IT Governance in Volvo
김 형곤 부사장
볼보 그룹 코리아
What is IT Governance
Structure around how organizations align IT
strategy with business strategy, ensuring that
companies stay on track to achieve their
strategies and goals, and implementing good
ways to measure IT ’ s performance.
• It makes sure that all stakeholders’ interests
are taken into account and that processes
provide measurable results.
• An IT governance framework should answer
some key questions, such as how the IT
department is functioning overall, what key
metrics management needs and what return IT
is giving back to the business from the
investment it ’ s making.
Strategic
Strategic Alignment
Alignment
Value
Value Delivery
Delivery
Resource
Resource Management
Management
Risk
Risk Management
Management
Performance
Performance Measures
Measures
Volvo Group IT Governance Structure
• The structure is described in the
Governance
Group CIO
CIO Office
GIB IT&PM
policy Management of IT within
the Volvo Group approved by
Volvo Group Executive
Committee and GIB IT&PM.
• To secure the IT efficiency on the
Demand
BA/BU
CIO’s
Supply
VOLVO IT
Volvo Group level, IT
management within the Volvo
Group is carried out by three
parties, Governance, Demand and
Supply.
Volvo has governance designed at multiple organizational levels
• Group CIO
• CIO Office
• GIB IT&PM
GEC
Governance
• Volvo CE CIO
• CIO Office
• IT Council
GM & SC
Demand Supply
Volvo IT
Volvo Group
Demand Supply
Volvo IT
Business Area
Pl
an
GEM
Governance
Volvo IT
Business Line
Tr
a
Demand Supply
/IT
PIO / SIO
IS
MPO
Meeting
ns
ni
ng
fo
Ex
rm
ec
at
ut
io
io
n
n
flo
w
Governance
• EXC BL CIO
• CIO Office
• CPS meeting
Volvo Group IT Organization
Group Issue Board (GIB) IT & Process Management (PM)
• The objective is to strengthen IT
and secure synergies at a Volvo
Group level.
Group
Group
CIO
CIO
Volvo
VolvoGroup
GroupITIT
Governance
Governance
StaffStaff-CIO
CIOoffice
office
GIB IT&PM
• Responsible for coordination
and financing of common
projects in the area of IT and
PM.
Chairman is Group CIO.
Councils
Councils
• Members are CIO’s from Volvo
Group Business Areas and
Business Units. They represent
Volvo Group in this forum and
not their respective BA/BU.
Councils
• Councils are established for the
Group
Group
CIO
CIO
Volvo
VolvoGroup
GroupITIT
Governance
Governance
Staff
Staff––CIO
CIOoffice
office
development of defined applications
and infrastructure areas within Volvo
Group.
• The main purpose is to focus on
specific IT areas of importance for the
Volvo Group.
GIB IT&PM
• See to that these specific areas are
operated, maintained and developed
in accordance with business demands
and act on mandate from GIB IT&PM.
Councils
Councils
• The councils consist of members
from the Volvo Group BA/BUs,
appointed by the BA/BUs CIO’s.
Councils
The primary purpose of the
control model is to
exploit synergies within the
Volvo Group and to
ensure cost effectiveness,
scalability and flexibility of
the IT Infrastructure and
common Applications.
GIB IT&PM
IAB
IAB -- Infrastructure
Infrastructure
Architecture
Architecture Board
Board
SAP
SAP
Council
Council
Applications
PLM
PLM
Council
Council
Infrastructure
Identity
Identity
Management
Management
Council
Council
Collaboration
Collaboration
Council
Council
Network
Network
Council
Council
Insec
Insec
Desktop
Desktop
Council
Council
IS/IT Strategy Framework
3. Vo
5 lv
O o
bj C
ec E
tiv
es
IS/IT strategy framework is deriving from the
business strategy articulation framework
AB Volvo
IS/IT
Strategy
Volvo Construction Equipm ent
Volv o CE Strategic O bjectives 2004 – 2006 (3.5)
Profitable Growth
Product Cycle Management
Operational Excellence
Customer Focus
Customer Value
Customer Satisfaction
• Share of key accounts, 10% gr owth p.a.
