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*

CREATING A
RECIPE FOR

SUCCESS
Questions to guide the
development of a first
class ERP solution

*Illumiti is a member of United VARs, which is an SAP platinum partner.

INTRODUCTION
ERP implementation
projects arent as easy as
they look, and they dont
look very easy.

operating expenses, or become more

Every year, organizations spend

achieve the benefits companies

effective at serving customers.

The problem?
Many of these projects fail to
envision when they set out on their

millions of dollars to implement

transformation journey. In fact,

different ERP solutions with the

according to a 2015 ERP Report by

hopes that the new solutions will

Panorama Consulting Solutions, 60%

allow companies to scale, reduce

BENEFITS REALIZATION
81-100% of
Benefits Realized

No Business Case

%
31

31-50% of
Benefits Realized

51-80% of
Benefits Realized

3%

13%

9%

16 %

No Measurable
Benefits Realized

28%
0-30% of
Benefits Realized

FIGURE 1 Source: Panormas 2015 ERP Report

of companies achieve less than half

Imagine that he has purchased a

Thats why, when you think about

of the benefits they imagined prior

coupon to a grocery store that entitles

ERP opportunities, its better to look

to their implementation. Only 9%

him to one of every item in the store.

at the combination of functional

realized between 80-100% of their

The chef faces a dilemma: Does he

capabilities necessary to meet the

expected benefits.

cook the best (assumed) value meal,

specific needs of your organization

or the best tasting meal?

over time, instead of simply

Sometimes, companies fail to meet

implementing as many functional

their objectives because they dont

Under the first scenario, the chef

set any. Its hard to achieve value

would lean toward trying to use as

if you dont know what you want to

many ingredients as possible,

accomplish. More often, however,

since the ingredients were all paid

companies fail to realize benefits

for by the coupon. In the second

because they try and do it all, even

scenario, the chef would be more

when they dont need to. Many

selective, choosing only those

companies believe that bigger is

ingredients required to cook the

While a comprehensive functional

better or in the case of ERP, that a

best tasting meal.

ERP solution may be the right choice

broader solution is best. But by trying


to implement every ERP option and
module available, companies often
create challenges that typically result
in cost increases and time delays.

Why do companies want


to implement more than
necessary?

The question the chef must


ask is: What does a first
class meal mean?
If the chef believes that first class
refers to taste, then it isnt the
number of ingredients that make
the meal taste good. Rather, it is
the combination of the ingredients

modules as soon as possible. The


more elements you include in
the initial scope, the higher the
likelihood that you wont achieve
the results you want, on time and
on budget.

for some organizations, it will not be


the right one for others. The question,
of course, is how to determine what
your organization requires in each
phase of the implementation no
more and no less.
Through our work with a broad
range of small, medium and large
enterprises, we have developed an
approach called focused simplicity

The answer lies in three key areas.

selected and the sequence of the

Firstly, there is often vagueness

courses which would allow the chef

on the specific implementation

to prepare the meal to the tastes

business objectives. Secondly,

of a particular diner. The more

most ERP licenses includes access

ingredients a chef throws into the

to a broad scope of functionality.

mix, the more likely the meal will

Finally, the waterfall approach to

come out below expectations.

amount of focus and evaluation.

The same can be said about ERP:

questions upfront, increases the

implementations of ERP is still the


preferred approach by many.

the broader the scope of an ERP

Consider and analogy where a chef

implementation, the higher the risk

wants to make a first class meal.

and potential cost of the project.

which involves answering 3 key


questions before initiating an ERP
implementation. While seemingly
straightforward, answering these
questions can take a significant
Furthermore, answering these
probability of a successful ERP
transformation that provides the
greatest value to your organization.

QUESTION 1:

Why Change?

Some implementations are


technical replacements.
Others are grounded in
desired business outcomes.

and provides an ongoing focus for

Regardless of the type of

outcomes that your business

implementation, if it doesnt

stakeholders want to achieve as a

come with clear objectives, it will

consequence of the ERP initiative.

likely fail to improve a companys

Every organizations Why may be

business performance. Thats why

different. At the highest level, the

any significant project should be

Why for many organizations is

grounded in a strong Why? a

usually associated with increasing

strong business case especially

throughput, reducing operating

when the decision involves an ERP

expenses, improving working

solution that could take significant

capital or improving compliance.

time and resources to implement.

any important decisions or dilemmas


throughout the implementation.
To define your Why, you need to
identify the most important

There are many activities that can

A good and clear Why becomes the

help you define your why with

true north for the implementation

respect to an ERP implementation.

