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At a time when many chief information officers find themselves increasingly distanced from the executive suite, Volkswagen's CIO Klaus-Hardy Mühleck sits on the executive board and has responsibility for defining business processes throughout the company. In that capacity, he has championed a new organizational information technology structure to use resources more efficiently and effectively.

Process integration officers work across business units to simplify the capabilities of entire business domains--for example, a public information officer in the order-to-delivery unit evaluates processes from the customer order back through sales, manufacturing and design. Throughout Mühleck's career, he has promoted the use of IT to simplify processes, gain a competitive advantage and create value. Detlev Hoch and Jürgen Laartz, directors in McKinsey's Düsseldorf and Berlin offices, respectively, recently spoke with him about how and why he has reorganized the IT function and the results that Volkswagen expects from the effort.

The Quarterly: You've helped lead Volkswagen through a transformation over the past few years--from a company whose IT function just supported the business to one where IT leads change and works hand-in-hand with the other functional leaders to innovate. Can you tell us about that transformation?

Klaus-Hardy Mühleck: In many companies and in a lot of industries, you will find that IT isn't a core competency. It's more or less a historical discipline--running data centers, preparing and servicing different clients. And management views it as a cost center.

But over the past ten years at Volkswagen, we've begun to talk about the role of the CIOs and how to focus their skills on business enablement. This is not a hard leap to make for executives in some younger industries, like mobile communications. But in more established industries, like automotive or energy, it takes a little more work, since explaining to senior managers in other functions how IT can help play this leading role is a real paradigm shift. So if we discuss finance and control with finance leaders, we tell them how we work with SAP (nyse: SAP - news - people ) to prepare standard processes for accounting and controlling work. From there, we have to agree that to map out new processes, we must work collaboratively, bringing together the IT and business knowledge to design what's possible. We call this "concurrent engineering."

And, of course, the same is true in automotive design. It's no longer possible to talk about designing automobiles or manufacturing facilities without IT's input, because the vehicles and the factories are all digital--all based on digital models. In fact, the biggest challenge in the product part of our business is to accelerate product development and manage the complexity of different products and versions. In a company like ours, this complexity is intensified by the high degree of interaction we need between the R&D; departments of our various brands and of our external engineering partners. It's no longer enough just to involve IT; innovation must be driven by IT.

Detlev Hoch is a director in McKinsey's Düsseldorf office and Jürgen Laartz is a director in the Berlin office.

For the complete article, click here:

http://www.mckinseyquarterly.com/links/24011

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