• Strengthen customer interface through competitive
commercial infrastructure
• No. 1 in customer productivity over the
product/service life cycle
Productivity and Cost Efficiency
Widening of Customer Offering
• Extend focus to include value & benefit driven functi onal
offers together with feature driven products
• After market and parts & services, 25%
• Financial Servi ces, 50%
• Other soft products, 200%
Sales Growth per Region
• Double sal es turnover in Asia
• No. 1-3 in market share in Europe and NA per business
and i ts main segments
Brand Management
• No. 1 in brand image and overall impr ession in relevant
customer segments
Price Management
• Use professional price management to incr ease gross
profit margins
Environment
• Leader in envi ronmental care in relevant customer
segments
• No.1 in cust. Satisf. in relevant cust. Segm.
• Reduce operating expenses by 5% p.a. as % of sales
• Cost reduction of end-product by 3% p.a.
Global Product Plans
• Cor e products, 8 year product plan
IT
• Soft products, 3 year pr oduct plan
• Transition to new PLM system according to agreed
road map per Business Area
Advanced Engineering
Leadership & Competence
Development
• Ave. 10% of R&D cost allocated to AE to
secure new key technology and vehicle
concept validation.
• Maximise common AE within the Volvo Group
(25%)
• 110 patents portfolio in key technology areas
Global Modular Architecture
• Reduction of production part numbers by 20%
• Implementation of subsystems & components
modular platfor m with standard interface to
enable decoupled development.
Safety
• Volvo Attitude Survey: ESI 2% increase p.a.
• Increase the number of female managers to 10%;
Minimum of 1 qualified female short-listed for every
open management position.
• Address l owest performing manager’s performance
with an ambition to make managers succeed
according to following pri nciples:
- Improve = get low performi ng managers to perform
- Move = find more suitable position for the individual
- Remove if first two attempts fail (10% of lowest
quarti le = 10% of 25% lowest performers be
removed from management positions pa).
Business Cycle Management
• Above average sustainable profitability over a cycle as
compared to peer groups in respecti ve industry
• Leader in safety i n relevant customer
segments
Capital Efficiency
• Cash2Grow – Cash Conversion Cycle of 50 days.
Quality
• Reduce warranty & goodwill costs by 25%
Volvo C E sp ecific o bjectiv es in place to supp
ort toVbeolv
3.1
• Vendor r ecovery
>20%o
of total
warranty cost
• Deli very Precision of 95% to the Customer.
V olvo C E S trat egy D ialo gu e M ay 1 8, 20 04
, Slid e 9
Volvo Construction Equipm ent
L3. Development of the after
market support
L4. Product Cycle Management
based on segment oriented
hard & soft product portfolio
L5. Development of supplier
relationship
HQ - P&S/EW
GMM upd ate
BL
/B
St A
ra / R
te eg
gi
es ion
Vo lvo Co nstru ction Equipme nt
S1. Profitable growth through
leverage on investment in
organization and capital
S2. North American distribution
coverage
S3. O ptimizing the industrial
structure in Europe
S4. Bringing Compact
Equipment and Motor
G raders back to profitability
S6. China development
S7. Excavator product
development
L7. Development of a committed
& effective organization
S8. Reduction of the overall
quality cost
2 004-05-27
Slid e 16
• To m ake our European dealers the custom ers first choice.
•
# 3 position in Russia & East E urope
•
# 5 position in Excavator sa les in China
• To develop optim al channels to allow end users m aximum
access to Volvo products and services.
•
# 3 or 4 position on all Dealer Markets
•
Over a ve rage margin on all sales on P roject Marke ts with m inimu m risk
•
• To be a top three supplier, m easured by m arket share, for all
products across Europe.
•
• To create a flexible organisation to fully m eet the needs of all
customers and dem ands of the m arket.
