How Business Automation Projects Fail, Part 1
12 March 2009
I’m starting a short series in How Business Automation Projects Fail. This is part 1, where I’ll cover the case of an apparently simple project to install a common software package. In part 2 I write about a much more complex and expensive project.
Business Processes
Businesses run by following well defined processes. Let’s look at a wholesale distribution business as an example. Here’s a grossly simplified version of the core processes at the heart of the business:
- An order comes in.
- The accounting department vets the payment, issues an invoice when necessary, records the transaction, and passes the order to fulfillment department.
- The fulfillment department picks, packs, and ships the merchandise, records the shipping transaction, and adjusts inventory quantities.
- The buying department reviews the revised inventory records and places replenishment orders when necessary.
Process Automation
In many cases, business processes can be made more efficient by letting computers do portions of them. Say you’re a small wholesaler with an overall selling process similar to what I’ve described. You know you want to automate many parts of the process. You’d like the computer to do the accounting, keep track of the inventory, alert you when customers haven’t paid and when inventory quantities are low.
So maybe you go to your accountant and ask for advice. The accountant says “Buy QuickBooks. I’ll help you set it up,” because that’s what the accountant is familiar with. So you do.
A month later you have the software installed and mostly configured, and you start to try running sample transactions through the system. You quickly discover that there’s a big problem. QuickBooks lacks the ability to manage multiple warehouse locations (this is a hypothetical example) and you need that badly. The entire automated system is useless to you without that feature.
Failed Project Postmortem
How did this happen? Your accountant recommended a capable and familiar software package without taking the time to define your requirements completely and to compare those with the software’s capabilities. The accountant was never trained in that discipline, and neither were you.
What’s the net result? You’ve lost a month of work setting up the software, and you have to start over from square one. You still have to find or commission the right software and get it set up.
Does this little story sound far-fetched? It’s not. It happens to small and medium businesses every day. This is exactly how software projects fail, how business automation projects fail – by failing to define the requirements formally and to make sure that they will be met by the proposed solution.
In this part I’ve told about one common way that a packaged software acquisition and installation project can fail. Stay tuned for part 2, where I’ll cover a more complex project where the business commissions a custom software solution.
I just wanted to take a moment and to welcome you to the Internet Marketing community here in Tucson.
I wish you the best. I see people come and go all the time. I hope to hear from you.
Thanks, Boris. I appreciate the thought.
[...] is all-too-familiar. Key chunks: Say you’re a small wholesaler …You’d like the computer to do the accounting, [...]
[...] Diamond presents How Business Automation Projects Fail, Part 1 posted at Steve Diamond Consulting – Steve’s Blog, saying, “Cautionary tale about how [...]
[...] addition to this advice section there were sections on business tips (like taxes and outsourcing) and home tips. And there was a general section with tons of [...]
In my previous company, there was a lot of work that came down “from the top” in regards to automation and streamlining – it all failed, was not used.
Now I work on my own, I use programming to streamline everything and it has all worked.
So, I think the problem can be if you are getting instructions from someone who doesn’t know how to program and/or their ideas are not in line with the people who will be looking after the automated systems that it can fail.
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Good point, David. That’s exactly why I believe that the role of the business analyst or requirements analyst is so important. That’s a person who’s trained to uncover the real underlying business requirements by interviewing the users and executives in depth, and then to translate the business requirements into a practical specification for developers to use.
In most cases I’ve seen, this trained intermediary is needed because most businesspeople and most developers simply aren’t skilled at understanding each other.
I have worked as a contract programmer and business analyst for several large companies, and agree that requirements analysis is essential when starting a project.
However, in your example of what looks like a small business, even if you have the skills to create a requirements doc it is often difficult to find a good solution as you will be dealing with off-the-shelf solutions that might not be customisable enough to fit.
I think the example quoted applies to many purchasing decisions – even outside business automation. A lot of buying decisions are made on personal recommendation with no analytic approach applied at all.
In my experience of custom software development for business clients, the cause of many misunderstandings is that the customer can’t clearly describe the key points of their existing process – if one exists at all.
