Assumptions Are a Necessary Evil

In over 27 years, I have never experienced a major problem on a systems implementation that did not begin with an assumption.

“Of course they can do it; they have a ton of experience.”
“Of course the development servers are being backed up.”
“Of course the new system can do that; it’s a tier 1 ERP- how can it not do it?”
“Of course there’s a compatible upgrade path; the vendor’s web site said so.”

Yeah, well, not always.

Fear the statement that begins, “Of course…”. From a handy web dictionary, assumption is defined as “A thing that is accepted as true or as certain to happen, without proof.”

So, assumptions are bad and should be eliminated. If you get rid of all assumptions, then you are good to go, right?

Yeah, well, not always.

Why? Because eliminating all assumptions takes time. It takes a lot of time and costs a ton of money.

Consider a project to select a new ERP system. A well architected project that includes a good process and the right level of participation from the right people generally takes six months for an average mid-sized manufacturer. If you hit that schedule, you have made a lot of assumptions, whether you know it or not. Why? Because if you try to eliminate every possible assumption, that same selection project would take years, if it could even be finished at all.

The pace of change within your technology environment, much less your business, as well as the tools you are considering, turns a nicely bounded selection project into a fruitless attempt to match your knowledge and certainty to things that are constantly evolving. There would be no end point in that scenario. By the time you have eliminated all assumptions, the people and technology have evolved from underneath all your hard-won knowledge.

So, we have a conundrum: if you make assumptions, you will screw up; yet if you don’t make assumptions, you cannot proceed. Your options appear to be limited. Certainly, there are situations that require eliminating all assumptions – I’m thinking here of building a space shuttle. But if you aren’t shooting for the moon with your project, what do you do?

You must make assumptions to move you forward, while balancing against overall risk. You may never get to the point where you make assumption your ally, but you can at least reach a cautious neutrality with them.

Total Recall: The True Cost of Foodborne Illness

All eyes are on Tyson this week after their recall of chicken nuggets with a trace of plastics. Unfortunately, it’s not just the makers of highly processed foods that are struggling with recalls right now.

As April unfolds, we see that the organic food industry is not immune either:

  • Three purveyors of organic black peppercorns here, here and here have also announced recalls this week.
  • And, the real shocker is this one: Tea Tree Oil mouthwash is recalled because of bacterial contamination, despite the many websites and even an NIH article touting tea tree oil’s antibacterial properties!

Traceability of the root cause is difficult for both contaminated food and hazardous consumer products, as the recent Fitbit Force recall shows. There still doesn’t seem to be an answer as to what material in the wristbands caused so many users to break out in a rash.

As the following infographic shows, foodborne illness is a serious issue, and some companies are better than others at weathering a recall crisis. As we have said in earlier blog posts, social media has been a real game changer during recent recall crises, in ways both positive (providing a way to tap into rising consumer concerns to spot quality issues early) and negative (the viral consumer frustration response at any lag in response or mis-step during a recall crisis).

Total Recall: The True Cost of Foodborne Illness infographic for disaster recovery and product recalls

 

 

Don’t let a recall become a social media storm!

With food recalls increasing and averaging one a day over at the FDA website, and a steady trickle of consumer product safety recalls as well, it’s mind boggling that so many CPG companies are handling recall response so poorly.  By poorly, I mean that consumers are not getting quick resolution from official corporate channels such as the corporate website or the consumer care toll free number–but are airing their frustration on Facebook and Twitter. Within 24 hours, the frustration has gone viral and turned into a social media storm.

In many recent cases, a recall has generated so much traffic that jams the phone lines and/or crashes the brand’s website. Sometimes, the website is down, but the social media team is still directing their angry commenters to log a complaint over at the website. It is painful to watch the frustration unfold.

Then, the consumer care team stokes the fire of consumer anger by sending rebate coupons that don’t work at the supermarket

Nicole's Comment

Or don’t line up with the products that the consumers had to toss, or don’t work in the sales channel of choice or the state of residence of the consumer who receives them.

