Redefining Success in People Terms

I 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.

Granted, 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.

PMOs and Business Strategy

For most organizations, the Project Management Office (PMO) is simply a centralized organizational structure for standardizing practices used in the delivery of their projects.  An effective PMO allows these organizations to more consistently deliver successful projects.

For some high-performing organization, the PMO is able to achieve much more.  It is able to help the organization drive and achieve its business strategy.  So how can something as boring and ordinary as good project management become a key to organizational success?

First, let’s think about the planning process.  Successful organizations define their goals and their plans for meeting those goals using some type of strategic planning process.  As a goal (e.g. achieve 5% organic growth) is refined into a strategy (e.g. by attracting more customers through a better customer experience), strategic and tactical projects emerge (e.g. redesign customer portal to improve ease-of-doing-business).

A mature, fully-engaged PMO becomes the keeper of the project portfolio.  If the PMO understands the strategy that the organization is striving to achieve, the PMO can use this understanding as it manages the project portfolio to drive that strategy.  First, and most critically, the PMO ensures that key, business-critical projects are delivered successfully.  It also ensures that project success is aligned with and measured against the strategic goals that the project is defined to address.  The PMO works with the project teams to define KPIs that clearly tie to the organization’s strategy.  If a project can’t be tied to the strategy, the organization can then determine if the project fits into the portfolio.  Similarly, the PMO can be used to resolve priority conflicts between projects, helping to clarify situations where the strategy may be at odds with itself.

More pro-actively, the PMO can forecast capacity, helping the organization understand how much change it can realistically undertake within a given budget or timeframe.  The PMO can also see and exploit synergies between projects, helping the organization take advantage of unexpected opportunities.  For example, given its view of the project portfolio the PMO may see how a service being built to support one project can be utilized to simplify or enhance another project.  Finally, the PMO provides a feedback loop, informing the organization of its progress against its strategic goals and allowing it to take early, corrective action when progress lags or goals shift.

Thus, a PMO becomes a crucial management tool for implementing the organization’s strategy.  Organizations that are able to effectively use this tool are better able to achieve their organizational goals and thus continue to thrive.  In today’s competitive and challenging environment, can any organization afford not to take full advantage of a PMO?

Why CEO’s must care about Enterprise 2.0 as a Strategic Imperative

One of the strongest and most misguided arguments expressed online and in many companies we speak with about Enterprise 2.0 is that it is not strategic.

That this collection of tools, technologies and ideas is not yet mature enough, lacks proven ROI, introduces a myriad of security and governance issues and even if successful is not a priority in today’s soft economy. It is too often delegated to IT managers to experiment with and report back in a few years.

Here’s where the difference is: Enterprise 2.0 is not a technology. It represents first and foremost a new way of thinking, interacting and communicating that includes attitude and cultural changes, empowered by IT. Is there anything more strategic than that and more important to a business future success?

It is arguably the biggest opportunity for IT driven cultural change facing organizations since the introduction of PC networks more than 2 decades ago.

One of the C suite most important tasks is to shape an organizational culture that will make their company innovative, competitive, efficient and successful not just now but in the future. Embracing Enterprise 2.0 now and guiding their employees through this transitional period should be one of their top priorities.

While in a few cases adoption started from the bottom up, a change of this magnitude usually needs to come from the top accompanied by the matching set of values and actions that prove the seriousness and commitment to change.

It requires leadership that is able to see that transparency and increased visibility into activities throughout the company will finally enable them to know what is really happening and will create a culture of trust. That openness and exchange of ideas will lead to innovation and efficiency. That collaboration will enable a diverse workforce to work together in emergent ways while being physically and geographically dispersed.

In short, it requires vision that will set a future path and will ask managers to overcome the obstacles in the way. The type of vision CEO’s need to provide and not delegate to IT managers.

The challenge and opportunity is that not many chief executives have realized yet that embracing Enterprise 2.0 is a strategic imperative and are focusing the discussion around short term ROI.

