Using and Validating the Strategic Alignment Model - Report Example

Case 3-2 Introduction In the contemporary business environment, organisations are faced with numerous challenges which have increased the risk exposure of these organizations. In this regard, one of the major challenges that can be observed is integrating information technology (IT) system with the overall business strategies. However, such alignment has become quite difficult for the current organisations in light of many challenges and hurdles faced by them. The ineffectiveness of the IT department to align IT system with business strategies is often associated with the failure of an IT project. Nonetheless, in order to meet such challenges effectively, many organisations in the current context are widely implementing IT governance practice. IT governance initiatives of many organizations are predominately directed towards reducing risks and cost control (Milne & Bowles, 2009). It is equally important that adequate funding is made available for the IT projects. Budgeting of IT projects needs to be made on the basis of prioritisation. In this regard, it has become essential for the organisations to effectively manage IT priorities and align them with business strategies and goals for ensuring desirable outcome (Teo et al., 2000; Berander & Andrews n.d.). At the same time, successful IT leadership is also an imperative factor for ensuring project success. The prime role of IT leaders in the current highly dynamic business environment is not confined to ensuring the effectiveness of the IT program but priority needs to be placed on the overall success of the business (Delisi et al., 2009). Correspondingly, the concerned case study, ‘Volkswagen of America: Managing IT Priorities’ describes the endeavours that have been made by Volkswagen of America (VWoA), the US subsidiary of Volkswagen AG (VWAG) in order to achieve the goal of establishing IT funding priorities and determining the type of project to be funded. 2. Summary of Facts The first Volkswagen automobile was designed during the period of 1930s in Germany by Ferdinand Porsche. Initially, Volkswagen was engaged in the development of the low-mid range vehicles that were targeted at the mass market. The success of the company upsurge significantly and worldwide popularity was accorded by the company primarily during 1960s with the development Beetle that was accompanied with air-cooled engine feature. After witnessing rapid growth in the 1960s, the sales of the vehicles dropped dramatically during the early 1970s. The fall in the sales of the company was primarily due the failure of the managers to launch new model in the market. During the 1990s, VWoA’s visualization of establishing its IT began to crop up. In the meantime, the company was engaged in offering a wide range of products in the American market with the aim to revive its brands while customer expectations were also at peak with the development of e-marketing and well-organised product distribution. In order to accomplish the goal of efficient IT infrastructures and resolve the related issues, Dr. Uwe Matulovic was shifted from VWAG headquarters in Germany to VWoA as Chief Information Officer (CIO) who used to act as the leader related to process development. Matulovic was faced with numerous problems in VWoA. However, he was able to mitigate certain issues faced by the company and meet the demand of growing American market. In order to reduce the IT costs of VWoA, process of prioritising was executed. This process was considered to be logical as it included all the departments. Although the prioritisation process at VWoA was well-structured, certain impeding aspects were still witnessed. More specifically, the budget constraints have a radical impact on the proposed project. The budget related to the project was controlled by several organisational entities that were involved in setting priorities. In particular, four groups were involved in the process which included the Executive Leadership Team (ELT), the Project Management Office (PMO), the Digital Business Council (DBC) and the IT Steering Committee (ITSC). All IT projects were aligned with the goals of Next Round of Growth (NRG). Moreover, the engagement of several business entities had created confusion in terms of roles and responsibilities of each group. In addition, there was adequate funding available for the supply chain IT project. At the same time, several departments within VWoA also did not receive proper funding for meeting the goals of their IT project (Harvard Business School Case, 2007). 3. Problem and Alternatives Several problems can be ascertained from the case study observation. In this regard, the proposed new prioritisation process was although logical to be implemented but at the same time, it was quite complex. Besides, defining proper IT governance and setting process was also observed to be a major problematic area faced by VWoA. Another problematic area can be observed with the organisational entities involved in reviewing the project proposal. Correspondingly, several entities were engaged in decision making and control process of the proposed project which created numerous confusions pertaining to the proposed IT project. To be noted, the most severe problem faced by VWoA was the issue related with availability of inadequate funding. Correspondingly, it can be observed from the case study that on VWoA requests of US$210 million to parent company (VWAG) for the purpose of implementing the proposed IT project, it was allocated US$60 million which can be identified to be relatively low as compared to actual amount requested. Additionally, it has been recognised from the case that several departments revealed their major dissatisfaction predominately due to not receiving adequate funding for the purpose of executing the project. Furthermore, it can be observed from the case that the new prioritisation process significantly not only ignored the VWoA’s market prospects but also the aspect of globalisation. Additionally, the aspect of global supply chain management was also overlooked in a sense that this facet was inadequately served by the new prioritisation process. Responsively, supply flow project was left unfunded. Finally, it can be affirmed from the case that the most severe problem faced by VWoA was the issue pertaining to availability of inadequate funding for meeting the proposed project requirements (Harvard Business School Case, 2007; Rand, 2000). Alternative 1 It has been ascertained that the budget constraint related with proposed IT project was the major problem that has significantly placed hindrance to the implementation of the proposed IT project in