Overview
In this Performance Task Assessment, you will analyze three case studies to demonstrate your ability to partner with information technology (IT) to assess organizational, cultural, and technical contexts and effectively implement and use business information systems.
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Part 1: Partners Healthcare Systems Case
After reading this case, respond to the following prompts:
- Identify key activities and best practices for implementing and managing business information systems based on the “Partners Healthcare System Case.” (1–2 pages)
- Identify and explain three to five important risks encountered in implementing business information systems for the “Partners Healthcare System Case.” (1–2 pages)
- Identify and explain the use of data resources, processes, and storage systems in the “Partners Healthcare System Case.” (1–2 pages)
- Select a resource that the business in the “Partners Healthcare System Case” should implement and explain how the company will benefit from this implementation. Identify three benefits and three risks to the business involved with implementing this resource. (2–3 pages)
- Should the company in the “Partners Healthcare System Case” implement cloud based data storage? Defend your position. (1–2 pages)
Part 2: WestJet Airlines Case
After reading this case, respond to the following prompts:
- Describe the aspects of the WestJet IT situation that the CIO assessed to respond to the CEO’s concerns as she evaluated whether or not the company had an adequate IT infrastructure. Explain the importance of these aspects. (1–2 pages)
- Summarize and critique Smith’s assessment and offer evidence and arguments that major changes in IT at WestJet were essential and that Smith’s governance model would enable WestJet to achieve its strategic goal. (2–3 pages)
Part 3: Pinnacle West Case
After reading this case, respond to the following prompts:
W13308
WESTJET AIRLINES: INFORMATION TECHNOLOGY GOVERNANCE
AND CORPORATE STRATEGY
Malcolm C. Munro and Sharaz Khan wrote this case solely to provide material for class discussion. The authors do not intend to
illustrate either effective or ineffective handling of a managerial situation. The authors may have disguised certain names and other
identifying information to protect confidentiality.
This publication may not be transmitted, photocopied, digitized or otherwise reproduced in any form or by any means without the
permission of the copyright holder. Reproduction of this material is not covered under authorization by any reproduction rights
organization. To order copies or request permission to reproduce materials, contact Ivey Publishing, Ivey Business School, Western
University, London, Ontario, Canada, N6G 0N1; (t) 519.661.3208; (e) cases@ivey.ca; www.iveycases.com.
Copyright © 2013, Richard Ivey School of Business Foundation Version: 2017-03-06
By any reasonable measure, WestJet Airlines had been a remarkable success. The company began
modestly in 1996 as a regional carrier flying three used Boeing 737-200 aircraft to five western Canadian
cities. By 2011, the airline boasted a fleet of more than 90 Boeing Next-Generation 737 aircraft serving
85 destinations in 18 countries and employed over nine thousand people. The company had become the
second-largest carrier in Canada and ninth-largest in North America. It described itself as a “high-value,
low-fare airline” with a corporate culture focused on delivering a “world-class guest experience.”
Information technology (IT) had played an important role in WestJet’s success over the years. The IT
organization, structure and staff had grown up around the business. IT remained relatively small, at least
compared to IT divisions at other companies of WestJet’s size, but was highly competent from a technical
perspective. The systems were proprietary, i.e., built and maintained within WestJet, but were quite
advanced for their time — WestJet was one of the first airlines that had electronic ticketing, for example.
IT and its systems gave WestJet a competitive advantage and played an integral part in WestJet’s growth.
But as the saying goes, “what got you here doesn’t always get you there.” As WestJet grew, an important
component of the strategic plan was to be able to codeshare — an aviation business arrangement where
two or more airlines share the same flight. This allows each airline access to more cities worldwide for its
passengers, and makes connections simpler by allowing single bookings across multiple airline networks.
The WestJet systems, while sophisticated, were standalone and not able to be integrated into any of the
major international reservation systems. This required an IT move into the core of one of the international
reservation systems, and WestJet selected Sabre. Unfortunately, the cutover to Sabre did not go as
smoothly as planned, which raised questions within the business about IT.
The IT organization also had to work differently with the business. Other airlines were becoming more
sophisticated with the integration of IT and guest experience, and WestJet was not keeping pace. While
WestJet had an executive responsible for IT within its portfolio, WestJet had never had a chief
information officer (CIO) or an IT officer at the executive level. A decision was made by the CEO and his
executive team to hire an experienced CIO on a contract basis for two years to determine what WestJet
could do to bring its IT systems up to par with other airlines, and to find out if having a permanent CIO at
the executive level was worthwhile.
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Cheryl Smith was contacted in early 2011. Following meetings with the WestJet CEO and the other
senior executives, Smith was appointed as executive vice-president and CIO in April 2011. Smith saw
WestJet as “exactly what I was looking for — a company that wanted to use IT to help it get to the next
level.” WestJet’s corporate strategy was heavily dependent on the ability of IT to deliver innovative guest
products and services, as well as solid operational support; IT was core to WestJet achieving its ambitions
and future corporate growth.
Smith immediately saw significant opportunities in the IT governance model at WestJet. Her first course
of action was to restructure the IT organization, align IT with corporate goals, overhaul IT planning and
budgeting and, in general, make IT more responsive to business needs. Overall, she proposed a major
transformation of IT along with aggressive solutions to pressing operational issues. But many of the IT
staff, some of whom had been with WestJet from the beginning, had reservations about Smith’s ideas.
Smith realized that selling a new vision for IT governance to both her executive team peers and IT staff
could be a major challenge. She would need a lot more than clever charts, graphs and diagrams. But
Smith knew that change in the governance model was a mandatory first step if IT was to become a strong
partner to the business and help it move to the next level, and she would need to move quickly.
THE WESTJET STORY
The headquarters and main hub for WestJet Airlines Ltd. was located at the Calgary International Airport
in Calgary, Canada. WestJet had been founded in 1996 by pilot/entrepreneur Clive Beddoe and three
business partners, who fashioned their business model as a low-cost carrier after one pioneered by
Southwest Airlines in the United States. Initial markets served included Calgary, Edmonton, Vancouver,
Kelowna and Winnipeg — all western Canadian cities, which gave the carrier its name. Flights to three
other cities in western Canada were added before the end of the year. By 1999, WestJet had expanded its
network to serve twelve western Canadian destinations.
Major growth beyond western Canada came quickly. In the years 2000 through 2004, WestJet added over
a dozen destinations in western and eastern Canada, including the major centres of Toronto, Montréal and
Halifax, thereby enabling the company to exploit the lucrative Toronto-Montréal-Ottawa triangle. The
WestJet network now spanned Canada coast to coast and the airline had begun replacing its fleet with
new Boeing Next-Generation 737 aircraft.
In the years 2004-2005, dramatic expansion occurred with WestJet adding flights to a number of major
U.S. destinations, including San Francisco, Los Angeles, San Diego, Phoenix, New York City, Las Vegas
and Honolulu. A major milestone occurred in 2006 when WestJet began scheduled service to Nassau,
Bahamas — a key moment in the company’s long-term destination strategy. In 2009, WestJet adopted
Sabre, the international airline reservation system, enabling it to establish codeshare and interline
agreements with over 30 other airlines to draw new global traffic into its network — a move that
generated tens of millions of dollars in additional revenue from the codeshare partners within a couple of
years. Included in the agreements were such prominent carriers as American Airlines, Delta, United,
British Airways, Air France, KLM, Qantas, Air New Zealand and Air China. By 2011, having added
another 18 international destinations, WestJet was serving 81 destinations in North America, the
Caribbean and Mexico.
