Aligning your performance systems during a digital transformation

Optimization not Validation

"Give me six hours to chop down a tree and I will spend the first four sharpening the axe."? - Abraham Lincoln

In our last issue of Carpedia Chronicles, we looked at the?benefits of optimizing the operational efficiency of your organization ?before?installing or upgrading a digital platform such as an Enterprise Resource Planning (ERP) system.?

But for many organizations, ERP installations can seem like a never-ending process. Months might turn into years as complexities mount and the “go-live” date gets pushed further and further out. By the time your installation is complete, you might find yourself quickly in need of an update or upgrade.?

So, what happens if you are in the middle of a digital transformation and discover that your processes, performance systems, and management training need substantial improvement to prevent inefficiencies from becoming masked by the new system at best, or perpetual and costly at worst? Is it too late to begin an operational optimization engagement? To borrow from Mr. Lincoln’s analogy, it depends on how long you have been chopping with a dull axe.

Fast, good, or cheap – pick two

There is a concept known as the Iron Triangle , which says that you can’t get something good, fast, and cheap. This paradox and the decisions that must be made to balance these constraints are magnified in large-scale digital transformations. Over my own 24-year career, I've rarely witnessed an ERP system that was installed both on time and on budget, and business leaders often find they are left with a new tool for visibility, but no time and money to ensure that the visibility they get is useful.?

The wrong balance of cost, time, and quality can also expose a company to greater risk. Consider the example of one client that went live with a new ERP system, only to be blindsided by a minor assumption that was overlooked by their team. The minor assumption significantly damaged their operations and nearly cost them their business. The incident underscored the importance of doing operational transformation projects?before?ERP installations, ensuring everything is in place before going live.

Asking the right questions

ERP systems provide data to give leaders a line of sight into things such as inventory, cost control, and utilization of equipment and labor productivity. But if managers don't know what they're looking for, or don’t know what to do with the information, then the system becomes the equivalent of a new toolbox filled with obscure tools. If you don’t know what a hex wrench is, you’re not going to use a hex wrench just because someone puts it in front of you. If you are like most people, you’ll reach for the same go-to tool that you’ve always used.?

Most digital systems provide information but are not designed to correct management problems or to identify the origin of operational inefficiencies.?

Digital installation teams ensure assumptions are correct and that data is accurate, but their focus is on validation, not optimization . To offer a simplified example - If it takes three weeks to do a particular process, your installers will likely verify those facts by getting sign off from multiple people in the organization who say three weeks is the right amount of time. They may later find out that the process really takes three and a half weeks.?

What an implementation-based management consulting firm like Carpedia would do in this scenario is learn the precise time the process takes by carefully observing and evaluating the steps, documenting, and analyzing variances, and identifying whether opportunity exists to compress the process. This is done to ensure you're either meeting or improving on your plan and getting more output from the same resources.?

Once an inefficiency is baked into the data, it’s difficult to eliminate. Like a circular reference in an Excel spreadsheet, an ERP system takes an output and feeds it into an input to predict the next output. However, this continuous loop needs human intervention to inject insight into the data's utilization and the timely communication of the information.?

How late is too late??

If the true and final go-live date is less than four months away, it's often too late to make significant changes without incurring additional costs. The changes can still be made and operations improved, and yes, those changes will still benefit the business, but the assumptions will need to be changed, and that means added time and money.??

If an operational consulting team comes onboard with sufficient time remaining in the installation process, they can work collaboratively with the technology installation team to ensure data is both accurate and optimized, and to limit the amount of costly rework that must be done.?

And while some leaders feel that bringing in a consulting firm may put added strain on their own team - a team that is already fatigued by extra work and strained budgets – the result is the opposite. It provides resources and support, injects momentum and efficiency into the transformation, and usually maximizes the results achieved.?

The bottom line

In summary, digital tools such as ERP systems tell you what you are doing; operational transformation projects tell you what you could be doing, and implementation-based operational consulting firms see those improvements through.?

Maintaining a high level of performance means getting the most out of your process, performance systems and people. As it turns out, this trifecta can also help you get the most out of your technology.?

By Carpedia Executive Vice President, Jacques Gauthier

Learn more at Carpedia.com

For business leaders seeking a framework for lasting improvements in performance and profitability Results Not Reports: Building Exceptional Organizations by Integrating Process, Performance, and People, written by Carpedia CEO Peter Follows and published by Forbes Books, will be released on September 19, 2023.?

Available for pre-order on?Target , Amazon, and Barnes & Noble .