CSR Challenge and Strategic Innovation in Volkswagen

This report proposes a leading edge, strategic innovation solution for Volkswagen Australia to deal with a corporate challenge faced by the selected company regarding its corporate social responsibility aspects within the nation’s automobile industry through renewing the company’s recent approach.

Running head: CSR CHALLENGE AND STRATEGIC INNOVATION IN VOLKSWAGEN
CSR Challenge and Strategic Innovation in Volkswagen
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1CSR CHALLENGE AND STRATEGIC INNOVATION IN VOLKSWAGEN
Executive Summary
Volkswagen Group has positioned its business internationally as well as in Australia being a
renowned German automobile organization that manufactures both passenger and commercial
vehicles. In addressing the CSR issue faced by Volkswagen, the report will consider developing
a strategic innovation model through employing innovative idea generation techniques. The
report revealed that for implementing the socially responsible strategies through its strategic lean
innovation model, Volkswagen needs to ensure that it requires transforming its organisational
leadership and culture that can support the success of this innovation strategy. In addition, it also
revealed that implementation of creative thinking technique can facilitate in developing a
strategic “Lean innovation model” that can facilitate the automobile company in dealing with its
CSR approaches.

2CSR CHALLENGE AND STRATEGIC INNOVATION IN VOLKSWAGEN
Table of Contents
1. Introduction..................................................................................................................................3
2. Innovation Challenge...................................................................................................................3
2.1. Corporate Social Responsibility Challenge Faced by Volkswagen.....................................3
3. Leading Edge Strategic Innovation Solution...............................................................................5
4. Strategic Innovation Model.........................................................................................................9
4.1. Innovation Action Plan.......................................................................................................10
4.2. The Leadership...................................................................................................................11
4.3. The Innovation Implementation.........................................................................................12
5. Conclusion.................................................................................................................................13
References......................................................................................................................................14

3CSR CHALLENGE AND STRATEGIC INNOVATION IN VOLKSWAGEN
1. Introduction
Corporate Social Responsibility (CSR) and strategic innovation are the foundation of
business competencies and improvements in the CSR initiatives can drive social innovation and
improvement in business operations. Volkswagen Group has positioned its business
internationally as well as in Australia being a renowned German automobile organization that
manufactures both passenger and commercial vehicles (Altenburger 2018). The company
manufactures and sells its passenger automobiles under its brand names like Scania, MAN,
Neoplan and Volkswagen. It also holds its leading position in global automobile industry through
distributing passenger commercial vehicles, engines, motorbikes, turbo machinery along with
sources such as leasing, financing and fleet management (Aragón-Correa, Marcus and Hurtado-
Torres 2016). The objective of the report is to propose a leading edge, strategic innovation
solution in order to deal with a corporate challenge faced by the selected company Volkswagen
Australia regarding its corporate social responsibility aspects within the nation’s automobile
industry through renewing the company’s recent approach. In addressing the CSR issue faced by
Volkswagen, the report will consider developing a strategic innovation model through employing
innovative idea generation techniques.
2. Innovation Challenge
2.1. Corporate Social Responsibility Challenge Faced by Volkswagen
CSR or Corporate Social Responsibility can be explained as the business practices that
are greatly relied on the ethical values for addressing the legal requirements along with
maintaining respect for communities, people, environment and marketplace. The Volkswagen