Growth in another form occurred in 2003 when WestJet partnered with Air Transat, which specialized in
providing charter flights from Canadian cities to Europe in the summer and southern destinations in the
winter. Under their agreement, WestJet crews and aircraft flew Air Transat passengers mainly to Mexican
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and Caribbean destinations. Building on this experience, WestJet launched WestJet Vacations in 2006,
which offered affordable and flexible flight and vacation packages.
Paralleling its growth in operations, WestJet became known as adept at growing a strong corporate
culture. Through the years 2003 to 2011, WestJet garnered numerous awards, including being named as
Canada’s second-most respected corporation (2003) and as having Canada’s most admired corporate
culture (five straight years commencing in 2005), inclusion in Canada’s Most Admired Corporate
Cultures Hall of Fame (2010), having the Best Flight Attendants (2011), and being one of only two
Canadian companies to receive the J.D. Powers and Associates 2011 Customer Service Champion award.
WestJet expressed its strong corporate culture and dedication to customer service with the employee
slogan “Because Owners Care,” which referred to the fact that about 86 per cent of eligible employees
participated in the employee share purchase plan.
A capstone event was the opening in 2009 of WestJet’s new six-story head office building next to its
existing hangar embedded deep among the runways of Calgary’s rapidly expanding international airport
(see Exhibit 1). The new building symbolized the company’s muscle, which had enabled it to shoulder its
way into the Canadian market, increasing WestJet’s domestic market share from seven per cent in 2000 to
38 per cent by 2009. This compared favourably with its major competitor, Air Canada, whose market
share dropped from 77 per cent to 55 per cent in the same timeframe. WestJet’s 2011 Annual Report
stated, “2011 marks the fifteenth time we have reported an annual profit in our 16-year history and we
expect this profitable trend to continue” (see Exhibit 2 for financial highlights).
In summary, the WestJet wizards had performed the air industry’s equivalent of transforming a mom-and-
pop corner store into a thriving international retailer in a decade and a half.
THE NEW CHIEF INFORMATION OFFICER
“When you have already achieved your career goals but have outstanding business experience and many
more years to contribute, what do you do?” This was the question facing Cheryl Smith in 2010. Smith had
begun her career by earning a Master in Public Administration degree at Pennsylvania State University in
1973 with a thesis on computing in public organizations. She pursued this interest with her first job at the
newly established House Information Systems (HIS) of the U.S. House of Representatives as a
programmer analyst and, eventually, manager. After seven years with HIS and with two children to raise,
Smith established her own consulting firm, Analinc Corp, working with a number of commercial, non-
profit and government clients. Her consultancy at this time focused on detailed database design, system
acceptance test plans and site/facilities planning.
In 1985, Smith began a five-year appointment as a Principal at Ernst & Young, the giant accounting and
professional services firm. Her responsibilities included large information systems planning, analysis,
design, development and implementation for a wide range of major organizations.
In 1990, Smith began her steady climb up the career/corporate ladder as she left Ernst & Young for the
position of management information systems director for Honeywell Federal Systems Inc. This was
followed in 1994 with her appointment as a business unit CIO with Bell Atlantic Corp. (now Verizon),
and in 1998 as senior vice-president and CIO of KeySpan Energy (now National Grid), a newly formed
New York-based energy company, which merged with several other energy companies during her tenure
to become one of the largest energy companies in the eastern United States.
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Smith then achieved her long-term career goal of becoming a CIO of a Fortune 50 company when she
was appointed executive vice-president and CIO of McKesson Corp in September 2002. McKesson was
one of the world’s leading pharmaceutical and healthcare technology service companies. Smith was
responsible for McKesson’s IT worldwide, including its company-wide technology strategy and direction,
as well as day-to-day operations. She managed an annual budget of $400 million and led 1,500 IT
employees.
By 2006, Smith was ready for a new challenge and a different career experience, this time as a CEO. She
found this challenge as CEO of utility.net, a privately held company established to leverage a set of next-
generation broadband over power lines (BPL) patents into large electricity companies. Deploying BPL
technology on energy company grids would enable utility.net to offer high-speed Internet access, voice
over Internet Protocol and other broadband services inexpensively to homes and businesses in rural areas.
Unfortunately, the company was unsuccessful in obtaining a large ($50 million) third round of financing
during a time of considerable contraction in the venture capital and credit markets, which forced a
graceful shutdown of the company in 2009.
In 2010, Smith reflected on her career as a senior IT executive with experience as a CEO and CIO in
industry sectors as diverse as energy, healthcare, telecommunications, manufacturing and federal agency
services. She realized she had derived her greatest satisfaction from bringing significant tangible value to
organizations through the innovative deployment of IT. For Smith, the most exciting opportunities lay
with companies wanting to use IT as a game-changer — companies for whom IT was integral to their
corporate strategy and future growth. She saw herself as a “change agent” and felt confident in her ability
to effect critical business transformations using IT.
These factors ultimately led her to conclude that her niche in the IT marketplace now was as a “contract
CIO,” someone who could parachute into an organization and bring immediate value, but for whom a
limited-term contract was acceptable. Such an arrangement had the advantage of freeing prospective
employers from the potential risk of a permanent arrangement with a new employee.
In collaboration with a few colleagues, Smith listed her availability in late 2010 on her own website
(www.smithandassociates.us.com), indicating her interest in working for a company in the $3 billion-$5
billion revenue range that was serious about “having IT be a key player in helping to take the company to
the next level.” She was contacted by WestJet early in 2011 and accepted the invitation to meet the CEO,
Gregg Saretsky, in Toronto. This was soon followed by a group meeting with her future senior
management peers and individual conversations with several people in IT. WestJet and Smith seemed to
be a perfect match. Everything went smoothly and she accepted a two-year appointment that commenced
on April 25, 2011, as executive vice-president and CIO.
THE WESTJET IT SITUATION
Two years before Smith arrived, WestJet decided to move to the Sabre reservation system — the
computer-based reservation system widely used by airlines and travel agencies throughout the world. The
cutover to Sabre in October 2009 was a difficult transition into the world of shared airline systems. It
made WestJet’s leadership sensitive to the company’s dependence on technology and its IT organization
for operational support and strategic growth.
Having the IT staff and their business counterparts work hand-in-hand for the first 15 exciting growth
years meant that those on both sides who were now WestJet executives were unable to describe or specify
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the level of competence of the IT staff or its organizational structure. “Come in and help us figure out
what we have” best described Smith’s initial assignment. It had to be determined whether WestJet had the
right technologies, the appropriate expertise, efficient processes and procedures, an effective operating
structure and solid systems. As CEO Saretsky observed, “I’m not sure if we have a great IT… or
otherwise.” For Smith, it meant she was coming to WestJet with no clear-cut idea either.
Before Smith arrived, she was informed that an IBM study had just recommended a solution to WestJet’s
IT concerns: establish a significant PMO (project management office), a venture that would require
substantial funding. Smith believed that overlaying a PMO on what might simply turn out to be an IT
operation in need of reorganization was not a prudent step, and asked that action on the recommendation
be put on hold until her arrival.
In her first month, Smith focused on benchmarking IT by bringing in two IT benchmarking and
performance experts to perform a comparative study with similar-sized companies in the transportation
industry. The objective was to determine the proper level of resources and budget, and to compare
WestJet’s IT costs and numbers of people by skill type to the industry standards.
The results of the benchmark were that WestJet’s IT was right on target in terms of total number of
employees and budget compared to the industry group. Another key finding was that among the 240-
person IT group there was a significant number of excellent technical people, as well as what were
described as “highly sophisticated generalists.” They were technically competent in a wide range of IT
areas, but many had been at WestJet since early in their careers and primarily knew “the WestJet IT way.”
There was also a mismatch in terms of numbers of employees within skill sets as compared to the
industry benchmark numbers.
As far as systems, operations and procedures were concerned, only about half were industry-standard.
