A McKinsey 7S Model-Based Framework for ERP Readiness Assessment

A McKinsey 7S Model-Based Framework for ERP Readiness Assessment

Payam Hanafizadeh (Allemeh Tabataba’i University of Tehran, Iran) and Ahad Zare Ravasan (Allemeh Tabataba’i University of Tehran, Iran)
Copyright: © 2013 |Pages: 43
DOI: 10.4018/978-1-4666-2464-1.ch009
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Abstract

Implementing Enterprise Resource Planning (ERP) systems is a complex, lengthy and expensive process which usually faces serious challenges and failures. Thus, it is necessary to perform a readiness assessment at the initial stage of an ERP implementation project to identify weakness areas which may encounter the project with failure. This paper proposes a new framework for assessing readiness of an organization to implement the ERP project on the basis of McKinsey 7S model using confirmatory factor analysis. Through this method, the construct of ERP readiness is proposed based on 7 dimensions namely “structure”, “strategy”, “systems”, “skills”, “style/culture”, “staff”, and “shared values/ superordinate goals”. Using the framework, the current situation of the organization can be determined and necessary changes can be made prior to system implementation. The proposed framework is then applied to 2 real Iranian banking cases and the advantages of the framework over available frameworks are illustrated.
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Introduction

ERP systems are described as “computer-based systems designed to process the transactions of an organization and facilitate integrated and real-time planning, production, and customer response” (O'Leary, 2000). These systems are designed to address the problem of fragmentation as they integrate and streamline internal processes by providing a suite of software modules that cover all functional areas of a business (Koch, Slater, & Baatz, 2001). Although, ERP systems can bring many benefits to organizations, the high failure rate is a major concern (Davenport, 1998). It is said that, about 70 percent of ERP implementations fail to deliver anticipated benefits (Al-Mashari, 2000) and three quarters of these projects are unsuccessful (Griffith, Zammuto, & Aiman-Smith, 1999; Hong & Kim, 2002; Kumar, Maheshwari, & Kumar, 2003). These projects are on the average 178% over budget, took 2.5 times longer than intended and deliver only 30% of the promised benefit (Zhang, Lee, Huang, Zhang, & Huang, 2005). These statistics imply that ERP projects are one of the most difficult system development projects. To avoid such costly failures, much effort has been done by researchers. Some researchers have provided valuable insights into the process of ERP implementation (Holland & Light, 1999; Mandal & Gunasekaran, 2002; Motwani, Mirchandani, Madan, & Gunasekaran, 2002; Soja, 2008; Subramanianh & Hoffers, 2005; Wang, Shih, Jiang, & Klein, 2008; Yusuf, Gunasekaran, & Abthorpe, 2004) and others have identified a variety of critical factors affecting either on success (Al-Mashari, 2003; Hanafizadeh, Gholami, Dadbin, & Standage, 2010; Nah & Delgado, 2006; Nah, Zuckweiler, & Lau, 2003; Zarei & Naeli, 2010; Zhang et al., 2005) or failure (Aladwani, 2001; Amoako-Gyampah & Salam, 2004; Bradford & Florin, 2003; Hong & Kim, 2002; Somers & Nelson, 2004; Umble & Umble, 2002) of ERP projects.

Considering the importance of ERP, some works conducted in this area are reviewed here. Esteves and Pastor (2001) in their work summarized and grouped ERP literature until 2000 according to what they term as “the ERP lifecycle framework”. The lifecycle consisted of adaption, acquisition, implementation, usage & maintenance, evolution, and retirement (Esteves & Pastor, 2001). They showed that most of the literature published prior to 2000 focused on implementation approaches. Other studies conducted considering categories proposed by Esteves and Pastor (2001) approved these results and suggested that literature on implementation dominates others, i.e., 38% of total papers published between 2000- 2005. According to the results, just 2% of all papers devoted to studies on adaption phase (Dery, Grant, Harley, & Wright, 2006). So, it is clear that there is a dearth of studies in the pre-implementation phases such as ERP selection, readiness assessments, ERP acquisition planning, etc.

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