“Get Evolutionized” – Strategy software and what can be learnt from the history of ERP

?When was the last time you were really happy about using your ERP software?

And what has changed?

We all have various experiences with software helping out in the operational business. The widespread ERP had a bumpy start decades ago, evolved manifold, and is irreplaceable by now for nearly every company. ERP systems bring massive efficiency improvements to business, where appropriately implemented. Notwithstanding, an impressive ERP history! But now, with the rise of software-supported Strategy Management, it is time to transfer those insights from the ERP space to the upcoming Strategy Software discipline. Digitizing the strategy work will evolve substantially faster and more stringent if we consider the learnings from the ERP evolution.

In this article we look at the evolution of ERP while taking inspiration from the Muda principle of avoiding waste or eradication of inefficiencies that were present before. Enterprise software was instrumental in enabling this transformation and it is one example that we will use to illustrates this.

Strategy software is in the rise. More and more organizations are accelerating their processes and experience a slowing two speed strategy world (much slower and sluggish).

Thus, if you haven’t found a recent example for the above question, you should be very much looking forward to what Strategy Software has to offer.

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ERP evolution

Already in the 1960s centralized computing systems started to assist in managing inventories. But it wasn’t until the 1990s that ERP systems received their name and really took off – with a German backwater startup shaping the global market. Companywide inter-functional integration saw a revolution in diverse fields such as manufacturing, distribution, human resources, accounting, project management and many others.

Some examples: After some tribulations NIKE was able to reduce the amount of “pre-building” of shoes from 30 percent of total manufacturing units to around 3 percent. And N&N Moving Supplies was able to reduce its payroll processing time by 84%. Plus the various benefits from the typical consultant′s “20% savings-everywhere” bucket. The introduction of such systems was and is a daunting task, still, a recent report showed that roughly 80% of ERP introductions in 2021 met the expected ROI.

What accelerated the adaptation of ERP systems was a progressing globalization with new requirements for accuracy, timeliness, performance, and scalability of business processes – in short: more efficiency and less waste.

Even though the development of these tools continues in an impressive manner, the power of ERP systems is largely limited to handling things on an operative level. What has changed?

Fluctuations in demand can be adequately modeled and addressed by an ERP system. However, a complete disruption of supply chains, a sharp shift of political agendas every couple of months, and black swan events such as the pandemic or war leave much to be asked for when it comes to the flexibility of most solutions.

One big learning on the evolution of ERP system was that customization is the road to expensive failure. It is nowadays broadly accepted to rely on out-of-the-box solutions, that are much easier to maintain and cheaper to implement.

Teaming is another one: In the early days only the IT department took charge – and failed due to not meeting the business requirements.

Or take the “unveil the monument” moment: To build the new ERP system (“monument”) intensive effort and resources were invested across the organization Then, tadada, with the Go-Live (“unveil”), leaders excitedly looked to the audience, waiting for applause and the magic to happen – only to be disappointed by a lack of enthusiasm and, therefore, success of the initiative. The importance of training, engagement and communication is crystal clear. (More about that in the next week′s newsletter issue)

It seems it took some decades to learn all the 2020′s insights with respect to “out-of-the-box standards”, change management, or process & corporate intent first, are no news at all. Already in the late 90′s there where several publications quoting more or less the same (e.g. Harvard Business Review 1998 )

A lot we have learned to now allow Strategy Software to prosper at much higher pace, right?

?Strategy software – the path ahead

Addressing the multi crises we are facing today and even more so in the future requires efficient strategy work. It is no longer suitable to review a strategy only once every 1-2 years and use a lengthy and tedious process to do it. The requirements of our time have changed. And the currently present inefficiency to meet them is what needs to be tackled next.

Thus, Strategy software typically anchors custom-tailored strategy processes with robust, standard methodology. It allows to align strategic plans across the enterprise both horizontally and vertically. The digitized workflow shortens decision cycles, aggregates decentralized input much faster and error-free, as well as prepares decisions / turn-arounds adequately.

There is no free lunch, as we economists are used to say. That′s the time to remember and apply the learnings from the evolution of ERP systems:

Today, every company thinks their strategy process is unique – like the early ERP days. Though, accepting a standard, leading way to do it, will pave the way for strategy software′s real impact: Faster results in an applicable and adoptive way.

Training & communication – train the new way of working. Start from the top management, demanding the results within the new strategy system and free it from its ivory-tower attitude, so you can drive a democratization of the strategy process, while accelerating the system’s relevance.

Now let′s get to three paradigms that are shaping recent strategy work and the respective digitization to come, as our appreciated colleague Ronald Herse put it:

?Adaptivity

The future will be dominated by those who are proactive, flexible and anticipatory. By those who act instead of reacting. This requires a constant and increased “strategic readiness” with fine-tuned antennas to avoid uncontrolled actionism and too many hard turns of the direction.

Alignment

Consistent and cohesive common action, even when it is about short-term changes of our assumptions, becomes a real challenge for many companies due to the high complexity of our grown structures. The key to aligning organizations in one commonly agreed direction is interconnectedness. Targeted alignment also leads to focus and higher efficiency with regards to implementation. A single source of truth can become a benefit as Osram has shown.

Anchoring

Applying one fully standardized strategy process to all the company's strategic business units globally will no longer work in the long run. The strategy work, process and the methodology must be anchored and individually designed for each planning unit respecting the individual market conditions. A few needed and sufficient elements build a common robust and effective strategic core for the strategy work across units.

The prerequisites for all this are the own personal ability and willingness to change and to give the intelligence of the network the chance to takeover. Smart aggregation via machine learning or text clustering can foster this, as Rohde & Schwarz have shown.

Conclusion

Strategy work is facing just as drastic changes as operational work once did. Digital end-to-end solutions can enable these changes. Let′s do things right directly from the start, as we have seen at ERP′s path. Get Evolutionized !