Evolution of Business and Software - Adapting ERP Systems to Change
A Darwinian Theory of ERP Software
Darwin believed that species adapt and evolve to suit their environment and that survival belonged to the fittest. The same can be said in business. Organizations evolve, and the processes and systems that support them need to adapt.
In today’s rapidly changing business climate, a commitment to continuous improvement can make all the difference. In this article, we will focus on the management software that businesses depend on, and we’ll discuss how keeping pace can better position your organization to remain competitive.
Adapting Your Business Systems to Change
Few businesses remain the same year after year. Operating procedures change, staff change, and new lines of business are added. To remain relevant, organizations need to ensure that their ERP system (or other business management software) continues to be usable to key staff and that it’s capable of revealing operational data that allows for good decisions. If you don’t keep on top of it, technology becomes dated and inefficient, doesn’t remain intuitive for users, or may suffer from frustrating performance problems. To add insult to injury, as a system ages it may not integrate with newer technologies or offer new functionality that naturally improves business performance.
So how does one prevent these consequences? In some cases, the answer can simply be a change in process – the way in which the existing system is used. Changing it up a bit can reap benefits, which could be any number of things. For example, the system could be used in a different way to perform inventory cycle counts or to track sales, or an accounting process that wasn't been required when the business was smaller and less complex might now be useful.
In other cases, a relatively routine software upgrade may provide an added or enhanced feature set that better supports the evolved business. Such features may include functionality that was not previously used, options that are now available in a newer version of the software, or even some additional configurations of the software to adapt it more appropriately to the business’s current needs.
There does come a time, however, when a full replacement of your business management solution may be needed. This is not a minor decision and introduces a lot to think about, including overall cost, impact on key personnel, the evaluation itself, and anticipated return on investment.
Defining Your ERP Needs
Regardless of which path you take in the ongoing evolution of your ERP software, it’s incredibly important to look at the big picture. Where is the business headed? What will it require to scale up effectively? To adapt to growing online competition? For staff to remain efficient?
Not looking at the future of the business and anticipating these types of questions can cause your total cost of ownership for your software systems to run higher than you expect. Imagine if you were to simply plan your building renovation as you go, pushing out a wall here, adding a door there. The supporting infrastructure would be affected each time, and the cost of rerouting electrical systems alone would be much higher than if it were part of an overall design.
Careful planning for changes to and expansion of your ERP system is just as important. Without it, you will experience unnecessarily higher costs as the overall design is reworked. As time goes by you may ask yourself why you’re paying so much for your system!
To further complicate matters, as a business grows each department can have different needs that at times can appear to be at odds with one another. This makes the overall design even more crucial – in an ideal world you would have a central system that works smoothly, with data flowing in concert among your various departments. This doesn’t happen naturally, despite what Darwin said.
Supporting Business Processes
If you don’t manage systems properly, the net result is often a collection of disconnected systems that are isolated in departments or with individuals, which doesn’t promote good overall business decisions. In our own business we have lived through this in an area as simple as contact management. As we grew, we inadvertently ended up with many islands of customer and supplier contact information, and our “single source of truth” in our ERP software had become a fallacy.
When we identified this as a key area of improvement and assigned experienced consultants to the problem, we were able to accomplish what we hadn’t before: a single source for accurate contact information, centrally managed but available to all. So how did we identify and resolve the problem? Over the past few years we established an internal Process Improvement Committee, which includes representation from each area of the business. This team meets monthly to discuss competing priorities and make decisions about which system improvements or upgrades will be the most beneficial to the organization as a whole. Every part of the business gets a voice. Our internal business systems have become a living, dynamic ecosystem as a result.
The Process Improvement Committee is not necessarily limited in scope to our ERP system, but it often ends up in the middle of the conversation as the team conducts a regular review of issues, evaluates the outcomes after changes are implemented, and discusses what is working and what isn’t.
Do you have a Process Improvement Committee?
If you don’t I encourage you to give it meaningful consideration. When you do, don’t just look for inefficiencies and errors. Look also for missed opportunities, such as, “If we did this or that with our systems, we could see an uplift on sales revenue in this category,” or whatever the case may be. Look, too, at opportunities for improvement, particularly in areas where it will benefit more than one department. By way of example, revisiting our overall approach to tracking, calculating and paying sales commission not only affected the sales team, but also allowed the finance department to be more efficient when calculating variable compensation as part of regular payroll cycles.
Continuous improvement isn’t just for the manufacturing floor – all processes that support the business should be reviewed regularly. Your software systems enable these processes to be effective; giving these supporting systems the care and attention they need can provide huge benefits.
Think of your business management software not as a necessary expense, but as a living, breathing, evolving organism that can help to keep the business functioning effectively. Take care of it accordingly.
This article was originally published in The Business Advisor.