WestJet IT had essentially “invented” its operations around what the company’s needs were over time. A
number of the “Day 1” WestJetters had pride of accomplishment from having created these structures
from scratch, and understandably held a somewhat protective mindset over the way things were. But the
question was, “Could what had gotten WestJet to where it was, get it to where it needed to go?”
Smith recognized that the IT organization at WestJet was structured according to an IT group’s
conventional internal functions of planning, building, operating, maintaining and governing, i.e., in the
manner that IT operated and felt most comfortable. All developers worked as a group, as did all of the
maintenance staff. All project managers and business analysts were together in a single group, as were
each of those working on business intelligence, IT governance, help desk, end-user computing and IT
technical infrastructure. The rationale offered for this arrangement was that everyone in each group could
be “all-purpose,” thereby enabling the team to respond quickly to any single emergency request from the
business side without regard to who might be absent. This also meant that any person could be working
on a different project or system on any given day, with the variety of activities thereby making the work
more interesting.
From the perspective of an IT expert from the outside, however, this structure presented several
challenges. It provided no direct connection to the business units being served, little visibility of IT
project status to the business units, and no specific resources assigned to any business unit. This implied
constant competition among business executives for IT resources, and minimal direct IT accountability to
any business unit for delivery. As Smith described it, “The business felt as though it threw requests for
systems over a wall, and sometimes what they wanted came back and sometimes it didn’t.” To business
unit managers, IT was a mystery at best and a black hole at worst.
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The IT planning/budget process, in turn, was also a challenging experience for both the business and IT.
The business unit vice-presidents (VPs), of whom there were then 16, met monthly with the VP of IT to
negotiate for resources and priorities. Business VPs were frustrated because everything took so much
longer than promised or expected. IT’s exasperation was that “the business couldn’t prioritize” or that
priorities shifted constantly, projects were never stopped or limited even when IT recommended it,
projects were continually added, and that while IT gave its best effort with the funding available, there
was never enough time or dedicated resources to do things right. Smith quickly recognized the limitations
of this type of IT planning and budgeting.
Smith cancelled the monthly IT planning/budget meeting her first month there, and replaced it with a
process that gave each of the business unit VPs the opportunity to present major capital projects annually
to the WestJet executive team to vote on. If a project made it into the IT budget for the year, then IT
would be committed to work on and complete the project. If it was not in the IT budget, then absolutely
no resources would be spent on the effort. The purpose was to prioritize and reduce the number of
projects so that the most important, as per the company-wide strategy, would be successfully completed
and deployed.
In addition to issues related to IT organizational structure, IT planning and IT budgeting, two other
significant concerns soon arose. First was the high-risk placement of the WestJet data centre adjacent to a
runway, at its WestJet headquarters. The data centre was well constructed, but a catastrophe of any sort
would be disastrous as the centre ran all of the company’s systems, including all key applications, without
which WestJet’s airline operations would immediately cease. WestJet clearly needed a backup data centre
somewhere outside a 150-mile radius of Calgary to ensure the redundancy of power grids, water,
telecommunication lines, etc.
The second concern was that while WestJet operated 24 hours a day, seven days a week, the IT staff
worked during the day and were available only on an overtime/on-call basis after regular business hours.
In addition to being expensive, “We were burning our people out by requiring them to constantly be on
call at night,” said Smith. It was logical that an airline that operated 24/7 needed to have around-the-
clock, on-site IT support.
There were a number of nuts-and-bolts IT issues requiring attention, such as standardizing the processes
for dealing with system outages, root-cause analysis, opening and reporting on service tickets, project
coordination and tracking, change/release control and management, and response-time monitoring. But
these would have to wait.
Smith also had in-depth discussions with senior business leaders. The emerging vision was that strategic
growth could be realized immediately by focusing on guest services and satisfaction. The company’s
“game-changer” was to sharply differentiate WestJet from other airlines by making seamless the entire
guest experience from first contact with WestJet through returning home. At the outset, this necessitated
new and more flexible WestJet.com and WestJet.com/Vacations websites, enabling travelers to find
destinations, plan and book trips, and create vacations much more easily. Business leaders also demanded
new kiosk/web/mobile capabilities for guest self-service and check-in at all airports and countries around
the world where WestJet flew. The company required newer, more flexible call centre systems, enhancing
the guest experience and enabling agent work-from-home capabilities. Another initiative was to evolve
WestJet’s innovative cash-based (not point-based, as was the industry standard) frequent guest program.
A cash-based system was regarded as extremely guest-friendly, as it had no blackout dates and could be
used for any of WestJet’s flights, products or services. These and many other business ideas were being
actively considered.
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As Smith and the senior IT leadership team pondered the “big picture” in these opening weeks, they
concluded that if WestJet hoped to sustain its rate of growth and build on its remarkable success, IT
would be a critical success factor. Smith knew they were faced with a challenge far greater than the
simple application of “common-sense IT.” Something on the order of a complete transformation was
essential for IT to deliver the products and services demanded by the business. IT’s entire approach would
need to be changed. In short, an IT transformation plan was needed.
THE PLAN FOR TRANSFORMING IT
Smith and the IT leadership team understood that the immediate core of their IT application strategy had
to be to increase revenue by increasing system functionality, and give the business units the confidence in
IT to expand WestJet even further, both regionally and internationally. The team realized that this meant,
fundamentally, that IT would have to be re-aligned from top to bottom to be more responsive to business
needs and enable business units to better exploit IT capabilities. IT had to become more transparent in its
operations and more responsive to WestJet’s individual business units. All this would imply sweeping
changes to the IT governance model and business processes, including planning, budgeting and day-to-
day operations. But it also implied a change in IT culture to one in which a collaborative mindset
prevailed — a client-centric way of operating that seemed in sharp contrast to the existing image of IT as
an organizationally isolated group. It also implied a change in how the business viewed IT — as a partner,
not an order-taker that reacted heroically in instances of IT emergencies. All in all, it was a daunting
prospect.
The first element in the governance overhaul focused on establishing much stronger linkages with the
business units (Airline Operations, Marketing and Sales, Finance, People, and — most recently —
WestJet Encore). The IT structure in place provided no direct connection to the business side and served
more as a barrier than a bridge. Drawing on a concept proposed and propagated by the CIO at General
Motors in the late 1990s, Smith envisioned making the IT organizational structure “business-facing” by
breaking up several of the existing IT functional groups and reassigning their people to concentrate on
specific business units to whose particular applications and needs they would then be dedicated. Half of
the 240 IT staff were reassigned within IT to concentrate on specific business areas. This included
developers and application support people, the enterprise resource planning systems groups, project
managers and business analysts, and the business intelligence group. The other half that remained
together included those dealing with IT infrastructure and operations, telecommunications, security, IT
governance administration, quality assurance and testing, help desk and end-user support. These were not
assigned specifically to any business units. These latter groups were charged with the responsibility of
maintaining an organization-wide common infrastructure, and adherence to industry best practices. As
Smith explained it, “A common operations team with common skills to support a common infrastructure
is highly cost-effective.” This allowed the business-facing IT groups to be totally responsive to business
needs and priorities, but ensured that all applications and systems came into and were supported by a
common infrastructure. All business units and their applications would be required to keep in sync with
and operate on the common infrastructure, which would keep hardware, software, telecommunications
and multiple skills set costs down and expertise levels high.
