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7 critical ERP digital transformation questions CIOs must answer
We've compiled a list of key questions you must ask before embarking on a digital transformation of ERP to ensure that it's aligned with your company's business goals.
It's an exciting time for CIOs to embark on an ERP digital transformation.
Technology has come a long way in recent years. Advances in ERP systems and cloud, AI, IoT and other emerging technologies are enabling quantum leaps in performance for organizations. Whereas a traditional ERP implementation focuses primarily on technology upgrades to replace back-office systems or as a means to gain efficiencies, an ERP digital transformation focuses on creating new business models.
An ERP digital transformation's potential payoffs are great, but the myriad of technology options can be confusing and overwhelming without a clear strategy and direction. And just as it was with traditional ERP implementations, aligning a technology initiative and an overarching business strategy is critical to success.
To that point, answering these seven questions can help you create the alignment you need to help ensure success.
1. What does your organization hope to gain from new technology?
ERP digital transformations entail more than relatively simple technology replacements -- or, at least, they should. It may seem counterintuitive, but before you get specific about the technologies you need, it is important to have a clear vision of how you expect technology to transform your business.
Your answer to this question could go well beyond overly simplistic answers like "because we have to" or "because our old system isn't cutting it." These are good starting points, but your transformation should enable much bigger improvements. Are you looking to enable top-line revenue growth, efficiency gains, reductions in inventory or other strategic benefits?
2. What organizational changes do you need to accommodate new ERP or technology?
Once you understand why you have chosen to perform an ERP digital transformation, it is important to define the strategic parameters. For example, will part of the transformation entail reorganizing to support a shared services model within purchasing or HR?
3. Are the required organizational changes realistic at this time?
After defining what changes you need to make to support the transformation, it is important to assess your organization's true risk tolerance for change. The greater the degree of change, the greater the organizational change management and overall project risk, so it is important to ensure that you have an effective risk mitigation prior to beginning the transformation.
Once you understand the magnitude of change and the corresponding risks, you may or may not need to revise your overall strategy.
4. What change management initiatives do you need to support transformation?
People will likely be impacted by changes -- even more than you may think. The impacts of change are different between massive reorganizations and granular changes to employees' day-to-day tasks. Your ERP digital transformation may even create change that runs the entire spectrum.
It is important to define how the changes will impact people so you can outline an organizational change strategy and plan that is tailored to your organization. Subsequent communications and training plans should incorporate the details of the change impacts so people have time to digest the changes.
5. What technology -- or technologies -- can best support the transformation?
Many organizations' instincts are to pick specific technologies prior to addressing the above questions, but that is misguided. Technology should enable business and organizational changes -- not the other way around.
The more you understand the above questions prior to choosing your technology, the more aligned your overall ERP digital transformation initiative will be with your bigger picture objectives.
6. What is your strategy and plan to address your answers to the above questions?
All of your answers should serve as inputs into your overall technology and ERP implementation strategy and plan. Technology workstreams are not typically the sources of project or budget delays -- people and process issues are. It is important to define how your plan might be affected by these critical path activities.
It is also important to ensure that your overall transformation strategy and plan is aligned with your overall business goals and imperatives. Too often, we see implementation strategies that are misaligned with corporate objectives and expectations.
7. What is the business case for the transformation?
Though this question is typically answered in iterations throughout the planning and software evaluation phase of the project, it is important to finalize your business case, including your ROI projection, prior to embarking on the transformation. This can help you manage internal expectations, help the team focus on the highest priority benefits during the transformation and provide a governance framework if the parameters of the project change. A good business case is one of the most underrated components of a successful transformation.
This is not an exhaustive list of the questions you need to answer early in your ERP digital transformation, but it highlights some of the most important ones. If you have clear answers to these questions, then you are off to a good start.
If you don't yet have answers to these questions, then it is important to take your time to establish clarity upfront. It will save you time, money and prevent risk in the long term and ensure that you have the best chance possible for success.