4CSR CHALLENGE AND STRATEGIC INNOVATION IN VOLKSWAGEN
CSR Code of Conduct indicates that “the company bears responsibility in maintaining
continuous improvement regarding the environmental tolerability of their products”
(Blackwelder et al. 2016). However, recently the company is observed to face several challenges
related with totally embracing strategies related with abiding by their CSR code of conduct for
offering socially responsible services to its consumers. The automobile company faced the CSR
scandal of heating on the pollution emission measures related to its diesel engines. With time,
several legal procedures were engaged all over the world by the government and the regulation
entities as well as the consumer groups. In addition, Volkswagen also faced the challenge of
numerous repercussions in the automobile industry due to such scandal that raised questions
regarding the company’s legitimate and effective CSR policies as well as practices (Brenner and
Uebernickel 2016). Considering same, it can be elucidated that as the consumers in the current
years are highly ware about social and environmental concerns, it is highly important for the
renowned automobile companies like Volkswagen to indicate a sense of social responsibility.
Over the years, the well positioned automobile company Volkswagen maintained its
image of offering good quality products and stringy emphasised on its CSR actions as a part of
its innovative marketing strategies. However, cheating of dangerous nitrous oxide emissions and
making no initiatives to reduce them indicates that the automobile company operated against
their CSR code of conduct (Butnariu and Filipeanu 2016). Volkswagen failed to maintain
sustainable environmental protection as a part of its CSR strategies to fulfil its corporate
responsibility of sustainable environment protection through checking all its production areas in
ensuring attest possible environment adaptability. With such violation of its CSR conducts it
seemed difficult for the organization to regulate itself with CSR as it is highly based on
corporation rather than on an individual level. This is in alignment with the statement that CSR

5CSR CHALLENGE AND STRATEGIC INNOVATION IN VOLKSWAGEN
do not just focus on the individualism of each person working in the company but rather the
actions of the organisation at a large (Calof, Meissner and Razheva 2018).
3. Leading Edge Strategic Innovation Solution
Strategic innovation focuses on generating new ideas to address an identified gap in the
marketplace through involving creative thinking techniques. In addressing the CSR issues faced
by Volkswagen in Australian automobile industry the idea-generation technique that is most
suitable is SCAMPER. Implementation of this creative thinking technique can facilitate in
developing a strategic “Lean innovation model” that can facilitate the automobile company in
dealing with its CSR approaches (Coulson-Thomas 2018). This creative idea-generation
technique can facilitate Volkswagen in segregating the problem and then analyse all the areas of
the company’s CSR approaches based on which the most important area is selected that needs
innovative transformation. This strategic innovation solution technique is indicated below:

6CSR CHALLENGE AND STRATEGIC INNOVATION IN VOLKSWAGEN
Figure 1: SCAMPER Innovative Idea Generation Technique
(Source: De Stefano, Montes-Sancho and Busch 2016)
 Substitute something- Through abiding by the CSR code of conduct of Volkswagen, the
automobile company can consider ensuring the safety of its consumer vehicles that can
be done through using carbon fibre rather than steel in developing the vehicle body.
 Combine it with something else- For attaining trust among consumers for its vehicles
after it has dealt with the emission scandal, Volkswagen must consider re-designing its
consumer convenience automobiles through combining its product with another in
creating a new offering (Inzelt and Csonka 2017). For instance, Volkswagen can consider
combine suitcase with wheels for increasing convenience of travellers. Moreover, in

7CSR CHALLENGE AND STRATEGIC INNOVATION IN VOLKSWAGEN
acting responsibly towards the society, Volkswagen can also consider offering additional
driver-assistance functions in its vehicles along with LED lights.
 Adapt something to it- For improving its tarnished reputation of being a leading a
renowned automobile company, Volkswagen must consider developing effective CSR
code of conduct following which innovation regarding adapting or readjusting its
convenience vehicles are deemed necessary so that it can serve other purposes (Kantola
et al. 2017). Such innovative adjustments can offer more flexibility regarding vehicle use
by consumers along with enduring their safe driving. For instance, Volkswagen can adapt
its vehicles to include a lowered roofline along with 8-speed automatic transmission that
can address fuel needs of consumers. Moreover, the redesigned cars of the company can
be electronic vehicles with having 20 battery powered brand models that can decrease
any chances of emission causing harm to society (Kytölä and Naaranoja 2016).
 Modify or magnify it- In relaunching its vehicles following its social responsibility
principles, Volkswagen can consider modifying the look of its newly launched emission
for vehicles through changing their shape, look or feel of these vehicles. The automobile
company can also focus on the innovate idea of emphasising on highlighting on a specify
aspect of its new vehicles that can create more value for consumers (Legl and Weaver
2015).
 Put to some their use- In this strategic thinking step, Volkswagen can use its innovation
strategy in using its vehicles in other industries majorly that is all over Australia in which
it will promote the ways in which its cars behave differently in another setting. For
instance, developing environment friendly automobile version for the Australian
automobile industry. Relaunching new car models through promoting that it is

