VOLKSWAGEN OF AMERICA: MANAGING IT PRIORITIES

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VOLKSWAGEN OF AMERICA MANAGING IT PRIORITIES
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Meeting

• Date September 8, 2003
• Room CIS 1012
• Hour 7 to 8 pm
• Reason Discussing some last minute issues and
  concerns about Volkswagen America prioritization
  process for IT projects
• Participants

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Participants

• Dr. Uwe Matulovic
• Volkswagen Americas CIO

Alias Jonathan Garriss
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Participants

• Mr. Chris Broderick
• Digital Business Council (DBC)

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Participants

• Mr. Brian Bullard
• IT steering committee (ITSC)

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Participants

• Mr. Donald Byrd
• Program Management Office (PMO)

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Participants

• Class
• Key personnel of Volkswagen America (VWoA)
  business units

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Participants

• Ms. Susanna Lopez-Legentil
• Executive Team Leader (LDT)

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Agenda

1. Overview of actual prioritization process
2. Problems and critiques
3. Alternatives Other cases
4. Brainstorming
5. Best alternative Implementation issues

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Prioritization process
Project description Symbol Budget Range
Develop a fidelity program
Develop software for supply chain
Translate VWoA website to Spanish
Create a web user portal
VWoA
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FIDELITY
15
Global
SUPPLY
VWoA
4
SPANISH
10
VWoA
USER
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Prioritization process
22 million
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Prioritization process

1. Calling for projects, communicating process, and
   identifying dependencies

Business blueprint
FIDELITY
SUPPLY
USER
SPANISH
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Prioritization process

1. Formal project requests from business units

Project description Project description Project description
Invest/Tech Types
Stay in business SIB
Return on Invest. ROI
Option-creating OCI
Base IT platform
Applications
Customized solutions
FIDELITY
USER
SUPPLY
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Prioritization process

1. Transforming business unit requests into VWoA
   goal portfolios

VWoA Goal Ranking Project ranking Project ranking
Customer Loyalty
Stable Business Infrastructure
New Vehicle Value
Pre-Owned Vehicle Business
Optimize the Supply Flow
FIDELITY
USER
SUPPLY
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Prioritization process
IT projects prioritized
Project description Ranking Symbol Budget Range
Develop a fidelity program
Create a web user portal
Develop software for supply chain
1
12
VWoA
FIDELITY
2
10
VWoA
USER
3
Global
15
SUPPLY
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Prioritization process
22 million
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Problems and critiques

• Projects of global importance were not funded
• How to encourage employees to think about the
  greater good of the company instead of their own
  business units
• Management exaggerates ROI
• Difficult to validate projects strategic
  relevance

Finding the right prioritization process
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Other cases discussed

• Donald, Chris, Brian

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Strategic Grid
Goal!!!
High

Low
Low High
FACTORY
STRATEGIC
Strategic Impact of Existing IS
SUPPORT
TURNAROUND
Strategic Impact of Future IS
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Matulovics notes

1. Projects of global importance were not funded
2. Ranking metrics
3. Management exaggerates ROI
4. Validating Proposals Strategic Claims
5. Setting and Applying Correct Filters
6. Sources of Funding

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Alternatives

• Alternatives proposed in the VWoA case
• Take funding from other funded projects to give a
  bit to critical unfunded projects
• Leave unfunded projects alone
• Help make an argument for funding the project
  from alternative resources
• Reopen prioritization process

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Prioritization process
VWoA Goal Ranking Importance weighted Project ranking Project ranking
Customer Loyalty 30
Stable Business Infrastructure 25
New Vehicle Value 20
Pre-Owned Vehicle Business 15
Optimize the Supply Flow 10
FIDELITY
USER
SUPPLY
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Best alternative
1. Financial Benefit/cost ratio Rate of
return Contribution of profitability Growth
rate Payback period
6. Management support Political
acceptance End-user understanding Cooperation Proj
ect management Top management support Match with
users' interest load Middle management support
2. Organizational needs Contribution to firm
goals Competing in the market Internal political
decisions Future success Importance to the
functioning Public relations effect Critical
success factors
5. Risk Technical risk Structure risk Risk of
cost overruns Size risk
4. Technical Isolated, simple, modular
project High visibility of project Basic
subsystem to system Basic module for
operations Availability of skilled IT
personnel Availability of needed technology
3. Competing environment Required by
regulations Response to competition Required by
customers/suppliers New industry
standards Lawsuit requires information
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Key Questions 1

• Volkswagens Next Round of Growth Initiative
  was established to accomplish what goal?
• To build more profitable product lines.
• To establish a line of communications between its
  North American and European divisions.
• To support and enable the new global product
  diversification strategy.
• Rank projects by their ROI.

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Key Questions 2

• One correct way a business unit manager could
  ensure that their project would be raked highly
  would be to
• Associate the project with an enterprise goal?
• Exaggerate the ROI?
• Only pursue projects that would be appealing to
  management?
• Buy their CIO a new car?

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Key Questions 3

• When prioritizing IT projects, a critical step
  to perform is
• Make sure the most innovative projects are
  funded.
• Align projects with the companys strategic goals
• Optimize the available funding so as many
  projects as possible get funded
• Obtain the CIOs agreement and support.

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Extra Credit

• Project leaders often exaggerate the ROI on IT
  proposals before submitting them. How can
  management limit this phenomenon?
• Project evaluation should be directly related
  to the initial proposals ROI calculation and any
  other metrics included within the proposal.