Having now been involved in a dozen system implementations, I believe that defining guiding principles for your IT initiatives is “necessary but not sufficient”. Guiding principles are a set of heuristics that guide organizational decision making in a common direction. However, if defined during a one-off activity at the outset of a project they will be stowed away and forgotten. The real value of guiding principles appears when everyone involved in the project refers to them during day-to-day activities. Once defined and agreed upon with all key stakeholders, these principles should be:
- Part of organizational slide deck templates
- On big posters scattered throughout the office
- Re-stated and elevated by leaders during all-hands calls
- Integrated into the team’s performance management process
- Integrated into the interviewing process to bring on aligned team members
- Etc.
In short, these principles need to be the north star that guide the team’s actions as they wade through the murky waters of IT implementations. As humans typically forget half of all new learned concepts within days, your guiding principles should be repeated often to become second nature.
Why Can Guiding Principles Be So Impactful?
1. Guiding principles align the organization’s decisions around common values and objectives
80% of ERP projects still fail to deliver the initially stated business outcomes (I feel like this number hasn’t changed for 20 years). Therefore, it is crucial to align everyone in your project team in a single direction. In an ideal world, existing company values, objectives and strategy provide this guidance. However, if these concepts aren’t brought down to the ground floor via guiding principles, they remain abstract ideas that do not drive behavior.
2. Guiding principles define the “rules of the game” before it starts.
Have you ever played monopoly with a group of friends only to realize they had “house rules” which you discovered while playing? Inevitably, the game ends prematurely after one too many disagreements over the rules. The same thing happens on projects.
Unless you develop a set of principles that are reviewed and agreed to by all members of your team before they start delivering, you’ll inevitably find yourself in a “monopoly-type” situation. For instance, consider the architect on your project recommends a new technology to satisfy a requirement. This new tool is the best suited for the scenario at hand, but you are trying to curtail your application portfolio and already own a similar tool. A guiding principle helps center everyone back on how to take the right decision.
How to Craft Your Guiding Principles
To be effective, your guiding principles need to support your company’s competitive advantage. Consider a company is executing against a differentiation strategy. However, their teams are delivering systems in ways that stifle your ability to generate value. Misalignment is clearly present and needs to be addressed.
To prevent this from happening, you can use the following thought process to get to meaningful guiding principles. I’ve illustrated using Costco, the low-price bulk retailer.
1. What are your company values and objectives? What is the current strategy to generate a competitive advantage?
- Strategy
- Costco operates under a cost leadership strategy on high quality goods
- Objectives
- Maximize membership sales (revenue)
- Maximize membership value for the customer (quality to cost ratio)
- Values
- Obey the law
- Take care of customers and employees
- Respect suppliers
- Reward shareholders
2. What behaviors are needed from your teams to realize this strategy, attain these objectives and respect your values?
- Effective controls and periodic audits on activities
- Effectiveness of membership “sales staff” (cashiers & floor managers)
- Operational Excellence (low operation and overhead costs)
- Minimize profit margins on products sold and avoid loses
- Buy in bulk to lower unit cost
- No frills warehouse setting
- Funnel supplier into a common process
- Low employee turnover
- Higher than average retail wages
- Career development
3. What capabilities are required to enable these behaviors in your teams?
- Standard sales scripts and procedures (Systematically asking membership at checkout) and effective training
- Standardized, simple and cost-effective processes for logistics, warehousing, sales & supporting processes (accounting, procurement, HR, etc.)
- Access to accurate pricing data for all products and segments
- Highly efficient supplier life cycle management processes (on-boarding, off-boarding)
4. Where IT is an enabler, what guiding principles should our IT teams strive to respect?
- Outside of identified exception areas (pricing data, supplier life cycle management, etc.), the enterprise must adopt standard system processes on a best of breath ERP system unless a business case for customization exists.
- When a solution is deployed to a new business unit, it must bend to existing processes unless the change would affect the business unit’s ability to sustain the company’s competitive advantage.
The above is by no means a complete exercise but helps illustrate how to get to guiding principles based on overarching strategy, objectives and values.
Additional Examples of Guiding Principles
Here’s a few other examples of guiding principles to inspire you as you go through this exercise:
1. Design for Automation – You Cannot Automate “It Depends”
In defining processes, “hard” business rules must be defined to enable automation. These rules should consider product limitations to avoid the need for customization.
2. Minimize Failure Points with Centralization – Humans Are Prone to Error
In defining processes, tasks where quality and rigor are needed to reach the desired benefits must be centralized to individual teams. Responsible staff must be highly experienced, trained and legitimized to run their operations.
3. Single User, Single System
In defining processes and IT landscape, always aim to keep users in a single system for their primary job role (i.e. do not separate job responsibilities across multiple systems).
4. Single Source of Truth
For any reporting, there should be a single source of truth per data object. If not, there are inevitable discrepancies between sources and trust in system data erodes which affect decision making efficiency. Not to mention additional costs to support additional reporting tools.
5. Work with a Minimum Viable Product (MVP)
After any design activity, build a basic working proof of concept and demo as soon as possible. Seek continuous end user feedback at each step of development to avoid an unsatisfactory end product. In addition, when working on a new complex deliverable, deliver a basic working version and iterate based on feedback.
6. If it’s not Written Down, it Doesn’t Exist
This one is not IT specific… I just can’t live without it… The best way to lose organizational knowledge is to work based on “he said, she said”.
7. Build for the Long Term
All things being equal, the solution that sets the company up for the best long-term benefits should be privileged.
Conclusion
Are guiding principles the silver bullet for good decision making? No. Nothing replaces contextual critical thought. However, guiding principles help you perform a sanity check before committing to big decisions. In the context of ERP implementations, if 2-3 big decisions are revised to align to overall business strategy and objectives before work begins, this can mean the difference between making or breaking the budget and timeline.
If you don’t feel you’ll be able to align your entire organization on a set of guiding principles, start by creating principles within your immediate team. Once others see the success you are generating with this simple concept, you can help it spread.
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Does your company use guiding principles in their IT initiatives? If so, what are your favorite ones? If not, do you think your company would benefit from putting them in place? Let me know in the comments.
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Last Updated on January 7, 2021 by Joël Collin-Demers
