THE NEXT GENERATION OF BUSINESS MANAGEMENT: SOCIAL ERP

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1 THE NEXT GENERATION OF BUSINESS MANAGEMENT: SOCIAL ERP April, 2015 Nick Castellina, Research Director, Business Planning and Execution Report Highlights p4 p5 p6 p8 The Best-in-Class are almost three times as likely to have implemented social ERP. Organizations with social ERP are 2.5 times as likely to have real-time visibility into the status of all processes. Organizations with social ERP are 2.5 times as likely to have real-time collaboration across departments and divisions. Organizations with social ERP saw a 22% improvement in profit margins over the past two years. This report identifies the adoption rates of social ERP, identifies the capabilities that are contained within, and promotes the benefits that can be gained from implementing this type of solution.

2 2 In today's environment, managing growth effectively requires improved visibility into operations, the ability to do more with less, and an enhanced ability to communicate and collaborate frequently and effectively. ERP vendors now offer social business functionality within their offerings that mimic the look and feel of social media, but also capture information that would have been lost when using outdated systems. Aberdeen's Business Management and Enterprise Resource Planning survey found that the top pressure facing organizations today is their inability to manage growth expectations. In today's environment, managing growth effectively requires improved visibility into operations, the ability to do more with less, and an enhanced ability to communicate and collaborate frequently and effectively. For businesses of all types and sizes, ERP software has long been the foundation for providing these capabilities. But older systems may be cumbersome and not able to support the conversations and information related to tasks, products, and initiatives, which do not fit into these systems rigid guidelines. As such, ERP vendors have started to offer social business functionality within their offerings. Not only do these new offerings mimic the ways in which employees interact with technology in their lives outside of work, but they also have the ability to capture information that would have been lost when using outdated systems. This report identifies the adoption rates of social ERP, identifies the capabilities that are contained within, and promotes the benefits that can be gained from implementing this type of solution. Collaboration Challenges Collaboration is extremely important for organizations to succeed and grow in the current business environment. Unfortunately, valuable collaboration is difficult to pull off. In a survey collecting data for Aberdeen's Enterprise Social Collaboration: Driving Customer Experience Excellence Through Teamwork, survey takers were asked to identify the top two challenges they face in collaboration (Figure 1).

3 3 Figure I: The Need to Connect in New Ways Team members are too geographically dispersed to support necessary meetings / discussions Organization leadership wants to implement a more dynamic way to connect the organization We need to be more innovative to remain competitive Lack of communication / teamwork negatively impacts productivity Employees don't know where to find information vital to performing their jobs 42% 38% 37% 35% 34% 0% 10% 20% 30% 40% 50% Percentage of Respondents, n = 233 Source: Aberdeen Group, January 2014 First, there are the challenges that organizations face when it is difficult to connect employees. The number one challenge is that employees are too geographically dispersed to interact effectively. Phone calls and s just are not cutting it. When these employees are removed from each other they cannot effectively participate in discussions. Productivity is impacted because not only is it difficult for employees to communicate, but also their individual skillsets are not able to be sufficiently leveraged by their coworkers. In these cases, the growth of the organization is a significant barrier limiting their ability to innovate. Additionally, many organizations understand that even when collaboration does take place, the results are not as substantial as desired. Business leaders in these organizations understand that more dynamic ways of collaborating will increase employee engagement and lead to greater results. Not only will employees be able to work together and innovate, but new forms of collaboration can also create a record of these interactions that can be referenced later. The Aberdeen maturity class framework is comprised of three groups of survey respondents. This data is used to determine overall company performance. Classified by their self-reported performance across several key metrics the groups are: Best-in-Class: Top 20% of respondents based on performance Industry Average: Middle 50% of respondents Laggard: Bottom 30% of respondents Sometimes we refer to a fourth category, All Others, which is Industry Average and Laggard combined.

