Information Systems

Professors Matt Stoltz and Meera Kesari Case Study: IT Governance (Victory Harmonica Corporation)

CASE STUDY: IT GOVERNANCE

VICTORY HARMONICA CORPORATION

ASSIGNMENT OVERVIEW

Summary: As a team, students should present their proposed solution to the case. Your

presentation should lay out clear recommendations for how management should

address the problem. This case study is divided into two parts:

1. establishing the IT organization, the IT strategy, IT charter, the roles and

responsibilities for the new IT organization, IT operating model, and

2. creating the IT service catalog and capability maturity model, and

governing IT entities.

Each team should analyze both parts of the case but only one team will present

each part. You only need to turn in the deliverables for your assigned part of the

case.

Presentation

Deliverable1:

Case study presentation (in Microsoft PowerPoint format).

Executive Briefing

Deliverable:

Single page case study executive briefing (in Microsoft PowerPoint format).

BACKGROUND

Einstein Harmonicas is a large global manufacturer of harmonicas (sometimes called “harp,” “blues harp,”

or “tin sandwich”) based in Stuttgart, Germany. Einstein has a long-standing tradition of quality and is a

recognized leader of quality in the Harmonica industry. It would like to expand its markets into the United

States so management has approved a strategic plan to create a new US-based company called Victory

Harmonica Corporate (or “Victory”). Einstein is treating Victory as a separate entity and will operate

independently of the parent for the most part. A decision was made that a new IT department will be formed

and run by Victory.

EINSTEIN HARMONICAS

Founded in 1849 by Sigmund Einstein, Einstein Harmonicas crafts some of the highest quality musical

instruments in the World. Einstein’s products consist of various harmonicas types such as diatonic,

chromatic, tremolo and bass to name a few. Harmonicas have been a slow and steady business since it

was founded. Occasionally, Einstein would experience surges in demand for their products when a famous

musician – such as Steven Tyler, John Popper or Huey Lewis – would endorse their product, but otherwise,

they have successfully achieved a nice 7% compound annual growth rate. Since 2005, however, Einstein

has seen a growing demand, primarily based in the US, for its products. Einstein is forecasting 25-40%

compound annual growth in its desired markets (such as the US) and knows it needs to move fast to capture

1 Presentation Deliverables are due only if your team is assigned this case. All others should read the case and complete the Executive Briefing Deliverable assignment.

Professors Matt Stoltz and Meera Kesari Case Study: IT Governance (Victory Harmonica Corporation)

Page 2 Master of Science in Information Systems: IT Governance, Risk and Controls (IT GRC)

the market share. New smaller harmonica companies are popping up around the globe in the US, UK,

Japan, Brazil and France that are carving out niches for themselves and stealing market share from

Einstein. The time to act was now and the place to start is the US since it represents the largest growing

and wealthiest segment of their target market. Todd Filisko, Einstein’s global President and CEO knows he

has to move quickly to get Einstein’s into the US market.

VICTORY HARMONICA CORPORATION

Einstein management took decisive action to establish a new company – Victory Harmonica Corporation –

to capture the market share in the US. Headquartered in Chicago, Illinois, Einstein management agreed

that Victory would be founded as a separate legal entity so that it could tailor its marketing and branding to

the discerning needs of US musicians. Einstein’s products are primarily used to play folk, ethnic, and Irish

music while US players prefer blues and rock and roll styles of music. They settled on the name “Victory”

to capture the free spirit and excitement of the new product design. Einstein recognized that the product,

design, marketing – and of course – the performance and quality of the product all had to be tailored to the

needs of US market. Einstein’s Global CEO, Todd Filisko, set a goal for Victory of becoming “the #1

harmonica company in the US (by market share and sales) within three years of the launch of the business.”

This meant that Victory management had to establish the business, build its product line and get the

products into stores and into the hands of the consumers fast. Key to this strategy is setting up a robust

dealer base and distribution system and lining up well known musician and celebrity endorsements. Victory

sure has its work cut out for them!

Filisko believes that the “secret sauce” for Victory will be in designing a high quality product that looks as

good as it sounds. Traditional harmonicas are boxy, square and have an “old look” to them. Victory

Harmonicas will redefine cool as the “go anywhere instrument of rock stars and blues musicians alike.”

