Why Reengineer Your Business Processes? (Part 2 of 2)

In our prior post, we noted that companies need to order and reengineer their processes first, and then think about the software they’ll use to bake those into the company’s mode of operation.  Today we conclude that post by sharing 7 steps that we think make a lot of sense, as recently published in an article by Panorama Consulting entitled “7 Business Process Reengineering Tips For Competitive Advantage” which you can find here.  They said it well, so we’ll excerpt some of their comments below.

1. Budget adequate time and resources. Business process reengineering takes time. In fact, it takes more time than the technical configuration, testing and implementation of ERP software. It probably took your organization years to adopt your current processes, so it will likely take some time to change those well-established processes. You should ensure sufficient time for defining, improving and implementing new business processes. Benchmarking against organizations of similar size and industry will help you set realistic expectations for your project.
2. Define business requirements before selecting ERP software. Organizations often find that modern ERP systems are too flexible to simply start using out of the box. Even the simplest business processes have multiple workflow options. This complexity will slow down your project if your business processes aren’t well defined before the design and build phases of your implementation.
3. Improve business processes before selecting ERP software. Just as you should define business requirements before software selection, you should also improve your processes as early as possible. This is also the time to consider whether your processes align with your long-term organizational strategy.
4. Don’t treat all business processes equally. It’s easy to be overwhelmed by the number of business processes you need to document, analyze and improve. So start by focusing on just the processes that are competitive differentiators. These processes should drive your selection of ERP software and shouldn’t be constrained by software best practices, which may not be best practices for your unique operations.
5. Integrate business process reengineering with change management. Resistance to change is one of the main reasons business transformation takes longer than expected. Ensuring employees understand and accept new processes is challenging because people naturally dislike change. Before training employees, you should identify the gaps between your current and future state, so employees understand new processes in the context of their day-to-day jobs.
6. Integrate analytics into business processes. ERP vendors offer innovative solutions that leverage business intelligence and predictive analytics, often utilizing AI technologies. When defining your future state business processes, you should include processes for analyzing and acting on data. Chances are, most of your competitors don’t have a strategy for leveraging AI nor have they implemented this innovative technology.
7. Measure results and make incremental improvements. Measuring post-implementation results helps you stay on track to realizing expected business benefits. Continually measuring incremental benefits realization allows you to make corrections as needed. Misalignment between business requirements and software functionality can deter benefits realization. Lack of employee buy-in can also create a roadblock.

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Why Reengineer Your Business Processes?

Every company wants its business software (or ERP system) to support the way their underlying business works.  It only makes sense, and with today’s business systems, that capability is actually within reach.

We remember 20 or 30 years ago when merely implementing the “accounting” portion of a client’s business was a long and tedious undertaking, and usually subject to some pretty rigid software rules dependent on how your particular accounting software was written.  Then again, that wasn’t that big of a problem since by definition accounting systems should conform to generally accepted accounting principles – and those were generally incorporated, at least in basic form, in most systems.

But today, we’ve gone way, way beyond mere accounting.  Today’s ERP applications are comprised (or can be) of a broad range of applications affecting nearly all areas of the business.  These include human resources (beyond just payroll), most phases of production and process control, all the accounting of course, as well as webstore interaction, electronic data interchange with trading partners, bar-coded freight systems and complete warehouse management for picking, packing, license-plating, receiving, putaway and shipping.

In today’s world, the only way to ensure that your software is going to match your processes is to reengineer them before you do your software selection.  Job one is to optimize those processes – enlisting the aid of what is usually an outside process expert or lean consultant – to ensure that everything you’re doing in the business has been optimized for efficiency, removal of obstacles and redundancies, and shared internally to ensure that all parties can eventually have access to the same process ‘picture’ – and the same data silos — where required.

To do all that, you need to order your processes first, and then think about the software you’ll use to bake those into your company’s mode of operation.  As the folks at Panorama Consulting note in a recent article:

Business process reengineering also ensures your chosen ERP software aligns with your long-term organizational goals. ERP systems are a big investment, so they should support your processes for at least the next five to ten years.

Most importantly, business process reengineering helps you beat the competition by ensuring your ERP system enables differentiated, efficient business processes.

