615260 Enterprise Systems Big Picture Stream Mondays

1
615-260 Enterprise Systems Big Picture Stream
(Mondays)
L23 Maximizing Benefits from ERP systems
References Shang and Seddon (Readings 12 13)
2
Structure of the subject
3
Research questions for this Topic (this group of
three lectures)

• What net benefits do organizations realize from
  Enterprise Systems?
• When, in the years after "go live", are net
  benefits realized?
• Why do benefits and problems occur in the years
  after "go live"?
• What can organizations do to maximize benefits
  from ES?

4
Two Messages for today

• A key to achieving benefits from ES is to achieve
  fit between organizational needs and configured
  ES
• There are four strategies for achieving fit.
  Exploration is best because it is based on
  sounder knowledge, but it requires most effort
  from process owner.
• Because of the complexity of large-scale PEAS, it
  is unrealistic to expect to achieve excellent fit
  immediately after go live. In addition, over time
  organizational needs change, the software
  evolves, and understandings of the system
  improve.
• A second key to achieving benefits from ES is
  therefore to institutionalize ongoing
  improvement.

5
Four Strategies for Achieving Fit (Reading 12,
p.8)
These strategies were deduced from the choices
that managers in the organizations made.
6
Figure 1 Maximizing Benefits from Enterprise
Systems (p.9)
Distinctive Characteristics of Packaged
Enterprise Application Software (PEAS)
Evolutionary Spiral of PEAS Process Change and
Management Initiatives
Net Benefits from ES Use
Another cycle of ES Exploration, Redesign and
Use
Packaged Software Features
Achieving Fit between PEAS and Business needs
Assess and Explore PEAS
Changes to PEAS
Agree on Redesigned Processes
Evolving Functionality
Changes to Process
Assess and Explore Processes
Sophisticated Knowledge
Initiatives to Manage the Distinctive
Characteristics of the PEA Software
Monitor Changing Conditions Reevaluate Benefits
Application Infrastructure
Use ES to Generate Benefits
7
Revision of Lectures 19 and 21 (the first and
second lectures in this Topic)

• Lecture 19 How do we measure benefits from ES?
• Lecture 21 What benefits and problems would one
  expect after go live?

8
L19 Davenport et al.(2002), Benefits achieved by
organizations (Reading 10, Handwritten p.16)
2 5 1 8 4 9 7 3 6 10
9
Shang Seddon (2002) ES Benefits framework
10
L21 Clear organizational-learning story is
visible in the typical benefits pattern
11
Conclusions from Lecture 21

• Benefits from ES are likely to be realized at
  different rates for different core processes in
  each of the five dimensions, even in the one
  company.
• Benefits from ES developed gradually in different
  dimensions because of
• different learning processes
• dynamic interplay among these different benefits
  
• Achieving ongoing fit through (a) sound
  implementation project management, and (b)
  institutionalization of ES improvement, appears
  to be important to maximizing benefits from ES.

12
Lecture 21 Factors affecting benefits after go
live (Reading 11, p.29)
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Today 615-260 Reading 12 (Reading 13 later)

• Shang and Seddon (2003)
• Strategies for achieving fit with PEAS
• Working paper, DIS
• Two lessons
• There are four strategies for achieving fit
• Which strategy, if any, is best?

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Lesson 1 Four Strategies for Achieving Fit
(Reading 12, p.8)
These strategies were deduced from the choices
that managers in the organizations made.
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Process Replication

• When we first put a system in, we had a
  reasonably short timeframe. We said, okay, what
  well do is well take the old ledger, the old
  way of doing things, the old order types and all
  those sorts of things and then we just put the
  new system in. We dont want to change the
  configuration of SAP because we want to put the
  upgrade in and all that very easily. So we just
  left it as it was .We had a brand new system-
  real time on-lineprocessing the old stuff.
• (Financial controllerUtilityA)

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Process Replication

• Use the PEAS to duplicate or automate existing
  business processes.
• Make as few changes as possible to either
  business processes or the PEAS.
• Make little use of the systems tailoring options
  or its embedded knowledge.
• e.g., Accounting systems are so standard that
  this strategy is often effective for accounting
  systems.

17
Why did managers use a Process Replication
strategy?

• Existing process are believed to be satisfactory,
  and the software can be configured to support
  those processes.
• Managers are too busy (or lack the knowledge or
  self-confidence) to get deeply involved in ES
  implementation.

18
Process Modification Enhancement

• When we did it initially, during the project,
  we tried to move everything to standard SAP
  processes. We told people they just had to fit
  with the standard.
• (Business CoordinatorUtilityB).

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Process Modification Enhancement

• Make changes to organizational processes to adapt
  to the so-called best practice processes
  embedded in the software.
• Employees in the business units have to adapt the
  way they work to the in-built processes supported
  by the system.
• a so-called vanilla or out of the box
  implementation.

20
Why did managers choose a Process Modif.
Enhancement strategy?

• One of the "best practice" processes available in
  the software is believed to be better than the
  organization's current process.
• Managers are too busy (or lack the knowledge or
  self-confidence) to get deeply involved in ES
  implementation.

