driving change management after go live v0.5
DESCRIPTION
Paper presented at ACMP Conference, Johannesburg, November 2010TRANSCRIPT
ACMP Africa Regional Conference
Johannesburg
November 2010
Shane Hodgson
Organisational Change Management Principal
Business Transformation Services
SAP Emerging Markets
"They think it's all over..."
Managing organisational
change after an ERP
implementation
What is an Enterprise System?
Some Key Issues in Implementing an Enterprise System
Change Challenges of ERP Implementations
Major Organisational Challenges after Go-live
So What Can We Do?
Summary
Agenda
What Is an ERP system?
An ERP system can be defined as:
―A packaged business software system that lets an organisation automate and integrate the
majority of its business processes, share common data and practices across the enterprise
and produce and access information in a real-time environment. The ultimate goal of an
ERP system is that information must only be entered once‖ (in Marnewick and
Labuschagne, 2005)
This means that an ERP system is a high-end solution featuring integration of information
technology and business applications. ERP seeks to streamline and integrate operational
processes and information flows in the organization to integrate the resources. The whole is
greater than the sum of its parts and each implementation is unique and is designed to
correspond to the implementer's various business processes.
© SAP 2010 / Page 3
© 2010 SAP AG. All rights reserved. / Page 4
Some Key Issues in Implementing an
Enterprise System
1. Determine Your Primary ERP Implementation Focus - there are two primary ways in
which an ERP system can be installed in your company; you make your company fit
the software or you make the software fit your existing processes. These two
methods provide the end-point markers or goal posts and all implementations fall
somewhere between them. They present the classic options you have available, either
you do a business process re-engineering project or you do a software re-engineering
project
2. Because an ERP system has a single database or a single instance of data, a full
process chain of dependencies is developed. Every organizational function becomes
dependent on the process steps before and after it no matter what department or area is
responsible (Kallinikos, 2004).
3. Because of these dependencies, a data error is no longer contained in a single isolated
system as in times past. Each data error, or each problem that occurs has both
upstream and downstream consequences and the corrections cannot be made in
isolation. Improper configuration or system design can have huge impacts on the
amount of effort to correct the data and to maintain the system in an ongoing fashion
(Sia and Soh, 2002).
Change Challenges of ERP Implementations
© SAP 2010 / Page 5
To successfully land and embed massive projects like ERP implementations we need to be
thinking about transformational change; about engaging employees in both solution design
and execution and about instilling a belief in the rightness of adopting continuous
improvement. There are key things we can and should do in designing our change
management programmes that will greatly increase our chance of success, and this
presentation provides a framework for planning these activities.
© 2010 SAP AG. All rights reserved. / Page 6
Change challenges of ERP Implementations
(2)
Most companies implementing ERP systems do not fully execute plans for the period after ―go
live‖, and only a small fraction of companies plan for ongoing training, change management and
knowledge management. Despite spending tens to hundreds of millions of rand on enterprise
system projects, companies usually insist on planning for the wedding but not for married life. As
a result they often end up with low user adoption of the new systems, low business value
achieved and low satisfaction in general.
To achieve a true return on an investment in an enterprise system, companies need to change
the way they think about change. Moving data onto an integrated system; reinforcing a culture
of measurement and analysis; and thinking in end to end processes instead of in departmental
silos all create new and unusual demands on our employees, structures and resources.
© 2010 SAP AG. All rights reserved. / Page 7
Change challenges of ERP Implementations
(3)
According to Fister Gale (2002), ERP is more than just a new software system, it is a culture
change.
ERP systems break down all functional barriers within an organisation and users are required to
be multi-skilled and multi-managed. This means that it is often difficult to implement an ERP
system in an organisation with strict hierarchical structures and line reporting. The culture of the
organisation must first be changed for the ERP system to be successful.
Most importantly, implementing an ERP system is NOT an IT project; it is a business
transformation. That’s because many companies, especially those that have expanded via
mergers and acquisitions, are organized along lines of business, each operating as a separate
entity with its own people, technologies and ways of working.
It is critical for executives in these situations to identify and create a core group of activities that
can be shared across all divisions—things like recruiting, human resources, customer service
and procurement—to eliminate wasteful duplication of effort (Segars and Chatterjee, 2010). An
ERP system can enable the transformation of these core activities.
© 2010 SAP AG. All rights reserved. / Page 8
Surely if we manage change during the
implementation it will be OK after Go-Live?
Example - How is Change Managed During an
SAP Implementation?
© SAP 2010 / Page 9
Final
Preparation
4
Realisation3
Blueprint2
Go Live
& Support
5
Project Preparation1
Co-ordination of Go
Live Support Plan
Handover to Training and Authorisation
Conduct Post
Implementation
Review
Sponsorship Support and Involvement in Project activities
Go Live Support Strategy & Plan
Role Mapping Process Execution
Action Plan & Communication of Impact to impacted stakeholders
Change Readiness Assessments, Reporting and
Recommendations
Integration Testing Sign-Off Milestone CelebrationOC
M S
TR
AT
EG
Y, P
LA
N A
ND
EX
EC
UT
ION
Rollout Communication Plan
A. OCM Strategy
and Plan Execute, Manage, Report Progress & Review where applicable
Management of Stakeholder ExpectationsB. Stakeholder
Management
C. Leadership &
Sponsorship
Alignment
D. Change
Agents
Mobilisation
E. Stream
Communication
F. Stream
Impact Analysis
G. User Role
Mapping
H. Change
Readiness
Assessments
I. Go Live
Support
J. Milestone
Celebration
Change Agents Support in OCM activities
Analysis of Go Live Support requirements
Impact Analysis
Approach
Identify Change Agents
Identify requirements
and review previous
results
Blueprint Kick-off/ Sign-off Milestone Celebration
Identify Communication
RequirementsCommunication Strategy
& Plan
Change Agents
Mobilisation
Detailed Organisational
Impact Analysis
Identify Change Requirements & develop OCM
Strategy and Plan
Change Readiness
Assessment Strategy
Role Mapping Approach
and Plan
Identify Stakeholder
Groups and NeedsDevelop Stakeholder Plan
Identify Sponsors and
Sponsorship Roles
Analyse current
structure and user base
Go Live Celebration
© 2010 SAP AG. All rights reserved. / Page 10
Major Organisational Challenges after Go-live
“When sorrows come, they come not single spies
But in battalions” (Shakespeare’s Hamlet, 1602)
50-60% of application functionality is not used
30% of performance problems are caused by user behavior
75% of system and application errors are never reported
25% of reported performance problems are not real
45% of refresher training is not needed. (KNOA Customer Research)
We also have:
People still using parallel systems
Loss of ERP knowledge and implementation project management skills
Unclear ownership of processes and data
Unstructured and disconnected training
Misaligned expectations about benefits
© 2010 SAP AG. All rights reserved. / Page 11
It’s About the People.
― As respondents make clear, the biggest challenge before and after implementation is not the
technology – only 19 percent of respondents cite technology as a prime challenge in the post-
implementation period. Rather, as 51 percent of the respondents said, the biggest issues are
people-related‖ (Deloitte, 1998)
ERP implementation success is found in modifying the organisational culture. Achieving
business benefit requires the organisation to experiment with new process models, and this
requires an orientation towards risk taking, rather than risk avoidance. Each of these aspects
requires effective leadership in the management structure, and appropriate involvement and
empowerment of the system users (Stewart et al, 2000)
Image: jscreationzs /
FreeDigitalPhotos.net
© 2010 SAP AG. All rights reserved. / Page 12
So What Can We Do?
Economist John Keynes once noted in The General Theory of Employment, Interest and Money,
“Worldly wisdom teaches that it is better for reputation to fail conventionally than to
succeed unconventionally.”
Nevertheless – here are my ―Secret Seven‖ tips for managing change after an implementation.
Review the Implementation
Capture and Embed Knowledge From the Implementation
Reinforce Cultural Changes
Track and Manage User Experience and Adoption
Manage and Develop User Competence
Upgrade, Expand and Grow the Solution
Revisit the Strategy
© 2010 SAP AG. All rights reserved. / Page 13
Review the Implementation
Post-Implementation Review
1. Most Change Management methodologies include a ―Post-Implementation
Review‖(PIR) step.
2. Five major components should be in a PIR
1. Review of the original business case and assumptions to see how these matched up to
reality
2. Measure performance pre- and post- go-live to establish changes and benchmarks
3. Identify Training Gaps
4. Identify Business Process Improvement Opportunities
5. Estimate the degree of adherence to project methodology
And...