Filisko has even been heard saying that he wants to do with Victory what Steve Jobs did with Apple and

the iPhone. Einstein’s engineers and designers have been working non-stop on new harmonica designs

and have three models – a low-, medium- and high-end model – ready to go to launch Victory. These

models have tested very well and have several patented innovations embedded into them that will make

Victory stand out from its competition. It is still unclear where manufacturing of the products will be located

and sourcing of the materials will come from. One idea is Einstein could manufacture components and sell

them to Victory at “cost-plus” pricing. This decision remains open and will be up to the Chief Operating

Officer to decide with her team.

An analysis of the market segmented the competition into two primary buckets:

1. Large Manufacturers – Established companies with global operations and wide distribution

network. These companies have been around for a long time and have a recognized brand and

position in the market.

2. Smaller Boutique Manufacturers – Specialized or custom harmonicas with smaller manufacturing

capabilities. Typically specialized or fill a niche in the market. Some of these brands are relatively

new but they are characterized by smaller production and specialized products.

Professors Matt Stoltz and Meera Kesari Case Study: IT Governance (Victory Harmonica Corporation)

Page 3 Master of Science in Information Systems: IT Governance, Risk and Controls (IT GRC)

Large Manufacturers Small Boutique Manufacturers

• Einstein

• Suzuki

• Hering

• Tombo/Lee Oskar

• Hohner

• Seydel

• Fender2

• Dannecker

• Dortel

• Turboharp

• Yonberg

• Bushman

There are also a number of harmonica “customizers” who take existing harmonicas and change various

aspects of the harp to achieve a specific tone or design characteristic. These customizers are not seen as

a threat to Victory’s business plans; rather, an integral part of their marketing plan if they can be given

harmonicas to customize and promote. Customizers will change some aspect of the harmonica’s four

primary components:

1. Comb – The core of the harmonica. Each comb has grooves that act as channels in which the

player blows and draws breath to hit a desired note.

2. Reed Plates – The metal plate mounted to the comb (often with screws, nails or small bolts). Each

harmonica has two reed plats: an upper and lower plate for the draw and blow notes on the

harmonica.

3. Reeds – The small strips of metal mounted to the reed plates that vibrate when a player blows or

draws breath into the harmonica. The reeds are what generate the tones on the harmonica.

4. Covers – Made of various materials such as metal, plastic or wood, the covers are what players

hold when playing a harmonica. The covers are generally screwed together to keep the inner

components harmonica protected.

Einstein’s preliminary designs have emulated the sleek designs of Yonberg and Turboharp yet have

preserved the quality and craftsmanship of brands found in Dannecker and Dortel. Einstein’s main

competition in the market is Hohner. Hohner and Einstein actually began as one company back in Germany

but split in 1857 due to differences in opinions in how the company should be run and what products should

be made.

Einstein knows that its products are seen as “old and traditional.” They are synonymous with grandfathers

playing “Old Susanna” on the front porch than a rock star front-man belting out a killer solo. So the idea of

establishing Victory to create a newer, younger, more vibrant brand seemed like a smart strategy to capture

the growing harmonica market. The Victory brand and mantra has become “the finest craftsmanship with a

rock-and-roll soul.” The prototypes have been developed and the Einstein CEO believes that once Victory

gets its instruments into the hands [and mouths] of some big name endorsers such as Sting, Jimmy Fallon,

and Billy Joel, these things will fly off the shelf!

Einstein’s global executive committee formed a Victory task force and created the new corporate structure

depicted below. This group represents the core business functions necessary to get the business off the

ground.

2 “White-labeled” by Lee Oskar and Seydel

Professors Matt Stoltz and Meera Kesari Case Study: IT Governance (Victory Harmonica Corporation)

Page 4 Master of Science in Information Systems: IT Governance, Risk and Controls (IT GRC)

Please note: the green boxes represent the IT sub-departments and depict your scope.

