What is the capability shock in IFS ERP projects?

The J curve explains the capability shock of IFS ERP implementations.  It’s a useful tool for ERP leaders to understand the process and manage both the board’s expectations and wider business communications.  

 How the J curve represents the capability shock

The J curve is a graph that shows how companies often begin ERP implementations with the unrealistic expectation that their capability will increase immediately after go live.   

In fact, capability dips before it improves. This happens because people need time for the new ways of working to become habit.  

 

This is a happy J curve because, after the dip, the increase in capability meets the expectations. You can expect a happy J curve when the project included good business change management.   

 

This is an unhappy J curve. The dip in capability becomes a pit of despair. The business is fighting just to get back to their previous level of capability.  You can expect an unhappy J curve when the business change isn’t managed well.  

How the capability shock works in ERP implementation projects 

At a point there will be a go live event. The company switches on the ERP and adopts the software. The expectation is that the business will immediately realise the new capability enabled by the software, and begin operating at the new level from here on.  

Everyone who’s done an ERP implementation before is excruciatingly familiar with what actually happens. The business goes into a bit of shock.  

People have a brand-new system. They start to draw on their training, they begin to use the change management frameworks, and they start to lean on the super users that are in place. All this change means overall business capability will drop while people adapt and form new work habits.  

The depth and duration of the dip depend entirely on the quality of the business change management and service transition.  

Educating people so they understand the J curve will happen is a good start. And then it’s about navigating the business to the target capability level.  

There are different names for the capability shock. It can be called early life support or hyper-care.  

You should know going in what the expected duration is and have a plan to exit.  You’ll have a couple of milestones in there, for example at the first month end, the first quarter, to test whether the business has achieved the target capability.

Planning for good business change at the start, managing the change, and planning for service transition and service delivery are major tools for mitigating the depth and duration of the J curve, and for maintaining target capability.    

Navigating the capability shock in Continuous Improvement 

Change isn’t a finite event.  Let’s say you do get there, and you do achieve capability in the system.  

(Some companies don’t. They get stuck in the pit of despair with costs ramping up while capability slumps along with trust and company morale.) 

 

Now you’re there, you need to stay there. If you don’t work to maintain the new product it will start to degrade, just as your previous system’s capability reduced to the point where you decided to replace it.  

This is where great service management comes in. 

Over time the business will pursue new opportunities for growth, react to market forces and respond to changes in regulatory frameworks as well as the myriad customer requests. 

All of these require changes to the product to maintain its capability. This is what we mean when we say continuous improvement.  

The initial go-live event is huge. It affects everyone. From then on, there should be lots of little happy J curves, testing and releasing new software, new changes in functionality.  

 

The real cost of the pit of despair 

Go-live is the most effort and cost-intensive event in the project. At this point you’ll have most of the different groups represented, all working concurrently. Any delay in this period is going to cost more than it would at the start or even at the end.  

At the start of the project you hadn’t yet rolled out the whole team. You were working in a business change capacity to understand the requirements. Delays at that point were manageable, the cost wasn’t huge.

And once you’ve handed over to BAU and let the big project team go, then the service delivery team can make incremental changes in a continuous improvement cycle. 

Reimagining the design of the product at the point of go-live involves possibly hundreds of people, with multiple decision-makers revisiting their decisions. Communication is hard to manage, multiple developments and tests means go-live is delayed and the duration of hyper-care extends.  

On top of the extended project costs, value realisation is also delayed because you haven’t achieved capability in the system.  

The losses in opportunity are hidden, but very real, costs to the business.  

Here’s a simple example. Say a business has a £100m turnover, and the operating cost is 80 per cent, or £80,000,000. The ERP project is set to deliver a 2 per cent of efficiency, or £1,600,000. The loss in opportunity is a cost of £133,332 for every month that go-live is delayed.  

We call it the pit of despair because trust and morale are eroded as the expected benefits fail to materialise despite everyone’s best efforts.  

This is the real cost of bad business change management and poor service transition and service delivery. 

Using the J curve to manage expectations and maintain trust

Educating the board to expect the dip in capability is vital. Then you can have a conversation about managing the change, and the importance of engaging the wider business to bring the best people into the project as workstream leads.

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