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V wo a_220509

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  • Let’s start the process overview with a simplified made-up example to refresh our memories about how VWoA prioritizes its IT projects. Imagine we have 4 IT projects to evaluate: A fidelity program, for instance like a frequent flyer. The project costs $12 million and will affect only VWoA The development of a new software to manage the supply chain. This is the most expensive project, $15, but will have a global importance, meaning that for instance Volkswagen in Europe will use the same software once it has been created Translate the American website in Spanish Create a web user portal where VW lovers can have access to cars designs, VW blogs, VW chats, etc. Class: Which project would you rate first??
  • To resolve which IT projects should be prioritized, Volkswagen of America designed a new prioritization process, with 3 main phases: First, Calling for projects, communicating process, and identifying dependencies: Each initiative is mapped against the business blueprint, similar initiatives grouped together, dependencies among projects are identified, and dependent projects rescheduled. For instance, it wouldn’t make a lot of sense to translate the website in Spanish until the new user portal is finished. Therefore, the Spanish translation project would be dependent of the user one and postponed until later on.
  • 2. Formal project requests from business units, which include: Detailed information about each project plus classification in one of the following investment types: Stay in business (SIB). Projects that are necessary to maintain business continuity or mandated by the parent organization. Return on investment (ROI): Project that have predictable cost savings, productivity gain or revenue-generating results. Option-creating investment (OCI). Risky actions taken in anticipation of discovering a new idea that will led to a competitive advantage. The presented projects also have to be classified in one of the following technological application types: Base-enterprise IT platform: Infrastructure services and tools used across all the company. Enterprise applications: Produce information used throughout the enterprise. Customized point solutions: Useful only in targeted applications So the Fidelity project could for instance have a clear ROI and application, the supply chain project could also have a clear ROI but be classified in the Base-enterprise IT technological platform, etc.
  • The last phase of the prioritization process is to transform business unit requests into enterprise goal portfolios: Each project is reclassified in one of the 5 top company strategic goals for project prioritization. Finally, projects were not funded by ranking importance in each strategic goal but rather in order of goal portfolios: So all projects in the top-ranked portfolio will be funded first, then the second goal portfolio will be funded, etc until no more money is available.
  • Following this process our made-up projects at VWoA will be funded in the following order: Development of a fidelity program Creation of a web user portal Development of a new software for supply chain management.
  • So if we only have 22 million to fund projects, that means project 3 will not be funded, even if it has a global importance for the whole group Volkswagen and was ranked first in the “Optimize supply chain” goal portfolio. As you are all aware, this process has been quite criticized and several problems have been pointed out. Please, Mr. Matulovic, if you would take over from here…
  • Problems: 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 was also a challenge, as units were used to work independently. …. All the problems can be regrouped in a major issue: How to find the right prioritization process.
  • When managing IT projects, you may consider 6 criteria groups 1. Financial related criteria: Benefit/cost ratio Rate of return Contribution of profitability Growth rate Payback period 2. Organizational needs related criteria: Contribution to organizational goals/objectives Aid the organization in competing in the market Internal political decisions Importance to the organization for the future success Importance to the functioning of the organization Public relations effect Importance to organization's critical success factors 3. Competing environmental related criteria: Required by regulations Response to competition Required by customers/suppliers New industry standards Lawsuit requires information 4. Technical related criteria: Isolated, simple, and modular project High visibility of project Basic subsystem to system Basic module for operations Availability of skilled IT personnel Availability of needed technology 5. Risk related criteria (VAR): Technical risk Structure risk Risk of cost overruns Size risk 6. Management support related criteria: Political acceptance End-user understanding, cooperation, and commitment to Project management Top management support Match with users' interest/work load Middle management support

V wo a_220509 V wo a_220509 Presentation Transcript

  • VWoA Managing IT Priorities MIS
  • Contents Recommendations 5 Background 1 Enterprise Goals 2 Present Situation 3 Prioritization Process 4
      • Volkswagen is a German Automobile manufacturing group.
      • Volkswagen was founded in 1937 as a public concern the Nazi government
      • Ferdinand Porsche designed the first Volkswagen automobiles during the 1930s
      • Volkswagen of America is a subsidiary of the Volkswagen group.
      • “ Volkswagen” means, literally, “people’s car”
      • NRG Program was launched in 2002
    Background
  • NRG (Next Round Growth) Improve Vehicle Value Build Brand Customer Loyalty Stable Business Infrastructure Pre-owned Vehicle Business Optimize the Supply flow Enterprise Goals B E C D A
  • Managing IT Priorities
      • Project Proposal Prioritization Process
      • New IT department : BPTO(Business Process,Technology and Organization)
      • The budgets for IT projects are controlled through a process that involves several organizational entities that establish priorities. There are four specific teams involved in this process:
          • the ELT (Executive Leadership Team)
          • the ITSC (IT Steering Committee)
          • the PMO (Project Management Office)
          • the DBC (Digital Business Council.)
    Present Situation
      • ELT is responsible for executing the NRG (Next Round of Growth) strategy in which the IT governance is a part.
      • The ITSC consists of business and IT managers and is responsible for guiding and approving the process of IT project selection and prioritization.
      • The PMO administers the project proposal and approval process.
      • The DBC is responsible for the project filtering process which decides which projects are most in line with the company’s business strategy.
    Present Situation
  • Present Situation
  • Present Situation
  • FIDELITY USER SUPPLY SPANISH $12 $10 $4 $15 VWoA VWoA VWoA Global Create a web user portal Translate VWoA website to Spanish Develop software for supply chain Develop a fidelity program Range Budget Symbol Project description Prioritization Process
    • PHASE 1 : Calling for projects, communicating process, and identifying dependencies
    FIDELITY USER SUPPLY SPANISH Business blueprint Prioritization Process
    • PHASE 2: Formal project requests from business units
    FIDELITY USER SUPPLY Return on Invest. ROI Customized solutions Applications Base IT platform Option-creating OCI Stay in business SIB Invest/Tech Types Project description Prioritization Process
    • PHASE 3 : Transforming business unit requests into VWoA goal portfolios
    FIDELITY USER SUPPLY Optimize the Supply Flow Pre-Owned Vehicle Business New Vehicle Value Stable Business Infrastructure Customer Loyalty Project ranking VWoA Goal Ranking Prioritization Process
  • FIDELITY USER SUPPLY IT projects prioritized: 1 2 3 $12 $10 $15 VWoA Global VWoA Ranking Develop software for supply chain Create a web user portal Develop a fidelity program Range Budget Symbol Project description Prioritization Process
  • $22 million FIDELITY USER SUPPLY 1 2 3 $12 $10 $15 VWoA Global VWoA Develop software for supply chain Develop a fidelity program Create a web user portal Prioritization Process
    • 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 project’s strategic relevance
    Finding the right prioritization process Problems:
    • Validating Proposal’s Strategic Claims
    • Setting and Applying Correct Filters
    • Sources of Funding
    Recommendations
  • Best alternative 1. Financial Benefit/cost ratio Rate of return Contribution of profitability Growth rate Payback period 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 3. Competing environment : Required by regulations Response to competition Required by customers/suppliers New industry standards Lawsuit requires information 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 5. Risk Technical risk Structure risk Risk of cost overruns Size risk 6. Management support Political acceptance End-user understanding Cooperation Project management Top management support Match with users' interest load Middle management support