In our following post, we’ll share what they had to say about 7 process reengineering tips that are designed to give your company a competitive advantage.  Stay tuned…

 

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How Business Process Reengineering Cuts Costs (Part 2 of 2)

In our prior post we touched on the first two of five tips for ensuring reduced costs and improved competitive differentiation by analyzing and then reengineering your business processes before you implement a new ERP system.  We ran out of space before we could cover the final 3, as suggested by the folks at Panorama Consulting, so we’ll wrap up with those last 3 business process reengineering tips today.

The third tip is to define and quantify your potential cost savings.  Start by looking at your pain points relative to your current state, and evaluate how you can map solutions to these in the new system.  Look for areas of improvement such as automating your current manual processes.  Look for areas of redundant data entry.  (We’ve found it’s not unusual for customers to record the same data three or more times by different people in different places for different reasons.)  Time spent looking for information in multiple disparate silos is one of the all-time great time-sucks with its resultant expense.  Take the time to quantify the times and economic gains – if only because you’ll be astounded at the waste you’ll find and thus all the more anxious to keep your automation project moving forward.

Step four is to evaluate non-labor savings as well.  How much could you reduce inventory with better visibility into your supply chain, your work-in-process or your purchasing channels?  With better visibility over inventory, how much better might you project customer demand?  What about accounts receivable?  Is it as automated as it could be?  Non-labor savings are important because most companies are not going to lay off people when they create the labor savings noted in our prior paragraph.  Those tend to be soft cost savings, whereas non-labor savings fall into the hard costs category and are often more immediately tangible.

Finally, measure the results, striving for realistic, incremental improvements.  It’s a process, not an event.  You won’t realize the benefits if you don’t measure the results, but you’re not likely to create miracles overnight.  The cost savings will come gradually, but they will come.  To ensure that cost savings materialize, be sure you’ve defined the proper criteria and mapped out the expectations.  Equally importantly, be sure all your users are clear on what you’re doing and the results you are expecting.  You’re looking for root causes of waste, identifying means of correction, building improved processes into your software workflows, eliminating redundancy and waste… and then measuring your progress (and fine-tuning) until your see the results you’re looking for – or understand why not.

 

The bottom line though is very real: Implementing real process change as the natural precursor to implementing an ERP system will provide the economic justification and eventual payback for having implemented in the first place.  So don’t skip the critical analytical work that will ultimately deliver the cost savings you did it all for in the first place!

 

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How Business Process Reengineering Cuts Costs

We regularly engage new clients for business process analyses because we’ve learned over the years that it’s the one sure way to create a realistic ‘roadmap’ to an ERP implementation.  We’ve long told clients that the BPA will easily save its own cost – and usually much more – just in terms of eliminating miscues and ill-advised project turns.  It sets the path for ERP.

But as a recent article by Panorama Consulting’s Eric Kimberling points out (and we concur), the business process reengineering that results from a BPA can create still greater savings for those companies willing to apply that reengineering to creating competitive differentiation.

When contemplating replacing your ERP system, you’re at the perfect point for reassessing all your key processes, and reengineering them for better performance.  Following then are 5 steps recommended to gain the most from the journey…

First, understand the process in the context of ERP systems.  Today’s systems are robust and flexible.  Most processes will have multiple possible workflows – with corresponding workflow steps and criteria to be defined.  So by starting with a clear understanding of how you want your processes to look, you can save a lot of time and expensive consulting costs later trying to do it after (or while) the software has been installed.  Moral: set your vision straight first, and define your steps in English, or in terms most comfortable to all concerned, so you can create the shortest path in your software later.

Second, recognize that all business processes are not equal.  Think about it: there are a lot of foundational tasks involved in an ERP system, many that can easily be handled by accepting your new software’s out-of-the-box method for handling them.  These are the more basic tasks (think: accounts payable processing, for example) which will probably be just fine out of the box.  So ‘go with the flow’ and use what the system offers here, saving your best efforts for the areas that provide the most competitive advantage.

Those competitive advantages may come from, say, how you handle your sales process.  In that case, paying greater attention to the details of the CRM implementation might yield more bang for the buck when designing your sales workflow.  Or it may be true of, say, your manufacturing processes.  That might mean spending a lot more time with the folks in engineering designing the right BOM workflow, route steps and setups.  The efforts put forth in these areas might be the truest path to an embedded competitive advantage inside your ERP system.  So put your greatest effort into reengineering these higher level areas, instead of the basics.

