Volkswagen of America: Managing It Priorities

This recommends helping the business unit executive for supply flow to make an argument for funding the yet unfunded supply flow project from alternative sources and to strengthen the executive’s position in doing so. Implementation of this exception-handling process will take place within 5 days of approval. As a result, the most important strategic goals of VWoA will still remain in focus and the new prioritization process will not have to be reopened.

Thus, resistance and fighting against the new prioritization process can be prohibited and at the same time a potential conflict with the parent company due to impeding their globalization initiatives can be resolved. Consistency in the prioritization process of the enterprise’s IT projects and reduced costs will result from these actions.

The implementation of the new IT project approval process led to the fact, that a SCM project with high importance to the global level of the organization did not get funding as it does not show significant value at VWoA level. Top-ranked NRG goals such as “build brand customer loyalty” or “improve vehicle value” are not addressed directly with this project, whereas stopping it would lead to a major setback for globalization initiatives of VW AG and would probably lead to a conflict with the parent company.

The introduction of VW AG’s new strategy of global product diversification breeds new model introductions in the U.S. and Canadian markets, which emphasizes the need for effective and sophisticated supply chain management even more. The recommendation is to find alternative sources for funding which could be raised in discussion with the IT department of the parent company VW AG or in getting VWoA’s CEO, Gerd Klauss, involved in the funding effort.

This plan should begin as soon as possible, as alternatives have to be found when this plan does not succeed. In the end, our objective is to contribute to the strategic supply chain position of VW AG worldwide with applying an exception-handling process and at the same time following VWoA’s strategic goals of the NRG program in spending the $60 million budget only for projects in the top-ranked goal portfolios.

The most important reason for this is to keep consistency in consorting with the new prioritization process for IT projects and thus prevent resistance and business unit executives fighting against it. The second most important reason is to avoid a potential conflict with VW AG due to impeding the globalization initiatives of the parent company in not finalizing the SCM project.

Supporting VW AG in their globalization effort will position the entire VW Company in a long-term strategic stance to face the upcoming challenges from implementing the new strategy of global product diversification. Other alternatives would be not to fund the SCM project and thus stopping it (see options grid- exhibit 1). This decision could lead to serious conflicts with VW AG and to disadvantages in VW’s strategic positioning worldwide. Another option would be to reopen the prioritization process or to cut funds of other projects at VWoA.

Both alternatives could lead to resistance and to the fact, that other projects which are important to VWoA’s strategic goals would be neglected. The risk in our course of action is not being able to find alternative sources for funding the SCM project which could cause discussions and a break with the supply flow people in Germany. If we do not succeed in raising alternative funds for the SCM project we should imply another sort of exception-handling process. This is important to do as successful businesses continuously forge new opportunities which cannot all be covered by the existing IT decisions. Thus we would bring the issue out into the open and allow debate.

Comment [MLW2]: Good! This is an effective summary of your recommendation.

Comment [MLW3]: True...but since we don’t do any of the mfgr here, do we care about the supply flow? Comment [MLW4]: Good!

Comment [MLW5]: Good!

The next step to do is calling Gerd Klauss to get him informed about the problem and to get him involved in the solution process. A senior manager has to take a leadership role and responsibility in this IT decision. As any exception to the IT architecture must be justified, we should create a short statement in which we lay out the importance of funding VWoA’s priority portfolio and the SCM project at the same time and thus to raise funds from other sources. This draft should be done end of the first week in December 2007. After we convinced Klauss of the need of funding from other sources we should negotiate a higher budget with the IT department in Germany or try to raise funds within VWoA in accordance with Klauss.

Work cited Austin, D. Robert, “Volkswagen of America: Managing IT Priorities”, Harvard Business School, Case 9-606-003, rev: June 14, 2007 Rock Kopczak, Laura; Johnson, M. Eric, “The Supply-Chain Management Effect”, MIT Sloan Management Review, Spring 2003 https://lib.pepperdine.edu/login?url=http://search.ebscohost.com/login.aspx?direct=tru e&AuthType=ip,url,uid,cookie&db=buh&AN=9547971&loginpage=login.asp?custid =s8480238&site=ehost-live&scope=site Rose, Tom, “Prescriptions for Managing IT Priority Pressure”, Information Strategy:

The Executive’s Journal, Fall 2000, Vol.17 Issue 1, p.18 https://lib.pepperdine.edu/login?url=http://search.ebscohost.com/login.aspx?direct=tru e&AuthType=ip,url,uid,cookie&db=buh&AN=3449385&loginpage=login.asp?custid =s8480238&site=ehost-live&scope=site Weill, Peter, “Don’t just lead, govern:

How top-performing firms govern it”, MIS Quarterly Executive Vol.3 No.1 / March 2004 http://www.misqe.org/jsp/showpaper.jsp?ob1=29&ob2=5&ob3=true Ross, Jeanne W.; Weill, Peter, “Six IT Decisions your IT People Shouldn’t Make”, Harvard Business Review, November 2002 https://lib.pepperdine.edu/login?url=http://search.ebscohost.com/login.aspx?direct=tru e&AuthType=ip,url,uid,cookie&db=buh&AN=7720817&loginpage=login.asp?custid =s8480238&site=ehost-live&scope=site McAfee, Andrew, "When Too Much IT Knowledge is a Dangerous Thing", Sloan Management Review Winter, 2003. http://lib.pepperdine.edu/login?url=http://search.epnet.com/login.aspx?direct=true&A uthType=ip,url,uid,cookie&db=buh&an=8955608&loginpage=Login.asp&site=ehost

&scope=site

Exhibit 1 – Options Grid

Option 1 Description of Option Reopen the new prioritization process

Option 2 Try to take funding for the yet unfunded “supply chain management project” (SCM project) from other funded projects, without reopen the prioritization process Not recommended as this procedure would challenge the merit of the new prioritization process and could lead to resistance from business unit executives against this new process; also combined with a lot of work Moves away from the first ranked goal “customer loyalty”; emphasizes the last ranked strategic enterprise goal “Optimize the supply flow” too much Full cost of the SCM process would take a significant portion of the $60 million IT budget for 2004 - resistance and fight against the new process from business unit executives - other projects which are

Option 3 Imply an exception-handling process: Help the business unit executive for supply flow to make an argument for funding the SCM project from alternative sources Recommended because the SCM project is critical to the global objectives of VW in Germany and shows a high value at the global level of Volkswagen. SCM implies strategic importance to the whole company and is crucial within the new corporate strategy Combines the strategic focus on the four other goals of VWoA and the need for long-term strategic stability of the VW company worldwide Not specified how much money has to be raised from other sources to keep the SCM project on track

Option 4 Leave the funding problem to the supply flow area to work out what to do about the SCM project

Overall Assessment

Not recommended as the SCM project does not show sufficient enterprise value and reopening the process could challenge the merit of the new prioritization process Moves away from the first ranked goal “customer loyalty”; emphasizes the last ranked strategic enterprise goal “Optimize the supply flow” too much Full cost of the SCM process would take a significant portion of the $60 million IT budget for 2004 - resistance and fight against the new process from business unit executives

Not recommended because the SCM project is critical to the VW’s global SCM objective and would constitute a major setback for globalization initiatives of the parent company

Strategic Fit

Fits to core competencies: the strategic change due to global product diversification lists “optimize supply flow” as the last enterprise goal The $60 million IT budget for 2004 can be spend as planned for VWoA’s top-ranked goal portfolios

Financial Attractiveness

Noteworthy Risks

- not being able to find alternative sources for funding the SCM project - discussions and break with the

- discussions and break with the supply flow people in Germany - conflict with parent company VW AG in Germany due to not