Best Practices: Best For Your Business or Best for the ERP Software?
I’ve never been a big fan of the term “best practices.” It suggests that there is a single best and standardized way for each organization to run its operations, which is clearly not the case. It also suggests that there is a magical Best Practices Board in the sky defining and approving those that qualify as best practices and those that do not. In short, we see the buzzword for exactly what it is: marketing hype.
Don’t get me wrong. There are cases where you want to leverage ERP software to avoid reinventing the wheel. Vanilla and non-differentiating business functions that don’t provide a distinct advantage between you and your competitors are good candidates for utilizing best practices. Think: accounts payable or general ledger. These are examples of areas where creating business processes from scratch may not make a lot of sense, and quite frankly, modern ERP software probably handles better than you can. (For more information on this topic, read our recent blog on the pyramid of ERP best practices).
On the other hand, competitive differentiators are much harder to generically categorize as best practices or not. After all, if competitors in a given industry are handling their customers, innovation, and profitability in the same fashion, then is it really a best practice? In addition, why do different ERP systems have different definitions of best practices for the exact same functions?
The secret is that ERP vendors define best practices according to what is best practices to their software, not necessarily to your business. For example, several years ago I worked with a client that implemented a Tier I ERP solution. Over the years, this client had found that the most efficient and cost-effective pick, pack, and ship process for them was to print labels for the customer orders, pick according to the labels, and load shipments directly on to the truck. However, the software they chose did not handle the pick, pack, and ship process in this way. Instead, the software’s “best practice” was to print a pick list, pick the products, store in a staging area that didn’t exist and they didn’t have room for, print the labels, then load the truck. In the case of this client, this was a significant step backward and was far from best practice. So the client had a choice: 1) invest over $1M reconfiguring the warehouse to account for this new process, or 2) spend considerable time and money customizing the software to accommodate the client’s best practices. This isn’t an easy decision.
So the lesson is that best practices is one of those terms with a lot of flash but with very little substance. It is important to understand how your business works, define those processes and requirements, identify opportunities for improvement, then engage in the ERP software selection process. Otherwise, you may be paying dearly for those “best practices” that we all hear about.
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About Eric Kimberling
After 15 years of ERP consulting at large firms including PricewaterhouseCoopers and SchlumbergerSema, Eric realized the need for an independent consulting firm that really understands ERP. He began his career as an ERP organizational change management consultant and eventually broadened his background to include implementation project management and software selection. Eric’s background includes extensive ERP software selection, ERP organizational change, and ERP implementation project management experience. Throughout his career, Eric has helped dozens of high-profile and global companies with their ERP initiatives, including Kodak, Samsonite, Coors, Duke Energy, and Lucent Technologies to name a few. In addition to extensive ERP experience, Eric has also helped clients with business process re-engineering, merger and acquisition integration, strategic planning, and six sigma. Eric holds an MBA from Daniels College of Business at the University of Denver.
Nice insight into “Best Practice”, as you mentioned each company has to determine how to utilize the information gained from reviewing the “Best Practice” and determine how well it will work within their organization.
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The article is spot on. The best practice phrase has become marketing hype except for accounting practices. The latest Panorama survey flagged the fact that 85% of ERP solutions had to be tailored. The reality is that virtually all deployments start off with the senior management stating that they wanted an “out of the box” solution.
Invariably, when the detail of the standard system enters the conference room pilot stage, the key users request changes that ape their established processes. Taken to extreme, some users get their old system replicated on a modern platform. This is usually a waste of money as the new system has a degree of flexibility not present in the legacy technology. However, the fact that within the new platform, there are easier ways of achieving the desired result doesn’t become evident until the system becomes bedded in and the users become familiar with the new flexible technology.
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A very good post, to the point and sheds some light on a pretty controversial topic.
IMHO, best practices are an important topic, and they are not just a marketing hype. They do have “a lot of flash”, but how much substance they have is entirely about how you use them and what you apply them to.
What I totally agree is that vanilla doesn’t equal best practices. Who ever is applying the term “best practices” to “vanilla solution” is just using it as a hype, because for better part those “best” practices turn out to be the worst for the customer. You give two good examples of best practices: finances and accounts payable – those two areas are extremely rarely customized. I usually point out finances to my customer as a process area which has been conducted more or less in the same way for decades if not centuries – some accounting practices come and go, but principles are the same, and reinventing the wheel there would just be counter productive. And still, it is mostly not about “software best practices” (something that in all honesty I don’t think exists), but about business best practices – how well an ERP fits to that is a completely another story.
Best practice is something that is proven to be the best through dozens or hundreds of iterations of do-analyze-improve cycles, either done by oneself, or learned through collective experience. If an area doesn’t have an industry differentiating potential (which finances or accounts payable most likely don’t) then it is a good candidate for applying best practices, and simply learn from immense experience of generations of companies who have done it and tried it in various ways and finally settled for something that simply works in the best possible way, all other things being equal.
For areas where a company can truly differentiate in the market, what’s best is what they find out to be the best, and it is something they’ll change and improve as they grow. In those areas, no software can teach them what to do, but another type of best practices comes to spotlight: the implementation best practices – which IMHO are also not necessarily a marketing hype.
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