Beyond Best Practices How understanding the value in

your business model helps de-risk technology-led change projects

Topics Included in This Paper

Why Traditional Approaches Lead to Failure

Factors of Failure

A New Way to Look at Complexity

Four Steps to a Radically Different Approach

Positioning for Success

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Reducing the risk of technology-led change projects

A white paper presented by KeyedIn Consulting Group on Best Practice. In everyday life, we’re very good at putting off things we don’t much like to do. Like delousing the dog, clearing out the garage, or taking heavy curtains to the dry cleaners. And it’s a very similar scenario in the business world. Except, of course, getting rid of bugs, de-cluttering processes and ironing out problems are slightly more critical to your business success than making sure your canine is flea free or your garage can accommodate a car.

The same old same old

So, unable to put it off any longer, let’s suppose you decide to take the plunge and embark on an ERP project. Thousands of businesses just like yours have trodden this weary path before so you figure it shouldn’t be too difficult.

However, the mistake you make is to follow a route that is traditional yet far from time honored.

First, you cast an inexpert eye over the myriad of tools available. Then you bring in your best business analysts and map out your company’s business processes from end to end. Ten weeks later you have a ‘war room’ set up, not to mention a bunker mentality. The walls of your nerve center are liberally festooned with detailed process flows showing how product, data and resources are deployed across the organization. From prospect identification right through to financial reporting and governance. No stone has been left unturned and very little wall is left visible. Just a bit near the light switch for illumination.

Making sense of it all

But the nightmare has only just begun. You now package everything up into a monolithic specification document along with 2,500 functional questions and a raft of new reporting requirements. Then you attempt to study it and draw meaningful conclusions. Using this ‘traditional method’ you soon realize that pretty much every ERP on the market has a reasonable fit. For a brief moment you think that this is good news. Then you come to your senses. You realize that none are perfect, and all need to be modified to support your business processes.

Tinkering with the proposals

Reducing the choices down to a final three you play each supplier off against each other, taking the opportunity to ‘fine tune’ their proposals. You start by reducing the number of days of the Project Plan by a third on the basis that the suppliers obviously got confused and thought that they were milking maids.

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Next you expand the scope to include all the free modules the vendor has thrown in on the basis that only a fool would look a gift horse in the mouth. Finally, you hammer them down on price so hard that only the tops of their heads are now visible across the negotiating table. For good measure, you schedule the decision process to the last day of their financial quarter to make sure you wring out every last penny. Job well done. Or so you think.

Six months later and you’re standing in the boardroom trying to explain why it’s all gone so horribly wrong. The product doesn’t appear to be working, the implementation has gone to pot rather than to plan, the users have lost faith in the whole project and the board members want answers.

How did it all go so wrong? Here’s how.

Setting yourself up to fail

Believe it or not, when implementing ERP, an incredible 99.9% of companies take the approach described above. Even with the very best of intentions it can only ever lead to failure. So the question is, why do so many companies put their faith in a system that is essentially designed to fail? The answer is simple. They fail to recognize that it’s an approach which is flawed in the following three areas.

Information Overload

Mapping out your business processes in the manner described above makes it difficult to see the wood for the trees. In effect, you’re embedding a whole heap of malpractice and poorly devised process into a model far too detailed to assess and change effectively.

Confusing the issue

Next, you inevitably dilute the real differences between the systems – in areas that would actually add some value - by raising thousands of benign, functional questions. Plus, you’ll also be held back by the shortcomings of your current technology as well as your reluctance to do things differently.

Manipulating the system

Finally, to the most fundamental mistake. By bending the system to meet the perceived needs of the business you introduce massive complexity, huge risk and exponential increases in cost to the overall project.

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The Complexities of the problem

In our previous white paper, Navigating the ERP Minefield, we looked at good practice for selecting an Enterprise Software Solution and structuring a project to drive success. Here, we look at the critical success factors that need to be considered around both your internal business process and your business model, in order to successfully implement critical business systems.

These approaches are relevant to a number of critical areas of business change. In particular, integrating acquisitions, outsourcing business functions and managing an exponential growth curve.

Chaos theory is the science of how tiny, insignificant events can come together to create an unpredictable yet often significant impact. In 1914, a single gunshot in Sarajevo eventually led to a world war. Two years earlier, on the Titanic, the catalyst for disaster was sub-standard rivets. More recently, in the Paris Concorde disaster it was a piece of metal on the runway.

The impact of chaos theory is very much in evidence when working with organizational change. Not only does every single change you make have an impact, but the more you make the more these changes interact and influence each other. The result? Even more chaos.

The integrity of an organization can be seriously undermined by making too many, perfectly valid and relatively low impact changes along the way.

It’s clear that each and every change you make to your organization, your software, your processes and your business model adds risk to the project. The question is how do you drive effective change whilst at the same time managing that risk?

A radically different approach

Within your organization there’ll be many unique approaches to managing everyday business. Most will have been developed over time as a way of managing specific issues influenced by a number of different things. For instance, the preferences of current and previous management, constraints in your current or previous technology, partner relationships, and customer demand.

Getting to grips with those that actually add value to your organization - and more importantly to your customers - is key to understanding how to move forward. And that’s where a clear understanding of the business model comes into play.

The first thing you have to do is ask yourself why clients deal with you. What is it you do that makes them come back for more? How exactly do you acquire new clients and what are your differentiators in the marketplace? The answers to these, and other questions just like them, provide the context in which you operate your business.

On the other side of the model you have the activities, resources and partnerships. Here, particular emphasis should be placed on the initiatives currently in play and the areas where you believe your process is ‘special’.