At the IT leadership level, five new BU-CIO (business unit CIO) positions would be created and each
BU-CIO would be assigned to support an EVP (executive vice-president) in charge of a business unit (see
Exhibit 3). Each BU-CIO would be dedicated to making their business unit successful. BU-CIOs and their
dedicated teams would ensure that each business unit received the application priority required;
infrastructure and operations teams would ensure that all units operated in a coordinated manner. By this
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means, IT would be organized exactly as the business was organized. The whole idea was to enable EVPs
and business unit VPs to be in much greater control of their specific IT resources and priorities. Unlike
the proposed project management office that would create a new layer of IT staff to interface between the
business and IT and would require many new employees, this IT business-facing structure entailed no
additional resources. The BU-CIOs were selected from among the current IT leadership team and
assigned according to their backgrounds. For example, the senior IT leader who also had a pilot’s license
was assigned to the Airline Operations EVP, the senior IT leader who had an MBA was assigned to
Finance, etc.
Smith and the new IT senior leadership team next turned their attention to the IT planning and budget
process. Under the new governance model, about 120 of IT’s total staff complement of 240 would be
application-based (business-facing). This meant that many — most — of the projects that the businesses
wanted would be delivered by their dedicated IT teams within the IT operating budget. Systems left to
address were either major projects within a BU that required more resources than assigned to it, or
projects that spanned the entire corporation. To address these larger efforts, IT proposed an annual budget
process for deciding on major capital and operating projects. Business cases would be developed for each
of the organization-wide efforts that the individual BUs wanted to accomplish and presented to WestJet’s
Executive Management Team (the EVPs) for prioritizing. High-priority projects would be funded; the rest
would not. This would set IT priorities for the next 12 months. The monthly VP meeting would be
abandoned. IT also committed to delivering detailed project status reports to each BU on a weekly basis,
and to the WestJet leadership team on a monthly basis. Work not approved in the annual operating or
capital budget processes would not be performed. A single IT person would be responsible for
coordinating and reporting weekly on the project status of all capital projects across the company.
A third major component of the new IT proposal dealt with the vulnerability of the existing data centre
located at the end of the runway. Smith and the leadership team responsible for IT operations proposed
establishing a redundant data centre in Toronto (an area with a different weather pattern, time zone and
power grid) Among weather-related considerations was the very practical fact that WestJet staff in
Calgary could be prevented from reaching headquarters if road access to WestJet offices was impeded by
a severe winter storm — a not unlikely event given WestJet’s location. WestJet needed a redundant data
centre with full access to Sabre in Oklahoma and the ability to maintain all flight activity, i.e., high
recoverability, if disaster struck (see Exhibits 4 and 5).
The final major element of the new IT governance plan was to ensure that an IT operations centre unit
was formed that would have on-site coverage 24 hours a day, seven days a week, in concert with WestJet
Airlines operations. IT could thus be immediately available and responsive to system outages and sudden
emergencies, a fact that would provide reassurance and greater confidence to the airline operating staff
dealing with stressful situations. It would also allow a much better work-life situation for the rest of the IT
teams.
TRANSFORMATION TRAUMA
Smith thought carefully about the magnitude of the changes that were being introduced and how different
groups would be affected. She was reasonably confident that she had credibility with her peers, i.e., the
CEO and the other EVPs. She had spent considerable time with them since her arrival, explaining what
was happening and building their commitment. Keeping her peers informed would, hopefully, help to
proactively deal with the organizational “noise” that might be produced from the plan to restructure IT
operations. But for them to approve the proposal would require a leap of faith. She knew she would have
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to convincingly communicate the strategic role of IT at WestJet and show how the change plans would
enable the IT organization to fulfill that role.
Within IT, Smith knew she was proposing major disruptions that would significantly affect and upset
long-established practices and personal relationships. She was concerned that it would be difficult to
convince the IT staff to accept the reassignment of half of the IT talent to the work of individual BUs,
with the other half focused on infrastructure support and development. Just as Smith had made an effort to
build credibility within the executive group, she had made an equal effort within IT. This was best
exemplified by her decision to establish her office within the IT group rather than on the executive floor
with the other EVPs.
However, preliminary reactions to the scheme from a few senior IT staffers revealed deep skepticism,
with blunt comments such as “this isn’t going to work.” A major concern was that by distributing half
their IT staff to concentrate on individual business units, they would lose the advantages of synergy and
backup expertise that came from having all staff in the same group. Some long-term staff members —
those apparently harboring pride of accomplishment from having built the existing systems — seemed
resistant to the scope of the proposed transformation. As one individual commented to Smith in reference
to both the organizational and system changes, “I can’t get my mind around what you are trying to do.
Please consider keeping everything the way that it is.” Another long-time IT employee remarked, “What
you are attempting to do won’t work. Not here at WestJet.” Simply put, some senior IT employees (and
others who were not as vocal) did not agree with the change. This signaled that several employees of long
standing might resign, which would further complicate Smith’s challenge. IT staff turnover had
historically been among the lowest at WestJet, and having long-time, well-respected employees leave the
company would be upsetting for many within the group, even for those who agreed with the changes.
These and other similar possibilities were natural anxieties for the IT group, but collectively they
represented nervousness and insecurities, which Smith would have to deal with in making her case.
MAKING THE CASE
Overall, Smith’s central argument was that IT’s service structure and reactive “hero” culture were
constraining IT’s ability to move to the next level. Fundamental changes in the way IT operated,
including the IT governance model, were necessary to enable WestJet to move ahead of the competition.
In the plan, BU leadership would be able to control their own IT resources through their BU-CIO and
know exactly who their IT counterparts were, what IT was committed to, what dates were committed to
and the budget. IT would be committed to clarity and total transparency with regard to its priorities. Smith
would further point out that the organizational and process-change initiatives — combined with new,
state-of-the-art, in-house-supported “guest service” applications to be put into production within the next
18 months — would be true game-changers. She would argue that this approach was the best way to
move IT to the next level so that it could better help the business move to the next level.
Smith needed to make the story compelling enough to convince both the business side and the IT group to
fully buy into the new governance plan. The changes would need to be solidly in place when her contract
ended or the organization could revert back to how it had operated in the past — or worse, it could end up
confused and somewhere in between. The strategic importance of the proposed changes needed to be
effectively illustrated to both groups. She would also need to be able to respond to questions about the
factors critical to the success of these changes, and whether or not what was proposed would really work.
On the business side, “making it work” meant managers would need to develop the skill to proactively
identify problems and opportunities and work with IT to effectively exploit the ever-increasing
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capabilities of the new technologies that IT would deploy. On the IT side, making it work meant that
Smith needed to somehow respond positively to the fact that IT people were attracted to their profession
in the first place because of their desire to excel as technical specialists. She needed something to replace
the possible lost sense of identity and the diminished opportunity to regularly commune with people of
similar technical interests that now appeared to be features of the new IT operating environment. These
and other issues simmered beneath the surface.
For Smith, WestJet and WestJet IT, it was time to take the first step in moving to that “next level.” But
communicating the central argument of the strategy to a nervous management group and a skeptical IT
department in the most effective way was the critical challenge. With the ink barely dry on her contract,
and the executive management team expecting her to act quickly, Smith made her move.
Emeritus Professor Malcolm C. Munro and Professor Sharaz Khan are from the Haskayne School of Business,
University of Calgary.
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EXHIBIT 1: WESTJET HEADQUARTERS
Source: Company files.
EXHIBIT 2: WESTJET 2011 FINANCIAL HIGHLIGHTS
Source: Westjet 2011 annual report.
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EXHIBIT 3: PROPOSED WESTJET IT ORGANIZATIONAL STRUCTURE
Source: Company files.
EXHIBIT 4: PROPOSED WESTJET DATA CENTRES
Source: Company files.
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EXHIBIT 5: PROPOSED EASTERN DATA CENTRE AND WESTJET CORE TELECOMMUNICATIONS
NETWORK (CONNECTION WITH SABRE IN OKLAHOMA)
Source: Company files.