SO WHAT?, WHO CARES?, AND


HOW MUCH?
The answer to Why must be strong enough to serve
as your projects true north. You can more effectively
establish this by asking so what? or more diplomatically,
what are the (positive or negative) ramifications of
this?. For instance if the answer to why change is to
improve our visibility, asking so what? could expose
a higher level outcome such as improve profitability
of customers by identifying which products our most
profitable customers buy repeatedly and enable us
to promote those product to customers who dont
currently buy them. This feels better and more aligned
to the broad category of increasing throughput. We can
further test this by checking who cares? the answer
As a starting point, look ahead to

we are looking for is someone at a senior enough level

six to twelve months following the

whose personal business plan for the next 3-5 years is

change and outline any related clear,


measurable outcomes you expect to

dependent on improving this outcome. If the answer to

accomplish as a result of the project.

who cares is not an executive level stakeholder, you are

These outcomes should align fully

too low, and need to ask so what again.

with your overarching business


strategy and your senior leadership
teams view of what is most

It is also important to quantify these as much as possible,

important. Next, ask yourself what

i.e. by how much would revenues increase if we get this

the risks and benefits are associated

right?. If quantification is not possible, at lease a qualified

with both making the change and


with not making the change. By
understanding the potential impacts
associated with both making the

order of magnitude is critical.


Going back to the chef analogy, a great chef will want to

change and not making change, you

set expectations for the meal. If the meal is for a food

will be able to really understand why

critic at a Michelin star restaurant, what criteria will they

or why not you should implement


an ERP solution.

base their opinion on? If its a high school cafeteria, what


do the students and faculty expect? Knowing what the
patrons want or expect will help a chef determine the right
menu, ingredients and approach for the meal.

QUESTION 2:

What Do We Need to Change?

Once you determine why your organization should


move ahead with an ERP implementation, you need to
consider very carefully what exactly you need to change
specifically, the scope of the implementation.

The best way to determine the

During this step, many companies

As was discussed earlier, more scope

the cascade. In order to achieve the

typically try to take on too much.

does not necessarily mean more

desired outcomes, companies should

Once theyve decided they need to

benefit just like more ingredients in

define the list of business capabilities

change, they assume that the best

a meal does not mean that it will taste

which are necessary and sufficient.

thing to do is to change as much as

better. Moreover, added scope in an

Further, to achieve each business

possible especially since an ERP

ERP implementation almost always

capability, companies should

license typically comes with a lot

results in more costs, time and risks

identify all the necessary functional

of functionality options included.

for an organization.

capabilities (i.e. the process

Companies make the decision


to implement the many options
available to them, rather than
critically considering what needs to
change on a systematic basis.

Rather than try and implement every


possible module associated with
an ERP solution, companies should
have a guiding principle to achieve
the minimal viable scope the
minimum solution needed to achieve
the value a company desires. By
looking to achieve the minimal
viable scope, a company can align a
solution with its desired outcomes
while reducing risks associated with
implementing added capabilities that
are not needed or required.

minimal viable scope is to consider


the Value Cascade as depicted in
Figure 2. The business outcomes
identified at the top of the figure
set the tone (focus) for the rest of

capabilities needed to deliver each


business capability efficiently and
effectively, the technical capabilities
needed to automate or enable the
processes, and the people capabilities
needed to support both process and
technical capabilities). Once each
of these has been defined in an ERP
implementation, the company will
be able to define the scope of the
technology (i.e., in this case the ERP
solution) needed to deliver to the
technical capability requirements.

It should now be evident why having

defines when we expect the various

stakeholders want and why not?

a clear and focused Why is so

business and functional capabilities

He got them all for the price of the

important. If you know why you

to be delivered.

coupon so there is no additional

need to change, you can assess


your business and technical
capabilities accordingly.