Automation isn’t that bad of a thing to do. I think the main problem a lot of people don’t realize is that things screw up and you’re probably not going to know about it.
If you outsource it to a third party, it’s not like they’ll tell you when things screw up. They typically deny it.
Very interesting article demonstrating the problems often arising when improper research identifies a potential solution to an issue. It is easy to see where the problems arose in the wholesaler situation you described.
Anytime you request a solution from an entity only familiar with a segment of the problem, the solution offered is likely only going to address a segment of the process (exactly what happened).
I also see where this can be extended to almost any situation in the business world or life in general. Too many times, people offer solutions to problems when they do not have the complete picture.
Ideally, both the person with a problem and the solutions provider should take the requisite time to properly research the problem fully and identify a real solution. Great insight, thanks for sharing …
Thanks for your comment, Jim. I was thinking primarily of the formal process of analyzing requirements in business situations, but you’re right, this could be extended to nearly any problem-solving situation in life.
Steve
these coming articles sound just the thing for someone like myself. it can be costly making a buying mistake not only in money but time and effort. I hope all your articles are just as good as this one.
That’s exactly why specialists are important. An accountant simply won’t be familiar with all the needs and solutions despite the financial background.
Reminds me of a story:
‘A washing machine repairman shows up at a call, and examines a non-working machine for a minute. Then he takes a rubber mallet and hits the side of the washer. The machine begins to work properly, and the repairman hands over a bill for $65 to the customer.
Of course the customer is outraged by the bill, and starts yelling, ranting, etc.about $65 for 1 minute of work being ridiculous.
The repair man writes a new itemized bill as follows
~Hitting machine with mallet ~$1
~Knowing where to hit it ~$64′
There’s a few versions of the story, and I can’t remember where I first heard it, just thought it’s a good example o specialist labor. I wouldn’t call my accountant to fix a washing machine, or to provide an automated business model.
Thanks for the comment, Mox. That story is a good one and very apropos.
In that instance, at least the customer knew enough to call a washing machine repairman. In business, often the owners and executives don’t even know what kind of specialist they ought to be consulting for this type of project. They don’t know that such a thing as a consulting business analyst or business process specialist or software requirements analyst even exists, so how can they be expected to call one?
I’m sort of trying to educate the world about this, one business owner at a time.
Steve
This article proves the importance of thoughtful preparation. Too often do people decide to launch an idea or open a business without taking the time to organize how it will run. They get so caught up in the innovation of their idea that they are unable to see past the developmental stages. The example given in this article of a business owner purchasing software incompatible to the design of his corporation is precisely what I am referring to. He was so excited about getting his idea off the ground that he eagerly swallowed the accountant’s advice without considering any other programs. If you are unsure about any part of the preparation for your business, take the time early on to seek expert advice and shop around for the best options. This will save you money, time, and headaches down the road.
That’s exactly why specialists are important. An accountant simply won’t be familiar with all the needs and solutions despite the financial background.
[...] tempts you to say, "Hey, that one looks good" too early in the process. In fact I wrote a blog post about this very point recently that you may find interesting. [...]
This is very true Steve, in fact I’ve been guilty of similar things in my own business career. It usually happens because not enough thought is put into the end result the business is trying to achieve and whether there is a better way of executing the process with more efficiency.
It also is often the case that the type of boss who tends to try and run everything just makes an instant decision about what is best with little regard for those who will be charged with carrying it out. Many times it pays to seek the advice of others who may already have carried out what you are attempting to learn from them about pitfalls they found so you can avoid making the same errors too. Where the process is involved it’s often a good idea to seek professional advice, yes it might cost more initially, however in the long run it will likely save a lot more than a seat of the pants approach.
Thanks for the comment, Duncan. You make a good point about the type of business owner who is prone to making snap decisions. I’ve met a number of those in my career. What they often don’t realize is that their intuition is great in areas that they’re very familiar with, but it may not be so great in technical areas where they’ve had little or no training. They get used to successful instant decisions in their areas of expertise, and they start to believe that they’re infallible in other areas. It doesn’t always work out well.
