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Various research studies report between 1/3 and 2/3 of new system implementations fail to deliver expected business benefits. By new "systems" we are referring to integrated business systems such as Enterprise Resource Planning (ERP) or Customer Relationship Management (CRM). ERP systems usually include integrated functionality for accounting, manufacturing, distribution, and customer service. CRM systems collect and organize customer data from various sources including call centers, e-mail, point-of-sale, sales personnel, etc. CRM enables a comprehensive view of customer data and behavior so companies can better manage their customer relationships.

The following article summarizes our methodology for Business System Solutions Selection. In this we offer what we consider the most important action steps your company can take to ensure your new system delivers the results your business expects and needs.

Step #1 Confirm your business is ready for the change.
Selecting and implementing a new business system is a major undertaking involving serious commitments of time and money. Integrated systems are fundamentally about how you operate your business and to be effective they require your business to operate as disciplined processes. If your business is not ready to operate with structure and discipline, postpone the new system.

Ask yourself if your business needs the new system to cut costs, reduce inventories, improve customer service, improve decision support information, etc. Those companies that have a clear link between these needs and functionality provided by the new system have the highest chance for success.

Any company embarking on a new system initiative should make sure they have built a "foundation for change":

Step #2 Establish a foundation for change and continuous business performance improvement.
While it may be clear your business needs real change to improve business performance (to achieve or maintain competitiveness), making that change can be very hard and elusive. This is especially common for well-established industrial companies, with deeply ingrained routines and habits. Because an integrated system affects every major operation, the company needs to have the "Organizational will to change" to support and sustain the difficult and sometimes contentious activities of selecting and implementing a system.

Performance measurements are a great way of highlighting the cause and effect relationship between how a company operates and the bottom line. Companies without performance measurements often do not have the facts to isolate the real problems that are cutting into margins, causing poor customer service, driving the wrong inventory, etc. For this reason, operational management personnel often resist performance measurements.

Performance metrics are most effective when tied to performance evaluation and compensation, not just for senior management, but also for all personnel that play a significant role in the business process. Performance measurements linked to compensation can be difficult to implement, but once implemented properly, they focus the company's collective attention on doing things that matter most to the bottom line.

Step # 3 Define system requirements that meet your business performance needs (i.e., focus on your business processes, not the technology.)
Your business is about your processes, not IT systems. The only value IT systems provide is in helping you to operate your processes effectively and efficiently. Before engaging software vendors, think through what your business needs from a system and prioritize those things that are most important and will help set your business apart. Broad involvement at this stage will take a little longer, but will help later on as decision makers know their needs were gathered and considered.

In developing your requirements, it is important to define not just what enables your business to operate today, but also the functionality that you can use to enhance your processes and ultimately business results. If your company's technology experience is limited to working with an outdated system, then your business probably has a great opportunity to improve by leveraging a new(er) integrated system. Unless you have internal staff that constantly monitors new systems, you should seriously consider engaging a business technology advisor experienced in your industry to help you understand how technology can be leveraged to meet your business improvement goals.

Step #4 Selecting the appropriate technology (software and service) providers
This first involves scanning the marketplace for vendors and technologies that align well with the company's business requirements (from the list developed under Step #3) and that are priced within the available budget range (considering software, services, hardware, ongoing maintenance.). Sometimes companies can identify relevant software alternatives by looking within their industry. However, another company's success does not guarantee yours, just as another company's failure with software should not necessarily eliminate it from consideration. (In many cases software does not work properly because it was not implemented properly.)

COMMON MISTAKE: Oftentimes companies will start in-depth evaluations of a software vendor without having completed Step #3 (Requirements Definition) and thoroughly defining several alternative vendors. These companies run the risk of not being prepared to properly evaluate the system, and if they are not familiar with current technology they may be enamored with the first solution they see and be compelled to shortcut their evaluation activities. Your company can avoid this risk, by first identifying the relevant vendors and then narrowing the field by having the vendors respond to your Request for Information (RFI) that outlines your key requirements and requests the vendors to provide responses as to how well their products meet these requirements and also what the approximate total cost of the solution (including software, services, hardware, ongoing maintenance, etc.)
After narrowing the field to three or four vendors, you are ready to conduct a detailed review of each product's functionality against your requirements and also detailed review of the providers' capabilities, integrity, viability, and direction. Reference checks can help to substantiate claims, but understand these are usually well managed by the provider / VAR. Your vendor negotiations will be more effective when you are armed with two to three solid proposals resulting from a carefully orchestrated solution selection process.

Step #5 Focus the implementation on achieving specific business performance results
Steps 1-4 are critical to putting your business in a great position to win. Step 5 is where your team drives the results from steps 1-4.

Whether your company is a $1M emerging business or a well-established $100M company, there are several common requirements for achieving a successful implementation:

1. The implementation is completely focused on implementing processes and procedures that enable significant business benefits.
2. The key people that will be using the system are heavily involved in the education and setup of the system.
3. The team responsible for the implementation has incentives and accountabilities that align to their efforts in implementing the system. An accountability system outlined in Step 2 helps pull the system initiative into place because it is a given that it is the right thing to do for the business, rather than being thought of as the CFO's new system, or the IT Director's new system.
4. The new system is setup in a test mode and test scenarios are executed to simulate how the system will be used. This is done for every significant operation, transaction, or event.
5. Every report that will be needed when the system is live is defined and developed before the new system is activated.
6. Solid project management leadership and project management – a system implementation can demand strong leadership and orchestration to deliver results and stay on schedule and within budget.

Your systems provider should have a well-defined implementation methodology and approach that they can reference having successfully used at several other companies.