CONFIDENTIAL
Volvo Construction Equipm ent
Life Cycle Phase – New Initiative
Strategy • Ga in De aler buy in and alignment
Consistent sales over 1BUSD
Over a ve rage margin on all sales on P roject Marke ts with fully discounted risk
Consistent sales over 1,5 BUSD (today ’s product portfolio)
17
North
Am erica
End
2003
Global Wanted position 2007
Int ernational
(incl. Japan
and C hina)
Market shar e:
Mix %: 250-499 hp
Mix %: 100-249 hp
23 %
(30 % )
(70 % )
(TBD)
20%
26%
74%
3 100
CSA:
60 %
(60% )
?%
Attachm ents:
TBD
(TBD)
TBD
Financing:
Opera tional
Excellenc e
(25% )
28 %
72%
Parts sales/unit in pop. TBD
“The world’s
leading provider
of wheel loader
solutions”
(TBD)
TBD
Op. m arg. incl. parts
15%
(17% )
11,4%
Op. m arg. excl. par ts
10%
(12% )
7,2%
Em ployee VG AS
TBD
TBD
(?)
?
35% (3 7%)
33, 5%
12%
16 %
Mix
33/ 67 (34/66)
32/ 68
21/79 (25 /75)
19/81
27 /73 (30/70)
21 /79
O p. income
End 2 003
TBD MUSD
68,3
TBD MUSD
17,6
18% (20% )
TBD MUSD
25 ,8
19 % (20%)
ll re gion s
• Fo cus on segm enta tion
V olvo C E comm on key act ivities
• Imp ro ve de aler per for man ce
• Tur n par tner ship d evelop ment initiative int o a t otal bu
siness cu lture to secu re sustaina ble d istribu tion per fo
rm ance and o ve rall V CE supp or t
• P ro fession al pr ice m anag emen t
Produ ct Cycle Managem en t
COE Business Line – 2003 Agreed Strategy
•
•
•
O pe rational Excelle nce
• Im prove d pr oducts w ith high
custom er business value
• Continued focus on operational
excellence and c ost re ductions
AH BL act ivit ies
• Continue to impr ove pr oduct qualit y an d reliability
• Develop and launch pr oduct impro vem ents
• Secur e technical lead ership
• Evaluate product of fer in smaller end t o furth er expand
the poten tial ADT -m arket
Volvo CE co m mo n key activ ities
• Volvo CE Br and Id entity d eveloped and implement ed
cr oss CE prod ucts
• Qu ality assur ed new platform parts with low er total cost.
• Ad vanced Engineering u tilizing CE and Volvo cr itical size
in key ar eas
AH BL act ivit ies
• Ensur e pr of it able cap acity gr owth
• Ensur e br eak- even levels below 1500 un its and f lexibility in
both pr oduction capacity and sup pliers
• Drive oper ational excellence and cost red uctions thr ough
Volvo O D- methodology
Volvo CE co m mo n key activ ities
• Industrial str ucture developm ent (H ubs, CAB & C MP)
• Continue d evelop th e O tD pr ocess e.g. MoM step II
• Define best pr actice within Volvo CE
•
A rticulated H aul ers Busi ness Li ne
“Lea n & Me an” culture .
V olvo Excav ators
•
• Continue to dri ve leader ship
de velopme nt and em ployee
motivation
S1 Build product awareness in the m arket
Clear & efficient processes to get ri d of non value ad ded activities.
TQM culture d eeply ingrained.
S2 Develop excellence in the de ale r network
S3 Be a so lution provid er with in chos en s egme nts
Facto ry overh eads kept to a minimum. N o du plication within the BL.
Fixed asse ts maintained at the low est possible le vel fo r best utilisa tion.
•
Aggre ssive prod uct costs reduction activities using relevant technique s
•
Re view distri butio n structure an d a ssociated co sts to match co mpetitors’ le vels.
S4 Crea te a reputation of supe rior ma chine a vailability on th e jobsite
S5 Have th e lowest tota l own ing and ope rating cost
Developmen t of Channels to Market
•
Adap t prod uct p lanning and de velop me nt to specific nee ds of R ental chann el.
•
Adjust D istribu tion Models : Dealer w ithin a Deale r e tc…
•
W ithin legal rules, no compe ting lines sales. No ch erry-picking .