© 2010 SAP AG. All rights reserved. / Page 14
Capture and Embed Knowledge from the
Implementation
1) Make Use of Narratives and Learning Histories
―Instead of trying to measure the impossible... we propose the use of narratives as the means of
disseminating knowledge, which ought to lead to improvements and enhanced action during the
implementation and usage of enterprise systems ―(Hedman and Borrell, 2004)
Narration is increasingly seen as the privileged mechanism for constructing and expressing
one’s own personal stories and organizations are viewed as narrative artefacts (Cortese, 2005;
Klein, 2005). Therefore, the use of stories for helping organizations learn and transfer tacit
knowledge is gaining widespread favour among both practitioners and academics (Cortese,
2005; Royrvik and Bygdas, 2002; Sole and Wilson, 2002).
Learning histories can be appropriate in many different contexts. Stories are particularly well
suited to capturing the dynamic and complex nature of Organisational Learning and knowledge
transfer (Kleiner and Roth, 1997a). Moreover, since any change project can be seen as a
learning opportunity, the learning history approach might be employed to help reflect upon,
assess and evaluate any type of organizational change initiative.
© 2010 SAP AG. All rights reserved. / Page 15
Capture and Embed Knowledge from the
Implementation (2)
2) Establish an ERP Centre of Excellence
The ERP ―Centre of Excellence‖ seeks to integrate application support staff and support
technology into the business for competitive advantage. ERP Centres of Excellence are
proactive and try to find ways to apply technology and resources to value propositions and
competitive pressures in an ongoing manner. Centres of Excellence actively look for value
opportunities (White, 2006) by:
1. Aligning business owners with IT
2. Identifying value-added and non-value-added processes
3. Benchmarking results against initial ROI projections
4. Simplifying ERP instances
5. Developing infrastructure and enhancement standards and procedures
6. Committing to ongoing training and knowledge transfer
7. Institutionalizing change management and project management
© 2010 SAP AG. All rights reserved. / Page 16
Reinforce Cultural Changes
―The institution will revert to its pre-change operating structure if cultural issues are inadequately
addressed‖ (Schein, 1992)
Establish a Continuous Improvement Culture
The key to a successful continuous improvement culture is the management infrastructure that
effectively translates strategic agendas into continuous improvement initiatives aimed at
maximizing value and results whilst directly linked to profits and loss through effective
management and tracking of results (Aruleswaran s.d.)
Embedding the concept of continuous improvement into the organisation’s culture requires
developing ―...strategies to cope with organizational change and pass along the strategies to
new members, settings, corporate values, artifacts and technology‖ (Leidner and Kayworth,
2006)
Establish a Process Ownership Culture
A ―process owner‖ is responsible for ensuring all the processes which affect performance are
responsibly developed and designed , using methods which aid collective involvement and
disciplined thinking. These are the major, cross-functional processes that deliver value to
customers and instilling the concept of ―ownership‖ of these as part of the real management
structure is critically important for gaining true value from ERP implementations.
© 2010 SAP AG. All rights reserved. / Page 17
Track and Manage User Experience and
Adoption
“If users do not, or cannot, effectively utilize applications, then projects fail, so end-user
performance and satisfaction are critical. This requires monitoring and measuring the
end-user experience using this insight to target continuous improvement
projects.“(Gartner, 2008)
We need to understand the degree to which users have adopted the software and are using it.
We can do this by measuring the live performance of the system and the real errors and delays,
whether they are application errors, user errors or performance issues (using tracking software
from companies such as KNOA www.knoa.com ).
Identify the technology barriers to end-user performance, such as slow response times, quality problems and cumbersome user interfaces
Identify which employees are not using the right transactions and reports to optimize their performance
Target training program for maximum effectiveness
Identify and Resolve end-user issues more rapidly
We can also survey the users to capture those errors not related to either system performance
or user training (e.g. those related to acceptance of the solution or to lack of proper change
management). Repeated surveying of the same population is the most accurate and reliable
and we can do this using software such as Mirrorwave http://www.mirrorwave.com/#seq1
© 2010 SAP AG. All rights reserved. / Page 18
Manage and Develop User Competence
―At the user level then, there are two distinct forms of learning that appear to be taking place
– learning how to use the system and learning how to improve the system ... Both of these
learning modes have to be in place before users can exploit the full benefits of the system
and identify how to improve operational and financial performance‖ (Kennerley and Neeley,
2001).