Between “basic” stuff and “competitive advantages” lies what Panorama calls “industry differentiators.”  Here you spend time reengineering to ensure that at least you have designed into your systems the appropriate industry workflows that will help you manage internal costs better.  Procurement and overall supply chain management come to mind.  Here, attention paid to ‘best practices’ will yield cost-cutting gains.  But you’ll save your most diligent reengineering efforts for those true competitive differentiators that are unique to your own firm, as mentioned above.

Given space constraints here, we’ll share the last 3 tips (on cost savings, labor savings and measurement) in our next post.  Stay tuned…

 

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There is No Easy Button (Conclusion)

As noted in our prior post, based on a piece written by Panorama Consulting, it is critical that companies implementing a new business management solution make sure they’re putting their cart in front of their horse.  Which it to say… you have to start to look at business process reengineering early in the process.  That means resisting the ERP salesperson’s suggestion not to think too much about future business processes until you get your software installed.

Indeed, the most important thing is to understand those current processes, and determine what they’ll look like in your future state, before you spend any money on software.

We’ll conclude this post today therefore by noting a couple key points made by the folks at Panorama, in a post we’ve summarized, but you can find here.  As they write:

“Too many organizations think that they will simply start with a clean slate and throw out their old business processes. We get it: your current business processes and systems are outdated, inefficient and ineffective – and you want nothing to do with those broken business processes going forward.

However, too many organizations throw the baby out with the bath water by neglecting those things that have made them successful. In addition, employees won’t understand the future state business processes unless they are communicated and trained in a way that connects them to the current way of doing things – or those processes that they understand best.  Even the best-designed business processes will be ineffective if your employees can’t understand them in the context of how processes work today.”

So, what should you do?  The author posits three ways to help ensure your team avoids the pitfalls of a Ready, Fire, Aim approach:

1. Remember to address both your current and future business processes. This should help illuminate the gaps between them which “is critical to ensuring your employees understand what is changing and how.”
2. Begin defining business process improvements prior to your ERP implementation. Doing this early in the process will make your entire evaluation process that much more effective.
3. Use your reengineered business processes as the foundation for your organizational change management and training strategy. Once business process changes have been defined and documented they should serve as the premise for training, communication and other organizational change management activities.

Wise advice from a firm that deploys big ERP systems, and which could not be more apropos for all smaller companies as well.

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There is No Easy Button

Once again we take note of a post by the folks at Panorama Consulting – if only because their experience selling ERP to big companies so often mirrors are own experiences in selling to smaller ones.

In a recent post they talk about the importance of business process reengineering noting how important it is to analyze your workflows and processes early in the process.  To quote directly from a recent post found here.

“…Some things look good on paper but don’t translate to reality – project teams decide business process reengineering will take too long, cost too much money and expose the project to too much risk. After all, isn’t it reasonable to assume that if we start configuring software without spending time to change our business processes, that the implementation will go faster? On paper, yes.  In reality, no. Failure to address or improve business processes too often results in additional complexities caused by inefficient operations that result in immensely slowing down the technical aspects of an implementation.”

The truth is, companies need to look at their processes before they get involved with software selection.  A lot of ERP salespeople however will encourage prospective clients to “defer to the ERP software to deliver business process improvements.”

Again, the folks at Panorama sum up this wishful thinking clearly and effectively:

“We’ve all heard it repeatedly during ERP vendor sales cycles: don’t think too much about your current or future business processes until after you buy our software. This is often referred to as the “easy button,” which most of us know does not exist for ERP implementations.  

In reality, most ERP software is extremely robust and flexible, meaning that even the simplest business processes can be executed in numerous ways, resulting in millions of potential variations across any one organization.  This complexity is overwhelming, will slow down your project and will ultimately cost you a great deal of money if your business processes aren’t well-defined prior to beginning the design and build phases of your implementation.”

The lesson for companies looking to build a better infrastructure out of modern software and technology is simple: focus on the business needs (not the whiz-bang technology) and start that process with a firm focus on how today’s process and workflow will translate into tomorrow’s.  Only once you’re confident you understand that piece does it make sense to get serious then about software.

We’ll have some closing thoughts on the key steps required to do that in our concluding post.  Stay tuned…

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7 Myths of Business Process Reengineering in ERP

As ERP consultants we frequently and regularly preach to our customers and prospective customers the value and importance of analyzing their processes before an ERP implementation (and sometimes during when revisiting those processes in greater detail).  The result of a business process analysis (or BPA in our parlance) is usually some form of business process reengineering.

