Agile or not agile? This is the typical question at the beginning of an ERP implementation. Can agile methods be used for an ERP implementation? But if so, can they be used in a strictly regulated industry such as the pharmaceutical sector?
These are the challenging issues we address with this item, especially with industries affected by stringent regulations, such as the healthcare sector, life sciences, energy or defense. ERP implementations in these sectors require not only technical knowledge, but also in-depth knowledge of the industry and the regulatory framework.
From waterfall to agile
Agile is a collective term for a set of frameworks and practices based on the values and principles expressed in the “Manifesto for Agile Software Development” (2001). The agile approach overcomes traditional waterfall phases, characterized by sequential activities and prior detailed prerequisites, through an iterative methodology based on continuous development and testing loops.
This is enabled by applying a set of methodologies, mindsets, organizational structures, and tools aimed at creating value for the customer, fostering communication and iteration, improving product quality, meeting expectations, and reducing time to initial deployment.
The agile methodology requires very close collaboration between the business and IT departments, but it has many benefits – especially for projects with a high degree of initial uncertainty. However, there are still some doubts about their application in the ERP domain, especially when there is an additional layer of complexity due to specific regulatory requirements. ERP implementations are usually executed by applying the waterfall principle. Take, for example, the implementation of the administration and finance module: It starts with the definition of a single account and then proceeds with an account plan and finally defines the accounting rules in a predefined sequence of propaedeutic steps.
The same is true of a manufacturing process that requires a time sequence of propaedeutic steps like Master data creation, work center definition, bill of material, routings, artworks management and the like before launching the production order.
How can we assess whether we are heading in the right direction before the design phase of such integrated processes is completed? There is no need for that, as agile practices are exactly what is needed to manage ERP implementations. Leading ERP vendors have even begun recommending a more agile approach on the road towards ERP implementation.
For example, SAP proposes an agile approach (e.g., SAP Activate) to accelerate the implementation of SAP S/4 HANA. This approach relies on best practices and guided configuration, test automation tools, methodologies, and a new definition of the project organization. Other examples include Oracle’s Enterprise Architecture or Infor Agility, which offer similar approaches to integrating agile methodology into ERP implementation, leveraging the specific capabilities of the software.
Based on our hands-on experience, we will focus on the key insights for an effective agile ERP implementation, highlighting the specific elements that need to be considered in regulated environments such as the pharmaceutical industry. Our findings can be summarized in five principles that enable incremental value creation through continuous delivery – just like a motor car setting off on a long journey.
5 key learnings from a hybrid-agile ERP implementation in regulated environments
Computer system validation rhymes with acceleration
Let’s keep in mind: Generally, compliance verifications (such as computer system validation) are time-consuming and considered a box to be checked on compliance forms. But every cloud has a silver lining as, if properly planned and managed, validation is a useful tool for testing specific processes and gaining insight into how they can be streamlined while adhering to all required principles.
The early involvement of an external validation provider and strict project management help to separate the roles of system integrator and validator and to meet project deadlines. Furthermore, it allows validation and implementation testing to be performed simultaneously, which provides good insights to accelerate future work. Moreover, planning validation gates in advance allows for better allocation of the system integrator’s resources.
The separation necessary between system integrator and validator is particularly important and requires a clear agreement on the roles and correct operations of both sides: Every misunderstanding can have a negative impact on the quality of the product as well as on the schedule of delivery.
- Plan the correct timing for validation gates, and do the best to follow the initial planning
- Involve the validation team as early as possible, but focus on keeping the teams stick to the roles
- Use validation gates as early testing to keep the compass on the right implementation direction
- Guide the teams firmly so to overcome any possible roadblock fast while satisfying required regulations
No need to reinvent the wheel
Most ERP vendors have developed vertical solutions for specific industries that help customers apply industry best practices while ensuring easier maintenance and smooth operation. Examples of such tools are SAP Model Company or Oracle E-Businesses, which offer a variety of solutions compliant with general regulations for several reference sectors.
Systems integrators have also developed tools to accelerate ERP implementation, both in terms of geographical localization and detailed niche requirements. These pre-built packages, developed with specific localizations and correct operations, provide companies with industry-specific processes. Since they have already been validated by regulators, they only need a basic configuration to be ready for use.
Using already existing and well-tried tools saves implementation time while ensuring that regulatory-approved best practices are used, so that working MVPs can be tested at the end of each sprint. At the same time, company-specific requirements can be hard-coded by relying on available elements and tools, reducing the timeframe for implementation.
- Leverage on ERP Provider’s available industry frameworks to use tested best-practices
- Leverage on System Integrators industry frameworks to have an additional expert view
- Leverage on System Integrators localizations, so not to develop regulator’s requirements completely ex-novo
- Re-use internal knowledge for necessary personalization to enhance the adoption of the tool while keeping peculiar processes
Two different highway lanes for vehicles with different speeds
Highly regulated industries require validation of certain processes by an independent third party, if not by the regulator itself. Such requirements can be time-consuming, especially if it entails a monolithic development with a waterfall mentality. With an agile mindset, it is possible to split the implementation into smaller streams corresponding to the regulatory requirements of each process.
