Warren Ritchie, CIO for Volkswagen Group of America, presented this session and told us about his personal journey with EA, its utility in a globalization concept, and how the EA program at VW Group of America provided initial benefits. He believes that EA is the missing piece in strategy management.
In his PhD dissertation (he has a PhD in Business Strategy), he looked for a more compelling explanation of why firms do or do not take advantage of a strategic opportunity: strategic choice or structural inertia? He found that small companies with a simple structure moved fast, medium size organizations (complex single business) were the slowest, and large, multi-business firms moved fast (possibly via a spinoff). The research pointed toward structural inertia being a key factor in whether or not a company took advantage of an opportunity.
So, if strategy implementation is about manipulating the structure, we cannot manage internal resources, products, and services as if they are independent things. If you can’t describe internal resource structure, you can’t implement strategy.
He went on the discuss VW’s strategy around sales and marketing globalization. I thought it was great that his diagram clearly showed areas for horizontal integration versus vertical integration. He talked about the notion of a modular platform for building cars, and how it was flexible and highly scalable. We need to do the same thing for organizations. Create a global core that can be customized for the particular regions. 70% of processes are global, 30% are local.
On speed to benefits, he suggested getting started with a specific “failure is not an option” project. Points on his slide were:
- Layout the EA framework
- Populate the repository as a trailing edge activity early
- Re-Use repository content for later phases
- First efforts are labor intensive, but returns start quickly
The project they targeted was a transition in their application management service supplier. A big step was that they took the tacit knowledge that was known in the incumbent supplier, and made that information explicit in an EA repository. They are now faster with projects because they know what things connect to each other, and by being faster, projects now cost less. The EA practice is now in high demand within the IT department and starting with the business units. The ROI they’ve achieved is well over 100% on risk mitigation alone. They are in a position where they can go to suppliers with their model, and those suppliers map to it.
The overall conclusions were:
- Organizations that are better able to describe themselves are more adaptive to market opportunity.
- Globalization strategy of sales and marketing requires a rigorous description of organization’s internal structure.
- After an initial investment in EA, each incremental investment is resulting in disproportionately positive returns.