Support from strategic management: Strong management support was exhibited at different levels. With the mandate that Carl obtained from the CEO, he was able to execute the project with unlimited authority and cut through the politics, allowing him to make quicker and more effective decisions which in turn, further strengthened his leadership position. Carl also received strong support from the presidents of each division as well as from IT. The role of the presidents of the business divisions was key in insuring stakeholders access and removing political obstacles. The division presidents also played the role of evangelist – supporting implementation teams throughout each wave of the project. Various IT managers in each division also played strong supporting roles in providing key resources and insights into various challenges. Overall, this strong management support helped lower resistance to change and sustained momentum for the project. This was a key success factor as it quickly established a strong coalition of the willing to guide and support the change.
Utilization of Right Skills: It was clear at the start of the project that Tektronix was ill skilled for a successful implementation. Several steps were key in building the right team to do the job:
- Carl immediately hired a CIO with the right experience to help guide the project. The role of CIO was critical in ensuring strong technical support and ability for IT to learn how to support the new system.
- Next he clearly defined the project team structure with roles that focused on project management and communication. The cross-functional teams helped bridged functional and geographic boundaries in implementing change. They also acted as negotiators to help resolve issues and offered domain knowledge of the geography or function that they came from. They clearly understood that the successful implementation would be the result of a happy marriage of technical and business savvy.
- Consultants were leveraged extensively for their knowledge of Oracle and industry best practices.
Sustaining Momentum: Tektronix believed strongly that schedule is more important than budget and that it is crucial to maintain momentum in such a long project. Believing that it is more expensive to re-build momentum, they spent little time comparing features and costs and chose to move quickly. For example, they spent a short time to make sure that Oracle could do what they wanted and assumed that most other ERP vendors still lacked maturity. Momentum was also sustained by setting a strict implementation date to keep employees focused (e.g. OMAR at VND). Another major means of building momentum is described in the next section.
Phased Implementation – The Incremental Approach: We already talked in detail about the phased implementation in detail earlier. However, this approach comes with some challenges. Sometimes, the starting point may not be obvious. For example, when implementing for sites in Europe, Tektronix picked a common denominator – distribution center in Holland – that could build overall confidence instead of a specific site. Furthermore, a strong understanding of interdependencies is required to create a plan of what to start first, what to follow, and what could be done concurrently (e.g. Financials and OMAR was concurrently implemented).
Adopting Best Practices (Fundamentals) in Software Industry: Tektronix avoided re-inventing the wheel and chose to buy a packaged system rather than develop one in-house. Hence, avoiding the risks involved with software development. It also avoided the risk of a poorly developed system, as a reputable software package would have been battle tested by the industry. They also chose to embrace a single ERP vendor rather than adopt a best of breed approach. This further reduced integration, maintenance and support risks. It also reduced the complexity of upgrades and modification. Additional integration efforts would only slow down the project and introduce more complications while the added functionality might not be worthwhile.
They also chose to deploy multiple instances to cater to different needs of different division, thereby, reducing the risk of losing key competitive practices unique in each division that might otherwise be lost through standardization. To gain economies of scale and to build a more standardized company, Tektronix leveraged on shared services. This provided better visibility into the business and the ability to compare different parts of the company. Another best practice observed in working with COTS products was to stay as plain vanilla as possible. Customisations make maintenance and upgrades difficult. Only where it is a competitive advantage for the company would exceptions be made. This had another big benefit to Tektronix. The principle to stay plain vanilla served as the driver for standardization. Hence, IT became the enabler and facilitator for re-engineering and standardizing processes. This helped bring about a change that would have otherwise encountered significant resistance.
Strategic partnerships: Implementation support was not only achieved through contracting consultants. But Tektronix learned to build trust and long-term relationship with Aris Consulting instead of short-term, one-off contracts that were after-all hard to scope. A long-term relationship reduced risks and improved execution.
Simulated testings: In more complex implementations (e.g. OMAR at MBD), extra care was taken in testing – both conversion and system test with actual work and actual load. Although the time taken was much longer, it reduced the risk of system problems after launch that could take even more time and effort to solve.
Overall assessment of and Suggestions and Improvements for the Tektronix ERP project
Overall, the implementation of the ERP system at Tektronix appears successful and well managed. We feel that there are some points that might be worth considering for the future and also in other similar implementation.
Beyond Basic ERP: The ERP implementation saw only the repair of what was dysfunctional. Although this brought about numerous benefits, additional plans should be made to leverage IT as a strategic advantage. For example, with the backbone ERP system already established, they could venture into CRM to help take their business to another level or they could further streamline and improve the efficiency of their supply chain with SCM systems and eProcurement systems that could enhance the upstream (from suppliers) and downstream (to consumers) performance. There was also a need to better justify and evaluate the solution to embark on rather than jump straight in to Oracle ERP. Alternatives might also need to be considered besides using and ERP.
Outsourcing Vs Insourcing: The approach taken seemed more towards insourcing with reliance on consultants contracted for various parts of implementation. Two issues are worth considering.
Firstly, if they intended to insource, there seemed to be a lack of skill and knowledge transfer. There was strong reliance on Aris and other consultants for system details, while Tektronix staff seemed to focus strongly more on business change. While this may lead to quicker implementations, it may not be as effective in terms of technical knowledge transfer. A plan could be made to ensure that in-house staff maximizes their learning experience by perhaps letting them handle some technical implementation on their own with some coaching from consultants. Secondly, considering the lack of internal technical knowledge, Tektronix should consider the option of outsourcing the hosting and operation of the ERP system. The strong relationship already established with Aris might be a good stepping-stone in building an outsourcing relationship. The IT department could then play program and contract management roles. One extreme could be to adopt a strategic sourcing approach where Tektronix chooses who to do the job before even considering how it should be done and with what software. In addition, utility pricing mechanisms could help avoid large upfront investments and possibly quicker ROI.
Linking costs to benefits: Although it is agreed that the benefits are obvious and quantifying the need to change is not required, there should be some budget estimation or guideline to have a better feel of the return on investment and payback period. This could be especially important as the company is on the road toward recovery of financial performance.
Standardization Vs Autonomy: Although standardization is critical in Tektronix, one would be cautious to do so not at the expense of the autonomy of employees. An autonomous organization has advantages of being more flexible; react faster to external forces and changes in the environment, while encouraging innovation and creativity. Standardization brings comparability and better visibility; thou possibly at the expense of autonomy if not managed well. Employees should still remain empowered and communication channels should remain broad.
Results of ERP implementation at Tektronix: The ERP implementation standardized information handling at Tektronix. Although not a driver for strategic initiatives, ERP was definitely an enabler. ERP caused huge operational improvements at Tektronix. Drastic improvements in several operational metrics like Days Sales Outstanding have been observed. ERP also enabled Tektronix to a sustainable business capable of both inorganic and organic growth.
Although many of the benefits were not directly tied to cost savings, they were significant in transforming the company to the next higher level of operation. For example, Tektronix had visibility to inventory level at all locations around the world. Improved data integration allowed financial analysts to get a summary view as well as drill down to details to the level of a single account. Standardization led to better decision making capability.
The general employees were also benefited by the implementation and found themselves more effective at their job. Since information was at their fingertips because of ERP, they spent more time on analyzing rather than gathering of information.
Figure 1:
Exhibit 1: Justifying an ERP System - Classification of business or technological benefits and risks