An Analysis of Volkswagen of America: Managing It Priorities

Case 2

An Analysis of

Volkswagen of America: Managing IT Priorities

Hayat Azhari, LaWanda Todd, and Meagan Wilson

OMGT 6333 Fall 2018

Dr. Ying Liao

East Carolina University

Section 1: What is your assessment of the new process for managing priorities at Volkswagen of America? Is it an improvement over the old process (if yes, what issues in the old system were improved in the new system? if not, what are the problems with the new system)?

The first Volkswagen was designed in the 1930’s in Germany. The ability to transport a family of five at highway speeds, modest fuel consumption, and affordability made Volkswagen popular and successful. The company peaked in the 1960’s in sales and profits, however, Volkswagen of America began to show instability in the market. VWoA struggled for decades with repeated cycles of ups and downs within the industry. VWoA would have intermittent success with various projects and financial profits but would also suffer major losses. It appeared that VWoA did not have the ability to manage multiple projects successfully. To stay in business, it was clear that VWoA had to improve internal processes and restructure the organization.

VWoA created a new process for managing priorities and projects. Dr. Uwe Matulovic, chief information officer, was charged with mimicking the success from the Volkswagen AG (VWAG) group. Dr. Matulovic’s initial assessment of VWoA revealed that the lack of governance and development processes were the root cause of the organization’s struggles and failures.

Dr. Matulovic developed the Business Process, Technology, and Organization (BPTO). The BPTO was charged with addressing problematic projects and developing processes that would lead to success. The strategy included a PMO officially managing projects, creating business architecture centered around the organizational goals, formalizing governance, and prioritization processes. This approach was new for VWoA and in stark contrast to the old process of managing priorities and projects. The new process still had some flaws, but it was an improvement over the old process.

• The new system would limit unstructured debate among executives about which projects to do. Under the new system, projects had to meet selected criteria to be considered. VWoA did not have a formal project selection process in place within the old system. Lack of processes contributed to the organization being over budget and having incomplete, excessive and unsuccessful projects.

• The new system would make trade-offs explicit and also link projects and core business processes with corporate goals. The old system was plagued with irrational haphazard processes and decisions making. Corporate goals were not clear nor deemed important across the organization. The new system provided clarity and direction.

• The new system would help the organization prioritize projects along with helping break the cycle of disappointing sales and failed efforts. VWoA had great ideas for many of the projects in the old system but often did not have the ability or resources to make the projects successful. The new system helped to ensure that the right projects were being done the right way.

• The new system would help with formalizing governance and creating prioritization processes that would categorize organizational activity to help relate in a logical way to the company's strategy and ability to execute strategy. Every major department in VWoA would have a voice in selecting projects. Lack of governance and prioritization processes in the old system contributed to project selection based on emotions and senior management desires. Potentially successful profitable projects had very little chance of being proposed if it did not come from the “right” person under the old system. This also increased the likelihood that ill-fated projects would get chosen based simply upon who proposed and backed it.

• The new system was a part of newly developed PMO that would help the create structure within an organization that had difficulties managing projects. The old system revealed several flaws within the organization. Project managers were not assigned to projects which resulted in proper planning not being enforced. Project failure was often revealed after it was too late to correct under the old system. The new system allowed for every project to have a project manager, required weekly status reports and monthly budget reviews for all projects to ensure staying on task and successful completion.

• The new system would help IT projects limit schedule and cost overruns. Under the old system, the IT department was not performing at high standards. IT was managed by multiple providers without clearly defined responsibilities and duties. The new system created a new internal IT department (BPTO). This created structure and processes for the IT department to follow in the project selection and approval process. The new system also required financial restrictions on IT that would help eliminate cost overruns.  

Section 2: How should Matulovic respond to his fellow executives who are calling to ask him for special treatment outside the new priority management system?

Matulovic is in a difficult position because he has to support the new strategic project prioritization system that he helped to create but also needs to maintain positive working relationships with the executive leadership team (ELT) of VWoA. Matulovic led process development at VWAG in Germany which is why his expertise was needed to create a formalized system of project governance. The purpose of the new system was to find a way to allocate limited resources to the projects that would be most impactful for the organization and align with strategic initiatives. When proposals were narrowed down to $170 million but the budget was only $60 million, many projects naturally aren’t pursuable.

Matulovic should defend the new strategic project prioritization system but needs to take some action so that the ELT doesn’t lose confidence in the new system thus creating a strained working relationship. He should charge the BPTO with creating a report to distribute to all members of the ELT outlining the determination and assessment of the hierarchy of enterprise goal areas. Some business units questioned the prioritization of the goals themselves so this would provide them with a codified document of how the goals were determined and why they are so impactful to the organization’s strategic plan. The report should also address the amount of overlap in proposed business unit projects that were grouped into enterprise level projects along with a summary of the impact of project dependencies. Lastly, the report should create a timeline of projects that can be pursued in the future based on dependencies on existing projects.