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H
909E23
PARTNERS HEALTHCARE SYSTEM (PHS): TRANSFORMING HEALTH
CARE SERVICES DELIVERY THROUGH INFORMATION
MANAGEMENT
Professor Richard Kesner wrote this case solely to provide material for class discussion. The author does not intend to illustrate
either effective or ineffective handling of a managerial situation. The author may have disguised certain names and other identifying
information to protect confidentiality.
Ivey Management Services is the exclusive representative of the copyright holder and prohibits any form of reproduction, storage or
transmittal without its written permission. Reproduction of this material is not covered under authorization by any reproduction rights
organization. To order copies or request permission to reproduce materials, contact Ivey Publishing, Ivey Management Services,
c/o Richard Ivey School of Business, The University of Western Ontario, London, Ontario, Canada, N6A 3K7; phone (519) 661-
3208; fax (519) 661-3882; e-mail cases@ivey.uwo.ca.
Copyright © 2009, Northeastern University, College of Business Administration Version: (A) 2010-02-26
INTRODUCTION
According to government sources, U.S. expenditures on health care in 2009 reached nearly $2.4 trillion
(expected to reach $2.7 trillion in 2010).1 Despite this vaunting national level of expenditure on medical
treatment, death rates due to preventable errors in the delivery of health services rose to approximately
98,000 deaths in 2009.2 To address the dual challenges of cost control and quality improvement, some have
argued that the U.S. health care system needs an integrated electronic medical record (EMR) system and
associated information technology-enabled processes.3 Although the information systems currently
available may meet the needs of the industry, the question remains regarding the requirements both within
and by the health care services organization to achieve a satisfactory response to these dual challenges.
Partners Healthcare System (PHS) maintained a centralized digital records library on more than 4.6 million
patients, augmented in real time by data, textual comments and artifacts (i.e. X-rays, MRIs [magnetic
resonance imagings], EKGs [electrocardiograms], etc.) as these patients visited doctor offices, received
hospital-based or home care services, and obtained prescription medications and other therapies.
Procedures were in place to ensure the data quality and integrity of these patient files. Going forward, any
health care professional across the network could access a patient’s complete record, ensuring accurate,
timely and comprehensive information sharing about that patient’s medical history, allergies, current
treatments and other related information. In and of itself, the investment in this electronic medical records
(EMR) system was expected to reduce delays in service delivery, mistakes in treating the patient and
overall health care costs. When coupled with a computerized patient order entry (CPOE) system to inform
1 Plunkett Research, Ltd., “U.S. Healthcare Industry Overview,” 2008,
www.plunkettresearch.com/Industries/HealthCare/tabid/205/Default.aspx.
2 Lucian L. Leape and Donald M. Berwick, “Five Years after to Err Is Human: What Have We Learned?” Journal of the
American Medical Association, May 18, 2005, pp. 2384–2390.
3 William W. Stead and Herbert S. Lin, editors, Computational Technology for Effective Health Care: Immediate Steps and
Strategic Directions, National Academy of Sciences, National Academies Press, Washington, DC, 2009.
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the selection of drugs and appropriate treatment, PHS health care professionals were now positioned to
target more specific therapies for their patients, to identify the most effective, low-cost options among
potential treatment strategies and to draw on a vast body of experience-based knowledge across the
network to inform patient care.
BACKGROUND: THE CHALLENGES FACING THE HEALTH CARE INDUSTRY
U.S. expenditures on health care in 2008 exceeded $2 trillion. Of that amount, approximately $747 billion
was spent on hospital services, $502 billion on physician and clinical services, $199 billion on nursing
home and home health care services, and $247 billion on prescription drugs.4 The cost of health care was
expected to spiral even further out of control as the 1950s baby-boomer population became elderly.
Alongside the growing furor over escalating costs, the health care industry also faced persistent questions
about the quality of the services it provided. Although the quality debate had persisted for some time,5
recent studies estimated that preventable medical errors led to as many as 98,000 deaths per year in the
United States,6 clearly suggesting that better informed and more knowledgeable health care practices could
not only save money for the government, insurance companies and individual-paying patients but could
also save lives.
In its most recent and comprehensive statement to date on the need to transform health care delivery in the
United States through better information management, a study sponsored by the National Academy of
Sciences observed:
Health care is an information- and knowledge-intensive enterprise. In the future, health
care providers will need to rely increasingly on information technology (IT) to acquire,
manage, analyze, and disseminate health care information and knowledge. Many studies
have identified deficiencies in the current health care system, including inadequate care,
superfluous or incorrect care, immense inefficiencies and hence high costs, and inequities
in access to care. In response, federal policy makers have tended to focus on the creation
and interchange of electronic health information and the use of IT as critical infrastructural
improvements whose deployments help to address some (but by no means all) of these
deficiencies.7
The authors of this report determined that the crisis in health care delivery was not just a matter of the cost
of these services but also a matter of quality.8 Even within the typical medical practice or hospital,
information about the patient was not integrated nor was it effectively leveraged to prescribe cost-effective
therapies.
4 Plunkett Research, Ltd., “U.S. Healthcare Industry Overview,” 2008,
www.plunkettresearch.com/Industries/HealthCare/tabid/205/Default.aspx.
5 Institute of Medicine, Medicare: A Strategy for Quality Assurance, National Academy of Sciences, The National Academies
Press, Washington, DC, 1990.
6 Institute of Medicine, To Err Is Human: Building a Safer Health System. National Academy of Sciences, The National
Academies Press, Washington, DC, 2000; Lucian L. Leape and Donald M. Berwick, “Five Years after to Err Is Human: What
Have We Learned?” Journal of the American Medical Association, May 18, 2005, pp. 2384–2390.
7 William W. Stead and Herbert S. Lin, , Computational Technology for Effective Health Care: Immediate Steps and Strategic
Directions, Academy of Sciences, National Academies Press, Washington, D. C., 2000, p. 1.
8 Institute of Medicine, Crossing the Quality Chasm: A New Health System for the 21st Century, National Academy of
Sciences, The National Academies Press, Washington, DC, 2005.
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Over the last two decades, a growing consensus has emerged that health care institutions fail to deliver the
“most [cost] effective care and suffer substantially as a result of medical errors.” The National Academy of
Sciences study observed that:
These persistent problems do not reflect incompetence on the part of health care
professionals — rather, they are a consequence of the inherent intellectual complexity of
health care taken as a whole and a medical care environment that has not been adequately
structured to help clinicians avoid mistakes or to systematically improve their decision
making and practice. Administrative and organizational fragmentation, together with
complex, distributed, and unclear authority and responsibility, further complicates the
health care environment.9
The current state of health care industry performance could be considered from both a cost and quality
standpoint, as a consequence of three sets of intersecting factors:
1. First, the nature of health care decisions were fraught with uncertainty about the patient’s current state
of health and past medical history, the patient’s genetic predisposition (or lack thereof) to particular
medical therapies and the actual effectiveness of past and future treatments for that particular patient.
2. Second, the economic structure of health care delivery in the United States was extremely complex and
could be argued to be counter-intuitive to the encouragement of low-cost options. Instead, the system
actively encouraged high-cost procedures under the guise of promoting risk-avoiding, “better”
medicine.
3. Third and finally, the very information systems and standards that could afford better integrated
service delivery, the identification of lower-cost medical options and the avoidance of mistakes in the
prescription of medications and other therapies were implemented in such ways as to throw up
significant barriers to information sharing and data-driven decision support.10
Despite the many very real barriers to the improvement of health care services delivery, the U.S. Federal
government, health care services organizations, medical practitioners, health insurance companies and
information technology companies that serviced this industry were coming together to help address these
concerns. This effort required a significant investment of resources over an extended period of time,
perhaps a decade or more.11 Major U.S. research hospitals and their affiliated service delivery arms were
transforming health care delivery in ways that could serve as a blueprint for industry-wide change. Among
these institutions, Partners HealthCare System (PHS) illustrated the potential opportunities and the ongoing
challenges in achieving more integrated, higher-quality and less expensive health care services delivery.