21
Software Modification Enhancement

• We are unique. We have successfully sold our
  product to our customers. The system has to
  follow our way of doing business.
•  
• (Sales Managers perception of the ES, described
  by the ES Manager in ManuCoA)

22
Software Modification Enhancement

• Make complex changes to the PEAS (customization)
  by modifying program code so that the implemented
  system fits perceived business needs as closely
  as possible.

23
Why did managers choose a Software Modif.
Enhancement strategy?

• The existing processes are believed to be better
  than any of the processes supported by the
  software. (Modifications will therefore be made
  to the software, knowing that future upgrades
  will be more difficult.)
• The software has bugs or limited functionality in
  areas that are important to the organization.
• Managers are too busy (or possibly too
  self-important?) to get deeply involved in ES
  implementation.

24
System Exploration

• Our endeavors were to take the system and use
  the best practices that were built into SAP and
  train and utilize those as best we can. That
  worked in some areas and in some areas it didnt.
  So it was a bit of a mixed bag as to what we
  could do and what we couldnt. I think we took
  the software, amended our processes and in some
  areas we bent the software a little bit to fit
  processes where we couldnt really change
  things.
• (SAP ManagerUtilityD)

25
System Exploration

• Review and explore all opportunities for better
  process performance by making changes to both
  business processes and the enterprise software.
• Some parts of the enterprise software will need
  to be customized to fit unusual but important
  business requirements.
• Some organizational processes will be changed to
  take advantage of the attractive (and
  readily-supported) features offered by the
  software.

26
Why did managers choose a System Exploration
strategy?

• A person or group in authority wants to learn
  from the software where possible, exploiting its
  integration benefits to the full, but to retain
  parts of the existing process where they are
  clearly better for the business.
• (This option requires a much greater level of
  management involvement and time.)

27
Lesson 2 Which fit strategy, if any, is best?
(Reading 12, p.14)

• Proposition System Exploration yields greater
  benefits than other strategies.
• (Still needs to be tested in other settings.)

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Process Replication during implementation

• Smooth change over
• Reduced costs for replacing manual work
• Problems carried over from previous processes
  redundancies, multiple authorizations, silo-based
  processes
• Software-supported integration features not used

29
Process Modification Enhancement during
implementation

• New processes integrated with other functions
• Operational deficiencies due to data errors and
  mistakes
• Inaccurate information
• Difficult to train users in new processes
• Decreased employee morale

30
Software Modification Enhancement during
implementation

• Smooth changeover
• Reduced costs by replacing manual work
• Technical problems with modified systems during
  changeover
• Continual extra IT cost and effort in managing
  system, especially for upgrades.

31
System Exploration during implementation

• Smooth change over
• Cost and speed benefits in streamlined processes
• Managerial benefits with tailored reports
• Achieved planned strategic benefits
• Increased organizational learning
• Business team members suffered from long hours
  doing two jobs

32
Further evidence that System Exploration yielded
benefits, this time after go live






By year 3, the Exploration fit strategy had been
used in all six surviving core processes.
Assuming rational behaviour, moves to Exploration
() suggest managers were seeking to solve
problems arising from prior strategies. Moves to
replication () were due to staff changes, where
new managers had limited time.
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WHY might system exploration be the most
beneficial fit strategy?

• Provided management can find the time to explore
  the software, System Exploration seems to work
  best because it enables those managers to (1)
  learn from the deep knowledge of other
  organizations processes embedded in the
  software, then (2) apply what seem to be the most
  beneficial processes to meet their own
  organizations needs.
• In the two processes in the preceding table where
  the case-study firms moved to a Replication
  strategy, management changes led to appointment
  of new managers who did not have time to devote
  to gaining in-depth understanding of the ES, so
  these learning opportunities had to be suspended.

34
Conclusion, Reading 12

• System Exploration was the most beneficial fit
  strategy during implementation.
• When management had time, System Exploration was
  also the fit strategy of choice after
  implementation.
• Needs further testing, but evidence suggests
  System Exploration is the most beneficial fit
  strategy.

35
Reading 13 Maximizing benefits from ES (Shang
and Seddon 2003)

• Motivation
• with our SAP project we are developing a core
  asset at Delta Airlines. It is absolutely an
  asset just like one of our aircraft. When we buy
  an aircraft we make a commitment that we are
  going to support it. We have maintenance
  programs to make sure that asset becomes more
  efficient and effective as we go. An
  implementation such as SAP should be no
  different.
• Walter Taylor, SAP Implementation Manager, Delta
  Airlines (Wilderman, 2002)

36
Motivation continued Quotations from Sapphire
2002

• The Y2K deadline, coupled with immature SAP
  methods and consulting skills, led to a vast
  number of rushed SAP integration projects that
  left hundreds of client firms still searching for
  visible benefit. (Meta Group 2002 p.1)
• The greatest single mistake that is made across
  the board is that firms get to Day One and go
  live and then break up the team. The business
  people who became engaged throughout the
  implementation think its over. People break
  up, and the engine stops. Except that in days 2
  through 10,000, business keeps moving and
  changing. (Wilderman 2002)

