Being Eaten by Software
“If you went to bed last night as an industrial company, you’re going to wake up today as a software and analytics company.” This is a statement from GE’s then CEO back in 2014. The underlying message of his statement is that unless you invest in software you will not remain competitive and so you may never wake up.
Yet until recently software and IT in general, had never proved to be source of competitive advantage. For instance, you buy a mainframe to better manage your business, so does your competitor. You buy a laptop for all of your employees, so does your competitor. You put in the leading ERP system for your industry, so do all your competitors.
All this has dramatically changed with the arrival of the digital natives like Airbnb, Uber and Netflix who are gaining an advantage by configuring and investing in their own software, unique to them and accessible by no one else, and they are disrupting markets.
The Power is now with your Customers
The arrival of smart devices like the iPhone has made computing a very mobile, accessible and personal experience.
The internet provides consumers with a plethora of choice, meaning geography and distribution costs are no longer the barriers they once were.
“If you make customers unhappy in the physical world, they might each tell six friends. If you make customers unhappy on the Internet, they can each tell 6,000 friends.” — Jeff Bezos
Customers of today are highly empowered, motivated and self-determinant. Armed with knowledge and computing power at their fingertips, they are quick to seek out the best/cheapest/most advanced etc. option.
As we’ve discussed in another blog article, customer experience is the brand goal.
Extending from that point, employees should be considered ‘internal’ customers. As connoisseurs of software, they are no longer happy to use cumbersome and limiting software provided by the IT division.
With millennials making up a significant portion of the workforce, it is also important to note how they might be shaping the workplace. A report by PwC discussed the specific expectations millennials have about technology at work , e.g. employer’s provision of state-of-the art technology, and being able to use workplace technology alongside their own.
Speed and Agility is Key
If all customers have this power over your brand, it is no longer about being able to predict the future 12–18 months in advance, it is about being able to quickly adapt to the changing expectations of your customers.
Those businesses who can tweak and adapt their business models quickly have a better opportunity to grab market share and maintain a competitive edge.
The latest survey on the state of corporate innovation notes that high-performing companies were 3x more likely to strive for first-mover advantage, i.e. they understood the importance of speed. Today, this is more important than ever, as leveraging the internet can enable speed of scale, while significantly reducing costs. Think about how much easier it is to set up a news website than it was to start a newspaper.
Failure to recognise the importance of speed, adaptability and agility will have a highly detrimental impact on a business’ success. For example, a business may be coasting along just fine and seemingly within a couple of weeks, their business model has been severely challenged, and possibly even disrupted.
Think taxis and Uber, travel agents and comparison sites, DVD rentals and Netflix etc. You can read more about business model disruption in our article on digital transformation .
McKinsey
So what are businesses doing in the face of changing customer demands and tech advancements? Fundamentally, there are two contrasting groups in terms of how they use digital technology. For the sake of this article we will label them as follows:
- Enterprises: existing incumbents in their industry, who are mostly non-tech companies
- Startups: digital natives trying to displace the incumbents
Enterprises
Corporate Enterprises have all-encompassing IT systems, most often purchased through ‘proven’ vendors.
These systems are employed to solve internal problems and optimise according to industry standards and perceived best practice.
As shown in the graph below, those purchasing any of the available off-the-shelf Enterprise grade software will only receive the basic functionality required by their industry.
Thus this methodology raises two key issues:
- Using the industry standard makes you standard in the industry
- Following what is labled ‘best practices’ may only mean watering down your competitive advantage
This means enterprises:
- Cannot create a point of difference for their customers
- Struggle to keep up with shifts in customer preferences and behaviours
Best practices, or more accurately understood as common practices here, will only get enterprises so far. Then to try and gain a competitive advantage or address a change in customer preference, enterprises may work hard to customise restrictive out-of-the-box software.
Unfortunately, this generally leads to added complexity, time, and cost to IT budgets, making competitive advantage an elusive goal. This is where most of the unpredictability and risks of enterprise system implementations lie, yet it is the most commonly accepted practice.
Startups
In contrast to Enterprises, successful Startups don’t use IT to support their business. Rather, they focus on customer problems that can be tackled through any means they have, which is usually software.
They orientate around a small set of problems and, starting with a clean slate, they optimise to solve them really well.
Unencumbered by the concept of industry best practice, Startups are equipped to invent business models that have never been seen before which can disrupt existing business models.
Again using examples of well-known successful startups: Netflix invented the on-demand movie streaming model, Uber invented the on-demand ride hailing model, Amazon invented the on-demand ebook publishing model.
Let’s contrast these two approaches:
- Enterprises solve their own problems with IT
- Startups solve customers’ problems with software
Which is more powerful?
“Take your eyes off the problem (customers’ problems) and soon a competitor will be solving it better.
How Postmodern ERPs Address Legacy ERP Issues
When it comes to postmodern ERPs, the technology is lightyears ahead of previous generations. Most importantly, the top postmodern ERPs address the issues that result from legacy ERPs (listed in the previous section). We explore how postmodern ERPs combat these problems below.