4 4 Combined, these challenges indicate that organizations are looking for business solutions that can connect more employees while enabling them to work in new ways. In Aberdeen s 2014 Business Management and ERP Benchmark Survey, respondents were ranked on the following criteria: Complete and on-time delivery: o Best-in-Class - 96% o Industry Average - 90% o Laggard - 77% Improvement in profit margins over the past two years: o Best-in-Class - 27%, o Industry Average - 7% o Laggard - 2% Change in time to decision over the past year: o Best-in-Class - 48% decrease o Industry Average -9% decrease o Laggard - 1% increase Improvement in cycle time of key business processes over the past two years: o Best-in-Class - 27% o Industry Average -9% o Laggard - 6% Introducing Social ERP In Aberdeen's Business Management and ERP Benchmark Survey, 80% of respondents reported having an ERP solution. Since ERP is the centralized repository of data and the tool through which process standards are adhered to, it would make sense that it could also serve as a portal for collaboration. This is why ERP vendors have started to include social business capabilities in their solutions. This can mean many things. It could be forums, profiles, and/or wikis. Some ERP vendors have integrated social streams where employees can tag conversations to products, projects, customers, equipment, or many other things. This creates a single hub for communication, as well as a record of that communication. But social ERP is only in its infancy. While the Best-in-Class are currently almost three times as likely to have implemented this functionality, only 26% of the Best-in-Class are currently doing so (Figure 2). Still, this functionality is something that should become more common in the future. Another 29% of the Best-in- Class plan to implement this type of technology, which means that the majority of Best-in-Class organizations could have it in the near future.

5 5 Figure 2: Adoption and Interest in Social ERP Percentage of Respondents, n = % 50% 40% 30% 20% 10% 0% Plan to Implement 29% 26% Best-in-Class Currently Implemented 36% 7% Industry Average 18% 13% Laggard Social business capabilities integrated with / embedded within ERP Source: Aberdeen Group, August 2014 What Makes ERP Social? When employees can comment on processes and tag components such as materials, customers, equipment, and suppliers, social ERP creates an environment similar to the social media that employees use in their lives outside of work. This environment helps to provide a variety of capabilities that increase engagement, collaboration, and continuous improvement. It also helps to ensure that the organization has a true record of what is really going on in the organization presently (as well as what happened in the past). In the past, this information would not be available except through hallway conversation or s. Instead, organizations with social ERP are 2.5 times as likely to have real-time visibility into the status of all processes (Figure 3).

6 6 Figure 3: Enabling True Visibility 75% of organizations with social ERP have a fully integrated view of all customer information in comparison to 28% of organizations without social ERP. Percentage of Respondents, n = % 100% 80% 60% 40% 20% 0% 72% 74% Real-time visibility into status of all processes Social ERP No Social ERP 96% 79% 29% 26% 30% 35% Users can annotate and share an existing report or visualization in real time Centralized management of work instructions, documents, best practices, and reports Central repository of metrics and KPIs Source: Aberdeen Group, August 2014 This is because users can easily share all of the information they are working on. Organizations with social ERP are almost three times as likely to be able to annotate and share reports in real time. On the other side, employees can also easily find the information they need when working on something. What was once tribal knowledge passed from employee to employee can now be accessed forever. For example, this information could include information about customer preferences or reference information related to rules of engagement with suppliers. Ultimately, the organization receives a more robust system of record that can include all essential information, including best practices, KPIs, and work instructions. The Benefits of Social ERP Improved visibility is a great benefit, but social ERP is truly intended to enhance collaboration across an organization. In fact, organizations with social ERP are 2.5 times as likely to have real-time collaboration across departments and divisions (Figure 4). There are an infinite number of benefits that this can create