8CSR CHALLENGE AND STRATEGIC INNOVATION IN VOLKSWAGEN
environment friendly can ensure that the automobile company is acting responsibly
towards its consumers (Li et al. 2018). In this innovative thinking approach it must
consider launching “Volkswagen Jetta” in Australian automobile industry as environment
friendly options for passengers. As a CSR brand promotion initiative, Volkswagen can
promote this car brand as a hybrid model that has turbocharged gas engine that can
decrease consumer concerns about emissions.
 Eliminate something- In this innovative thinking step, Volkswagen can find creative
solutions on addressing its issues related emission scandal that negatively affected social
responsibility approaches of the company. In this initiative the automobile company can
re-develop its consumer vehicles to make it emission free as well as convenient, faster
and lighter. In this innovative thinking approach, the automobile company can make its
cars totally emission free and safe positioning the company as socially responsible
towards its target consumers (Li, Xue, Liu and Sy 2018). Eliminating its emission
causing cars with advanced electronic vehicles having advanced safety driver features
such as forward collation warning, autonomous emergency breaking along with
pedestrian walking monitoring as well as traffic alert systems.
 Reverse or rearrange it- In this innovative thing technique, Volkswagen can improve its
tarnished reputation among consumers through reversing assumptions related with its
vehicles. For instance, in acting responsibly towards the society and to regain trust
towards its vehicles along its consumers, the automobile many can consider exchanging
the defective Volkswagen cars with emission issues owned by consumers by its new and
safe car model at sharply lower price in order to regain their trust towards the brand
(Lindholm 2017).

9CSR CHALLENGE AND STRATEGIC INNOVATION IN VOLKSWAGEN
4. Strategic Innovation Model
Based on the strategic innovation solution proposed, the most suitable strategic
innovation model for Volkswagen as its improved CSR strategy is “Lean Innovation Model”.
This strategic innovation model can serve as a successful and integrated implementation of lean
thinking in Volkswagen Company’s innovation and product development strategies. This can
also support the company CSR approaches through ensuring that the consumer vehicles are
manufactured responsibly through following best production practices (Palazzo 2019). The
strategic lean innovation model developed for Volkswagen is indicated in the figure below that
ensures an organised manner to attain business success along with continuous deployment of
different socially responsible car manufacturing processes under each enabler.
Figure 2: Lean Strategic Innovation Model of Volkswagen

10CSR CHALLENGE AND STRATEGIC INNOVATION IN VOLKSWAGEN
(Source: Rasche, Morsing and Moon 2017)
4.1. Innovation Action Plan
In implementing the lean strategic innovation model, Volkswagen has current approach
of developing most productive and fuel efficient cars in recognition to its socially responsible
production strategy. The new strategic innovation approach of the company must be based on its
considerate that “a lean group drives strong brand”. Following this innovative approach,
Volkswagen can carefully coordinate its production process through keeping in consideration
redeveloping every smallest detail of its eco-friendly car models along with keeping its
production smooth. The change requirements considered in this strategic innovation approach of
Volkswagen is to replace all its consumer vehicles that faced the emission scandal issue with the
cars that are electronic vehicles (Student et al. 2017). Moreover, this lean strategic innovation
strategy implementation will support the automobile company in changing its approach to keep
vehicle production more socially responsible that can build trust among consumers. The target
market that is considered by the automobile company in promoting its socially responsible
strategic innovation approach is the middle-upper and upper-income class consumer groups. This
target consumer group of the company are selected based on the urban areas along with the
young generating that looks for fuel-efficient and comfort equipment’s at affordable prices.
Through implementing lean strategic innovation model in its vehicle manufacturing process the
company must be focussed on enhancing consumer perceived value through offering them eco-
friendly cars with having value added features of high quality, competitively priced and viable in
the long run (Tench and Amo-Mensah 2017).

