In this post, I will define a case study where my utilization model is applied for a customer. A key point to be made here is that the health and effectiveness of the business process is directly related to the performance and utilization of ERP features that support the business process.
Case Study – Procurement Business Process
For our discussion, we will focus on the procurement business process. Following is a generic definition of the procurement business process.
To continue this illustration, I will define the key business activities associated with the procurement functions highlighted. I will also define how business activities are likely executed based upon the business process Capability Maturity Model Integrated (CMMI) level.
Legend:
- Manual: The business activity is performed manually. We can assume that since the process is manual that the organizational capacity (resources) is lower for adopting mature business activities.
- Partially Automated: The business activity is partially automated. Manual effort is still required to complete the business activity. Integration is performed manually.
- Automated: The business activity is completely automated. However, the inputs and/or outputs for the business activity are point integrations at best. Example of this scenario is when a customer utilizes an isolated point solution for a specific activity.
- Integrated: The business activity is automated with limited integration. Integrations are limited to the immediate input and output business activities.
- Closed Loop: The business activity is both automated and integrated across the entire business process. The customer has visibility to data and metrics across all business activities.
Disclaimer: Now, you may not completely agree with all the information presented in the above illustration, but please do not let that derail you from our discussion.
A key premise of the above model is that mature business activities will provide very limited to no business value until the underlying business process maturity levels are implemented. There are two key factors that directly influence business process maturity levels: technology and people. Practically speaking, we can agree that reaching a CMMI Level 4 or Level 5 requires an integrated and closed loop technical infrastructure that supports the entire business process.
To complete the model we need to answer the following question: “How does this relate to ERP product features?” There are two aspects to consider. First, what appropriate ERP feature(s) support the business activity. Second, to what level of functionality should the feature be deployed. For example, a standard feature in the accounts payable function is matching. Matching is an audit performed for goods and services through the entire process.
Continuing the discussion, if I am working with a customer with a procurement CMMI Level 1 then my focus (scope) will be on implementing either 2-way or possibly 3-way matching in accounts payable. For many of my seasoned colleagues in ERP consulting, this conclusion would appear self-evident. However, to an emerging customer or a new millennial in ERP consulting or sales, this automated guidance would be insightful.
Application in the Real World
Let’s say I am a customer performing research of ERP vendors for a procurement solution. Today, I have two options:
- I can gather information via the ERP vendors’ websites. Generally speaking, there are at least 4 ERP products (purchasing, inventory, account payables, and supplier management) that support the procurement business process. For argument stake, let’s assume that each ERP product has 20 features and most ERP vendors provide a feature list for each of their product offerings. If my math is right, that means that I would have to wade through 80 features to determine if the ERP product(s) are a possible fit.
- I contact a sales representative or presales assistant to gather information. Next is a series of business need assessment questions I have to answer before I can get the information I need. Most likely, I would also have to involve business users in the ERP vendor’s information harvesting to get any value from the activity.
I would prefer a self-service option that would ask me two key questions:
To expand on this scenario, I provide the following information to the above questions:
- Procurement CMMI Level: 2
- Organizational Capacity for Change (OCC): Low
We can leverage the above information to quickly refine our ERP product focus to the area highlighted
The power in this approach is to quickly focus on the business activities and corresponding ERP product features that can mature the customer’s procurement business process. Instead of asking a battery of questions that add little value, we can focus on the “low hanging fruit” that can generate quick wins for the customer. However, keep in mind that the customer responded that they have a low OCC. This indicates that we should implement ERP product features that aligns to the customer’s current business activities/maturity. Technology alone does not mature a business process. Keep it simple! Keep it fast!
Value Proposition
Customers are looking for a specific, cost-effective ERP adoption roadmap that will enable them to mature their business model in a rational manner. Today, this guidance is created by outside consultants costing thousands of dollars and time commitments from business executives. Using the above model gives us a solid foundation that we can enhance versus rebuilding the wheel for every customer. Automating this model and improving guidance via machine learning enables ERP vendors and consultants to accelerate guidance delivery to customers.
Summary
Even with the cloud, ERP implementation services and guidance are still the largest costs that make up Total Cost of Ownership (TCO) for customers. As the cloud delivery model continues to squeeze TCO, ERP vendors and consultants have to find most cost effective methods to deliver specific value and guidance to customers. Machine Learning, CMMI Business Models and ERP Utilization Models can be key enablers to automate business solution guidance.
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