37
Figure 1 Maximizing Benefits from Enterprise
Systems (p.9)
Distinctive Characteristics of Packaged
Enterprise Application Software (PEAS)
Evolutionary Spiral of PEAS Process Change and
Management Initiatives
Net Benefits from ES Use
Another cycle of ES Exploration, Redesign and
Use
e.g., annual cycle
Packaged Software Features
Achieving Fit between PEAS and Business needs
Assess and Explore PEAS
Changes to PEAS
Agree on Redesigned Processes
Evolving Functionality
Changes to Process
Assess and Explore Processes
Sophisticated Knowledge
Initiatives to Manage the Distinctive
Characteristics of the PEA Software
Monitor Changing Conditions Reevaluate Benefits
Application Infrastructure
Use ES to Generate Benefits
38
Distinctive Characteristic 1 Packaged software
features

• PEAS embeds the accumulated experiences of many
  businesses in a smorgasbord of so-called best
  practice processes. However, best practice in
  one setting is not necessarily best practice in
  another.
• Implication For maximization of benefits, the
  PEAS processes selected and configured for a
  given business must be aligned with the needs of
  that business (i.e., need to achieve fit).

39
Distinctive Characteristic 2 Evolving
functionality

• To remain competitive, PEAS vendors are
  continually upgrading their products. These
  vendor-imposed changes bring both opportunities
  and challenges. The good news is that new
  functionality, such as web-enablement, makes it
  easier for businesses to keep their systems
  up-to-date. The bad news is that upgrades can
  cost as much as 30 of the original
  implementation.
• Implication For maximization of benefits,
  organizations with PEAS must plan for new
  releases and regularly evaluate the advantages of
  utilizing new functionality.

40
Distinctive Characteristic 3 Sophisticated
knowledge

• PEAS embeds deep knowledge of the problem domains
  in which it is designed to operate. However, a
  huge amount of individual and organizational
  learning must take place before an organization
  can configure and use its PEAS effectively. The
  technical team have a lot to learn. Users have a
  lot to learn.
• Implication For maximization of benefits,
  organizations must train users (not just once,
  e.g., Hersheys Super-User certification
  programme), hire skilled staff, and adopt
  staff-retention policies to stop loss of valuable
  know-how.

41
e.g., Hersheys Super User Roles/Characteristics
(ASUG 2003)
42
Distinctive Characteristic 4 Application
infrastructure

• Enterprise systems provide a platform for new
  business initiatives. For example, an ERP system
  provides a foundation for initiatives such as
  customer relationship management (CRM), shared
  services, and employee self-service for managing
  leave and travel claims.
• Implication For maximization of benefits,
  managers should actively look for ways to build
  on and extend the existing PEAS infrastructure.

43
Figure 1 Maximizing Benefits from Enterprise
Systems (p.9)
Distinctive Characteristics of Packaged
Enterprise Application Software (PEAS)
Evolutionary Spiral of PEAS Process Change and
Management Initiatives
Net Benefits from ES Use
Another cycle of ES Exploration, Redesign and
Use
Packaged Software Features
Achieving Fit between PEAS and Business needs
Assess and Explore PEAS
Changes to PEAS
Agree on Redesigned Processes
Evolving Functionality
Changes to Process
Assess and Explore Processes
Sophisticated Knowledge
Initiatives to Manage the Distinctive
Characteristics of the PEA Software
Monitor Changing Conditions Reevaluate Benefits
Application Infrastructure
Use ES to Generate Benefits
44
More example ES improvement initiatives

• Establish an ES Improvement function active
  on-going ES development and upgrade teams
• On-going process reviews and evaluation of new
  software functionality
• Regular, active core-process manager involvement
  with the ES Improvement function
• Core-process manager actively planning additional
  applications to build on the ES platform
• Tailored training courses user and technical
  staff (e.g., Hersheys Super User programme)

45
Summary Two Messages for today

• A key to achieving benefits from ES is to achieve
  fit between organizational needs and configured
  ES
• There are four strategies for achieving fit.
  Exploration is best because it is based on
  sounder knowledge, but it requires most effort
  from process owner.
• Because of the complexity of large-scale PEAS, it
  is unrealistic to expect to achieve excellent fit
  immediately after go live. In addition, over time
  organizational needs change, the software
  evolves, and understandings of the system
  improve.
• A second key to achieving benefits from ES is
  therefore to institutionalize ongoing
  improvement.

46
Summary for this topic Factors affecting
benefits after go live (Reading 11, p.29)
47
Five Propositions (The preceding diagram in
words) (Reading 11, p.30)

• Benefits from ES are the consequence of achieving
  a good fit between the ES software and
  organizational needs.
• Knowledge management is a prime driver for
  achieving benefits from ES.
• Long-term, broad-scope change management is
  essential for achieving benefits from ES.
• Over time, software upgrades, changing
  organizational needs, and demands for
  enhancements will lead, almost inevitably, to
  reduced fit.
• The key to improving benefits from ES is to
  institutionalize ES enhancement and exploration.