<complaint 4

It doesn’t have to be this way!

Most companies have the means of capturing the product, quantity, state of residence and retailer in their CRM systems. Whether their systems have the capacity to handle the increased load during a recall is another story.

In a food safety situation, lot or batch traceability is critical, and required by domestic and international regulations. Full traceability enables manufacturers to limit the recall to only those production lots with quality issues. The ERP system must provide full forward traceability through the distribution channels, and backward traceability into the supply chain.

Process recall readiness gaps exist in the area of documented processes, roles and responsibilities, and the pre-existence of a disaster response handling project plan/timeline.

If your business faces the threat of a product recall or another similar crisis in consumer confidence, are you really ready to handle it? Take a short self-assessment, and see how you score across the key readiness categories.

Change Management Lessons from the Animal Kingdom

My recreational reading this week has been Temple Grandin‘s Animals Make Us Human. (Don’t worry, it’s not another animal post from Skeptechal!) I’ve found lots of great insights that will help me figure out why my cat behaves in ways that have been puzzling (although I am sure she will keep me guessing). Some of the lessons from the animal world are really reshaping some of my entrenched thinking about organizational change management.

Much of Grandin’s approach to more humane animal handling boils down to preventing the rage, fear and panic responses, and promoting seeking (curiosity) and play behaviors.

When we think about some of the typical overt and inadvertent messages that many companies release in the course of launching a big business initiative (be it a new ERP system, an acquisition, or an internal reorganization) we see much that is likely to press those rage, fear and panic buttons right out of the gate.  Once these responses are in play, they are difficult to quell:
rage

Welcome to the core team! You will need to spend 20 hours per week for the next nine months getting our new software ready for release. We know you will be able to work this into your schedules along with your current day job.

fear

Here is the course outline for your job role (5 pages, 55 unique system tasks). We have one training session for your group (53 people), with 1 hour allotted this Thursday.

 

panic

We haven’t had time to complete the testing but we only have a small launch window, so we are going live this weekend as originally planned.

You get the idea.

What if we approached things differently….and used early messages and techniques to promote curiosity and made even a small effort to make things fun:

  • Instead of the typical big bang kickoff (complete with bulky boring  slide deck) use internal social media tools like Yammer and Sharepoint to build excitement — dropping hints about how things will change for the better, without revealing all the details.
  • Use gamification and crowdsourcing to augment formal software QA processes, rewarding people for completing their test cases on time, or naming winners for finding the must bugs
  • Show users how to interact with the new system to get answers to their everyday questions BEFORE teaching them to plow through lengthy transactions

If we turn on the seeking and play behaviors first, we may have a good shot at keeping fear, panic and rage to a minimum.

The Vale of False Best Practices

What is a best practice and why you should and sometimes should not accept them.

The way ERP vendors speak about “best practices,” you would expect accompaniment from a bell choir and a sonorous, celestial host. Best practices! Let us all bow and acknowledge their wisdom!

A best practice in ERP-speak is nothing more than a set of process steps, supported by underlying functionality within the system, that a majority of system users agree works for them. This is completely understandable from the perspective of an ERP vendor, who wants to sell software to the widest possible audience.

What better way to do that than to incorporate into the software functionality and processes that provide value to the largest number of prospects? Does that mean that best practices are nothing more than a marketing ploy?

Well, yes and no. If your accounting department is not doing true three-way matches between orders, receipts, and invoices, then an automated three-way match process would probably be a best practice for you because you are behind the curve. So, best practices built into ERP software can be a huge win for companies that are behind the technology curve.

Cherdonsidering that the rest of your industry has probably already adopted better practices, it is not invalid to hope to move forward by joining the herd. I grew up in Texas where herds are not to be disparaged. They provide a livelihood to many and can be quite tasty. Being one-in-a-herd is sometimes the right place to be. Deciding when to separate yourself from the herd is the hard part.