Such an approach ensures a two-speed development that can be easily implemented. On the one hand, processes not affected by regulatory requirements can be developed at full speed, focusing solely on internal needs, and using feedback from testers to refine the solution in each sprint. On the other hand, processes with specific regulatory requirements are developed at their own pace, guaranteeing thorough review during validation gates, and allowing almost constant interaction with validators and regulators.
Another positive effect of the “two-way approach” is the allocation of resources, which can be shifted according to project phase and need.
- Develop regulated processes following thoroughly all required validation gates
- Develop unregulated processes with a complete Agile mindset
- Interact with the validation team to ensure stickiness to regulation
- Leverage on Agile staffing fluidity to allocate resources where needed the most
Determine the objective and involve fellow participants
When working on such a large project, it is important to remember that the entire company is involved – not just the IT department. An ERP implementation requires the commitment of all company divisions and must be supported by everyone.
To make the process run smoothly, it is important to define a business case upfront that involves all stakeholders and specifies the expected results in qualitative or quantitative terms. This provides direction to teams and ensures alignment with leadership expectations, i.e., using standards wherever possible, limiting the use of system customizations.
In such a scenario, commitment can be strengthened by introducing project-specific KPIs for each of the stakeholders involved to anchor their engagement and ensure that the entire team has a stake in the cause.
As a best practice, the strategy to achieve the set objectives must be defined in the first phase of the project and agreed with the stakeholders to find the right way to reach the goals set forthwith.
- Set the business goal and outcome of the project with the sponsor, either qualitative or quantitative
- Define the strategy to reach your goals and set specific objectives for business stakeholders
- Measure the project outcome continuously through a set of pre-agreed KPIs to monitor the progress
- Keep the engagement of every stakeholder high throughout the project, both the IT and business departments
Making sure you have the right navigation system
Another crucial factor is the governance team, which drives implementation and guarantees the achievement of objectives. The appropriate leadership is essential to ensure correct implementation without missing anything, while also acting as a liaison between stakeholders.
The governance team should know the industry to anticipate all validation steps and any industry-specific issues. At the same time, it must ensure the readiness of the design authority, who will make enterprise architecture decisions in conjunction with system integrators and as per industry best practices. The governance team must engage at a high level to maintain the right mindset while working on multiple streams and issues.
The governance team must be independent of all other parties involved:
- from the end user to ensure the same quality of the final product in all delivery areas
- from the software vendor to ensure that the customer requirements are covered by the provided solution without using the customer as a test object
- from the system integrator to ensure that schedules and requirements are met and reviewed with the customer in a timely manner
- from the validator to avoid possible conflicts of interest and to be able to act as “arbitrator” between validator and system integrator
- Leverage on stakeholders’ and governance team’s knowledge of the industry and previous experiences
- Create and maintain the right mindset to allow focus on all streams while maintaining flexibility
- Guarantee independence of governance from the delivery team, with the aim of maximizing project value
- Ensure a proper Design Authority is in place to guide Enterprise Architecture decisions together with the system integrator
In nature, there are several shades of gray between black and white; the same principle applies to straight waterfall and pure agile approaches.
Hybrid Agile can be the right compromise, allowing the division of the monolithic phases of the waterfall approach into differentiated and incremental time windows typical of agile. This technique increases the value of the project by shortening the delivery time and ensuring that each phase is performed using the most appropriate method, while allowing for good management of the required sequencing and implementation validation gates as per the rules set by the regulatory authorities.
In such a scenario, BCG Platinion has a proven global experience in most industries and offers qualified expertise in project management for ERP implementations and other similar solutions.
We asked IBSA Group’s IT leader about how the company benefited from BCG Platinion’s experience implementing Hybrid Agile during an SAP S/4 HANA implementation program across the company’s value chain.
Read the interview in full length:
Interview with the IBSA Group Head of ITLearn More
How BCG Platinion supported with an hybrid-agile approach
About the Authors
Ivano Ortis is a Managing Director & Partner at BCG Platinion based in Milan. He has a long history of success supporting consumer companies in unlocking strategic tech & digital transformations across the retail, CPG, fashion and luxury, and travel and tourism sectors. His experience spans from strategic advisory to value realization, defining a vision of leadership enabled by technology, including designing target technology architecture, platforms, and roadmaps. He is steering large-scale tech & digital implementation programs to deliver business impact.
Giovanni Lamberti is a Principal Enterprise Solutions based in the Milan office of BCG Platinion. He has more than 14 years IT consulting and extended SAP experience in complex Transformation International Programs. He is currently steering multiple large projects in the SAP S/4 Hana space.
Flavio Casazza is a Manager in the Milan office of BCG Platinion. He has more than 6 years of experience in IT consultancy across various industries, such as Automotive, Oil & Gas, Construction and with particular attention to the Pharma sector. His experience covers heterogeneous IT transformation projects, including SAP S/4 Hana transformation programs.
Carlo Morandi is a IT Consultant in the Milan office of BCG Platinion. His previous experiences included transformation projects in Banking, Media and the Pharma world, focusing on the digital transformation of legacy tools in complex architectures.