Dion Hinchcliffe at ZDNET provides a comprehensive review of the evidence and opinions regarding ROI and adoption challenges, and adds his own interesting model of collaboration cause and effect chains that while clearly provide benefits, make them harder to pinpoint and measure.

He also concludes that

“… an accumulating body of knowledge is pointing to potentially dramatic business returns with Enterprise 2.0. If these continue to be borne out, it will affect the competitive and financial positions of the companies that are proactive and therefore their long-term marketplace success“

And wonders what it will take to break the current status quo?

His colleague Dennis Howlett on the other end thinks the ROI is still years off and concludes

“As always, the secret to long term success depends on management’s ability to maintain a sustained commitment and all that goes with it. The difficulty today is that same management is wondering where the next sale comes from or how cash will be generated.”

The good news is that Enterprise 2.0 does not require large capital expenditures but mostly thorough organizational commitment. There has rarely been an opportunity for businesses to gain so much competitive edge by investing so little.

As in many cultural revolutions, by the time Enterprise 2.0 related changes start translating into business differentiators, organizations that have not made the transition will look as outdated as an organization resisting getting these useless PC boxes or adopting email.

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

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.

Leveraging Enterprise Web 2.0 for competitive advantage

What is Enterprise Web 2.0?

For the last 3 years, web 2.0 and social networking have been all the rage in the Internet community. This is where the VC money is going, the media attention is focused and users are spending much of their time. Businesses are still trying to figure out what does it mean for them. Applying web 2.0 principals and attitudes to business and the enterprsie can be called enterprise web 2.0

Many tend to think that becoming a 2.0 organization as the use of flashy interfaces, communities, blogs, wikis and user generated content and tried to jump on the bandwagon by adding these to their sites without comprehending the deeper and more fundamental cultural changes that make these tools effective, and have seen little gain.

Web 2.0 is about attitudes and a new way of interaction with all constituents, customers, employees, and partners.

 

With all its hype, cool startups and sexy conferences, web 2.0 still baffles many business people who see it as a playground for kids (MySpace, Facebook, YouTube) or a get-rich scam for young entrepreneurs and VC’s. Many who have been through Bubble 1.0 would rather wait until the web 2.0 fad disappears to see what is left standing. Tim O’reilly has provided what many see as the most comprehensive definition of web 2.0. And while his explanation is very thorough, it is also technical in nature.

 

My favorite definition comes from Ian Davis who wrote:

“Web 2.0 is an attitude, not a technology. It’s about enabling and encouraging participation through open applications and services. By open I mean technically open with appropriate APIs but also, more importantly, socially open, with rights granted to use the content in new and exciting contexts.”

In my opinion, web 2.0 is indeed defined as an attitude that can be personal or organizational. A web 2.0 organization adds specific terms and values to its code of conduct and sets priorities and incentives to promote them.

We see web 2.0 attitudes, or what I like to call the web 2.0 spirit, as made of the following attitudes:

• Open: you don’t have to share your source code to be open but from the application to the users, the approach is open. Easy to integrate with, easy to add to. Built on Sharing. Open to new ideas, Flexible, Agile, Simple, and Diverse.
• Interactive: the interaction among users and active participation is a core element of Web 2.0. The ability of customer and partners to respond and engage in discussions, post reviews, comments, thoughts and ideas. Agree and disagree. Provide a different point of view. Support and promote.
• Transparent: Do not hide, lie, spin, manipulate, threat, or intimidate. The Internet walls are nonexistent and everything you say or do, internally or externally will be exposed. Therefore: Share as much information as possible, acknowledge mistakes, and explain decisions.
• Collaborative: Listen, encourage opinions and group decisions. True collaboration is a tremendous thing producing a result much greater than the sum of the parts. It can only flourish in a nurturing environment.
• Social: Web 2.0 is about building relationships, trust, playing well with others, give and take, respect of each player and of the social order that is in place. Social corporate responsibility, caring about the environment and about the local community are very important as well.

