LorryMer Corporation

LorryMer Corporation was a leader in a specialized motor vehicle industry in North America. In the early
2000s its sales began to suffer substantially due to the recession in the U.S. economy. As a result, the
company was forced to change its primary strategic objectives to focus on cost efficiency. It needed to cut
operating costs to improve the company ’ s competitive position. LorryMer specializes in the design,
development, and manufacture of a complete line of technologically advanced motor vehicles. The
company has been in business for more than six decades, and now operates seven major vehicle
manufacturing plants and one parts manufacturing plant in North America. With more than 14,000
employees, its mission is to provide the highest standard of technological innovation and premium quality
to its customers. LorryMer remains committed to the highest degree of innovation and quality, and is
dedicated to meeting its customers ’ needs.

Saul McBarney, LorryMer ’s information technology (IT) program management officer, has been with the
company for 25 years. Saul is proud of the company’s history, strategy, and background. “ We are unique
in terms of listening to the customers. We find out what customers’ business needs are first, and then
develop products for them that meet their needs. ” However, 2001 was a painful year for LorryMer. As a
result of economic hardship in the motor vehicle industry, the company ’ s sales and profits dropped, and
its losses exceeded $ 1 billion. In September 2002, the Refrigerated Transporter reported that depressed
used automobile prices caused many carriers to extend trade cycles because they owed more on their
automobiles than they could sell them for. As a response to the crisis, the company embarked on a major
cost savings initiative in late 2001, which later produced a number of cost savings programs.

Dingo Ostar, a LorryMer business value account manager and a member of the business advisory group,
said, “ It was about cost, cost, cost and nothing else . ” Nevertheless, LorryMer continued to experience
substantial business challenges in the following years. With the economy still suffering, LorryMer’s
automobile production in 2002 did not meet 2001 production levels, which were significantly lower than
2000. Funding for any new programs was minimal, especially during 2003. LorryMer needed to change in
order to survive.

John Mennon, chief information officer for LorryMer said, “ The business environment for all automobile
manufacturers remained depressed and was not expected to regain its historically high levels until late
2004. We knew we had to make some changes to be ready to compete. ” LorryMer focused on reducing
costs quickly. As a result of relentless cost - cutting programs, LorryMer ’ s operating costs were
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dramatically reduced, and breakeven profit was achieved in 2003. “ However, we knew those changes
were tactical and not sufficient, ” John said. “ We had to make additional changes. ” Therefore, during
2005, LorryMer modified its strategy by focusing on five new core values: providing market leadership
and brand coverage; pursuing technological innovation; partnering with operators for maximum
productivity; focusing on the needs of its customers, employees, communities, and the environment; and
being an advocate for their industry.

During the past several years, the IT strategy at LorryMer has been to maintain legacy systems. Most of
the new IT investments were dedicated to e-business websites for after-market sales, and marketing.
Dingo said, “ Eighty five percent of what we sell is a complete commodity available from thousands of
other people. So the only thing we really have to sell to increase profit is service. ” The remaining
incremental IT spending supported enhancements to keep the legacy systems compliant with government
regulations and provided some basic level of additional functions.

To improve the company ’ s competitive position, radical changes needed to take place to create an IT
environment that was better positioned to support all five of the new core values. As part of the
improvement efforts, the IT department was reorganized and made much more agile in 2005. That was
done by replacing the functional structure with a matrix organization, consisting of application (IT
application developers and service providers) and program management (program managers and
business system analysts) competency centers. Then, a business advisory group concept was introduced.
It consisted of value account managers who provided IT focus in business units and acted as the IT
voice of the customer, which was something LorryMer lacked previously. Also, a joint strategic planning
session of business units and IT was initiated in the middle of 2005. Its purpose was to determine the
business needs to be supported by the replacement of legacy IT systems. Saul commented, “ This was
previously unheard of. In the old system, IT goals were either left to IT or imposed on us by the company.
Now, our strategic goals and direction were determined by the end users in the joint strategic planning. ”

In order to ensure IT strategy and business strategy alignment, IT activities and programs had to
complement the needs of the business. The IT team used an alignment chart tool to accomplish this (see
Figure 1 ). John explains, “ The alignment chart provides a strategic mapping of the business goals, the
business values (initiatives), and the IT programs. As part of the strategic changes, we were tasked by the

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company to design the alignment process, part of which was accomplished by the alignment chart. A
bubble on the intersection means alignment.