If training does not cover why each task is important and how every transaction is part of a
larger process, then the users are less likely to use the system correctly or consistently
(Fister Gale, 2002).
So we need to ensure that users:
•Learn how to use the system – by experimenting with system capabilities.
•Learn how to improve the system – by requesting new reports and data.
© 2010 SAP AG. All rights reserved. / Page 19
Upgrade, Expand and Grow the Solution – or,
“As Soon As you’re Done, Start Another One”
Specific findings indicate that ERP-adopting firms, which initiate early enhancements in the form
of either add-ons or upgrades, may enjoy superior differential financial performance in
comparison to other ERP-adopting firms’ differential performance (Nicolau and Battacharya,
2006)
Early changes, irrespective of their form, represent firms’ ability to respond rapidly to
organizational needs for ERP transformation
Most of the value adding occurs in ongoing activities that closely follow developments in the
construction, implementation and use of information systems. These results also provide
empirical support for Nicolaou’s (2004b) qualitative findings that post-implementation factors are
very significant for ERP-adopting firms’ ability to realize positive performance outcomes.
© 2010 SAP AG. All rights reserved. / Page 20
Review the Strategy (1)
Although choosing and implementing an ERP system can be seen as an articulation of strategy,
the dialectic between the system and the strategy does not stop at Go-Live.
Instead, the process of alignment between the enterprise system and the organisational
elements will continue to unfold and take shape through successive post-implementation
phases of the system’s life-cycle (Markus et al. 2000).
We also know that ―Successful ERP implementation develops new cross-functional knowledge,
capabilities and competence for the organization‖ (Wan, Shan and Huang, 2001).
And we also know that turbulent markets are better served by emergent strategies than by
deliberate ones – however, implementing centralised control systems like ERP can tend to
predispose companies to thinking in terms of deliberate strategy. ERP implementation in
organizations tend to increase standardization, specialization and formalization (Sharma,
Sharma and Krishna, 2008)
© 2010 SAP AG. All rights reserved. / Page 21
Review the Strategy (2)
So – implementing an ERP system opens up a new world of strategic possibilities.
Sharma and Sarkar (2007) found that managers were getting freed from mundane activities with
CRM implementation in an organization; and this freed time was used in doing more analysis
and engaging the organization in participative management.
Labovitz and Rosansky (1997) suggest that traditional, hierarchical organizational structures are
designed to break up managerial tasks into pieces: departments and divisions. This
segmentation makes it difficult to integrate the organisation's strategy, business processes and
systems into a cohesive working whole. The organisational structure actually becomes a barrier
to change and improved performance.
So – finally – how do we use an ERP system to increase flexibility? And how do we realign our
strategy towards that?
© 2010 SAP AG. All rights reserved. / Page 22
Review the Strategy (3)
Emergent strategies are those strategies that have developed as part of a "pattern in a stream
of actions" and are divorced from any preconceived plan (Mintzberg, 1987; Hamel & Prahalad,
2005). This strategy is the ability of the organisation to be responsive to the environment in
order to maintain its competitive position. Bonnet and Yip (2009) refer to strategic agility, it is the
ability an organisation has to constantly, "sense, assess and react to market conditions". They
suggest that in today's turbulent markets strategic agility is necessary rather than the idea of
sustainable competitive advantage.
An Emergent strategy should focus on ―...broad corporate intent, rather than fixed goals‖ and
should both inform and be informed by ―...the application of well defined and broadly understood
business models‖ (Gardner and Ash, 2003)
SAP’s view is that advantage will be achieved through flexibly enabling the business process
lifecycle by leveraging components and subsystems such as Business Rules, Business Activity
Monitoring and Business Process Management. These are all technologies whose express
purpose is to support emergent behaviour.
© 2010 SAP AG. All rights reserved. / Page 23
In Summary
Go-live is not the end of the change process, but only the
beginning.
As users grow in experience and confidence, and as the
organisation becomes more comfortable with real-time data and
cross-functional knowledge, we have the chance to grow our
original project-based efforts into a profound business
transformation.
© 2010 SAP AG. All rights reserved. / Page 24© SAP 2007 / Page 24
Questions ? Please contact:
Dr. Shane Hodgson
Organisational Change Management Principal
SAP Emerging Markets
SAP Business Park
1 Woodmead Drive
Woodmead 2148
South Africa
Phone : +27 11 235 6075
Mobile: +27 7947 84082
Email: [email protected]