Steve
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How Business Automation Projects Fail…
Even the simple task of choosing an off-the-shelf small business accounting package can backfire if you don’t analyze the requirements correctly beforehand….
Automation can certainly be tricky – I think a lot of these failures can be avoided upstream though if enough planning is put forth ahead of time. I think they say a large percentage of failed businesses are due to these types of failed ERP programs being implemented poorly and a huge loss of customer trust. Undeniably not something to enter lightly, or without the help of a skilled consultant!
Inventory is a must in a certain business. Knowing your assets, revenues and cost will help you in future decision for your business.
I feel sorry for these guys. It sounds like you have to be really careful, do your research and have a list of questions to ask before hiring someone to set your software up for you. In this case it sounds like it sure would have saved them a lot of time and money.
One major obstacle I have come across is with the transport (export/import) of data from the database of a whole sale company and into the MySQL database of an online reseller. The problem is the whole seller uses an antiquated Windows type database (that is internal and not online) and the reseller is up to date with PHP 5 and MySQL. They can export the data, but the table fields are different than the product table and field structure of the shopping cart. I know there’s software that lets you path fields from one database to another, but I don’t have experience with that to know how reliable it is. Do you have any thoughts about this?
Hello, Paul. I’m not an expert in automated data mapping tools. There’s no reason that it can’t be done if used properly. Back in the day, when I had to manage migrations from extremely antiquated enterprise accounting systems to newer ones, I used to hand-code the mappings. But I’m sure better tools are available now.
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While automation can be of great use, if used without at least a bit of supervision it will almost always fail. Hoping that people can simply do everything on their own is a bit farfetched. Yes, they may accomplish a lot on their own, but without precise goals set by people who supervise them, they will eventually fail in one way or the other.
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It does not happen every time with every automated system and if this would then how can big manufacturing companies or production companies handle all their data, inventories, stocks etc that are vast and huge. It is not possible for them to manually keep records of each and everything. Steve as you say that small business automations fails then that is because of there lack of knowledge of the softwares available in the market that will suit their needs.
This example story is not far fetched at all. In fact, it is quite similar to a situation I faced, only it was not with inventory and accounting, but with a web site, its data and the content management system software. Before I settled on a content management program of choice, I was at a stage where I was still researching and experimenting with various CMS brands. Before I learned which one suited me best, I made a mistake choosing one program that was not suited to meet my needs and as a result, I lost a few months of progress learning that what I had chosen was not the right choice. I suppose you can call it a learning curve, but since it is possible to avoid wasting time by making the right choice in the first place, that should be the goal.
It seems to me that the tendency to buy software that you don’t really need or that does not meet your expectations or your actual needs is not only a problem in business, but also for personal computer users as well. Promotional copy for software programs can be so well written with the features of the software cleverly described that many programs have a tendency of falling short of the expectations they create. If everyone had an in house computer expert on hand to provide advice, they might avoid a lot of unnecessary expenses. Come to think of it, that is exactly what a software / IT consultant like Steve Diamond is for.
I am still paying for a mistake I made recently by buying the wrong software, or to state it more accurately, expecting too much from the wrong software. I have been using a content management system for my directory web site for a few years without any problems. Things were moving along seamlessly until this content management system decided to upgrade their structure and essentially created a new one which forced many millions of its users to have to migrate their databases to the new structure. There was no push button solution to migrating the CMS. So it was basically everyone for themselves. A few extensions were created by companies to facilitate the process, but none of them proved to be easy. I ended buying into two of those only to realize they were not the solutions they claimed to be. So I lost time and money trying these extensions.
It is easy to over spend on a software program or to buy one that is not ideal for the application you had in mind. One of the drawbacks of purchasing software is that seller policies do not let you get a refund if you happen to buy the wrong software. The most you are entitled to is a credit with the same seller that is equal to the value of the software you bought. I wonder when the day will come when software programs are no longer installed locally on the computer, but used online over an internet connection.