AN INTRODUCTION TO PARTNERS HEALTHCARE SYSTEM (PHS)
Partners HealthCare (PHS) was founded in 1994 by the partnering of Brigham and Women’s Hospital and
Massachusetts General Hospital to become an integrated health care delivery system that offered patients a
continuum of coordinated high-quality care. As of 2009, the system included 6,300 primary care and
specialty physicians; 11 hospitals, including its two founding academic medical centers, specialty facilities,
community health centers and other health care-related entities; and an ongoing affiliation with Harvard
9 William W. Stead and Herbert S. Lin, editors, Computational Technology for Effective Health Care: Immediate Steps and
Strategic Directions, National Academy of Sciences, National Academies Press, Washington, DC, 2009, p. 3.
10 Ibid.
11 Rainu Kaushal et al., “The Costs of a National Health Information Network,” Annals of Internal Medicine, August 2, 2005,
pp. 165–73.
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Medical School. In 2008, Partners HealthCare serviced approximately 2.9 million outpatient visits and
149,000 hospital admissions. Its facilities at that time included 3,500 licensed hospital beds, serviced by
40,000 full-time equivalent (FTE) employees across its network of affiliates. For fiscal year 2008, PHS
generated more than $7 billion in revenue and conducted approximately $1 billion worth of biomedical
research. PHS also pursued joint ventures with the Center for Integration of Medicine and Innovative
Technology, Dana-Farber/Partners CancerCare, the Harvard Clinical Research Institute and The Partners
Center for Personalized Genetic Medicine (see Exhibit 1 for an overview of the PHS organization).
Over the years, PHS had come to exemplify the large, complex, successful and highly regarded
metropolitan health care provider, closely linked with academic medicine and medical research. Its
affiliation with Harvard Medical School and its exploration of leading-edge medical practices garnered
PHS substantial federal and private medical industry funding to support a rich portfolio of research
projects. PHS held information on more than 4.6 million patients, augmenting these records in 2009
through 2.9 million office visits, 149,000 hospital stays and the processing of 20 million prescription drug
orders.
From its inception, Partners focused both on keeping the costs of its services under control and
continuously improving the quality of service delivery and overall patient outcomes. To this end, the
organization’s leadership extended the electronic medical record integration achieved at both the Brigham
and Women’s Hospital and Massachusetts General Hospital across its entire network. This investment
improved the quality of decision making both by individual doctors and medical teams concerning
prescription drugs and other medical therapies. It also leveraged medical practice knowledge to improve
the preventive and therapeutic treatments that the PHS network offered its patients. These aggressive
efforts to improve the quality, safety and efficiency of care were the centerpiece of the so-called “High
Performance Medicine Initiative” at PHS, which concluded in 2009. In reviewing the serious and capital-
intensive efforts made by PHS on all of these fronts, Dr. James J. Mongan, president and chief executive
officer of Partners HealthCare observed:
Partners HealthCare is playing a leadership role in each area, and in fact, Partners is
demonstrating how organized systems can lead to solutions. Only organized systems — as
opposed to the very fragmented, disorganized non-systems that make up much of
American medicine — only organized systems can implement reimbursement reform,
thoroughly disseminate electronic medical records, and establish sophisticated disease
management programs.12
AN INTRODUCTION TO PARTNERS HEALTHCARE SYSTEM’S INFORMATION SYSTEMS (IS)
ORGANIZATION
PHS maintained a substantial information management arm. The 2009 Information Systems (IS) team
comprised 1,500 employees operating out of 19 locations in the greater Boston metropolitan area. With an
operating budget of $196 million in fiscal year 2009 and a capital budget of $68 million, IS supported
80,000 end-users and 82,000 networked computer devices running in 140 PHS locations. In an average
month in 2009, the IS organization answered 18,000 calls; and over the course of 2009, it managed 250
major information technology (IT) projects for the enterprise. To realize its information management
objectives, PHS had invested heavily in information technology over the years and had hired some of the
best information management professionals in the industry.
12 James J. Mongan, “Comments to the Greater Boston Chamber of Commerce — Health Care Costs,” Partners
HealthCare, Boston, 2009.
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John Glaser, the chief information officer (CIO) at PHS, had served in the same capacity at Brigham and
Women’s Hospital prior to the establishment of PHS. His first hire was Mary Finlay, who later became his
deputy CIO. Together they had served PHS since its inception, focusing on a strategic approach toward IS
unit staffing, planning and research, and the deployment of an overall IT architecture across the greater
PHS organization of end-users. Key personnel across the IS unit had, in addition to medical credentials,
either IT or business management credentials. Among the distinguishing features of the PHS Information
Systems organization were the following:
• Stability in executive management and consistency in the articulation and pursuit of a common
strategic vision for the role of IT within PHS.
• Top-flight talent recruited and retained in key positions across the organization.
• The placement of executive level (i.e. CIO) positions within major business units to ensure an ongoing
C-level presence and thus alignment of IT within the business.
• The development, adoption and maintenance of an enterprise-level architectural approach to IT
selection and acquisition.
Given the intense and in some ways unique use of IT in the various member hospitals and medical services
units of PHS, each major business unit had its own customer-facing CIO, including Partners Community
Healthcare, Inc., which supported the 6,000-plus general and specialist physician groups affiliated with
PHS’s constellation of hospitals. John Glaser’s intent was to ensure that each key business unit within PHS
had a strong IS advocate to focus on the particular information systems and technology needs of that
constituency’s health care practitioners (see Exhibit 2 for an overview of the PHS IS organization). As part
of IS’ commitment to research and development (R&D), Glaser commissioned organizational units to
investigate the IT-enablement of core PHS business processes, including the following:
• Clinical Informatics Research and Development to address clinical informatics infrastructure
• The Center for Information Technology Leadership at Partners, which explored the return on
investment when purchasing an EMR or other health care information technologies
• The Center for Connected Health, which considered how developments in IT and telecommunications
could transform health care delivery modalities
• I2B2/National Center for Biomedical Computing, which studied the genetic similarities among cohorts
of PHS patients that reflected a particular respond to prescribed medical therapies
• Clinical and Quality Analysis, which explored the impact of the PHS EMR and CPOE systems on care
delivery
PHS recognized early on that to be successful in these regards, three information management capabilities
were required:
1. The means to collect and consolidate into an integrated digital record all the information about a given
patient over time, including medical data, such as age, weight, height and vital signs; textual
information, namely the transcribed comments of those health care professionals with whom the
patient had interacted; and objects, such as X-rays and MRI scans.
2. Decision support processes that support the medical practitioner in making the best recommendations
for drugs and other therapies on the basis of their likely benefits (i.e. positive outcomes) to the patient
at the lowest possible cost.
3. Knowledge management processes that derive best practices from the observable outcomes of
recommended medical therapies and employ these lessons learned to inform the ongoing delivery of
services and the reform of existing therapies.
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PHS’s medical and IS leadership saw the company’s investment in IT as the enabling information system
foundation to achieve these capabilities.
PHS’S FORAY INTO ELECTRONIC MEDICAL RECORDS (EMR) AND COMPUTERIZED PATIENT
ORDER ENTRY (CPOE)
The founding members of Partners HealthCare, Brigham and Women’s Hospital and Massachusetts
General Hospital. pioneered electronic medical records (EMR) solutions. Massachusetts General Hospital
began work on an early version of an EMR system in 1976, and Brigham and Women’s Hospital initiated
an EMR in 1989. When these hospitals combined to form PHS in 1994, they adopted an internally
developed EMR platform, which they dubbed the Longitudinal Medical Record (LMR). Thereafter, as the
PHS network grew, member hospitals adopted LMR for their use in managing their digitized patient
records.