Going back to the example of


our gourmet chef; when the chef
understands the objectives of the

ingredient cost). No one would be


surprised that the outcome would be
cafeteria slop

Making the tough decision of what

meal and why it is being served, he

If the Chef doesnt know what is the

NOT to implement right now may

will be able to define what is needed

objective and what needed to make

not be popular with those business

to accomplish the objectives from

the desired meal, it is more likely that

stakeholders who are feeling some

determining the appropriate courses,

he will put in more ingredients than

pain at present but is critical to

to ensuring the kitchen is equipped

needed and the meal will be a flop.

ensure that each phase is as simple

with the required kitchen utensils.

and lean as possible yet providing the

The chef may also need to hire on an

components necessary to deliver the

appropriate sous chef to help with

desired outcome of each phase.

meal preparation.

It is important to remember that

In the chef is cooking for a gourmet

ERP transformation implementing

with ERP, it is usually easier to add

food critic, he will likely be very

functionality that isnt actually

more sophistication to a simple

selective with the ingredients he

needed to get you to where you want

solution later on than it is to reduce

uses, his tools, his methods and

to go. Regardless of the breadth of the

the complexity of a complex solution.

the sequence of the courses. The

solution you choose, it is much more

Furthermore, since not all business

less-is-more mentality is front and

effective and efficient to implement

outcomes are needed right away,

center. If on the other hand the chef

the minimum viable functional scope

most companies can define the

is trying to please all the students

possible to achieve your desired

timeline desired or required to

and all the faculty of a high school

outcomes. By making more changes

achieve the outcomes. This timetable

cafeteria, where some kids like

than you need, you only reduce your

also facilitates the phasing of the

beans, some like rice and others like

ability to achieve what you really

capabilities required to deliver

potatoes, etc the chef may just opt

want, while also increasing the risks,

those outcomes. We call this time

to creating the highest value meal (ie

time and costs associated with your

the capability roadmap which

put in all the ingredients that all the

ERP implementation.

Without a thorough understanding of


the capabilities required to achieve
your desired outcomes, you may
spend a significant amount of your

THE VALUE CASCADE: ALIGNING SCOPE TO BUSINESS OUTCOMES

Business Outcome
Business Capability
People Capability

Technical Capability

Process Capability

Technology Scope

FIGURE 2

QUESTION 3:

How to Change?

The last major question you need to ask before


moving ahead with an ERP transformation initiative
is How to change?
The answer to this question includes

of each course to make sure the

the detailed roadmap for your

corresponding ingredients meet

change (e.g. methodology, timing or

those objectives. At this point in

phasing, key resources, etc). From

the meal planning process, the

the previous question, you know

chef plans the sequence of courses

what you need to change. However,

carefully to make sure each

very few organizations if any can

subsequent course builds on those

make all of those changes at once

previous in order to ensure the

and be successful. That is where this

meal as a whole is first class.

question can help.

From an ERP implementation

Going back to our cooking analogy,

perspective, we use the capability

our gourmet chef will not put all of

roadmap to define when the key

the ingredients of a planned meal

aspects of capability should be

into the first course. Rather, the

delivered. But actually flushing

chef will plan out the number of

when specific areas of scope should

courses, and then define the objective

be implemented requires some

consideration. Our preferred method

complexity, high impact (benefit);

to determine the most effective

second high complexity, high impact;

sequence for an implementation

third low complexity, low benefit

project is to consider the relative

and generally last (or never) high

complexity/risk of a change step

complexity low impact.

versus the benefit expected from


the step.

In order to make this step more


tangible, we have adapted Geoffrey

The complexity and/or risk of a

Moores Core/Context Matrix (see

given functional area of scope is

Figure 4). We leverage this matrix

typically dependent on the amount of

to help classify the required

innovation or customization required

capabilities and so determine the

to deliver that functionality. In other

best possible sequencing.

words, any scope area where the


functionality is standard, proven
or based on existing best practices
is typically easier and less risky to

COMPLEXITY/RISK VS BENEFIT MATRIX

implement than a scope area that


has to be created, customized or

an impact on either improved


profitability or risk mitigation. From
a profitability perspective, the area
most likely to be affected is revenue

High Impact

Benefit or value is the result of

Low Impact

implemented for the first time.

