New technologies

 

Throw a coin in the air. There is a 50% chance of heads and a 50% probability of tails. Today, based on a recent study with 113 process companies, an organization’s probability of success with an IT project is almost the same as the toss of a coin. Based on a recent study of 113 process manufacturers, only 58% of companies report that their projects meet their business objectives. So, within manufacturing organization, the chances of an IT project meeting successful business outcomes is about the same as a coin toss. Scary? Yes, I think so.

Lets face it, getting a new project kicked off is tough. The average company spends 1.7% of revenue on technology investments. More and more of this budget is allocated to maintenance support and systems support. As a result, the funds for new projects are fewer and far between. The IT budget is being squeezed. As a result, the hurdles to get money and kick-off a project are higher. There are fewer projects and the technologies are changing fast.

Does this mean that organizations should not attempt to do an IT project? No, we do not think that this is the answer. Instead, we believe that companies need to take five actions to improve their odds of success. These observations are based on work with over 500 companies over the past ten years.

Step 1. Educate the Line of Business User. Line of business users need to take responsibility for project success, but most business users do not know enough to scope and clearly define business requirements. In addition, the IT teams often work in silos. They understand IT, but lack the understanding of business requirements. Business users need to educate themselves through conferences, structured networking and work with strategic vendors. Action item: This can take different forms in different organizations. Experiment and define an approach that can work for you. There are many possibilities. Set aside funds within a supply chain center of excellence for education, and support innovation spending to better understand new technologies without being hamstrung to have a formal project with a well-defined ROI. Support technology innovation and test and learn. For example, one client that I work with hosts an annual IT innovation day and invites technology companies and consultants to participate.  The good news is that many analytics projects are small and incremental with sequential learning. (This is a very different approach than the big-bang approach of ERP.) Another organization that we work with funds innovation funds for business groups to tap to test and learn with new forms of analytics. Project teams submit a proposal to a cross-functional team that reviews potential projects.

Step 2. Consider the Redefinition of Career Paths. Some of the most successful companies that I have worked with have promoted a line-of-business leader into the role of the CIO. When this happens, the CIO has a greater tendency to serve the business. Additionally, the companies that I have worked with that are the most progressive in the management of successful IT projects have career ladders that encourage the cross-functional movement of IT and business leaders between organizations. In these organizations, there is a more natural interchange between groups. The bigger the walls of the silos, the greater the probability of project failure.  Additionally, the more IT outsourcing within the organization, the bigger this issue can be. Action Item: Consider redefining the organizational career paths to develop a greater opportunity for cross-functional process development.

Step 3. Get Clear before You Contact Solution Providers. Some of the largest project failures that I have witnessed started with a project team that was unable to make a decision on a project after an extensive vetting of technology options. When a project team is unable to sort requirements to sort out which technologies and approaches to create the most value, the project starts out badly and is doomed for failure. Instead, the team needs to start with business outcomes and work backwards to requirements. The danger of contacting technology suppliers and consultants first is that the larger technology ecosystem tends to think in feature and function language. As a result, it is important to get clear before you get started. Action Item: Define a project outcome and decision process to make a final decision before you get started. Send out fewer RFPs and work on more upfront definition.

Step 4. Be Realistic. Lets face facts. Today, getting technology funding is tough. As a result, many projects are doomed to failure before they get started because they are saddled with unrealistic expectations before they get started.  Action Item: Set reasonable expectations and stick to a focus on business outcomes.

Step 5. Don’t Hamstring the Project with a Sub-standard Solution from a Strategic Vendor.  Many companies have ERP backbones for transactions or an IT standard for analytics. Over the last decade, the business organization has been hamstrung by a well-intending IT organization to use these ‘more strategic vendors.’ There is a goal to have fewer vendors and one throat to choke. The unfortunate reality is that the gap between strategic vendors and innovation has grown in the past five years creating an opportunity cost of the organization. With today’s options for hosting and cloud, the organization needs to release these requirements and free the organization to drive new levels of innovation. Action Item: Help the organization make the right balance between IT standardization and evolving technologies. The pendulum has swung….

So, can you beat the odds? We hope so. Let us know how we can help. We think that a successful business project should have better odds for success on an IT project than the flip of a coin.