VWoA. Furthermore, it can be observed from the case that the management decided the budget before looking at the proposal for the new project (Harvard Business School Case, 2007). In this regard, it can be suggested that priority should have been placed on the projects that were closely aligned with the objectives of the business. Moreover, the funds from other entities of Volkswagen could have been allocated to those projects ranking higher in the priority order (Gilb & Maier, 2005; Makipaa, n.d.). Alternative 2 Likewise, it would have been relevant for the IT project to move ahead after conducting cost benefit analysis. The funding decisions could have been made on the basis of certain relevant criteria such as rate of return, growth rate and payback period (Sonnenreich et al., 2006; Bardhan et al., 2004). Alternative 3 Another alternative can be identified in terms of contributing fund requirement to unfunded projects from other well-funded projects. This would have resulted in meeting the needs of both unfunded and funded projects irrespective of their priority. However, such initiatives can have certain limitations as well (Keil et al., 2002). Alternative 4 It has been observed form the case that VWoA was significantly reliant on the parent company for the funding activities. In this regard, it could have identified other sources of funding for meeting its fund requirement. Alternatively, it could have been possible to leave the unfunded projects and focus only on the important projects (Harvard Business School Case, 2007). 4. Decision and Conclusion The first alternative predominately focuses on allocating funds to those projects that are aligned with the strategies, goals and objectives of the company. In this regard, it can be justified that such allocation would have facilitated the VWoA to meet the customer requirements effectively in the growing American market and thereby increase its revenue earning capability along with strengthening its brands (Avison et al., 2004). Similarly, the second alternative focuses on allocating funds on the basis of certain criteria such as cost based analysis and other analysis tools. Notably, the use of such criteria would have facilitated in determining the most appropriate project that needs to be funded. Furthermore, funding on the basis of such criteria would have assisted in allocation of funds that would positively influence the profit earning capability of the company. The third alternative emphasises meeting the fund requirement of unfunded project from the well-funded project. Correspondingly, such funding would have facilitated in meeting the funding requirement of both projects that are ranked high as well as the project ranked low in the priority order. Nonetheless, certain risks can be identified with this alternative. In this regard, the projects ranking high in the priority order may face with scarcity of fund in the later stage of the project commencement. The fourth alternative primarily deals with seeking fund from other alternative sources and leaving unfunded project. Correspondingly, it would have resulted in reducing the reliance on the parent company for funding requirement and focusing only on those projects that are of paramount importance for the successful operations of the business (Harvard Business School Case, 2007; Smail, 2007; Sonnenreich et. al., 2006; Bardhan et. al., 2004). It can be comprehended from the foregoing discussion that allocating appropriate budget is essential for ensuring effective implementation of IT project as well as attaining the desired project objectives. Notably, the current business environment is faced with certain challenges which often restrict organisations to successfully execute their IT project. It is imperative for organisations to align their IT objectives with the overall business strategies. At the same time, the IT department within an organisation is also required to reflect their expertise. In this regard, IT governance practice has significant influence on the IT project success. Besides, the role of IT leaders cannot be ignored as decisions of IT leaders can have a profound impact on prioritising IT projects. It has been observed that the proposed IT project within VWoA was ridden with numerous issues and challenges such as a lack of clear goals and failure to make effective decision among others. Moreover, several business entities were involved in prioritising projects which created considerable amount of confusion. Besides, business units were not able to align their projects with their business goals and objectives, which caused ignorance of many relevant projects. Therefore, it created tensions amid various business units. Although the proposed projects were relevant and logical but at the same time implementation of the proposed projects was complex. References Avison, D., Jones, J., Powell, P., & Wilson, D. (2004). Using and validating the strategic alignment model. Journal of Strategic Information Systems, 13, 223-246. Bardhan, I., Bagchi, S., & Sougstad, R. (2004). Prioritizing a portfolio of information technology investment projects. Journal of Management Information Systems, 21(2), 33-60. Berander, P., & Andrews, A. (n.d.). Requirements prioritization. Springer Verlag, 1-27. Delisi, P. S., Moberg, D., & Danielson, R. (2009). Lessons from an information technology leadership laboratory. Santa Clara University, 1-16. Gilb, T., & Maier, M. W. (2005). Managing priorities: a key to systematic decision-making. Tom Gilb and Mark Maier, 1-19. Harvard Business School Case. (2007). VoIkswagen of America: managing IT priorities. Case 3-2, 449-461. Keil, M., Tiwana, A., & Bush, A. (2002). Reconciling user and project manager perceptions of IT project risk: a Delphi study. Info Systems J, 12, 103-119. Milne, K., & Bowles, A. (2009). How IT governance drives improved performance. IT Process Institute, 1-18. Makipaa, M. (n.d.). Introducing a strategic information systems planning meta-method for cooperative inter-organization Relationship. University of Tampere, 1-10. Rand, G. K. (2000). Critical chain: the theory of constraints applied to project management. International Journal of Project Management, 18, 173-177. Sonnenreich, W., Albanese, J., & Stout, B. (2006). Return on security investment (ROSI) – a practical quantitative model. Journal of Research and Practice in Information Technology, 38(1), 55-66. Smail, R. (2007). Good practice for implementing structural funds programs and projects. EIPASCOPE, 13-19. Teo, T. S. H., Wong, P. K., & Chia, E. H. (2000). Information technology (IT) investment and the role of a firm: an exploratory study. International Journal of Information Management, 20, 269-286. Read More