Volkswagen of America: Managing It Priorities

Volkswagen of America: Managing It Priorities

INTRODUCTION

The main idea of this case evaluated the prioritization process as to whether it was the right process for VWoA. In this case, VWoA introduced a new prioritization process with three phases. But in the running the new process, VWoA have met many problem. All the problems can be regrouped in a major issue: How to find the right prioritization process. Background of VWoA 1930——Ferdinand Porsche designed the first Volkswagen automobiles.

1940——since the launch of the Beetles, Volkswagen met the peaking point in its history. 960——VWoA settled into a trying cycle of ups and downs that became known “Himalayas chart”. 1990——the company was suffering the “Valley of Despair”. 2002——VW Group chairman, initiated a strategy of diversifying the product ——VWoA’s CEO, Gerd Klauss instituted an organizational readiness program called “Next Round of Growth” based on the product-diversification strategy. IT at VWoA 1992——VWoA , in order to reduce short-term costs, entered into a 10- years agreement with Perot Systems, an IT services provider.

Thus also reduced its internal IT staff to fewer than 10 people, eliminated much of the knowledge of IT within the company. 1999—— VWAG company was created in the U. S. A, gedasUSA Inc. To speed the start-up of gedasUSA, all employees of VWoA internal IT department were transferred to gedasUSA. There is a arms-length relationship between gedasUSA and VWoA. VWoA made it appear that the knowledge was lost to VWoA. 1999——VWoA set up “eBusiness team” for the purpose of creating digital-marketing assets and interacting with customers. 999-2002——gedasUSA, Perot System and the eBusiness team worked together to rebuild the IT environment to support the now rapidly growing VW and Audi brands. But IT function was not performing optimally within VWoA.

ISSUES/PROBLEMS

1. In order to adapt to the corporation globalization strategy, Klauss, VWoa’s CEO, instituted an organizational readiness program called “Next Round of Growth”. Some currently operating projects must stop, some new projects must start, others existing activities must be enhanced. So the primary question is how to classify the activities?

2. Across IT development at VWoA, the company put marketing and selling in a chiefly position and neglects the role of IT function. Review of building the IT department in three times, responsibility for managing IT was shared among multiple providers with no single organizational entity in control of the overall process.

3. In Matulovic’s mind, the major issues at VWoA were not related to technology but rather to the ambiguity that surrounded governance and development processes. . From executive’s ranking of enterprise goals for VWoA (in the exhibit 5), customer loyalty was put on the top position. In the final project list, keeping with the ranking of the NRG goals, the DBC will fund all projects in the top-ranked portfolio, the moving to portfolio with the next highest rank. In other words, all projects with the customer loyalty will be support. At the bottom position project, optimize the supply flow, may be get none aid financial.

5. The core question about whether the new process was right for VWoA.

Does it need innovate or continue running application?

6. How about the unfounded supply flow project? Leaving alone the project or giving up others projects to saving the money for the global project?

SOLUTIONS (Taken by the company)

  • To solve the problem about how to classify the activities, proposals categorized projects in terms of 1) the type investment they represented, and 2) the type of technological application that would. Investment types: Stay in business (SIB) Return on investment (ROI) Option-creating investment (OCI) Technological application types

Base-enterprise IT platform Enterprise applications Customized point solutions

  • In order to change the IT situation in the VWoA, Matulovic set about creating a new internal IT department, which he called “Business Process, Technology and Organization” (BPTO). He empowered a nascent Program Management Office to take over management of all projects.
  • To manage a new process for managing priorities at VWoA. The ELT had primary responsibility for executing the NRG program of which the new IT governance processes were a part.

The entire process was expected to play out in three phase. Phase? ——Calling for Projects, Communicating Process,and Identifying Dependencies. Phase? ——Formal Project Requests from Business Units Phase? ——Transforming Business Unit Requests into Enterprise Goal Portfolios

EVALUATION OF SOLUTIONS/ANALYSIS

  • Evaluate the three phase

Advantage:

  1. Classify the projects: the measures make a fundament for the future prioritization process.
  2. Creating a new IT apartment: a single organizational entity set up in the company which made IT knowledge came back VWoA.
  3. PMO contribution: PMO had done so much to tame difficulties with out-of control projects, would administer the IT project-proposal and approval process.

Disadvantage:

  1. Using the Ranking Method for project prioritization, it didn’t solve the problem in feasible resource. There is a big gap between the funding requirement and budget.
  2. A lack of index measure system: in the second phase, it lacked relevant data which are cost analysis, risk analysis, revenue analysis ect. Thus, it didn’t give a visual representation of the project’s anticipated profits.
  3. VWoA’s strategic goal was not in a same step with VWAG global strategy.
  • The number of the projects To much projects tied up a lot of money, and consumed much expense such as expense of administration, and increased the cost of human recourses. Before enforcement the projects, according to enterprise scope, the cost scope of project, and profit margin of the project relevant factors, in this way, it may reduce some projects which didn’t come up to the strategy plan or the profit margin in a low level.

RECOMMENDATIONS

  • To the problem of feasible resource, I follow some suggestions:
  1. In the Phase, every project team should provide a detailed project report which was a feasible analysis with limited resources. The repot have to include cost analysis, risk analysis, revenue analysis.
  2. Quantitatively managed project: Using the phase ? report, every project set up an index measure system. It selected the project which was high profit margin and had come up to the strategy goals with adopting some scientific method in appraise of project.
  3. Imposing 0-1 ILP method and Net Present Value Index method to fix portfolio.

Though setting decision variables and objective problem, it would get the optimal solutions with the object function. Objective problem data come from the cost analysis, risk analysis, revenue analysis.

  • About final project list, according to the ranking of enterprise goals, it assigned the budget capital in terms of percentage. For example, customer loyalty 30%; new vehicle value 20%; stable business infrastructure 20%; pre-owned vehicle business 15%; optimize the supply flow 15%. Every project in each ranking would have budget capital.

CONCLUSION

The management of change is a responsibility that many managers fear, misunderstand, and have very little training to handle. Yet for the IT executive, managing change is critical skill because the implementation of new systems always involves change. In this case, VWoA introduced a new prioritization process with three phases. But in the running the new process, VWoA have met many problem. All the problems can be regrouped in a major issue: How to find the right prioritization process. In the part of recommendation, I give some suggestion with related thesis. I think imposing mathematical model is very useful to solve the problem of feasible resource.

RELATION TO THE CHAPTER

This chapter has looked at the challenges associated with the management of change. These challenges reach beyond the IT organization as a pervasive problem organization-wide. However, the IT management must deal with change in every technology implementation undertaken. Research on techniques for change management was presented, including detail on team building as an important tool for successful change management.