Australian manufacturers are continually being advised to focus on innovation in order to remain competitive. How can adopting the right software systems help to facilitate this? By Neil Clarke.

The ‘I’ word is being bandied about a lot these days. In my role as an IT specialist I like to consider how IT systems can affect a company’s ability to innovate in a positive way. Specifically, can operational software such as an enterprise resource planning (ERP) system help a company to innovate?

Often the definition of innovation seems to change depending on what is being discussed or even who is discussing it, so for the purposes of this article I will use Roger LaSalle’s definition: Innovation is change that adds value. So how can software help to make change that adds value?

Many companies are using software systems that are fragmented and the processes have evolved to closely parallel the processes of the business, or indeed in some cases create them. These systems work well for day-to-day operational management but typically lack flexibility to change if needed and, due to the disparate nature of the systems, have a moderate overhead to access timely information across all aspects of a company. This has the tendency to limit the appetite to review those areas and to provide information that may already be out of date due to the workload involved in assembling the data for a report.

When an appropriate ERP system is implemented, configured and used properly, it becomes easier to access information at both a high and a detailed level that allows the business to pin down areas that may be underperforming. Where it was previously difficult to gain accurate figures on the real cost in labour and time of, for example, a manufactured component, an ERP system will allow you to record and analyse the exact make-up of the component. To help you to innovate in your own processes, an ERP system offers the ability to gain insight into areas for a low overhead.

A good ERP system will allow you to identify areas for improvement and then measure the amount of improvement over time. Features like bill-of-material revision systems allow you to implement a process change in a new version and then compare costs of manufactured items from revision to revision. By comparing costs of production of a component before a change is made to the recorded cost after the change you are able to measure whether a change has had a positive, negative or neutral impact. Likewise, in any area of the business, the ERP system will allow identification, change and comparison of affects.

The second area that an ERP system will help you to innovate is in the reduction in management time required by having a set of structured processes or workflows in place to allow the business’ leaders to step back a little from operational management and take the time to look at the bigger picture. An ERP system can help to formalise, manage and enforce operational procedures in areas such as purchasing by providing workflows that, for example, allow smaller purchases to go unhindered but require larger orders to go through an approval process. Once these processes are implemented it becomes possible to measure performance in a meaningful way as there is trust that procedures are being enforced, allowing you to measure ‘apples against apples’. With this trust and the ability to monitor and measure it, it becomes possible to start thinking more about how to make changes that will add value. Or in other words – innovate.

Thirdly, consider areas like product design, marketing and sales. A modern ERP system will allow you to monitor sales against changes made in product range and design. If a new revision is made to add or remove a feature you will be able to see a change in sales performance for that product at any time. Likewise any marketing and sales initiatives can now be measured properly and compared over time, again, allowing you to make changes that add value.

So when you are considering how to innovate in your business, it may pay to first look at what information you have available to you to help determine what needs to be changed. If, like many companies I deal with daily, it is almost impossible to measure these things, you may want to first consider how to get access to good information about your business. Sometimes implementing effective IT systems will go a long way toward this.

When looking for IT systems, consider the Innovation Connections element of the Federal Government’s Entrepreneurs’ Programme. When you lodge an innovation research IT inquiry, we will be able to help by researching and reporting on the best-fit solutions for your requirements, with no vendor bias. Moreover, it is fully funded by the Federal Government.

Neil Clarke is an IT Systems Innovation Facilitator with the Federal Government’s Entrepreneurs’ Programme. For more information on this programme and the Innovation Connections service, visit: