ERP is back on the agenda, but not as Enterprise ‘Resource’ Planning, to run a successful Digital Business you need a different approach to ERP. Better to think of it as Enterprise ‘Response’ Planning, the ability to support a dynamic Digital Business where the very business activities are constantly changing.
It seems a little late, perhaps by even a decade or more, to be thinking about ERP. Surely any competitive enterprise has been there, done that and got the benefits as part of the last wave of Business and Technology disruption starting in the early 90s? More importantly that means the choice of an ERP package has been made, and a big investment carried out. Making changes? Keep them to a minimum as its not just expensive, but this is tinkering with the very foundations of how the enterprise operates.
And there is the problem, for any established Enterprise their ERP installation defines their very operating model and capabilities’. A business model where optimization is defined by choosing optimized processes and reducing, even eliminating, variation and change on the basis of inefficiently and cost.
ERP, as it is generally understood today, defines the business model created by Business Process Re-Engineering that was built on the new disruptive capabilities of PCs and Networks. This was previous business model disruption to take advantage of the competitive benefits of the then new wave of technologies/capabilities.
Right now Enterprises are facing up to their new business model disruption and competitive opportunity with the challenge of moving beyond the first generation of Digital Business. (The addition of an online capability in front of their existing business model to increase sales exposure and direct revenues without changing any other aspects of their business – see links at the end of this blog for more detail).
For the last couple of years there has been no shortage of Business School detail on defining the new business model to survive, and prosper, in a fully Digital economy, where the competitive rules are different. If you change your business model it should come as no surprise that you should examine changing your ERP operational supporting model! So the topic of what form of ‘ERP’ solution has the capability to manage a new and entirely different business model needs to be back on the table.
If you had the luxury of starting a new business built around the generally accepted principles of the new Digital Business; a de centralized market and customer reactive business based on using services to minimize overheads and increase flexibility, etc. would you choose to re install your current ERP system?
Note the word re install, not necessary choose a different supplier, but how would you implement one? Maybe there are a few enterprises that could come up with a reason for investing in owning, and operating, the existing model in this environment. However the answer from everyone else, and certainly true for the new startup Digital Business players, is that you would use ‘Services’ on a pay as you go basis, plus, and it’s the big point, gain huge flexibility to adjust your ERP processes frequently in line with how your market, business and activities are changing with circumstances and opportunities.
The big ERP providers are equally aware of this too, and the existing leaders from the last decade are all offering their capabilities as Services, accepting smaller customers, and facing up to their own competitive wave of startups offering ‘Digital Business’ supportive ERP.
Digital Business, whether a new startup, or a new operating group in an existing Enterprise, is all about a new business model based on frequent change to make the most of opportunistic circumstance. Delivered by using Services that are directly cost attributed to the outcome, allowing flexibility in ‘process’, or actions, achieved by minimizing all overheads. That is not a business model to fit existing Enterprise ERP systems and implementations! New business model = new ERP model!
Actually the case for better management in these ultra dynamic Digital Business operations is higher than in the optimized process business model of existing business, but its role is subtly different. Lets call it Digital-ERP to differentiate because the R now stands for “Enterprise Response Management’, and it has to provide managed ‘responses’ to frequently changing business outcomes. It also has to tie with a new set of management financial controls that reflect an overhead light, low investment, direct cost allocated Digital Business model, (for more information on the new financial controls see links at the end of this blog).
A Digital Business unit needs new management and financial operational controls that suit and match with its basic business ethos; the case for introducing a new approach using Digital-ERP and a new set of Financial controls at the outset is a strong one. It doesn’t necessarily mean changing ERP supplier, though it is an opportunity to re examine what is available in the market, but it does mean changing ERP implementation and use!
This topic, and the conclusions above, formed part of the discussions at the London event of the Constellation Digital Disruption tour. The discussions where helped by the London event being sponsored by FinancialForce.com who has grown rapidly over the last five years as a new wave ERP, or Digital-ERP, market player. More information on the following topics on the above, and aligned topics, can be found in the following Constellation blogs;
Its Smart Business now and not Digital Business; https://www.constellationr.com/content/sell-more-today-then-its-digital-business-survival-smart-business
Mastering new financial controls for Digital Business; https://www.constellationr.com/content/digital-business-mastering-new-financial-controls