Consider your accounting department again – when was the last time you heard anyone say that their accounting processes provided a competitive advantage or made them stand out in their market? Right. It doesn’t happen. That’s because some processes are me-toos – sure you want to do them the right way and maybe save some money, but they are simply not places where significant investment is warranted. Enough investment, yes. More than that, no.

If, however, you introduce new products in half the time as your nearest competitor, then that is an advantage you want to not just protect, but enhance. That is an area where additional investment is warranted.

Here’s the stark reality. If you are leading the pack within your market, it is unlikely that any ERP software will natively support best practices within those areas where you are a market leader or visionary. Why? Because you are an outlier. A trend setter. Once people figure out how you are leading the market, and then replicate that within their companies and in their technology in order to catch and then dominate you, then those become best practices.

Notice that best practices can make your company more efficient, but they will NOT make you a market leader. Only innovation and ingenuity can do that, and while those are always best practices, they are also uncommon in the herd.

The Lake of Unclear Benefits

lake of unclear benefits

Source: harrypotter.wikia.com

So the decision comes down, your company is moving forward with new ERP. Congratulations on your decision; just remember, a year or so from now, that ERP implementations are potentially the next great, bloody spectator sport. They are not for the weak or those lacking determination. Decision made, presumably based upon a business case that documented the expected benefits and how you are going to get there. If so, continue. If not, then you’d probably better back up a bit and get all of your bunnies in a row because, in either case, now you have to communicate why you are doing this project.

So whom do you have to communicate with? How about: anyone who will be impacted by this project. Certainly that includes directly impacted end-users and their supervision and management. It also includes people in other organizations that may not be included in the initial project, this might be HR or some other organizaton. Why communicate with them? Because they will hear about the project and will naturally have questions about it, including why they are being included in the scope of the change, especially if they are unhappy with current systems and processes.

What needs to be communicated at this early stage? Frankly, it does not have to be complicated. It almost always begins with “We are moving to new ERP because…” and then you simply fill in the blank. This is also a good time to develop a good 15-20 second answer. Why? To get the key points across quickly. That said, you absolutely MUST be ready to provide details regarding what specific goals exist, by area/location, and how you expect to get there. Elevator speeches can only go so far – it takes details to calm people who are fearful of change.

We actually get asked frequently, “why do we have to communicate so early about the reasons for our new ERP project?” Our answer is pretty simple: because if you don’t, people will fill in the blank themselves. And you won’t believe what they will come up with, most of it from the depths of fear, distrust, or native suspicion. Here’s what we’ve heard people come up with:

So, why are they doing this to us (again)?

To get the company ready to sell (and all of us are going to lose our jobs)

To increase automation and efficiency (and all of us are going to lose our jobs)

Here we go again, more churn, churn, churn and someone else gets the butter (and we are all going to lose our jobs)

Get the point? If you don’t provide a good answer in advance, people will answer their own questions in the most negative possible way.

Your communication of the reasons or rationale for moving to new ERP is merely the start of a good communication strategy and plan – not the end of it. Oh, yeah, if you don’t have a comprehensive communication strategy and plan, it is most definitely time to get one. And for pity’s sake, if you don’t know how to do this, call someone who does. Everyone who depends on the future ERP system will eventually be grateful.

Lack of concerted communication to end-users about the reasons behind the implementation, the anticipated benefits stemming from successful adoption and the ways in which each individual end-user and executive are impacted will affect project success or failure.

Mitigation Step: Create and follow a comprehensive organizational change management plan – at the very least, get an expert involved to do an assessment of readiness and challenges.

Landscape of ERP Pitfalls – New Map Discovered!

ERP MapOne of our young, and deeply curious, co-workers discovered an artifact – a map – while browsing a dusty, old book store in Boston. She bought it for a pittance and took it home where she discovered the key to cracking its codes. No, she will not share those with us – something about job protection…

The map contains the key to how so many ERP implementations stumble and – this is most exciting – confirms that the Valley of Despair truly exists! Upon further translation, she has identified the title on the map as “The Land of ERP Pitfalls”. While translation continues, we have already identified several locations on the map that are both illuminating and thought provoking.

