Pinnacle West Capital Corporation sought to transform its IT department from a traditional functional model to a process-oriented one to improve communication between business and IT and increase responsiveness to change. The company's CIO, Denny Brown, established a Center for Process Excellence to lead the effort using lean principles and small, skilled teams. An assessment determined that implementing a Process and Enterprise Maturity Model was the best approach to identify strengths and weaknesses and enable the necessary process capabilities and performance management. The implementation focused on defining responsible owners for each process, empowering performers through decentralized management, and establishing metrics to continuously improve processes across the organization.

1. Pinnacle
West
Creating a Process Oriented
Enterprise
Case Study
by
Tanaya Bose & Kaustav Chaudhury
ISM-6155 Enterprise Information Systems Management

2. BACKGROUND: The situation till now
● Pinnacle West Capital Corporation (PNW): Is a large organization
that provides energy-related products throughout Arizona for
nearly 120 years.
● Arizona Public Service (APS) was the largest affiliate for IT
innovation
● APS also co-owned and operated the Palo Verde Nuclear
Power Generating station.
● Among Top 10 US companies in Information Week 500.
● Awarded Edison Award by the Edison Electric Institute for
“Transformer Oil Analysis and Notification (TOAN) System”

3. Where is the Problem?
● Existing Process Engineering has
hit a dead end!
● Miscommunication between
business people and IT dept.
● Traditional functional model is
costly and ineffective
● Ancient Infrastructure
● Rising Demand
2007 2025 2007 2025
1.5%
15%
100%
160%
Renewable Energy growth Customer Demand

4. The Approach:
Solution
● Institute a process-oriented culture
inside the IT service.
● Determine strategy for wider rollout
of operations
● Decision Factors include Resource
Availability & Change Management
Competency
● Build Center for Process Excellence
(CPE): Internal Consulting
Organization
● Small teams with Skilled people
● Incorporate Lean principles
● Initiate quick changes
● Redesign existing services

5. MAN of the MOMENT
Denny Brown
● Vice President and CIO of Pinnacle West
● 1990 :Denny left APS to pursue a career at IBM for 10
years
● Creator of CPE
● Key role behind the Edison Award

6. Strategical Options: What to choose?
Alternative Solutions available
Prospector Strategy
Partnerships
Implement PEMM
Implement BPM
Pinnacle West Organization
Based on Miles &
Snow Typology
Strategy
Make Alliances with
other Big Names in
Industry
Identify Strengths &
Weaknesses of Process
orientation
Define, stimulate,
analyze Process
Models

7. 1. Prospector Strategy
Pros:
● Managers formulate strategies that parry with outside environment
● Take risks, Innovate, seek out opportunities and grow
● Suited to dynamic, growing organization which focuses on business & technology
● Good scope for research and design team
Cons:
● Entrepreneurial problem: Choose proper domain and allocate correct resources in
market
● Engineering problem: Good technical system introduced to deliver service to
customer in shortest time
● Administrative: Not enough strict hierarchies can cause issues in management
causing organizational instability, eventually leading to collapse of industry

8. 2. Forming Partnerships
Pros:
● Alliances with other big name of the industry would help them to gain competitive
advantage
● It will help to get the skilled resources to make their reengineering work
● Information sharing environment can increase task output and quality.
● Keep the competition down in the same market.
● Happy Customer - no increase in the item’s price
Cons:
● It will fail miserably if Pinnacle is not prepared for this kind of partnership
infrastructure.
● Hiring smart partners and trusting each other.
● It could be an alternative option, should not be the only and initial step

9. 3. Process and Enterprise Maturity Model
Pros:
● It helps to identify strengths and weaknesses for process
● Independent of industries and processes and organization size
● Helps to identify needs for change to enable process performance
● Identifies both necessary process and enterprise wide capabilities
● Allows measurement and management of change transformation results
Cons:
● Understanding of the organization- top driven and bottom down
● Everything should be in proper place within the organization - design, owner,
performance, metrics and good infrastructure

10. 4. Business Process Management
Pros:
● It provides the tools and infrastructure to define, simulate, and analyze process
models
● It provides a lifecycle for processes from Discovery to Execution for continuous
improvement
● Execution of the implemented software artifacts can be managed from a business
process perspective
Cons:
● Many challenges exist along all the phases - Process discovery, design,
development, deployment
● Business and technical consequences

11. So what would you choose?
Why?

12. Approach Taken?
Process and Enterprise
Maturity Model

13. Why?
Pros:
● Pinnacle West needs to determine if Process is delivering Higher
performance over long time
● 5 process enablers: design, performers, owners, infrastructure &
metrics
● 4 enterprise capabilities: leadership, culture, expertise & governance
● PEMM is easy to administer : easy to implement
● Testable propositions rather than emotional approach
Cons:
● Have to understand their own company completely
● Strong process required before proper enterprise

14. Denny’s Approach: Implementation
Design
● How process needs to
be executed
● Responsibility of Info.
Mgmt. Team to
present to Bsns.
Team.
● Make sure everyone
understands
Good
Better BEST
Performers
● Implement smaller
teams with more
efficient people
● Skilled people who
should execute the
process
● Decentralized form of
Management
● Motto: customers,
teamwork, and
personal
accountability;
Owner
● Senior executive
should take
responsibility for all
process initiatives
● This should be top to
bottom, starting from
Denny Brown
● oversee processes
instead of activities
Infrastructure
● Plan team meetings
between Research &
Development teams ,
IT and business
stakeholders
● Scheduled Audits &
assessments for
improvement
Metrics
● Measure Company
process’s
performance
● Enable Lean & Six
Sigma principles &
failure Root Cause
Analysis

15. Takeaway● PEMM framework doesn’t make the road to
process re-engineering easy to cross
● Executives and senior management needs to
continually improve process
● integrate the bottomup process improvements
with a topdown management strategy for
processes
● Benchmark business & IT processes for
evaluation
● Follow S.I.P.O.C chain :
supplier>input>process>output>customer
● Planning & execution. E.g. Automated work
order generation system
● Milestones should align with work prioritization
and backlog
Customer
PEMM
Organization

16. “The only reasonable approach to business transformation is process
alignment and service orientation. I am pushing for a change from
functional to a process model. One of the first steps we took is to
transform IT and it has been very difficult. We have 50 years of IT
experience run on the functional model. It served us well – people are
comfortable with it but it is costly and not as responsive to change.”
-Denny Brown

17. Thank you