When Paul asked me to write another blog post for the ERP team it took me next to no time to think of a topic that not only was a constant issue during my time as a CIO in midsize enterprises (manufacturing, to be precise) but also a topic that I stumbled over in many inquiry calls with our clients.
It seems, more organizations than I thought put too little effort into this topic. The typical question is: “We need a new ERP (for several good reasons, including legacy modernization), what is the right vendor for us?” It is a valid question and selecting the right ERP vendor is, for sure, an important question to answer, since there is so much effort, time and money involved implementing the new ERP.
So, what vendor should we pick? We already have a few names: Macrohard, TBQ, Prophecy and others*. My follow-up question usually is: What do you actually need? The typical answer refers to an RFP they want to do, a description of their business processes or conversations with the business (good!) and a few other things.
In only a very few cases the answer is: “We built our business capability model in alignment with the business strategy and business outcomes. We used the business capability model as a heat map to identify those capabilities that are supported poorly by existing applications. We also identified capabilities that we will need in the near future to support business outcomes that cannot be achieved with the business capabilities we have today!”
Wow that would be an answer, wouldn’t it?
However, this is in a nutshell what MSE CIOs need to do before even thinking about selecting an ERP vendor: know exactly where you are heading (business strategy), where you are (business capability model) and how to get there (roadmap). Then you can select the tools you want to use (ERP or more general: applications).
“Business capabilities are a structured way of expressing the activities that the enterprise performs to achieve its desired business outcomes”
When I was a CIO, I remember asking my boss in our weekly meeting for the business strategy to align the IT strategy. He first looked at me with a puzzled look on his face, implying that this seemed to be none of my business as a CIO. Then he leaned back and made up a list, it seemed in that moment. I would have expected a file with the business strategy he might have presented to the board. But there was no such document.
Picture: the D.T. Sheridan Shipwreck, Monhegan, Maine
I read a book a few years ago that some people are like ships without a rudder**). They have no goal in life and no plan to pursue. Having no business strategy as a goal and no business capability map as your guide is also like being a ship without a rudder. The currents destine your future. There is a wonderful place in the state of Maine, Monhegan Island where you can see the results of navigating in the fog. (Monhegan Island is one of the most beautiful places in Main. Certainly, worth a day trip!)
A final word on business processes. They are usually overrated in their meaning in selecting the right ERP system. Sometimes they are confused with business capabilities. A business process can be seen as a view into the past: it is execution with the tools you have at hand at this very moment in time. With a new (ERP-) system the business processes will usually change dramatically as legacy systems often required awkward processes. The business capability, which is the link between strategy and execution (processes) remains the same. It will change due to changes in the business strategy and to support new business outcomes.
CIOs in midsize enterprises must use their special circumstances of being in organizations with shallow hierarchies with close proximity to the business. So don't just ask for the business strategy (as I did many years ago) but also support the process of defining one. Become a “business-strategy-detective”!
*) Names changed by the editorial staff
**) Dr. Denis Waitley, The Psychology of Winning