So we’re always interested in other consultants’ opinions about the process of both BPA and BPR.  Recently, the CEO at Panorama Consulting suggested 7 Myths of Business Process Reengineering, which we thought worth reprising in today’s post.  Here then, are Eric Kimberling “7 Myths” along with an abbreviated synopsis of his comments.  (You can access the full post here.)

1. Business process reengineering doesn’t need to happen on ERP projects. Perhaps the most misguided of all. Every ERP system will wreak some sort of havoc on your business processes. Most of these changes will be positive improvements, but will still require some effort in defining your operations in the new system environment.
2. Simply implementing a new ERP system will drive process improvements. The most pervasive myth. Today’s ERP systems are extremely robust and flexible, meaning even the simplest business processes can be performed in a wide variety of ways. This leads to a need for pre-defined business processes so the software can be configured and/or customized accordingly.
3. ERP project teams should focus on “to-be” rather than “as-is” processes. If you are the organization making the changes or the employees doing the work every day then the current processes absolutely DO matter.  It is thus critical that you assess the current state of your processes to help you obtain the future state as part of your business process reengineering and optimization efforts.
4. Business process improvements can be done without organizational change management. Too many executives think that they can simply redefine and implement business processes without organizational change management. This is a misguided view. The most effective business process reengineering efforts succeed largely because of the way organizational change is addressed – not because of how well the processes were defined on paper.
5. You can’t reengineer business processes before knowing which software you are going to implement. It is typically more advantageous and efficient to both evaluate and improve your business processes prior to selecting and implementing a new system.
6. All business processes need to be overhauled before selecting and implementing a new ERP system. Not true. Typically, the most successful organizations focus on improving their core areas of competitive advantage or differentiation as part of their ERP implementations, while letting other non-core business processes follow the lead of the software’s out-of-the-box functionality.
7. Business process reengineering will cause my ERP implementation to take more time and money to implement. The Achilles heel of many failed ERP implementations is that they assume that “doing things right” will cost more time and money than if they cut some corners along the way. While it may look good on paper to strip out any extensive business process work, the reality is that your project will most likely take longer to implement and proceed to fail at go-live if business processes are not adequately addressed as part of your implementation. Remember that it is much less expensive to do things right the first time than it is to do clean up after an ERP failure.

We couldn’t agree more with Kimberling’s points, and urge all companies embarking on their own ERP initiative to take them to heart.

 

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Avoiding 3 Common ERP Pitfalls

According to a 2014 Business Process Management Report produced by Panorama Consulting (available here)

“Organizations that effectively define and document business process improvements as part of their enterprise software initiatives are much more likely to complete their projects on-time and on-budget…. [and] are more likely to receive the business benefits that they expect from their ERP systems.”

Panorama lists three reasons why business process reengineering is sometimes overlooked (and then list 3 things you can do about it):

1. Business process reengineering (or Business Process Analysis) appears to cost more time and money – at least on paper. After all, if we configure and implement ERP software without spending time to analyze (and change our processes), won’t the implementation go faster?
2. Less experienced implementers defer to the ERP software to deliver business process improvements. This, Panorama points out, is like the “easy button.”  The software is so robust, surely it will fix all our problems, right?  In fact, the complexity can be overwhelming, and will cost you a lot more money if your processes aren’t well-defined before you design and build the phases of your implementation.
3. Too many organizations think that they will simply start with a clean slate and throw out their old business processes. The truth is, you don’t want to throw the baby out with the bath water.  Sure, some of your old processes may be outdated or inefficient.  But don’t neglect those things that have made you successful.  Your people need to be trained in a way that connects your “future state” business processes to how things are being done currently.  Here, communication and training become key.

Panorama then provides 3 tips to help ensure that your team avoids these pitfalls:

1. Don’t forget to address both your current and future business processes. Identify the gaps between current and future state and ensure employees understand what is changing, and how.
2. Begin defining business process improvements prior to your ERP implementation. (At our firm, we always start here.  That Business Process Analysis is the critical first step – it builds the roadmap for the ERP implementation and all that follows.)
3. Use your reengineered business processes as the foundation for your organizational change management and training strategy. Document and communicate to all persons what’s changed, how it’s changed, and how things work in the future.  It’s all about training and communication.  Whatever you do – don’t ignore these critical elements.

Just like Panorama, our long experience bears out their very good advice.  Take it to heart.

