How Škoda can save and drive ERP

Posted on 8 Aug 2011 by The Manufacturer

Having declared that everything you think you know about ERP may be wrong, my focus now moves to defining ERP as it should be for manufacturers and how the technology needs to be reinvented to deliver value. For inspiration I turn to an unlikely source - Škoda.

For decades Škoda was the butt of motoring humour as drivers ridiculed the jewel of eastern European technology. However, following the takeover by Volkswagen, the perception of Škoda in Western Europe changed completely. In the UK, a major change was achieved with the risky, ironic “I’s a Škoda, honest” campaign, which confronted Škoda’s image problem head-on. If the technical improvement and product quality of the Škoda models available at the time – the Fabia and Octavia – were anything less than excellent, the campaign would have back-fired.

But by 2005 Škoda sold over 30,000 cars in the UK and for the first time in its UK history, a waiting list developed. By 2010, 762,500 cars were sold worldwide, a record for the company. The lessons for ERP are plentiful.

Firstly there is the recognition that looks are important. For Škoda, this meant face-lifting the exterior of the cars and a dramatic overhaul of the interior. For ERP software it means an equally radical approach to the user interface.

This is not just an issue of cosmetics. According to Aberdeen Group, best-in-class companies spend 25% of the working week looking for information rather than the 40% spent by ‘laggards’. In addition these pioneers see a 30% annual improvement in ‘time to decision’ rather than 7%. Businesses cannot make this kind of progress if they have an ERP system dogged by an obstructive interface that is not keenly aligned to individual roles.

Secondly there is the critical role of added services. For Škoda, it is vital to ensure that dealers establish a relationship that will lead the customer to return to other brands in the Volkswagen Group when they wish to ‘trade up’. For ERP, pre-sales, implementation and after sales consultancy and support are just as vital. This is particularly critical in the SME market where the perceived interruption of implementing ERP is the number one barrier to uptake. But regardless of the size of the end user business, services that show an organisation how to exploit and maximize investment in ERP can be just as critical as the functionality of the system itself.

Lastly there is the common ground of domain expertise. Prior to the initial Volkswagen stake (itself some nine years before VW took full ownership) Škoda had begun closing the gap on Western European automotive manufacturers. They had looked and learned so that by 2000, Škoda had a full understanding of the Western European market and could compete.

Similarly if ERP is to deliver – for example by consistently achieving the 20% reduction in operational costs that Aberdeen identifies as a hallmark of best in class companies – it needs to be rapidly adaptable to a given industry or business; standardizing, streamlining and accelerating business processes quickly.

ERP implementations however, do not have the luxury of a decade to perfect this fit. Rather, ERP solutions need to deliver domain expertise ‘out of the box’ to provide a quick time to value without lengthy configurations. Just like a car, today’s ERP is about speed. Speed of implementation, and the all important speed of accessing the right information for effective decision making.

These specifics risk understating the profound strategic change that Škoda underwent – and indeed that lies ahead for ERP. By thinking differently about what made them unique, about what drivers wanted from their cars and how to best fulfill these requirements, Škoda was able to transform from motoring joke to the critical entry level brand of the Volkswagen Group.

Likewise, it’s time to think differently about ERP. For ERP vendors, thinking differently about the demands of manufacturers is now the order of the day. Because unlike Škoda, ERP can no longer afford to be the butt of jokes in the boardroom.

Wolfram Schmid, Infor