 

Andrew McAfee at Harvard likes to add the term Emergent, noting that out of many local interactions as web 2.0 facilitates, comes higher level structures. I’ll expand that definition to include emergence of order and structure out of the seemed chaos that is online interaction. It is the transcendence of web 2.0 communities that created Wikipedia.

 

What can be gained?

Enterprise web 2.0 promises substantial incentives for early adopters:

• Enhanced brand image, exposure and buzz. As influence circles expand, using new methods for communication and data distribution will reach an ever expanding user base.
• Improved customer relationships and increased loyalty. Customers will appreciate the new approach that respects and listens to them.
• Faster feedback cycle and agile response to market opportunities. By providing real avenues for customer collaboration and listening to chatter and monitoring usage, companies can create faster release cycles and quicker response methods.
• Improved utilization of internal creativity and innovation. When employees at all level are engaged is collaboration and discussion, great ideas and solutions can quickly surface, get reviewed and implemented
• Better lead generation and inbound traffic. Beyond search, activity in the social web can be a great source of traffic and referrals.
• New business channels. Whether it is finally establishing a DTC channel to leveraging social commerce applications, the new landscape provides new opportunities and new potential partnerships.

Adoption Challenges:

So now, show of hands. Has your organization embraced the web 2.0 spirit? Chances are that unless you are working for a web 2.0 startup, the most you have seen is the introduction of a limited corporate blog or a Wiki’s coming up on your intranet.

Many companies have a deep rooted problem with the web 2.0 spirit. It contradicts some of the fundamental principles of corporate mentality and therefore risky to undertake. In my experience very few companies have truly bought into this attitude and at the most are paying lip service by implementing some basic enterprise 2.0 applications to replace their failed and unused Intranets and KM systems.

Bob Warfield provided a very insightful discussion as to the reasons companies are wary of embracing web 2.0:

The headlong rush the Web brings to expose everything to everyone scares the heck out of most corporate types. Their two biggest requests for Web 2.0 initiatives are Governance and Security, and the reasons for it are exactly what we’ve been discussing. It isn’t just that they have “control issues”. There are sound business reasons why controls have to be in place.

Morale: Do we really want everyone to know how poorly some initiative is going? How will it help to tell those who can’t make a difference and would only be depressed by the knowledge? Is it fair to expose some internal squabble that was mostly sound and fury signifying nothing? Won’t that just unfairly tarnish some otherwise good people’s reputations and make them less effective?

Governance: Is the information legal and appropriate for everyone to know in this age of SOX and Securities Laws?

Competitive Advantage: Do I want to risk giving my competitors access to key information because I’ve distributed it too broadly?

Still, the web 2.0 spirit as reflected in the actions, habits and expectations of users WILL impact the way companies do business. Some of the most important trends include:

• Loss of control: as mentioned above, companies no longer have absolute control over their brand, products and services and how they are portrayed. From rumor sites to product reviews and fake commercials, people have many more ways to learn about you and form opinions.
• Opinions matter. 68% of shoppers read products reviews before making a purchase.
• Wider influence circles. Information (good and bad) can quickly spread through influence and social circles.
• Transparency is expected and recent cover-up attempts by companies like Merck and Bear Stearns were not tolerated.

Companies will have to adapt because the old practices are getting them in trouble and new opportunities for leadership position are being lost due to lack of clear web 2.0 corporate strategy or what we would call enterprise web 2.0

By embracing the new enterprise web 2.0 paradigm, businesses can create long lasting changes that will truly resonate with audiences beyond the quick fix of adding a marketing blog to the web site and some promotional videos. As these changes take time to implement, early adopters and market leaders can create a significant competitive advantage by differentiating themselves and reaping the benefits.

Let us know what you think