I cant’ say I have done extensive research on the matter, but I think what is needed is a rating and reviews website, like Cnet, but that focuses not only on consumer grade software, but also systems that are designed for the business market. Oh, my apologies, that is exactly what a pro consultant like Steve Diamond is for. I get the feeling that most small business owners have the misconception that IT consultants charge an arm and a leg for their services and maybe that is why they tend to gamble their money on software they haven’t really tested or even researched, and then just hope for the best. But one thing I have learned from trying countless programs, there is no magical program that can solve all of your needs automatically. Often you have to choose more than one with compatible platforms in order t fill all of your needs. I am speaking, of course, about consumer grade software.
A lot of startups and high-growth companies are using Marketing Automation to help them grow faster. However, if growth has stalled because you’re selling the wrong products to the wrong people, Marketing Automation will not help. You will just try harder, and still not sell anything.
An in house IT person already faces the possibility of being viewed by the old school higher ups as being a waste of money. The last thing the resident IT guy needs is to make the call that makes the company spend a considerable amount of money on a software system. Then weeks later, other employees, some of whom may already be on the chopping block because of their own incompetence, begin to blame the software in an attempt to save their own job. Before you know it, the resident IT guy becomes the scapegoat and gets all kinds of undeserved blame from several departments. The higher ups do not know any better. They simply listen to managers who may be just as oblivious to the real problems. Such is life in a large company. This sort of thing happens every day. I’ve seen it happen within a company in which I worked as a web developer.
The sale of software programs might very well be the equivalent of making a company publicly traded in the sense that you can sell a program at a perceived value, and only after the consumer spends the money will he or she fully understand the ramification of their investment. That includes the real capabilities of the software because you can only learn that after you test it in a real world environment. I know there are trial versions of packaged software programs available for download, but those are usually limited in some way. That applies to less costly consumer grade programs. That is not the case for pro / industry grade software such as motion graphics editing software that is used in television broadcasting. I’m not talking about adobe after effects either. Maybe I’m wrong; I’m not the expert. Mr. Diamond would know better.
Does anyone remember when Microsoft unveiled the Windows ME operating system? I know everyone has blocked out the memory of the blue screen riddled Windows ME OS, like some traumatic experience (which is what those blue screen errors were). I remember when Bill Gates and some Microsoft higher ups demonstrated the new operating system to a live audience and via satellite to countless others, and the operating system crashed! It was one of the first occurrences of the dreaded blue screen crash screen and no doubt an omen for what would forever be remembered with that version of Windows. I’m sure heads rolled that day within the ranks of the evil Microsoft empire. I wonder what ever happened to the project leaders of that endeavor? Talk about an epic fail.
This post reminds me of why, in business, you need to be a strategist and not a tactician.
A strategist takes a little time beforehand to map out and rationalize the processes and makes them optimal for the situation. So that may be delivering the best value for the customer, is as easy to teach and repeat for your personnel, has the lowest effective operating cost, etc.
Especially in small business (and a huge big bold underlined especially for one man army businesses) automation is absolutely necessary. The more you can automate or outsource, the better. Ideally, you want to only be doing the activities that directly require your unique skill or what brings in the dollars. If you can hire someone to do the activity for less $/hour than your unique moneymaking skills are worth and outsourcing that activity can free you up to do more of the key things or working on your business rather than in it, you may want to consider doing it.
That’s exactly why I believe that the role of the business analyst or requirements analyst is so important. That’s a person who’s trained to uncover the real underlying business requirements by interviewing the users and executives in depth, and then to translate the business requirements into a practical specification for developers to use.
It seems to me that the information age is comprised of a plethora of incompetent IT consultants who look to make a quick buck from the first and least suspecting company. More often than not, those victims turn out to be small company owners who have recently experienced growth and the owner or directors have been too quick to spend the new found revenue without doing their due diligence in order to hire a qualified IT consultant. If you do some research on the internet, you will soon discover that there are lots of unqualified people positioning themselves as experts. I am not including Mr. Diamond in that bottom feeder’s category simply because he has demonstrated certain approaches to his field of expertise that scam artisets simply cannot dare to tread, namely, transparency. When I grow my start up to the point where I need a customized software solution, I will be sure to mine for Diamonds, as in Steve Diamond.