Did I miss any that you would add? Please let me know. I love getting responses on my blog. If you want to connect in person, next week, I will be speaking at the Quintiq world tour in Philadelphia and at Pivotcon on the Digital Supply Chain in New York. Hopefully, I will see you in my travels. All the best….

 

 

Joining Forces for the Third Act

by Lora Cecere on July 24, 2014 · 0 comments

“I read your blog, and was struck by some of your comments on Forbes,” stated the email. “Could we arrange a call?”

“Sure,” I said, and the call was quickly arranged.

As I answered the phone, I heard the voice of an aggressive investor in supply chain technology software. He seemed very certain in an uncertain market. I scratched my head because I question how anyone can be this “sure.” Since more and more equity groups are reading this blog, and sending me questions, this post is for them.

I have been writing on what I term the “Third Act in Supply Chain Planning Software.” I believe that we have seen two prior evolution periods of supply chain planning software and we are entering into a third period. I am excited about this evolution and eager to share my opinion.

Here are the questions I am getting most often:

What does it take to be successful in the supply chain planning market? I look for three basic factors. Leadership by the CEO, understanding of the business problem at the product marketing/management level, and the ability to build software. Many companies are missing one or two; while sadly, some are missing all three.

So, you write that SAP will struggle and then recover, but Oracle will not do well in what you call the “third act” of supply chain planning software. Yes, I say. This is the beauty of being an independent analyst and having the ability to call as spade a spade. I find too few analysts are able to speak the truth. They are hamstrung by their organizations.

I think that SAP has great talent to write software, but their current focus is on the analytics technology market. They put supply chain into a traditional framework of CRM, SCM and SRM and the world has moved past this. I think that SAP lacks focus and a basic understanding of the business problem.

Most of the work on SAP APO is currently focused on sales-driven initiatives or maintenance work, and as a result the company has struggled to bring supply chain innovation to market. SAP SNC has been disappointing, as has their work on inventory optimization and demand sensing. I don’t think that they understand the basic concepts of being demand-driven enough to bring new solutions to market to solve the problem. We see in our benchmarking work that SAP APO takes three times longer to install and has a lower ROI than best-of-breed software.

Oracle is different. Their solution is based on acquisitions. They have not been successful in building a cohesive architecture. While there are pieces of the software like transportation planning or trade promotion planning that are promising, today it is piece parts.

They are in worse shape than SAP. With the turnover in the organization, they are missing all three of the elements that I look for in a successful supply chain company. I just don’t see the leadership, the understanding of the problem, or the technology skills to evolve the product. The rewrite of the Numetrix and Peoplesoft supply chain planning products has been disappointing for business users.

What about JDA? Using the same model, JDA has the ability to write software, but they come up short on the other two factors. There is a shift in leadership along with turnover of talent, and both are a barrier to success. Their current struggle is to bring together different views. Some folks within JDA want to solve the problem like it is an i2 problem, while others approach it from a Manugistics viewpoint, and others from a Red Prairie perspective. None of the three views today is visionary; and it is hard for them to get a clear vision of what to build and how to go to market in the manufacturing space. As a result, we see them on-again and off-again in the market. They need to jumpstart their thinking; and no, I am not optimistic about flowcasting. I think that it is problematic for many reasons.

Which companies do I think are interesting?  I like the movement into Software as a Service deployments. I also like B2B networks. So, my list of interesting vendors in this space includes: Kinaxis and Steelwedge for SaaS; GT Nexus, GHX, Elementum, Elemica, E2open for B2B networks; Logility and Terra Technology for demand and inventory management; Quintiq and Solvoyo for concurrent optimization; Llamasoft for network design; and Enterra Solutions and ToolsGroup for Cognitive learning. I also like what Infor is doing on visualization, S&OP and collaboration.

What do I tell SAP clients? I advise clients to take advantage of their current architectures. Stabilize the investments in ERP. If the company has SAP APO, I advise them to maximize the integration capabilities of the CIF interface and then augment the platform to compensate for the lack of depth in the SAP optimization engines.

I hope that this helps. For line-of-business supply chain leaders, we will be facilitating a session at the Supply Chain Insights Global Summit on September 10th-11th to enable supply chain leaders to talk to each other about this topic in a room with no vendors or consultants. It is an informal networking session to discuss alternative strategies to build technology architectures as we transition from the second to the third act. We hope to see you there! Reserve now, because the room block is up on August 8th at the Phoenician, and there are only 48 seats remaining in the audience.