How a Failed ERP Implementation Took Down the FoxMeyer Drug Company

FoxMeyer Drug was a $5 billion company and the United States’ fourth largest drug wholesaler.

In 1993, with the support of the company’s CEO and CIO, the company began a $100M project to implement SAP’s R/3 ERP software. To implement the software, FoxMeyer chose Andersen Consulting, a proven SAP integrator at the time.

When the ERP was put into service later that year, it couldn’t cope with FoxMeyer’s transaction volume. Order processing dropped from 420,000 to 10,000 per night.

The implementation was significantly flawed, and the company had obvious leadership issues. Four years and more than $100M later, FoxMeyer was forced into bankruptcy.

SAP was an established software provider, Andersen Consulting had a history of success, and FoxMeyer Drugs had deep pockets. Yet, a disastrous ERP implementation brought down one of the largest retailers in the world.

Learnings From the FoxMeyer ERP Failure

This case, and many other large technology implementation failures, are still fresh in the minds of CIOs around the world. To close a sale in B2B, it’s critical to reduce the perceived risks of buyers.

This means being aware of the risks perceived by organizations. In B2B, there’s a lot to learn from similar failures. You’ll always be more successful if you’re able to take on the perspective of your prospects.

Consider the totality of risks. Risks can be personal (damage to professional credibility, reduction in job security, etc), or organizational (inability of the product to work as expected, loss of financial commitment, downtime, etc).

Companies will often apply a risk discount—discounting the value proposition—based on how much (or how little) they believe in the offering.

More on Risk Reduction in B2B

• How the Best Companies Reduce Risk to Win in B2B
• Why You Want to Consider Doing Pilot Projects With Your Customers
• Why I Wrote the Second Edition of Lean B2B (And What You Can Find in the New Edition)