Implementing or upgrading an SAP-ERP can provide an advanced, flexible IT landscape that helps organizations adapt quickly to dynamic market requirements and to improve efficiency, digitalization, and cost optimization in the long run. But SAP implementations are rarely just technical implementations. They can fail when companies neglect the need for organization change and the transformation journey. Many enterprises underestimate the effort required to change their internal behaviors and ways of working.
For example, a leading multinational conglomerate implemented an order management system as part of its SAP package, which cost around $120 million. The system was supposed to save the company more $10 million per year, but it had quite the opposite effect. The organization’s sales representatives struggled to adapt to the new system. Getting early buy-in from the end users and providing adequate training was overlooked.
Another construction materials company implemented an SAP system and estimated it would generate $12 million to $14 million in net sales after it went live. In fact, the company’s profit dropped by 45%. The major reason for this failure was not the new process or system but the lack of user adoption.
In fact, when organizations and their people are not prepared for the transformation, implementation can take more time and more money. The key to a successful SAP implementation is a comprehensive Organizational Change Management (OCM) strategy. To achieve actual business benefits and increase user adoption, people need to engage continuously, sharing their concerns and feedback through a constructive change management roadmap.
Software Advice, a Gartner company, has identified the key reasons for SAP or any ERP implementation failure as shown in the graph below. Half the respondents cited poor change management as the primary reason for SAP transformation failure.
Fig: Why ERP implementation fails?
Organizational Challenges in SAP Implementations
The business impacts of an SAP implementation demonstrate the importance of change management:
These challenges can be illustrated through real life cases.
Case 1: SAP Concur Implementation
A major oil and gas company wanted to leverage their expense management process and systems by implementing SAP Concur and integrating it with their core SAP system. Users are dispersed across 10 different countries. This new SAP implementation resulted in a new way of submitting the expenses. User adoption was not to the expected level and, as a result, business benefits were not achieved.
The company did not have the proper channels to handle the people side of change. and facing difficulties in spreading awareness and conducting training as their people across locations and time-zones. Employees were not using the system effectively.
Change management was not initiated until late in the project life cycle when change resistance and misinformation were on the rise.
After handling the people side of change through a change consultant, the client was able to achieve the desired end-user adoption levels across locations and the number of helpdesk tickets related to expense was significantly reduced.
Case 2: Vendor Invoice Management
The client implemented the SAP invoice management workflow to automate the end-to-end invoice process. The scope covered internal and external stakeholders and business processes, and the new SAP system implementation introduced a new way of submitting, processing, and approving invoices. However, end-users were not properly or adequately trained, and post-implementation adoption levels were low: less than 10% of the invoices were being processed using the new system.
The organization resisted embracing the transformation because the client did not have a proper change management strategy and approach to onboarding internal and external stakeholders. The actual business benefits of the system were not achieved, and leadership considered canceling the project.
However, they decided to introduce a strong change management team to help bring the project back on track. Stakeholders were onboarded and engaged effectively. Vendors started using the new system to submit their invoices, and internal users started using the new system to process the submitted invoices. Adoption was measured as part of the change strategy and communicated to leadership periodically. Now, the project is running successfully, with more than 90% of invoices processed using the new SAP solution.
Risk of Focusing More on Technology
Traditionally, executives have placed more importance on the technical aspects of implementations including functionality, reliability, timeline, and budget. In-house and external IT teams have often concentrated more on system engineering aspects than adoption and change management. Nonetheless, project overruns and failures still happen – primarily when SAP projects are managed from the technical perspective and neglect the people side.
Wipro’s view is that change management should be an integral part of SAP implementation from the beginning. This involves deploying a dedicated change manager or change management team with the necessary skills to handle the people side of the change effectively.
Characteristics of Change
Don’t think about “users” – think about the people who are using the system. People have emotional reactions to change. Change management will educate leadership and end-users and make them aware of the changes that are coming their way. The key focus should be on these elements:
Change management for SAP implementation follows a structured methodology that should be adopted to encourage the organization to understand and accept the changes. An organization can only get the full value and potential from a new SAP implementation after all the people who use the system have accepted the changes.
Key Change Levers to Drive Any SAP Implementation Project
Effectively driving change management will lead to achieving effective system adoption. Listed below are change levers used in the invoice management problem mentioned above, but which are valuable for any SAP implementation project.
1. Create a Business Case
A business case will provide the end-to-end information about the change, particularly in terms of why the change is triggered and what benefit or value is expected from it.
Example: On the invoice management project, a detailed case study was prepared regarding the change. Initially, the vendor would submit invoices manually into a submission box. The expectation is to onboard all vendors and make this new solution the single window for all invoice submission. This will provide better cash flow and hence, strengthen the relationship between vendor and client. This was measured frequently against the expected results covered in the business case.
2. Leadership Alignment
Leaders across all levels must have absolute clarity on the purpose of the change and be aligned strategically. Leaders must have clarity on:
Example: The executive team should have a regular update on statistics such as number of invoices submitted, processed, and paid (among others). Also, monthly reviews should be conducted to keep them engaged.
3. Stakeholder Management
Stakeholders are dynamic, and it’s important to form and maintain constructive relationships with different stakeholders. People who were once supporters of the project may have learned something that causes resistance now. By spending time with stakeholders on regular basis, a change manager can monitor and maintain good relationships. Stakeholder management drives change management.
Example: The invoice management project impacts both internal and external stakeholders. A stakeholder analysis provides different categories of audiences across the organization and leads to understanding of their perceptions of the project. Then, change strategies were devised to manage external stakeholders and internal stakeholders efficiently. Focused vendor sessions, and internal stakeholder sessions are conducted to listen and address their concerns and feedback.
4. Change Impact Assessment (CIA)
CIA is a detailed analysis comparing the current state to the future state and understanding the impact of the implementation on process, people and the organization. CIA helps drive the change from the organizational level to the individual level. CIA will act as the input for building communications and training strategies. It also covers a detailed analysis of job or role mapping.
Example: A detailed analysis of existing and new invoice management processes against each stakeholder segment was completed to figure out the most efficient communication and training strategy. People react to communication differently and a customized change strategy is needed based on the user group.
5. Change Agent Network
Effective and excellent change management delivery requires establishing a change agent network across the organization. A group of people was selected from various department to be influencers and drive change within their user communities. They are the focal points and the carrier of the change program.
Example: An influencer for every department was appointed across organization. These focal points act as change agents. Constant engagement with change agents helps take the change to the grassroots level across departments. Communications and training were executed well with the help of the change agents.
6. Business Readiness and Adoption
How prepared are users to accept changes? Before the system goes live, the enterprise should evaluate business and transformation readiness, in order to understand the level at which users are ready to accept change. After going live, the same process can be repeated to understand the adoption level of the new SAP system.
Communication – the right message, to the right audience, using the right communication channels, at the right time – is one of the key levers of the change program. A good frequency of communications will keep the audience engaged.
Example: With input from the impact assessment, a detailed communication strategy plan was made and very well executed. The key benefits of the new invoice management solution were communicated periodically to different stakeholder groups through all possible and available communication channels across the organization.
Another key lever of the change program is to educate stakeholder groups about the new process, their roles, responsibilities, and the system. Understanding training needs and training the users on relevant modules, using an effective training strategy, enhances the user’s readiness to adopt the changes.
Example: The Concur case adopted a “train the trainers” approach. A group of internal users was educated to conduct further training and reach out to audiences across different countries. In the invoice management project, the training strategy was based on input from the impact assessment and executed at department level to reach the audience effectively.
9. Change Reinforcement
Once the change is implemented, an organization tends to move on to the next change program. However, it may not sustain the change in long term. People can turn back to their original level of comfort. That’s why reinforcement is required to sustain change. For example, a celebration event or a reward and recognition program directly linked with the change can help to sustain momentum.
Example: To reinforce the change in the invoice management project, a new email and helpdesk channel to address the stakeholder’s concerns was provided after system go-live. “On the job” training was provided to the stakeholders required to adapt to the new solution. Detailed statistics were prepared on people struggling with the new solution, and they were supported through targeted communication and training sessions.
Vendor meetings and stakeholder engagement sessions were been arranged to embrace the change. Feedback was collected and success stories were shared with audience to create positivity. Overall progress and success of the project was communicated in every stakeholder meeting to reinforce the change.
Technology & People
For enterprises adopting an SAP system, the focus should be two-fold: on the system-related changes on SAP but also on people side. This will increase user acceptance and adoption and leads to the desired results. Change management consulting can be the key to improving success. Organizations can also set up a change management office to increase the effectiveness of change programs if the SAP implementation is running as a different project. It is better to have a common pool of change professionals to run the programs with uniformity, common language, and framework to change management across organizations.
Wipro’s change management capabilities and its global pool of consultants can help technical implementation teams achieve high a degree of client satisfaction, run projects on time, and with the desired adoption outcomes.
Pradeep Kumar R
Senior Consultant, Digital Consulting
Currently based out of India, Pradeep specializes in driving large-scale Organizational Change Management (OCM). He is an engineering and MBA graduate having total experience of nearly a decade, the majority of which has been devoted to OCM. Pradeep has also worked on technology, digital transformation, ERP implementation, and mergers and acquisitions projects.