Low Complexity

High Complexity

(i.e. through the ability to either


increase price or quantity, or both).
The only real mechanism a company
has to increase volume and/or price
is through differentiation. So in order
to identify areas of maximum value,
a company needs to understand how
a change in a given capability will
create either a reduction in risk or an
increase in differentiation.
As a general rule, the sequence
of scope to be implemented is as
numerated in Figure 3: First the low

FIGURE 3

UNDERSTANDING THE
CORE/CONTEXT MATRIX
On the Risk Axis, there are two classifications for
capabilities: Mission Critical and Enabling.
In order to understand this axis, we define the red line. The red line is that level
of performance that if the company dips below, for a given capability, the entire
company will be exposed to significant risk.

CORE CONTEXT MATRIX


2

AREAS OF
MANDATORY
EXCELLENCE

PRIMARY AREAS
OF OPERATION

AREAS OF
INNOVATION

SUPPORTING AREAS
OF OPERATION

Core

Context/Standard

Mediocrity

Enabling

RISK

Risk

Mission Critical

Differentiation

DIFFERENTIATION

FIGURE 4

MISSION
CRITICAL

These include capabilities whose output is at a level close to or below the


red line. In other words, those capabilities at a performance level that are
close to or already putting the company at risk. Capabilities considered
to be mission critical do not imply any ramifications of significantly
improving above the red line. An example of a mission critical capability
for a typical company is payroll. If performance drops below a minimum
level, the company is exposed to significant risk. Once above the red line
by a safe margin, substantially improving payroll capabilities for most
companies has very little consequence (unless the company is in the
business of providing payroll services).

ENABLING

These include all other capabilities that are not mission critical.

As depicted in figure 4, quadrants 2 and 3 are Mission Critical, where the current
performance level (dotted line) is close to the Red Line. Quadrants 1 and 4 are Enabling
current performance has a substantial orange zone before the red line.
On the differentiation axis, we have two other classifications for capabilities: Core and Context. From a differentiation
perspective we consider the blue line as the level of performance that if exceeded, will significantly differentiate the
company to the extent that the company can justify charging a premium for its products and services or simply sell more
at the same price as its competitors.

CORE

These include capabilities whose output is at a level close to (i.e. either


right above or below) the blue line. If performance levels associated with
a core capability increase, the capability will significantly differentiate
the company against the competition. An example of a core capability is
the ability to substantially reduce production lead times while delivering
to committed dates reliably. By the way, just because we do something
differently to everyone else doesnt make it Core. In order to be Core, we
have to do it differently AND it needs to differentiate us as stated above.

CONTEXT

These include standard capabilities that a company has in common


with other companies in the same industry or across industries. In
other words, Context capabilities and processes are executed almost
identically by many companies. We often refer to these as best practices
or standard processes. For example, running payroll or processing AP
for a manufacturing company would be little to no different than running
payroll for most other companies.

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USING THE CORE/


CONTEXT MATRIX
Oftentimes, we see companies lean towards classifying
most capabilities as Core and Mission Critical (i.e.
Quadrant 2). This is because they fear that if they dont
classify capabilities in this quadrant then their key areas
of interest will be de-prioritized.
Dealing with this sort of bias requires sensitivity. We recommend challenging
any questionable classification in this manner.

First, challenge Core/Context


by asking:

Second, challenge Mission


Critical/Enabling by asking:

In what way does this currently

Is the capability really close to the

or with some slight improvement

red line? If so, how? and further

differentiate us? Are we really doing

If we drop below the current level

it in a unique way? If this is unique,

of performance what would be

is it because thats the way we have

the negative ramifications to the

always done it? Or does it truly

company as a whole?

differentiate us?

When you look at each capability

capabilities are standard or similar

while ensuring a company is

objectively by considering

to those of other companies. Having

conducting standard functions to the

and carefully checking risk and

standard capabilities should not be

same performance levels as other

differentiation sensitivity you

seen as a negative. In fact, the higher

companies with similar processes.

can make better decisions on

proportion of standard capabilities,

classifications.

the more time and effort a company

Figure 5 highlights the typical


proportion of capabilities across

that truly differentiate them.

that Core capabilities and processes


should always be customized or
unique. While Core capabilities

quadrants that we expect to see

When you are determining changes,

typically differentiate a company,

based on our experience working

you should leverage as many best

some of these capabilities can be

with a wide range of companies

practices and standard functionality

delivered within standard ERP

on ERP implementations. For most

as possible when it comes to Context

functionality. In the cases where

companies, the highest proportion

capabilities and processes, especially

standard functionality will not work,

of capabilities (75%) usually will fall

in mature ERP solutions (i.e. like SAP).

companies can make the informed

within the Context quadrants (i.e.