7 7 throughout an organization. Product design and sales can collaborate to ensure that the organization is creating attractive products. Logistics can collaborate with supply chain to better plan production due to availability of materials as well as demand. Manufacturing could collaborate with product design to make suggestions on how products can more easily be manufactured. Finance can collaborate with HR. Really, the opportunities are limitless. Ultimately, by working together, ideas can be generated; new best practices can be devised, and greater results can be achieved. Truly, organizations with social ERP are 57% more likely to be able to support continuous improvement teams. Figure 4: Connecting the Organization Social ERP No Social ERP Percentage of Respondents, n = % 80% 70% 60% 50% 40% 30% 20% 10% 0% 76% 80% 83% 31% Real-time collaboration across departments and divisions 39% Sales and product design collaborate to set proper expectations with customers 30% Manufacturing operations are integrated with customer service, logistics, and delivery 71% 24% Manufacturing operations are integrated with product design 83% 53% Cross-functional teams are responsible for improving operational performance Source: Aberdeen Group, August 2014 Due to improved communication, more continuous improvement, and enhanced visibility into processes, organizations with social ERP perform better than organizations without ERP across a variety of metrics (Table 1). For example, these organizations have become more efficient, as evidenced

8 8 by their superior performance in complete and on-time delivery, schedule compliance, and the cycle time of key business processes. Also, by working together, 41% more employees exceed performance metrics in organizations with social ERP. This helps to improve time to decision, customer satisfaction, and, ultimately, profits. Table 1: The Results Performance Social ERP No Social ERP Complete and on-time delivery 94% 90% Improvement in profitability over the 22% 8% past two years Percentage of employees that exceed 48% 34% performance metrics Improvement in time to decision over the 35% 15% past year Internal schedule compliance 95% 89% Percentage of customers that report 84% 77% better than average satisfaction Improvement in the cycle time of key business processes over the past 12 months 23% 12% Source: Aberdeen Group, August 2014 Key Takeaways While ERP systems of the past provided essential functionality for running a business from end-to-end, the current business environment has evolved and requires more frequent and valuable communication between employees and other key stakeholders. Therefore, ERP software vendors are evolving their solutions to include social business capabilities, which emulate the look, feel, and functionality of social media that employees

9 9 use in their lives outside of work. Employees can now tag and comment on reports or processes on a real-time basis as well as involve more key stakeholders in processes. This functionality improves communication, agility, and innovation and creates a more robust system of record. Organizations with social ERP are: 2.5 times as likely to have real-time visibility into the status of all processes 185% more likely to enable users to annotate and comment on reports and visualizations in real time 3.2 times as likely to have centralized management of work instructions and best practices 145% more likely to have real-time collaboration across departments and divisions 57% more likely to be able to support continuous improvement teams The next generation of business management is here with social ERP. For more information on this or other research topics, please visit. Cloud Technology and the Multi-Tiered ERP Strategy: Supporting an Expanding Organization; February 2015 Customer-Centric ERP: Integrated Systems for Customer Satisfaction; December 2014 Related Research Author: Nick Castellina, Research Director, Business Planning and Execution (nick.castellina@aberdeen.com) Improve Your Midmarket Business Operations with Cloud Applications; September 2014 Mobile ERP: Taking ERP ROI into Your Own Hands; August 2014

10 10 About Aberdeen Group Since 1988, Aberdeen Group has published research that helps businesses worldwide improve performance. We identify Best-in-Class organizations by conducting primary research with industry practitioners. Our team of analysts derives fact-based, vendor-agnostic insights from a proprietary analytical framework independent of outside influence. The resulting research content is used by hundreds of thousands of business professionals to drive smarter decision making and improve business strategy. Aberdeen's content marketing solutions help B2B organizations take control of the Hidden Sales Cycle through content licensing, speaking engagements, custom research, and content creation services. Located in Boston, MA, Aberdeen Group is a Harte Hanks Company. This document is the result of primary research performed by Aberdeen Group. Aberdeen Group's methodologies provide for objective fact-based research and represent the best analysis available at the time of publication. Unless otherwise noted, the entire contents of this publication are copyrighted by Aberdeen Group, Inc. and may not be reproduced, distributed, archived, or transmitted in any form or by any means without prior written consent by Aberdeen Group, Inc.