Now compare the two. Notice how little synergy there is between what your customers value and where you focus your energy internally? This leads us to the first rule of building an optimized business:

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‘If a business process is not directly underpinning customer value or delivering regulatory compliance, it’s a valid candidate for change.’

Step One: Normalize

Best Practice

This is easy to identify since there are many texts and industry-specific documents that help define what best practice looks like to an organization such as yours. The closer you stick to defined best practice, the more likely that a technology solution, outsource vendor or shared services team will be able to quickly and easily integrate into your organization.

Non-Value Add Processes and Functions

This approach requires you to first look at how the system would prefer to operate. This then forms the basis of your process into which you can add configuration and personalization. Remember, you don’t want to change or break the process flow, you just want to support how you do business. So capture the relevant entities, static data and reporting variables but change your business process to what your industry identifies as best practice.

Step Two: Quantify the differences

Governance and Compliance Process

This area is key during the selection process. Make sure the solution you select has support for the relevant regulatory controls you need to have in place then build your processes around them. The vendor and the implementation team should be able to demonstrate other successful implementations into similar businesses, as well as provide industry-specific best practice guides and advice.

Value Add Processes and Functions

The end results and objectives of these key processes should have been mapped out in the selection document. Focusing on the deliverables from these processes, the vendor needs to demonstrate how they would support these from within their system.

High Customer Value Processes

These are the only processes you need to map out in detail at the outset. Once again, the client and process deliverables are the key issues. However, they are so important to the success of the process, we need to fully understand how you currently approach them. Once they are understood in detail, both the output, plus any nuances in the delivery of the output, can be effectively documented.

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Step Three: The Current Business Issues and Bottlenecks

Within every organization there exists a myriad of issues that have a fundamental impact on the ability of the business to operate effectively. Things like breaks in the information flow, latency, re-entering of information, and lack of visibility. The problem is, as businesses grow, these issues magnify and can quickly destroy the expected economies of scale. Automation doesn’t help – you simply get more things wrong more quickly, so you end up taking on more staff and increasing costs in line with increases in revenue. If you fail to drive out the value of an acquisition you run the risk of spending a great deal of money building a group of companies worth somewhat less than you paid for them!

Step Four: Completing The Model

It’s now time to map out the end to end flow through the business at a reasonable high level, flagging each process with either Best Practice, Regulatory Specific, Value Process or Customer Value.

Provide a more detailed level of process mapping for the Best Practice and Regulatory Specific process and then very detailed mapping, complete with data flow level detail, for Value and Customer driven process. Include the current key business issues and constraints in your definitions, taking care at this stage to use those that are part of the objectives, not the defined solutions. This should provide you with a clear picture of where the business needs to be, going forward.

Better than that, you now have an Optimized Business Model. One that uses best practice where possible, supports your regulatory commitments and delivers on your customer value proposition. You also have a business model that can be quickly harmonized and aligned with the technology solutions you intend to underpin it.

Performed correctly, this task will be completed in around half the time of an end-to-end process mapping exercise. Plus, it will already have locked in the value of both the new technology and a pragmatic, client-focused approach to defining how the organization should do things.

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Commoditizing Business Functions

Normalization is the first step towards delivering commoditized business functions. As an organization you want key back office functions to be simple, defined and easily understood. This increases flexibility and also reduces dependency on key staff as well as ramp-up time for new ones. It also opens the door to delivering shared service or off-shored service centres as the company grows and acquires new entities.

This business model led Normalization and implementation of Optimized Best Practice, is a vital step in effectively integrating new acquisitions. It is also an area that venture capitalists and private equity investors value highly. They look for organizations that can deliver exponential growth and manage business integration effectively.

In this M&A world you are either a Bidder or a Target. Which of these you are seen as will be defined by the maturity of your business model and the level of commoditization demonstrated across your organization. What’s more, as a management team, your long-term future, future returns and levels of pain will be driven as much by this assessment as by the products, services and growth curve to date.

Driving The Maturity Model

In the process described above we’ve outlined how to create a target operating model. This is the roadmap that provides context for your organizational change programs. These could be Technology Projects, Consolidation, Integration, Business Process Outsourcing or the creation of Shared Service Centres.

This context is vital for the success of any organizational change project and should be the first step in any program aiming to fundamentally change the way you do business. It comes before selection, before the formalization of the key change projects to be embarked upon, and before setting the phasing and budget for your upcoming programs.

The Best Chance of Success

Delivering an optimized business model prior to undertaking major change projects is the very best way to de-risk the program and give your organization the greatest chance of success.

Utilizing the tips, tricks and tools described here, together with those in our Navigating the ERP Minefield and Project Rescue white papers, will help ensure your selection and project initiation processes not only run smoothly, but also provide your change program with the very best chance of ultimately delivering on the business case.

Watch out for our next white papers on the subject of Deliverables Planning which details how delivery-based planning can both drive success and reduce cost in business critical projects.

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About KeyedIn Solutions

KeyedIn® Solutions is transforming the enterprise software market through a suite of

true SaaS-based integrated business applications and a consulting organization rich

in IT expertise. KeyedInProjects™ software includes PPM and PSA applications that

help organizations manage projects, resources, billing and customer relationships.

Trusted, multi-tenant SaaS deployment makes implementation quick, yet highly

configurable and the intuitive interface makes learning simple, delivering a

measurable ROI faster.

The KeyedIn Consulting Group provides strategic and tactical consulting services

around existing or planned systems, helping organizations and PMOs improve project

initiation and execution while delivering bottom-line results.

KeyedIn provides executives with tools to drive and monitor business results and their

teams with capabilities to effectively manage their projects and programs. Try

KeyedInProjects for free at www.keyedin.com.

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