 

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The Small Business Owner’s Dilemma: Working ON Your Business Instead of IN Your Business

I have long considered the CEO’s number one task to be that of working ON the business, rather than IN the business whenever possible.  It’s not always possible, but it’s possible more than most CEOs and small business owners think.  It’s a principle I’ve abided by for the nearly 28 years I’ve been at the helm of this software company, and many of my colleagues and fellow business owners know that about me.

In fact, I take a fair amount of good-natured ribbing over my ‘inferior technical skills.’  Truth be told, I was a highly-technical-PC- guy a good many years ago.  But I dropped the mantel of the wizard and the Cult of Personality shtick a long time ago in favor of trying to do one thing well… just manage the business.

In other words, work ON it, not IN it.  So a recent article espousing that very philosophy written by the folks at Panorama Consulting was music to my ears.  In it, we are reminded of a book you may have read quite a few years ago called The E-Myth Revisited, in which author Michael Gerber first articulated this challenge, now so familiar to so many CEOs and entrepreneurs.

Panorama provides a succinct summary: “To summarize the general dilemma: executives at organizations often get consumed with “doing” the work rather than “building” a business that enables the work to get done. ”

So, if a business has not structured the right business processes… if it hasn’t managed its workflow into repeatable patterns… it hasn’t defined roles and responsibilities… it’s more likely to suffer from the stresses that stem from a lack of clarity.

Especially as organizations grow, owners who have focused more of their time working on the business tend to suffer through fewer crises and can often minimize stress and confusion.  Businesses can run more smoothly and predictably when roles and responsibilities are well established.  Less time is spent putting out fires and a little more time might be expended on planning for the future.

So, what does all this have to do with ERP?  If you’re a “mature” business, with a focus on growth, probably a lot.  The ERP system is a foundation for being able to focus on the business, instead of working in it.  ERP creates consistency of process and procedure, augmented by the speed of computing, that enables profitability and scalability – key components to growth.

Of course, that only works if the managers of the business have used the process of implementing ERP to evaluate and reengineer the underlying workflows that the system is intended to manage.  The way you get to scale and growth is through repeatability.  Planned and executed properly (and only then) ERP fosters repeatability.

It all starts with analyzing processes.  That usually leads to business process reengineering.  Then, in order to actually succeed at this, the company must embrace organizational change management, establishing clearly defined roles and responsibilities, clear communications and expectations, and a few key performance measures.

Only then are companies in a position to actually implement the (ERP) system that will put them on the road to repeatability, scale and growth – and thereby free the owner to work even more on the business, than in the business.

Or maybe, on the golf game.

 

 

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Business Process Engineering: The Missing Link in ERP Implementations

Whether you’re looking to improve your customer service, improve your top line or increase your bottom line, companies seeking improvement have plenty of reason to reengineer their processes.  Usually, all of the above.

So when a firm takes on the task of implementing an ERP system, business process reengineering is – or should be – the key motivation.  That’s often coupled with a desire for growth, or the ability to handle growth already upon them.

A recent 2014 ERP Process Improvement Report from Panorama Consulting showed that 100% of respondents had suffered some sort of “material operational disruption at the time of go live.”  Of these, 60% lasted at least a month.  Nearly two-thirds said they expected some difficulty in adjusting to operational change.  Interestingly, fewer than half “changed their business processes [in order] to leverage functionality of the new ERP system.”

We ask: Why do it, if not to review, analyze and ultimately change and improve your processes?

Well, as it turns, one key reason is budget and timeline overruns.  The challenges of the reengineering that motivated acquiring the new ERP system in the first place appear to cause companies to neglect the very reason they went there in the first place: process change and improvement.

In other words, it’s harder than they thought it would be.

Panorama suggests three things to keep in mind to ensure that you achieve the best business process reengineering results possible:

1. Recognize that not all your business processes are created equal. The short version: Prioritize your process improvements, and then focus on the handful that brings the most bang for the buck.  Push the others to the back burner when necessary.
2. Integrate your business process reengineering and organizational change management activities. Don’t treat these as two separate activities.  So for example, the people defining the new processes should also be the ones defining the impacts on departments and people.
3. Ensure your project plan includes enough time and resources to properly account for business process reengineering. Most teams don’t ignore process work because they want to… they often simply don’t have enough time (or didn’t budget for enough) to address this on top of all the other important project activities.  Start with a realistic plan and budget that accounts for process evaluation and retooling, and you’ll be an order of magnitude ahead of most ERP implementations right off the bat.

There’s the gist of it, and we couldn’t agree more, based on our own observations of many years.  The rest of the article author’s thinking can be found here.

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