It can be a lot of pressure to have a boss or manager put you in charge of buying an important software program that the department will be relying on for day to day productivity. This is the sort of thing that can easily get away from you and you could wind up becoming the fodder of many co workers who may never let you live it down. That’s if you don’t first get fired. This sort of happened to me when I was put in charge of a national classified advertising budget before the days of the dot coms and sophisticated software. I used to have to fax every major news paper in the country and I use a database software called Q & A to track the spending. Let’s just say it was not a suitable program for this large task and it cost me many wasted hours of excessive work and frustration.
You were right your second post was a much more expensive and much larger scale problem. But this one had it place in line as well. Why do you suppose people that don’t really know about this stuff try to make these judgment calls anyway? You don’t have to be a genius to figure out when you are in over your head and ask for help before you completely ruin everything. Better yet speak up from the beginning and say you don’t know how, it is that simple. This article was just as great as the other one and they both have very good information in them. Thank you for posting both of these and I look forward to your next post.
The complete requirements have to be said at first when you’re doing something that requires to be completed on the deadline without any progress meetings in between. If you do have progress reports before the deadline, any additional system specifications could be added there, but do take note that these should only be the minor things.
I am not sure what they were thinking when they put something like this in the hands of someone that didn’t really know what they were doing. It is really to bad that the project planner didn’t know enough about this project to make at least an educated decision that would have saved the company in the long run. It was a good thing that the business owner stepped in when he did or his entire company could have been at risk. I hope the next time they hire a project planner that knows what they are doing. Or maybe do it yourself as the business owner so that you know it is right. This kind of project is way to important and expensive to leave to just anybody. If you don’t have anyone in the company that has the talent to do this then outsource it so you know it is done right.
This is a very costly mistake on the companies part as a whole. You don’t want an accountant telling you what software to use for inventory purposes, they don’t go together. I can’t wait for part two of this little fiasco, this was very entertaining and informative at the same time. I feel sorry for the one that made the call in the first place.
It is imperative to a company, large or small, to have a project planner in place to do this kind of thing. That way they are sure to get the information that is needed to make an educated decision on the purchase of the software. A project planner also takes note of any changes along the way that may be required so that mistakes like this are not made. Very eye opening stuff, great post.
I found this to be a very interesting article and I can’t wait for part two. Your story was very familiar to a company I once worked for, that now is not in business. I often wonder if the mistakes like this that they made is what finally broke them. Thank you for sharing this with us, do you have any updates on part two as to when it will come out?
I worked for a company once that tried to use an accounting software “Quickbooks Pro and get it to do everything they needed it to do in a construction company and it was a very costly mistake on the companies part as a whole. They had to spend a tone of money to have a professional come in and clean up the books and inventory etc. I feel sorry for the one that made this call.
I agree with Phyllis’ statement about the business owner taking care of this themselves if they know what they are doing but the outsourcing part I am not to sure of, what if they claim to know what they are doing but really don’t, how would you know until it was to late? This is very important stuff and if the business owner has time they should take care of it themselves to prevent this kind of thing. Very eye opening stuff, great post.
Making buying decisions on software is only a little more afe than say investing in a business opportunity or buying stocks. I mention all of these because all of these because they all have one thing in common. When you invest in any of them, you are essentially gambling your money based on the perceived value. At least with software, you have the opportunity to see a demonstration or even better, use a trial version for a certain time period or until you are convinced of its performance. But if you don’t have this option, I would say buyer beware!
The software industry has become over saturated and super completive to a tipping point where now, it is too easy to walk right into a pitfall. My collegue once had such a bad experience funding a software venture that he swore he would never again invest money in another software business venture. He was not saying he would never again buy a software program, but he just isn’t going to sink his investment capital in this industry. He never did use a consultant.