The operational requirements faced by PHS member institutions in this regard were two-fold. On the one
hand, each institution was obliged to establish processes to capture all ongoing health care information
digitally and to convert past paper-based medical records to a shareable digital format. On the other hand,
due to the increasing interaction among members of the PHS services network, patient information residing
anywhere within the network needed to be made available to all PHS service providers.
To address these requirements, PHS business units underwent significant process changes, and the
enterprise as a whole adopted an information management and technology architecture and platform that
proved flexible enough to deal with the differences posed by the various information systems and digital
record formats extant within PHS. Key among these innovations was the adoption and widespread use of a
computerized patient order entry (CPOE) system that captured patient prescriptions and other physician-
assigned medical therapies.
Although these efforts were not without their difficulties, they paled in comparison to the challenges posed
by bringing the 6,000 medical practitioners under the PHS LMR/CPOE umbrella. The barriers to adoption
included the following:
1. Two-thirds of the doctors in question had some formal affiliation with a PHS hospital, whereas the rest
were scattered around the greater Boston metropolitan area and operated out of their own local offices.
2. Of those doctors with a formal affiliation with a PHS hospital, many employed an out-of-hospital
office or offices as their primary venue for meeting with patients.
3. Local doctors’ offices typically lacked the information technology and telecommunications
infrastructures to support the LMR and CPOE systems. System training and support were also issues,
especially when these tasks took time away from either seeing patients or keeping abreast of
developments in a specialized field.
4. Many of these health care practitioners, though perhaps not technophobic, were not enamored of
interacting with a computer terminal while they were seeing a patient and were even less interested in
using a computer system for taking notes and issuing prescriptions when handwritten work was
perceived as more efficient, easier and less stressful.
5. The cost of implementing an LMR/CPOE connection in a physician’s office cost an average of
$40,000 per doctor. Existing anti-kickback legislation prevented PHS from subsidizing the adoption of
this information management platform.
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The move to bring all PHS medical practitioners under the same medical information management
umbrella got underway in 2002/03. The rollout was characterized by a three-pronged deployment strategy:
1. A focus on a value-added experience for the doctor, moving beyond the capture of insurance claims
processing data and toward content delivered through the system to help the physician to better
diagnose the patient and to recommend the most cost-effective therapies.
2. A focus on system ergonomics and usability, for example, to speed the process of patient data capture
and to more readily identify recommended therapies, drug allergies and other related data.
3. A focus on early opportunities for immediate and dramatic success in the implementation and rollout
of the system to particular doctor groups married with an ongoing, incremental process of deployment
that targets those most open to the change.
Key to the realization of this strategy was broad community involvement through a multi-tiered approach
to involve key hospital organization and medical practitioner stakeholders in project governance. To that
end, PHS executive management engaged existing committees and working groups while establishing new
ones as needed, including the following:13
• Council of Chief Medical Officers, Chief Nursing Officers and Chief Information Officers, which
provided business direction to guide the clinical IS plans and approved the clinical IS strategy. The
Council met with the Clinical Systems Strategy CSS Committee at appropriate intervals to facilitate
alignment of clinical IS plans and clinical goals and strategies.
• Physicians Executive Council contributed to the overall IS strategy and served as the arbiter of
jurisdictional issues across PHS.
• Clinical Systems Operations Committee initially developed the overall IS strategy for platform
adoption, and ensured that all institutional strategies were harmonized with the enterprise medical and
business strategies, and systems architectures and standards.
• Architectural Council developed and managed PHS’ IT architectural framework, policies and
standards. The Architectural Council reviewed all proposed IS acquisitions or development projects for
compliance with PHS’s overall IT architecture.
In addition, every IT project was assigned a business sponsor, who was responsible for communicating
business requirements and ensuring a positive business outcome, and a project manager, who was
responsible for delivering in line with business needs, on time and in budget.
Because the introduction of LMR and CPOE as the PHS patient information management platform was
core to all health care delivery, these projects touched many stakeholders. In addition, it was important to
appreciate the decentralized nature of decision making and control within PHS where the ultimate
authority rested either in the hands of the medical practitioner in situ or in the hands of the medical
practitioner’s specialty department.
Another barrier to be addressed from the outset concerned financial incentives. As already noted, although
PHS could make the case that an LMR/CPOE system would improve care quality and safety, these systems
came at the cost of changing the doctor’s personal approach to interaction with the patient and at a steep
initial investment in IT within the office. To offset start-up costs, PHS negotiated improved terms of
reimbursement between network physicians and the insurance companies that provided most of the
medical reimbursements. According to these insurance contracts, the typical doctor received 90 cents on
the dollar for services delivered. To obtain the remaining 10 cents and at times to receive a premium of
13 Partners HealthCare System. “Partners Strategic Plan for an Integrated Clinical Information System (ICIS),” Version 1,
Partners HealthCare, Boston, December 2005, p. 61.
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greater than 10 cents on the dollar, the doctor was obliged to follow a series of medical protocols in
conjunction with the patient.
For example, the doctor needed to track that a patient who suffered from diabetes or heart disease had
taken all of the prescribed precautionary and preventative steps (e.g. follow-up visits to the doctor, related
medical check-ups and the monitoring of vital signs) associated with ongoing treatment. Keeping track of
all of these activities without an integrated EMR or CPOE was difficult and expensive for the primary
physician. Those doctors adopting PHS’ system within their office achieved a higher level of compensation
from the insurance providers for services rendered and at lower operating costs than those who did not
adopt the new systems.
During the rollout of the new systems, the PHS team also provided a number of support services to ease
the transition for doctors’ offices. For example, they assisted each office in selecting the platform that
would best meet its needs, taking into account the underlying cost structure and the pros and cons for each
option. In addition, PHS offered orientation workshops and ongoing training sessions for practitioners and
their support staffs as well as user and technical support through a help desk.
Between 2003 and the end of 2007, almost 90 per cent of the existing PHS provider network moved over
to the LMR system and began the process of sharing their health care information digitally within PHS.
First, the project team identified and worked with early adopters, who were open to the use of the new
technology platform. Next, they targeted primary care physicians because patients would visit these
physicians before being referred to a specialty practice. Lastly, they targeted specialty practices, again
piloting with early adopters and learning from these experiences. Of those practices that fell into the
remaining 10 per cent, the majority were small offices where the doctors were nearing retirement or did not
see any financial benefit from joining the integrated system. During 2007, PHS worked with these
remaining offices to get them on board. Some simply left the system, disaffiliating themselves from PHS.
Others sold off their practices to physicians more inclined to join in the system. By the end of 2009, the
entire PHS practitioner network employed LMR, actively integrating their digital patient records with the
rest of PHS.
The successful implementation of these information systems depended largely on their adoption and use by
health care practitioners across the PHS network. To that end, the rollout plan involved service delivery
process reengineering as well as the extensive initial training and ongoing support of end-users. In
addition, the IS unit provided a robust, integrated platform for the collection, processing and dissemination
of information across the PHS network, and they also worked to ensure the quality and integrity of the data
going into these systems and processes. The new data management platform embraced a so-called “service
oriented architecture.” The attributes of this platform included the following:
• A single, enterprise repository and list for each of the key data types (allergies, medications and
problems)
• All software capable of reading from and writing to these lists
• Standard data definitions applied to support the back-end aggregation of key clinical data for decision
support, and quality reporting
• Standards for clinical knowledge across the enterprise
• Knowledge management process and procedure for achieving clinical consensus on the rules
governing system decision-making processes
• Variation in the workflow of applications that were consistent with PHS medical and service delivery
practices
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• Workflow-based applications should demand some key work processes and data displays that lead to
demonstrated superior results14
This approach allowed for the exchange of information within the PHS network of users without the need
to address the discrete data and process rules associated with the many different information systems
operating across the enterprise. Furthermore, as new enterprise-wide systems joined those already in place,
these future clinical applications would take advantage of the shared repositories of enterprise data,
knowledge and process workflows that were built as part of the services-oriented architecture. (For more
technical information on the service-oriented architecture, see Exhibit 3.)
