Management and Supply Flow Project: VWoA Case

Matulovic, the new CIO, has two primary concerns at VWoA: defining governance and establishing development process directives. However, Matulovic is in a difficult situation; he faces inadequate funding, new business architecture and increasing pressure from his peers. His circumstances are predictable given the history of IT consideration, by VWoA, as a source of overhead and the highly unpredictable U.S. market for Volkswagen Group. Matulovic’s biggest hurdle is in regards to the capped funding that has been determined by the parent company (Volkswagen Audi Group). VWAG allotted VWoA only $60 million, out of the requested $210 million, for IT projects.

Given the scope of VWoA initiatives, the amount is far from adequate. However, at the time, there were no additional funds available. The procedure for deciding which projects will receive funding is streamlined by a new prioritization process. This process for managing IT priorities is part of a new business architecture designed to align organizational activity with corporate goals and strategy. During the first few years of any new policy or procedure there are bound to be unforeseen complications. The largest glitch was how the new process did not account for “behind the curtain” programs such as the intercontinental Supply Flow Project.

The Supply Flow Project should absolutely receive funding. The cost should not come entirely from VWoA, but allocated amongst the global Volkswagen group of companies. This project is critical to Volkswagen’s global supply chain management and their goals. Successful global integration not only promises company wide savings, but plays an underlying role in customer satisfaction and loyalty, the number one corporate goal. This Supply Flow Project is already underway and needs additional funding for a timely completion. The new funding prioritization process overlooked such programs as this, primarily because the benefits achieved were at the global level. Because of the widespread benefits, all global constituents should contribute to the project’s financing.

Matulovic, along with the supply flow group in Germany, should combine forces and present their case to VWAG for separate and additional funding for the Supply Flow Project. Due to situations like the Supply Flow Project’s lacking “qualifications” to receive adequate funding, opponents claim the new system is “too theoretical” and may not be conducive to VWoA operations.

True or not, this cannot be properly determined in the first year of the prioritization process implementation. Furthermore, with a capped spending amount, there are bound to be a few disgruntled individuals whose project did not receive the proper funding. These discontented members of the Executive Leadership Team may not agree, but must realize it is a part of doing business. Furthermore, it is a way of doing business that they all previously agreed to. Matulovic should proceed as formerly agreed, with the business architecture output “blueprint” which plays a vital role in formalizing governance and prioritization processes.

1. Who controls the budgets from which IT projects are funded at Volkswagen of America? The budgets for IT projects were controlled through a process that involves several organizational entities that establish priorities. There were four specific teams that were involved in this process: the ELT (Executive Leadership Team), the ITSC (IT Steering Committee), the PMO (Project Management Office), and the DBC (Digital Business Council.)

The ELT was responsible for executing the NRG (Next Round of Growth) strategy in which the IT governance is a part. The ITSC consisted of business and IT managers and was responsible for guiding and approving the process of IT project selection and prioritization. The PMO administered the project proposal and approval process. The DBC was responsible for the project filtering process which decided which projects were most in line with the companies business strategy.

2. What is your assessment of the new process for managing priorities at Volkswagen of America? Are the criticisms justified? Is it an improvement over the old process? The new IT priority management process was driven by the new IT budget constraint given to VWoA by the parent company VWAG. If the new budgetary constraint was not initiated, it is likely that elements of the former less organized and less centralized method would be maintained.

In the end, this may benefit the individual business units, but be detrimental to the business as a whole. In creating the new process, Matulovic enabled the business unit managers to work together to make the decisions that would effect their departments using the overall company strategy as the driving element. In doing this, he succeeded in involving all of the managers that would be affected by the prioritization system while maintaining the executive leadership team’s strategic goals. This new system was a substantial improvement over the former system.

3. On page 8 we see that $16 million of the $60 budget is for SIB projects, under the spending direction of Matulovic; on page 1 we see that some people consider this unfair – is it? Should budget be “set aside” for IT projects? Why? The budget allocated for the SIB (Stay in Business) projects (business continuity and legal) should receive the highest priority.

As denoted by the name, if any of these projects are incomplete or fail, the risk to the business is substantial compared to business unit priorities. However, the amount budgeted may be a point that could be questioned. Instead of predetermining the amount required, he should have submitted the SIB to the same process as all of the other projects which would have reduced or eliminated the business unit manager’s perception that Matulovic was trying to control company strategy.

4. How should Matulovic respond to his fellow executives who are calling to ask him for special treatment outside the new priority management system? What should Matulovic do about the unfunded Supply Flow project? Matulovic created a well organized system that focused on company goals. His fellow executives were involved in the IT priority decision making and the company expectation is that business unit managers also support company goals.

If they think that these goals in relation to their requests does not make sense, then they had the opportunity in this process to voice their concerns to the one of the process teams (the ELT,ITSC,PMO, and/or the DBC), not to Matulovic himself. Because the Supply Flow project is tied into global strategy, Matulovic should propose that the funding for this project come from VWAG.

5. In general, what characteristics should a process for deciding about funding of IT projects have? General characteristics that an IT funding process should have: – Involve all of those who will be affected by the
funding decisions in the process. – Align IT funding priorities with company strategy.

– Enable communication between business units depending on the funding and between those units and executive management.