How to avoid losing millions in revenue during an ERP update
Blog Post › Transformational Leadership
No company expects to lose more than $120 million in revenue when it completes an ERP installation or a major systems upgrade. It happened to a Fortune 500 packaged goods company that spent $100 million and 30 months implementing its enterprise resource planning system. When the ERP system went live, the company experienced inventory tracking and distribution issues during peak selling season. Stock prices dropped 27 percent and sales and retailer confidence took a hit.
So what went wrong? The new system was designed in a vacuum from a set of charts with no input from the people who do the work. The charts did not show shadow processes and work-arounds that had been instituted over the years. Full implementation became difficult, which also affected getting resources for future upgrades. Fear of failure played a part, resulting in a diminished interest in joining implementation teams.
The reasons range from resistance to change and limitations of existing systems to lack of executive consensus and inadequate team skills.
Whenever a major system upgrade occurs, a company must have an aligned leadership coalition with a clear direction. The issues of implementation and the realities of day-to-day operation need to come before the design. Implementation is the first step — and that shapes design. Leadership needs to understand what the barriers are and address the “resistance to change” issues. Communication should increase by a factor of at least 10, and senior leaders must actively manage and engage those affected by the change.
Using these principles, the packaged goods company, mentioned earlier, completed a redesign, and the upgrade came in under budget and without disruption. Employee satisfaction jumped over 300% the year following the upgrade, and business processes in order management were greatly enhanced.
Upgrades and installations are a necessary part of doing business. Executed poorly, they can trigger your company’s kill switch and take it down. Done correctly, they can produce breakthrough results beyond expectations.