Figure 1. Sample alignment chart tool

On paper, the alignment chart is straightforward, but the execution of the steps in the alignment process
is more complex. LorryMer has a mix of formal and informal processes for ensuring proper IT strategy and
business strategy alignment. The processes are internally embedded within the business strategy
formulation and throughout the program life cycle. There are six steps in the alignment process : Strategic
planning, Informal portfolio management, Envisioning, Planning, Development and Deployment

In step one, strategic planning, the strategic plan document is developed to help accomplish the goals of
IT in support of the company’s business strategies and goals for the three-year planning horizon.
According to John, “ Our challenge within IT has always been to take a look at how we treat the goals,
whether they’re well defined or not, and determine what our strategic plan is to help accomplish those
goals. Our approach is an evolutionary process. Once you know where you want to go, you take it one
step at the time, one program at a time, and each program gets you closer to the goals. ” Then, business
value/activities, called strategic initiatives and programs, are formulated based on the goals of the
business strategy. These are done by the business advisory group and Program Management Competency
Center. Tools at the strategic level, which are used to ensure the quality of the alignment, include the
strategic plan document, roadmap charts, and alignment charts.

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 • Strategic plan document is a tentative capital plan that shows the snapshot of all program
summaries and types, and estimated headcount and payback. It is based on the business strategy
and goals of different business units that IT supports.
• Roadmap charts are used to define where the company wants to be in IT in the next three- year
timeframe. They address all the business goals of different business units that IT attempts to
support and their timeframes.
• Alignment charts are the mapping of the business goals, the business values, or strategic
initiatives, and the IT programs.

Step two, the informal program portfolio management process, is a significant part of Lorry Mer’s
alignment process. Once the portfolio management process is completed, it produces information about
a set of candidate programs, their investment opportunities and program priorities. In short, the process
reveals the most viable programs and possible risks that could occur in the envisioning, planning,
development, and deployment phases of their life cycles. Saul said, “ Portfolios help to assess and monitor
programs that are the best investment. ” Currently, this assessment is done in the portfolio process
through business value assessment (BVA). BVA consists of a set of questions prepared by value account
managers. The program management office (PMO) is asked to first answer the questions regarding
business value weighting, which is expressed on a 1- to- 10 scale, 1 being the lowest value, 10 being the
highest value. Second, it assesses business risk, also expressed on a 1- to - 10 scale, 1 being the highest
risk, 10 being the lowest risk. Programs then are evaluated based on BVA, program type, program size,
priority and business area, and are selected accordingly. Once programs are selected, they go through the
standard life cycle phases: envisioning, planning, development, and deployment. A program manager is
usually assigned at the end of the portfolio process or the beginning of the envisioning phase, which is
step three of the alignment process.

Saul commented, “ Ideally, we like to have a program manager on board when envisioning is just ready to
begin. That allows enough time to develop a close relationship with the business system analyst, who is
responsible for detailed planning and execution of the program. Sometimes we engage a program
manager immediately at the time the portfolio process starts. Therefore, the program manager is
responsible, along with the value account manager, for the business value of the program, and solely
responsible for achieving the program’s other requirements . ”

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In the envisioning and planning stages, the ball is in the program manager ’s court. Jeff Barrison, a
program manager, said, “ Use case development and traceability matrixes are used to develop the
program plan. A program manager maps the details of the program with the use case, describing a series
of tasks that users will accomplish using the software, which also includes the responses of the software
to user actions . The program manager also traces program actions back to the initial requirements
(traceability matrix) to ensure that the plan is still aligned with the requirements. In addition, the business
system analyst and the program manager meet with the business members and end users to get sign -
off, as part of a mechanism to make sure that the program is still in line with the business goals and
requirements. ” After the program plan is approved, the program team starts to implement step five, or
the development stage, of the alignment process and later, the deployment stage. According to Jeff, “
Program metrics are used as a mechanism to track progress to plan. At the end of each program life cycle
phase, a program manager is required to present the program status to the PMO and get customer sign -
off to be able to proceed from one phase to the next. Therefore, customer sign - off and PMO involvement
are the other control mechanisms to make sure that the program is still in line with the expectation
throughout the program life cycle. ” The program status report is used as a vehicle to communicate
between the program team, PMO, and customers. When a program does not meet the requirements at
each of the phase gates, adjustments are required (if the program is not killed). This mechanism is referred
to as a corrective approach, in which a new strategy or action emerges from a stream of managerial
decisions through time.

Aligning programs to business strategy is new to LorryMer. John remarked, “ We are learning the
alignment process, and I am happy with its results. For the first time, we are aligning IT programs with the
business strategy- and it works. ”

Questions:

1. Discuss how LorryMer ’s IT programs were aligned with the company’s strategic goals and
business values. (Understand)
2. Explain how company’s alignment process was accomplished by the alignment chart? (Evaluate)
3. Show in a chart the Program to Business Strategy Alignment process (Create)
4. The LorryMer experience offers a good example of the use of an integrated management system
in practice to achieve strategic business objectives. Discuss the key elements of such practice.
(Apply)

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