•
Diffe rentiate Parts & Service marketing betwee n GPPE an d C ompact custo mer requirements.
North Am erica:
Europe:
International
‘Strategy & Roles’
250
200
25
¾
S uperior Total C ustom er S atis faction as
m easure d by R ents c ustom er sa tisfaction
s urvey > 75% .
¾
B reak-even in 2005 – profitable from 2006
onwards.
¾
Rental franc hisee Wellness Re port < 10%
in red.
IS/IT Strategy
Framework
Framework
Volvo Construction Equipm ent
CST Strategy Dialogue
Excavator BL - Key Strategies
Focus on co re competences – outso urce all low add ing value activities (fab rica tion).
To tal Costs (P rodu cts & SG&A)
•
W orld-wide, position in top 5 of rental
c ompanies (revenue ).
P resen ce in 3 regions with s tores o pen in
ex cess of :
¾
¾
¾
CE Rents Strategic Dialogue – 2004 (April 28, 2004)
Operatio nal Excellence
Profitable Grow th
• Ensure profitable volume growth in a
A H BL act iv ities
• S upp or t d ealer p erf orm anc e initiatives
• Fo cus on the co mp let e c usto mer of fe r o ver the lif e c y
cle
• De ploy g loba l pr ic in g m anag eme nt
AH BL act ivit ies
• Continue inter nal lead ership development and combine
with OD -pr ogr am
• Continue str ong focus on inter nal employee
commu nication
• Use VG AS as a tool f or impr oved le adership and employe e
motivation
Volvo CE co m mo n key activ ities
• Continue business driven le adership pr ogram
• Ad apt VG AS to Volvo CE business m odel
30
Accelerate Growth,
Improve Profit ability
& Pursue Operation al
Excelle nce
• Market supp ort to Dealer sales personn el
• Targe t custome r marketing
• Detailed fo llow up
Volvo Co nstructio n Equipmen t
V olvo Con struction Eq uipm ent
Strategic c hallenge : C reate sustainable double-digit operating m argin (excl par ts) over a business
c yc le in a mature industry
• E nsure co mpe titive d ealer strat egy
• Dr ive fu rthe r int egr ation be tw een in dustr ial and c omm
er cial or ga nizat io n
( ) Stretch target
Market share
End 2003
End 2 003
Excavator
Life Cycle Phase – Second phase of new business line introduction
Strategy • Dea le r alig nment through focus
VC ESN A, Master Plan, BL Presidents
16 April 2004, Slide 1
Strategic objectives 20042004 -2007
W L BL
Profita ble growth
E urope
Continue
to Add Value t o
Franchisee s
• Grea te r pull with greater customer reach
• In sure participation in ne w market
# 2 position in Russia, East E urope and Brazil
# 4 position in Ch ina on We stern style technology e quipm ent
# 2 or 3 position on all Dealer Markets including Ja pa n
•
•
Upda ted W L BL Profitable Growth Stra tegy
S olution
P rovider
¾
Strengthe n Franchisee
Business Mod el
Compact
No Own Distribution
•
•
V olvo Co n stru ctio n Eq uipmen t Reg io n In ternation al
S trateg y d ialo gu e A pril 27, 2004
6
¾
Ensure Initial
Fran chisee Q uality
• Iden tify a nd ta rget lo st sh are factors
• Ta rge t and regain custome r intimacy
• Insure tota l life cycle va lu e (remarketing )
Long Term (N ext 10 ye ars)
•
• To offer the custom er a full range of effective soft products.
• To fully establish the Volvo brand in construction equipm ent.
2007 (SD, 20 04)
Artic Haulers
Life Cycle Phase – Grow Incrementally
Strategy
• Return to Volvo
S hort Term (N ext 2 Years)
• To ensure a true and profitable partnership relationship with all
European dealers.
• To actively m anage all product pricing to a prem ium position.