Quadrant #3 and #4) and because the

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can spend on the core capabilities

At the same time, this does not mean

Leveraging best and standard


practices can reduce time and risk

decision to use more innovative or


complex architecture. However, these

types of changes typically

remember that Context capabilities

implemented together with quadrant

will bring more risk, time and

are generally simpler to implement

3 (if time permits in an early release)

cost, and so should be sequenced

than Core capabilities. As a result,

or right after. Once both of these

carefully to maximize value

Quadrant 3 capabilities are typically

have been completed, you can target

while decreasing risk.

included in early implementation

capabilities in Quadrant 1, and then

releases (i.e. Context and Mission

in Quadrant 4 (especially if these

Critical). Capabilities in Quadrant 2

are supported with standard best

(i.e. Core and Mission Critical) are

practice components).

When you are determining the


sequencing and phasing of your
ERP implementation project,

typically next in line and are usually

PROPORTION OF CAPABILITIES ACROSS QUADRANTS


Quadrant 1:
Core/Enabling
Quadrant 2:
Core/Mission Critical

Quadrant 4:
Context/Enabling

15

5%
%

20

60%
Quadrant 3:
Context/Mission Critical

FIGURE 5

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RED FLAG
If your company is considering custom development for
Context capabilities, you should step back and reconsider
your value and objectives. Context capabilities should
be delivered within standard functionality as they dont
offer differentiation.
Like a gourmet chef preparing a meal, planning how you
will implement an ERP solution up front from capabilities
prioritization and sequencing to determining how to make
each phase build on the one previous can help you create
a successful recipe that will guide you to the achievement
of your overarching objectives.

CREATING A RECIPE
FOR SUCCESS
ERP transformation can significantly help your
organization move from where it is today to where you
want to be in the future but only if you know what
you want to accomplish and have the right recipe or
roadmap to get you there.
By asking your Why change?, What do we need to change?, and How
and when do we change? before you start , you will be well positioned to
make a first class meal without setting off the fire alarm.

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ABOUT THE AUTHOR


Larry Perlov, President of Illumiti Corp, is a veteran of the high-tech and consulting
sectors with over 20 years of international executive-level experience in SAP, ERP, and
IT infrastructure solutions.
Larry has extensive experience

Prior to that, he was vice president

expert in core SAP modules as well

leveraging people, processes and

of Intuit Corporation Distribution

as process design and integration,

technology to drive business value

Services and director of EMC

Larry is a results-driven leader with

for clients. Prior to Illumiti, Larry

Corporation Client Solutions of

a proven track record in business

was a senior vice president at IMG

New England. As a senior director

development, operations, and

responsible for the Global SAP

at PLAUT Consulting, Inc. he was

program management. He is noted

Business One business unit.

responsible for international SAP

for his ability to create and motivate

implementations, which spanned

highly efficient teams to drive SAP

business development and project

solutions excellence.

and integration management. An

ABOUT ILLUMITI

Illumiti is a member of United VARs which is


an SAP platinum partner.

Illumiti is a leading systems integration and management consulting company with


offices in Canada, the U.S. and Switzerland, serving customers globally.
Its team enables customers to realize

alternatives. Illumiti is a member

their vision by leveraging the worlds

of United VARs, which is an SAP

leading on-premise and cloud-based

Platinum partner. Illumiti has been

business applications. Illumiti

recognized as the top SAP reseller

helps its clients achieve optimized

for Canada for five consecutive years

operations in the key areas at the core

and is one of the fastest-growing

of their business, by implementing

SAP channel partner in the U.S.

custom-fit solutions from SAP and

For more information please visit

other vendors faster, at a lower

www.illumiti.com.

cost, and at a lower risk than other

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For more information, please contact:


Myles Beecroft, Sales Associate, Illumiti
mbeecroft@illumiti.com

illumiti.com
The information contained herein is of a general nature and is not intended to address
the circumstances of any particular entity. No one should act on this information without
appropriate professional advice after a thorough examination of the particular situation.
Copyright 2015 Illumiti. All Rights Reserved.
The Illumiti name and logo are registered trademarks.