We are moving forward with a set of blog topics involving these pitfalls and key success factors for successful ERP implementations as they are uncovered from the difficult text of the map. h/t to the curious and talented young who illuminate the days of the middle aged, if we are wise enough to listen.

Redefining Success in People Terms

Success in people termsI suggested in my previous post that unmet business benefits, make ERP initiatives fail even when they are on-time, on-budget, and on-scope. If we spoke previously about failure, then let’s start here talking about success.

According to my dictionary, success is a noun with multiple meanings, yet the primary one is “the favorable or prosperous termination of attempts or endeavors; the accomplishment of one’s goals.” It’s not about the scope, timeline or budget, it’s all about the business GOALS.

So when we talk about redefining success – hitting your goals – in people terms, what does that mean? Defining where you intend to end is important, but so is defining how you expect to get there. Defining success in people terms means we also have to define how something will be made successful and who will do it.

Here are some of the “goals” customers have given us for implementing ERP:

  • To improve business performance and automation
  • To replace an old or legacy system
  • To better support the business across multiple locations
  • To better serve customers
  • To position the company for growth

Admirable reasons; terrible goals.

Why?

They can’t be measured and they give no clue how they could be achieved. They look good, but are sort of neutral and unobjectionable, actually saying very little.

When a client tells us they want to move to new ERP to improve business performance, it is the beginning of what becomes a very long – and critically important – discussion that looks like this:

What areas need improvement? Why? What would the improvements, by area, look like? What changes (people/org, role, process, system, or data) are required to achieve it? How will ERP enable this? How can we state this in measurable terms? What about timeframes for realization?

Starting with “improve business performance,” we can end with goals like this:

Through updated standards for purchase orders enforced in the Purchasing module at the field level, and through improved training of Buyers and weekly monitoring of conformance with these standards, we will eliminate 90% of incomplete purchase orders from flowing through the supply chain within three months of go-live.

By eliminating non-conforming purchase orders, we will reduce the effort of Accounts Payable clerks matching POs to vendor invoices which will be sufficient to eliminate three temporary clerk positions.

post-it-1Granted, this would be but one of many, many goals that would be documented to achieve “improved business performance.” But that is what it means to truly document goals within a business case and to define success in people terms.

Arriving on-time, on-budget, and on-scope are valid goals on any ERP implementation project. Anyone working in this business knows those goals are themselves hard enough to achieve. While they may be necessary when viewing ERP through the lens of an enterprise software implementation project, they are woefully inadequate when viewing ERP as a business transformation initiative.

If you want to really get your hands around how to make ERP successful, you have to spend the time, energy, and effort defining your goals more completely and concretely. They should enable and guide your implementation. If they don’t, head back to the whiteboard and lock the right people in the room until you get what you need. And if you don’t know what you need, get help defining it.

Is ERP Success Really Such a Secret?

ERP isn’t just big business, it’s huge business, projected by those who know to break $50 billion yearly by 2015 in software sales, maintenance, development, and services. Thousands and thousands of companies undertake ERP investment and implementations yearly. There are millions of pages on the Internet about how to make ERP projects successful. And hundreds of firms and thousands of people exist whose life-blood is implementing ERP solutions.

ERP Enterprise Resource PlanningSo why does ERP so often fail to deliver? According to some, you’ve got a fifty-fifty chance to satisfy half of your goals for the investment. So, if I plan to drive to Dallas and only get half way there, is that a successful trip or a failure? I may have enjoyed the journey while it lasted, but then I ended it in Abilene, not Dallas. That is not a successful trip. It is a sure ride to the Desert of Disillusionment.

Failing to deliver the desired business value means the project was a failure regardless of whether it was on-time, on-budget, or on-scope. It failed. Let’s hear that again. It failed. Sure, everyone got to keep their jobs because the project concluded reasonably close to the schedule and within some allowable contingency of the targeted budget. Success, right? Well, not if you wanted to get further it isn’t. It failed.