11CSR CHALLENGE AND STRATEGIC INNOVATION IN VOLKSWAGEN
4.2. The Leadership
For implementing the socially responsible strategies through its strategic lean innovation
model, Volkswagen needs to ensure that it requires transforming its organisational leadership
and culture that can support the success of this innovation strategy. In ensuring successful
innovation strategy implementation and in consideration to the fact that faulty leadership
practices of not abiding by the CSR code of conducted resulted in tarnished reputation of the
company and loss of loyal consumer base to great extent, implementation of this new strategic
innovation model will need leadership and culture of the organisation to be transformed
(WarrenMcFarlan et al. 2016). The leadership and the organisational culture that must be
followed by the automobile company are required to be more socially responsible in order
rebuild trust among its consumers. Transformational leadership approach must be followed by
Volkswagen in which streamlining and development of vehicle models will be considered and
for developing a culture in the organisation that will focused on ethical business practice values
and principles. The corporate culture in the production pants of Volkswagen must be focussed on
acting efficient, systematically and promptly (Tench and Amo-Mensah 2017).
Transformational, leadership in the company requires focusing on promoting
accountability along with creating more synergies mong all its brands. Strict culture of
constructive dissent followed in the company might strengthen its accountability along with
penalising misconduct. In implementing the lean strategic innovation strategy, the dear of
Volkswagen needs to ensure that strategic decisions are made at the lowest level closest to the
operations. This can encourage the culture of avoidance of duplicating work, speeding up the
decision making process along with increasing mutual responsibility and interdependence (Tench
and Amo-Mensah 2017). Following the culture of maintaining operational and business conduct

12CSR CHALLENGE AND STRATEGIC INNOVATION IN VOLKSWAGEN
transparency, the leader of the German automobile company will be able to manufacture cars
following the la production process and make it highly fuel-efficient and emission free along
with successfully dealing ith the challenges of car-sharing, electrification and autonomous
driving.
4.3. The Innovation Implementation
The strategic lean innovation implementation takes into consideration maintaining
suitable processes, systems, structure and innovation team that will include people with great
expertise (Tench and Amo-Mensah 2017). The systems that must be implemented by the
automobile company in its innovation strategy is “Modular Transversal Toolkit” through which
lean process can be followed by Volkswagen in transforming its front-wheel cars along with
making several modular configurations in them to make it more socially responsible and eco-
friendly vehicle. The production structure must be redesigned in a way that can support suitable
implementation of the company’s lean innovation process. Considering same, the manufacturing
process of the company is needed to be structured in a manner that increases efficiency,
eliminates costs and reduces time that it takes to manufacture a car by 25% (Student et al. 2017).
This will also facilitate the automobile company in manufacturing multiple eco-friendly car
models on the shared production lines that can further improve its flexibility to respond
effectively to consumer demand changes while decreasing the overall manufacturing costs.
Strategic lean production innovation in Volkswagen will consider developing an optimal
process in the manufacturing units of the company that can boost value creation along with
prevent stressful situation to take place. Maintaining such systems can also facilitate the
company in maintaining its vehicle assembly lines on the lean path that can shorten the work
process (Studeny et al. 2017). Conducting manufacturing operations through strategic lean

13CSR CHALLENGE AND STRATEGIC INNOVATION IN VOLKSWAGEN
innovation model can be operated in an ethical and socially responsible manner by ensuring that
the company considers optimal material handling along with maintaining perfectly designed
tools designed for a specific job site and ergonomic workstations (Studeny et al. 2017). The
innovation team that needs to be employed and developed by Volkswagen in making its strategic
lean innovation strategy successful will include employees with expertise in performing
specialised manufacturing tasks along with the technical skills that focuses on continuous
yorking on improvements.
5. Conclusion
The objective of the report was to propose a leading edge, strategic innovation solution in
order to deal with a corporate challenge faced by the selected company Volkswagen Australia
regarding its corporate social responsibility aspects within the nation’s automobile industry
through renewing the company’s recent approach. It is gathered from the report that the
automobile company faced the CSR scandal of heating on the pollution emission measures
related to its diesel engines. Based on the strategic innovation solution proposed, the most
suitable strategic innovation model for Volkswagen as its improved CSR strategy is “Lean
Innovation Model”. The strategy lean innovation model developed for Volkswagen is indicated
in the figure below that ensures an organised manner to attain business success along with
continuous deployment of different socially responsible car manufacturing processes under each
enabler.

14CSR CHALLENGE AND STRATEGIC INNOVATION IN VOLKSWAGEN
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