V olum e &
Mix
Strategy and W anted Position 2007
Business Strategy Overview
Wanted Position - International
- 35 -
Volvo Construction Equipm ent
Volvo C onstructio n Equipm ent
Volvo Construction Eq uipment
Wanted Position
Eur ope an Re gion Str ategic Dialogue 2004- 04- 27, R egion SW OT
Volvo CE
IS/IT
Strategy
S5. Develop rents business to
profitability
L6. Development of a flexible,
responsive and cost
effective industrial structure
S6 Have the lowes t total cos t of supply
Mission
• W e create value for our customers &
other stakeholders.
• Give high m achine up-tim e by providing cost efficient
world class customer support services, building on
our unique knowledge of our products & where they
are during their lifetime.
P ositive/Opportunities
9 Profitab le gro wth
9 Strong product portfolio > Imp lement!
9 Motivated & enthusiastic team
•
China growth - and open spot as best customer s
upport provider
9 Continue roll out of logistics concept
Visio n
Volv o CE Custom er Support to be the strongest
argum ent for buying V olvo CE products & recognised
as a market leader in customer support within its
industry.
Issues
•
Inves t in Partner ship d evelopment
• Resources for partnership development
• P opulation contro l
• D ealer OTC availability
• D ealer loyalty
• M echanics availability
• G row CS A
•
IS/ IT s tructure
•
COE exp ansion
•
Overall machine population increase
•
Prod uct quality
•
Explosio n of BL machine and new engine models
•
Reg io n /d ealer C ST resources
•
N.Am. Over all exp ansion
•
Exploit rap id increase in High tech content
Wan ted Position 2007
• B e recognised by customers as one of the two best
customer support providers in each region.
• A strong argum ent for buying Volvo CE products
• P rofitable growth of the CST business
Note: Green text are additons on 2003
7
Volvo C ompact Equ ipm ent Str ategy Dialogu e
30 Apr il 200 4 Slide 8
Exav ator BL Strateg ic Dialogue
29 Apr 2 004, Slide 10
Custome r S upport
2003- 04
Business Articulation
Framework
8
Biz
Strategy
Business
Application
Architecture
Infrastructure
Day to Day
Operations
ier
ppl
Su
ent
em
nag
Ma
Ro
l
Res es &
pon
sib
iliti
es
L2. Development of the
distribution network
Engine
L1. Focus on one single brand
Enablers
Sh L Vo
or on lvo
t/M g T C
St ed erm E
ra iu
te m &
gi T
es er
m
Volvo CE Long Term & Short/Medium Term Strategies
Strategic Direction of IS/IT Service Transformation
- From ‘Commodity’ to ‘Strategic Value-adds’
IT Enablement
Proactively provide proven innovative technical
solution in order to increase business value
(Business Process innovation)
IS/IT
Strategic
Focus Model
Business Support
Operational
Excellence
Operate IT in a way to deliver high
quality results for optimized costs
(Reduce operational expenses while
meeting service levels)
Align IT to Business in the way that it best
supports business requirements – in IT:
enhance business process capability, IT
Capability, Organizational structure
(Business Process harmonization)
IT Organization Transformation
: Redefine R&R between demand and supply function by set
up Volvo IT Korea. No more ambiguity with double hats
IT Process Transformation
: PIO / SIO as ‘IT Demand’ component, have four areas to contribute.
Business value to mega-process will be realized through them.
22.
33.
4
4.
•
Decision-making structure
•
Application architecture
•
Infrastructure
•
SOX compliance
Biz Alignment Management
•
Ensure Business – IT Strategy Alignment
•
Initiate business driven IT projects
•
Offer IT enablement opportunities
Project Management & Business Value Realization
•
Key project delivery monitoring
•
ROI management
•
Change management support
IT Supplier Management (Service Level Agreement)
•
Service resource management
•
Service delivery
•
Performance index
•
Risk management
PIO Key Agenda
on AB Volvo IT Governance model
AB Volvo
Business policies
Governance
1
2
Demand
EXC BL
Strategies
Supply
4
3
….
1. IT Compliance Management
1
Communication with process owners
: PIO will have mega-process owner and key managers
updated timely and effectively.
Communication with business owners and IT community
: IT service performance is to be measured periodically and
shared through web portal