How can that possibly continue to happen? The ERP landscape is enormous. Almost every business – particularly those involved in manufacturing or distribution – use or want to use ERP software. Certainly people know better. There are thousands of really experienced, smart people guiding and informing these projects, yet they continue to fail to deliver fully against expectation and goals.

Is the problem that goals are too high? I sincerely doubt it, as companies engaging in ERP projects rarely agree to document their goals in writing or in measurable ways, paying only lip service to “productivity gains” or “improved efficiency”. So if the goals aren’t the problem, what is? You can read for years about better project management, better leadership, a better implementation process and still miss the boat.

The bottom line is simply this: software does not drive a business. People do. And if you don’t empower and support people, all the technology in the world won’t move your business forward. This is something we’ll explore further in subsequent posts. But stay tuned as we drill into how to turn the discussion on ERP success on its head.

Does your Order-to-Cash Process Need a Check-up?

circulatory-system1

The order-to-cash process is the circulatory system of every business. As with the human circulatory system, there are many ways this process can break down, and seriously erode the overall health of the business.

Diagnosing and fixing order-to-cash symptoms is not easy, because the order-to-cash process is complex from many perspectives. It involves:

  • Multiple technology systems or application modules
  • Multiple locations
  • Multiple departments and job roles
  • Multiple stakeholders

Much of the inefficiency we see in this core business process arises from an inappropriate approach to making decisions and changes concerning any of the technology or business processes involved in order-to-cash.

Without strict change control over the processes and technology, some companies are allowing decisions to be made on the fly, resulting in in an order-to-cash process that yields significantly less cash than it should!  Some real world examples from our project teams include:

Symptom: A CPG company that required a return merchandise authorization (RMA)  to match the quantities on a purchase order (PO).  Some of their customers returned products across multiple POs.When a customer service rep could not find these POs, they created a new PO just to process the return against. This workaround skews information inappropriately in any number of reports.

  • Diagnosis: It’s not just this process that’s broken. The company needs to devote more effort to process definition, with review of exception handling by all impacted stakeholders.

Symptom: High volume of billing errors, requiring significant effort in reviewing/correcting invoices and handling customer inquiries. Your staff might also be trying to review every order and every invoice because of the historically high rates of errors. You’ll start to see a drag on your Days Sales Outstanding (DSO) metric as well.

  • Diagnosis: There are many possible causes here: price lists and promotions being maintained offline, manual re-entry of orders from handwritten order forms, lack of automation in the order approval workflow, undue delays in entering orders, manual handoffs to fulfillment team, to name a few. While there are many causes,it’s easy to see that investments in automation here can have a significant effect on cash flow (especially important in the current economy), because even a small reduction in DSO can have huge returns.

Symptom: High volume of customer inquiries and high volume of customer complaints, coupled with long average call times, as well as repeated or escalated calls to follow up on the same issue.

  • Diagnosis: The CSRs may not have real-time access to the right information to address customer inquiries (order status, credit hold status, account balances). Tighter integration and better training can often address this.

Other organizations realize that an ounce of prevention is worth a pound of cure, and proactively monitor key performance indicators (KPIs) across the order-to-cash process. These include:

Contact to sales order: leads (number and cost), qualification (lead conversion ratio), quote (gross margin and average discount) and closing (win/loss ratio and time to close/sales cycle).

Order fulfillment: Order-to-delivery performance data includes metrics related to customer orders (number of new or open orders and number of orders with errors, number of orders delivered on the date promised to the customer

 Invoice to cash: Metrics include number and value of invoices created, sent and disputed as well as cash received or accounts receivable days outstanding.

In summary, to make sure your order-to-cash process is not leaking cash, adopt the following measures:

  1. Strict change control over all the processes and technology.
  2. Adopt and track key metrics to help you find and address inefficiencies.
  3. Take a look at the integrated operating platform between your customer relationship management (CRM), Order Entry, Finance and Supply Chain Management systems.  Too many manual interventions across the lifecycle of an order leave the doors wide open for errors on orders and invoices that could significantly impact your bottom line.