Einstein employed a US-based executive search firm to staff the Victory Executive Leadership Team. This

leadership team has been in place for a month and has been charged by the new Victory President and

CEO, Walter Musselwhite, to determine what their respective departments look like. Specifically,

Musselwhite would like to know:

• What will each of the VP’s departments do?

• How will they all work together to achieve the vision and goals they have set for themselves?

• What metrics will they use to determine if they are successfully hitting their goals?

Each of the Vice Presidents has been given a consulting team to help address these basic questions from

the CEO. The VP of IT, Howard Greene, has extensive experience in building and running IT departments

in the past and has determined there are six key deliverables he must define in order to get his organization

up and running:

1. A comprehensive IT organization chart and associated job descriptions along with a very brief IT

strategy statement

2. An IT charter and roles and responsibilities

3. IT operating model

4. IT service catalog

5. Capability maturity model

6. Governing IT entities

Greene has asked for your help creating these important foundational documents and would like your

recommendations. He has provided some preliminary guidance below on what he is looking for and how to

put these materials together.

Todd Filisko Global CEO,

Einstein

Walter Musselwhite President and CEO, Victory

Christelle Power VP of

Finance

Internal Audit and Compliance

Financial Planning and Analysis

Accounting and Financial Reporting

Corporate Development,

Acquisitions and Strategy

Office of the Controller

Corporate Counsel

Kat Berthon VP of

Operations

Program Management

Office

Supply Chain and Logistics

Engineering and R&D

Manufacturing and Production

Howard Greene VP of Information

Technology

IT Operations , Telecom and Infrastructure

Enterprise Applications

IT Risk Management and Security

Innovation Center of

Excellence

Architecture and Engineering

IT Support and Service

Management

Joe Levy VP of Marketing

and Sales

Internal Communications

External Communications

and PR

Sales and Distribution

Rachelle Terry VP of Human

Resources

Talent Management, Learning and Development

Recruiting and Talent Sourcing

Payroll and Benefits

◼ Blue = Einstein Harmonicas

◼ Red = Victory Executive Leadership Team

◼ Green = Victory IT Sub-Departments

◼ Gray = Victory Director Team

Professors Matt Stoltz and Meera Kesari Case Study: IT Governance (Victory Harmonica Corporation)

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BUILDING VICTORY IT

Greene knows there is much work to be done to present his vision for his organization but he has great

confidence that your team will be able to help him describe what his organization will do. Before he goes

off and hires his director team, he believes he has to better define the mission and vision for each of the

areas. Although experienced in building IT departments, operating models and charters, Greene would

really like your help to validate his line of thinking. He knows he has a lot riding on this new venture and he

is worried about understaffing the organization and overstaffing the organization. To get it just right, he

believes he needs to lay out the following key components in his plan:

1. THE IT ORGANIZATION AND IT STRATEGY

Based on his experience and the workshops with the Einstein task force, Greene put together six key sub-

departments within the IT department (represented in the organization chart above):

1. IT Operations, Telecom and Infrastructure – will be responsible for the servers, data center,

telecommunications, and general IT infrastructure for Victory.

2. Enterprise Applications – will be responsible for application development and maintenance.

Applications include enterprise resource planning (ERP), business-area applications,

manufacturing and supply chain applications, etc.

3. IT Risk Management and Security – will be focused on management of IT risk which includes IT

audit, IT compliance and cybersecurity.

4. Innovation Center of Excellence – will be focused on the development and integration of emerging

technologies such as mobile app development, consumer-facing applications, and assists with the

technology aspects of new products and services.

5. Architecture and Engineering – will manage the enterprise architecture for Victory. This group also

works as solution architects and works with the business areas engineer solutions to business

problems using existing or new technologies.

6. IT Support and Service Management – will serve as the helpdesk, service and support function for

IT. They are responsible for managing the IT request and management of the IT services defined

in the IT service catalog.

Greene has asked your team to challenge the model above and see if you have other recommendations

for organizing his department into logical functions. Once you have a model you are happy with, he’d like

your team to “define the boxes” representing sub-departments below each of the 6 areas above. He

believes each of the gray boxes equates to one director position. He would like to know how many

managers and analysts/associates should be included in this model. You must write a short job description

for each position and describe what each position will do. Greene believes that consulting sources like

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