Innovative Technology
Companies that utilize postmodern ERPs can better adapt, scale, and automate their business to accommodate evolving demands. They can also integrate new technologies into their processes like ecosystem integration platforms, IoT, and machine learning. Older systems cannot handle these tasks, making the companies that use ERP legacy system integrations are less competitive. By employing legacy and outdated platforms, companies are missing out on functions that can greatly improve operations.
Lastly, new ERPs on the market are more relevant to modern businesses and are often cloud-based. Cloud-based ERPs means there is no physical hardware or infrastructure that needs to be bought or maintained, therefore reducing costs.
Supply Chain Visibility
Visibility into the supply chain is vital to a company’s success. Visibility into the supply chain can result in greater efficiency, reduced costs, fewer errors, and lead to more business. This is because companies can assess various steps in their supply chains to discover areas that need improvement and which areas are performing well. Once a company has its findings, it can work on addressing the areas that require improvement to better its operations.
Control is another benefit of visibility. By having better insight into what’s happening at every connecting point of their supply chain, companies have a greater understanding of their inner workings. This information can be used to make better decisions, especially regarding optimizations, as well as provide more accurate updates to customers. So instead of companies having to use their best judgment due to the very limited visibility that legacy ERPs provide, or relying on the (usually delayed) information that 3 rd -party managed service providers (MSPs) pass along, businesses can go into the ERP themselves and view real-time updates of their supply chain.
Collaborative Data
One of postmodern ERP’s greatest benefits is removing data silos. Postmodern ERPs combat data silos by utilizing integration and integration strategies. Companies can integrate their various platforms into their ERP to create a source of truth for data. The data is collected and presented in real-time so metrics are always up to date. This removes the need for requesting data from coworkers and waiting for the information to be sent over.
Furthermore, there are fewer errors with integrated ERPs since they remove the need for humans to manually pull the data. Integrated postmodern ERPs promote collaboration because teams have access to data outside their department. Employees can access company-wide data to understand the big picture and use it to make informed, unified decisions.
Efficiencies
In a time when demand for workers exceeds supply, postmodern ERPs help companies through automation. Postmodern ERPs and integration platforms automate processes, reducing the need for human labor. This not only saves companies time since automation is more efficient and accurate than humans, but it saves companies money since they do not have to pay employees to complete these tasks.
Postmodern ERPs and integration platforms also help with onboarding. Instead of having to teach a new employee or team member the intricacies of a legacy ERP platform, postmodern ERPs are less complicated. When it comes to upkeep, new ERPs do not require the same level of maintenance as outdated ERPs. This is because postmodern ERPs are predominantly located in the cloud. Thus, removing the need for expensive, physical hardware that requires humans to regularly make fixes, install updates, and monitor performance.
Increased Revenue
Growing a company’s revenue is not always a straightforward process. However, upgrading from a legacy ERP to a postmodern ERP is a major step in the right direction.
Postmodern ERPs are much more efficient than their predecessors, as most legacy systems were functionally efficient for the time period in which they were designed and constructed. With the rapid advance in technology driving modern business practices and productivity, old systems can hamper productivity and contribute to an inefficient process flow. Companies can use modern ERPs to speed up processes including data collection and analysis, and EDI transactions. This results in greater productivity and the ability to secure more business.
There is the added benefit that most modern ERPs harness cloud technology, removing the need to buy large, expensive, physical hardware. This means companies do not need to pay an on-site staff to perform maintenance on the machines, resulting in cost savings.
Intuitive UX
User-friendliness is a key factor when designing technology interfaces, but that has not always been the case. Postmodern ERPs have become much more user-friendly and intuitive than their legacy counterparts. Users can navigate postmodern ERPs like most other software and platforms, removing the need for intensive training.
This makes it easier for companies to train new employees and team members, as the learning curve for postmodern ERPs is less intense than legacy systems. So instead of having specialized employees that focus on all things ERP, team members of all backgrounds can navigate the systems since postmodern ERPs are more accessible than ever.
Cybersecurity
In today’s digital world, cybersecurity has become a critical area for businesses as trillions of dollars are stolen globally every year. Postmodern cloud-based ERPs are highly effective when it comes to cybersecurity, especially when compared to legacy ERPs.
Postmodern ERPs regularly receive updates and patches that address security issues and risks. Since most modern ERPs are cloud-based, customers can install updates and patches as soon as they become available. This makes it harder for cybercriminals to hack since the ERPs are receiving consistent updates that make infiltrating the technology more complicated. Additionally, since the ERPs are cloud-based, service providers can troubleshoot issues and attacks remotely. This allows for quicker response times and faster resolutions.
When looking at the difference between postmodern and legacy ERP system integrations, the disparities are clear. Postmodern ERPs have significantly improved upon the foundation of the initial ERPs from the 1970s, 80s, and 90s. The new ERPs are much more efficient, secure, accessible, profitable, and transparent than the clunky machines of the past. Companies that are looking to migrate ERPs should highly consider a postmodern solution combined with an integration strategy to maximize their return on investment.
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