The day ERP became insufficient

Wikipedia says ERP (Enterprise Resource Planning) “is the integrated management of main business processes, often in real-time, and mediated by software and technology.”  It goes on to say this includes tracking cash, raw materials, production capacity, orders, purchase orders, and payroll.  That sounds very thorough, and it has served companies well for more than 20 years, but even with tools like The Balanced Scorecard of metrics first introduced by Kaplan and Norton over 30 years ago – organizations are still chasing metrics that may or may not actually lead to overall organizational alignment toward a specific set of outcomes, either tactically in the short term, or strategically in the long term.

Put another way – ERP has helped organizations manage by looking in the rearview mirror – what has happened.  What is really needed, and is now possible, is something forward looking related to outcomes, like a GPS driving app.

You may remember the scene at the end of the Pixar film Finding Nemo, where Nemo is swimming past a group of fish trapped in a large net being raised out of the water.  Nemo notices the fish are all pointing in different directions.  He instructs them to all “swim down” so they are all swimming in the same direction. When the individual efforts of the fish align with the efforts of the group, only then do they have the strength to free themselves from the net – which in the moment is the only outcome that matters.  As simple as the example is – this is, in fact, a vivid illustration of the benefits of Enterprise Outcome Management.

“Enterprise Outcome Management (EOM)  is a system for deploying and managing the Outcome Management discipline on an enterprise-wide basis, with special emphasis on those key outcomes that drive and determine performance. – including Discipline, Tools, and Process”

Put another way, companies are falling short with their ERP system because they are unable to see the dependencies that cause the outcome, or outcomes, that matter most.  Many learned the vivid difference between correlation and causality in the landmark book Freakonomics .  Causality (often manifested in the form of dependencies), linked to accountability (both Discipline and Process above) are the fundamental pieces missing in the typical ERP solution.  And when it comes to larger organizations, it’s completely unrealistic to track these details manually at the necessary level of granularity, and that’s where the tools come in.

Two vivid examples of the power of Enterprise Outcome Management are:

1. ERP reporting showed everything was progressing as planned to fulfill orders.   What was not seen was the delayed outcomes that had to be delivered now to improve the processes required to achieve the profitability targets the following year.   Once the new year arrived, ERP showed the profitability problem, but the solution to implement change over nine months still remained.
2. Growing customer satisfaction and competitive demand saw declining orders but the solution was not in operations, it was a lack of outcomes achievement within the marketing and product strategies last year which showed up in lagging ERP metrics now.

We still need ERP, so it is still necessary – but it is no longer sufficient. Today the importance of Enterprise Outcome Management is clear for both tactics and strategy and not leveraging the tools needed to stay on top of this, makes life much harder and less predictable than it should be for senior executives.