prepared and eager to use these systems to achieve business goals and help the organization make money! We believe the basis for a successful implementation is this ...

There is a Need for Formal Risk Management
While the benefits of big technological systems like ERP have proven to be big for many companies, the implementation of such a system continues to be a risky proposition. The size of the risk, which we've seen run into the tens of millions of dollars for the new systems, or into hundreds of millions for potential disruption to the organization or to its customers, calls for aggressive and systematic Risk Management to ensure success.

Managing Technical Risks ... We've Got It Nailed!
Companies and technical vendors have been doing high quality Risk Management for a couple of decades. But most of the risks that have been managed are what we call the Technical Risks of the implementation project. The best layman's definition of the Technical Risk is associated with the critical questions -- will the system work, will it work on time, and will it come in on budget. This kind of Technical Risk, while occasionally mis-managed, is usually handled quite well by a combination of the company's professionals and the vendors.

Managing Organizational and Business Risk ... This is the Key!
However, for really big, comprehensive technical systems like ERP's, other kinds of Risks must be equally well managed for the implementing company to get what they are looking for. The two most critical risks are what we call Organizational and Business Risks. By Organizational Risk, we mean the chance the organization will not use the full potential of the new system or, in some documented cases, use it at all. Failure to use the new system could be caused by a number of factors -- one of the most commonly and deadly factors is "workforce resistance." By Business Risk, we mean the chance the costly-to-implement system will not pay off in "dollars and sense" for the implementing company. Failure to gain a business outcome could be caused by a number of factors -- one of the most commonly-found factors of failure is lack of alignment between imbedded processes and company business objectives and priorities.

Mitigating Organizational and Business Risks
The primary approach to mitigating Organizational Risk is the systematic and comprehensive use of Change Management to ensure that the organization will be positioned to use the new system after technical installation. After all, that is the goal, isn't it?

Change Management is the body of knowledge that is used to ensure that a complex change, like that associated with a big system, gets the right results, in the right timeframe at the right costs. Change Management is a disciplined approach applied in the organizational units that will operate the new systems to ensure their acceptance and readiness (to use the new system effectively).

The primary approaches for mitigating Business Risk fall into three general categories: System Selection, Business Process Translation, and User Work Training. System Selection must be done so that the system selected has not only the integrating efficiencies needed by the company but has the imbedded processes that the company will be able to use to make money over the long-term in their specific business environment. Business Process Translation (or documentation) must be done so that the overall work of the organization as it uses the new system is logical, understandable, and doable by the workforce. User Work Training must be done so that the users will not only be able to operate the new system but will be able to use the system correctly in the context of the work they must get done for desired results.

Use ...	To Ensure ...
Technical Risk Management	ERP System works technically
Organizational Risk Management	Organization will use the new system
Business Risk Management	Organization will get the projected benefits from its use

To Implement or Not Implement ... That Might be the Question!
New technology can promise -- and deliver -- important business results in today's highly competitive business environment. But delivery of those results is highly dependent on disciplined Risk Management that handles all three major risk categories -- Technical, Organizational, and Business Risks. Unfortunately, that kind of comprehensive Risk Management is a tall order for many of today's organizations that focus on Technical issue resolution alone while Organizational and Business Risks are left to chance. Today's message is very clear. Plan to resource and manage all three kinds of risks effectively ... or keep what you have in the way of systems and business processes. Moving ahead without managing all three risks is a certain recipe for organizational disruption and even disaster.

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