The implementation of the LMR within PHS also called for data to be of a high level of quality. The
mechanisms for data collection, validation, cleansing and warehousing, as part of enterprise-wide process
improvement, were all made more rigorous. In addition, the IS organization faced the need to review the
rules engine that enabled its CPOE platform. Over the years, millions of rules, concerning such subjects as
prescribed dosages, drug interactions and the recommended sequencing of therapies had found their way
into the CPOE knowledge base. The provenance for many of these rules remained obscure, and the
relevance and accuracy of others were in doubt. Given the vital importance of a current and accurate set of
rules with CPOE decision-support system, IS took on the re-documentation and clean-up of the system’s
knowledge base, as well as the establishment of a more rigorous process for the ongoing maintenance of
rules engine. Like the rollout of LMR, the improvement of the PHS knowledge management process
progressed in phases. The clean-up phase gave way to a more formal assignment of content stewardship by
subject matter experts, which led ultimately to the regular authoring and updating of best practices that
better informed health care delivery across the PHS network.15
THE EMERGING TRANSFORMATIONAL HEALTH CARE DELIVERY LANDSCAPE — EMPLOYING
EMR AND CPOE DATA TO INFORM BEST PRACTICES
Scenario 1: The I2B2/National Center for Biomedical Computing
PHS’s 4.6 million-plus active patient records constituted a rich resource for the tracking and study of
specific medical therapies. The I2B2/National Center for Biomedical Computing focused on this resource
to study the genome types (genetic characteristics) of patient cohorts that responded in a similar manner to
a particular medication or other therapies.16 For example, the Center examined a sub-group taking a
particular anti-depressant and of that cohort, the sub-set of patients who were unresponsive to the drug.
With the permission of these patients, the Center studied their DNA to investigate whether something in
their genetic code explained the drug’s ineffectiveness. More traditional, random samplings of potential
drug users might involve 500,000 people and costs billions of dollars in research. Instead, the Center
leveraged the data within the PHS LMR/CPOE systems. Over time, the findings of the Center would more
precisely focus the administration of drugs to result in the most favorable outcome in patient treatment,
would avoid the prescription of therapies to genome types where the drug had proven ineffective or even
dangerous, would help direct new drug development and would as a result lower the cost and risk of drug
development and its administration among patients in need of treatment.
14 Partners Healthcare System, “Partners Advanced Clinical Informatics Infrastructure,” Partners HealthCare, Boston, p. 6.
15 Tonya Hongsermeier et al., “Collaborative Authoring of Decision Support Knowledge: A Demonstration,” Partners
HealthCare, Boston, 2009.
16 Shawn Murphy et al. “Instrumenting the Health Care Enterprise for Discovery Research in the Genomic Era,” Partners
HealthCare, Boston, 2008.
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Scenario 2: The Center for Connected Health
The Center for Connected Health explored the use of information and telecommunication technologies as
part of a broader strategy to re-engineer health care delivery and the respective roles of the medical
professional, the medical para-professional and the patient in the process. This Center focused first and
foremost on the collection of accurate physiologic data from patients, not on self-reported data. These data
were then employed to encourage the patient in the use of better health practice, offer coaching that was
personalized to each patient and optimize health care provider involvement while keeping costs down. For
example, through DiabetesConnect, patients monitored and uploaded their glucometer data and any
observations or changes in medication to an online journal that was shared with health care service
providers. In this manner, many more diabetes patients could be supported at a lower cost and with fewer
required office visits. More importantly, this approach further engaged the patient in the treatment process.
Similarly, the Center employed cell phone texting to remind heart disease patients to take their
medications. The Center was also able to collect blood pressure and other metrics through remote devices
that transmitted the data from the patient’s home. All of this data — both patient-generated and doctor-
generated — became part of the LMR. Outcomes were tracked to further refine PHS decision support
systems and to refine the knowledge around therapy best practices.
Scenario 3: Center for Information Technology Leadership (CITL)
The Center for Information Technology Leadership (CITL) conducted value-based technology assessments
of new health care information technologies. CITL studied the value of novel health care IT by creating
evidence-based simulation models of costs and benefits. By focusing on the learning that took place within
PHS as the organization designed and deployed its information management solutions, CITL looked to
develop a business case for each of its investments. The quantification of these costs and benefits was
essential in developing support for new IT-driven ventures within both PHS and the health care industry as
a whole. With similar goals in mind, CITL also explored new opportunities for investment, such as a so-
called “telehealth” health care information exchange technologies,17 personal electronic health records18
and a national databank of personal health records.19
Scenarios 4 and 5: Clinical Informatics Research and Development (CIRD) Group and the Clinical
and Quality Analysis (CQA) Group
The Clinical Informatics Research and Development (CIRD) Group’s mission was to improve the quality
and efficiency of care for patients at Partners HealthCare System by ensuring the most advanced current
knowledge about medical informatics (clinical computing) was incorporated into clinical information
systems at Partners HealthCare. CIRD activities aimed to ensure that the clinical systems developed and
implemented at PHS helped to advance the field of clinical computing and improved the quality of care,
patient safety and the efficiency of health care delivery at PHS.
The Clinical and Quality Analysis (CQA) Group was responsible for evaluating information systems
across the PHS network. The CQA team conducted both analyses intended to improve operations
17 Caitlin M. Cusack et al., The Value of Provider-to-Provider Telehealth Technologies, Center for Information Technology
Leadership, Partners HealthCare Systems, Inc., Charlestown, MA, 2007.
18 Douglas Johnston et al., “A Framework and Approach for Assessing the Value of Personal Health Records (PHRs),”
AMIA Annual Symposium Proceedings, 2007, pp. 374–378.
19 David C. Kaelber, The Value of Personal Health Records, Center for Information Technology Leadership, Partners
HealthCare Systems, Inc., Charlestown, MA, 2008.
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Page 11 9B09E023
internally and research intended for publication. The CQA group focused on the impact of clinical decision
support, across a wide array of domains. The overall goal of CQA was to perform evaluations that
demonstrated the value of high-quality information technology in health care.20
ACKNOWLEDGEMENTS
The author would like to express his gratitude to the staff at PHS for their openness and time in the
development of this case study. In particular, I would like to acknowledge the contributions and editorial
advice of John Glaser, CIO, Partners HealthCare; Mary Finlay, deputy CIO, Partners HealthCare; Steve
Flammini, chief technology officer, Partners HealthCare Systems, Inc.; Susanne E. Churchill, executive
director of I2B2/National Center for Biomedical Computing; Joseph C. Kvedar, director, Center for
Connected Health, Partners HealthCare; Blackford Middleton, corporate director, Clinical Informatics
Research and Development, Partners HealthCare; and Cindy Bero, CIO, Partners Community Healthcare,
Inc. Although these good people contributed mightily to the quality of this case study and its companion
teaching note, the author alone takes full responsibility for any errors of omission or commission found
herein.
20 Partners Healthcare System, “CITL, CIRD, and CQA Research Activities,” Partners HealthCare, Boston, 2007.
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Page 12 9B09E023
Exhibit 1
THE PARTNERS HEALTHCARE ORGANIZATION
Source: Provided by Partners Healthcare System, revised December 30, 2008.
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Page 13 *
Exhibit 2
THE PARTNERS HEALTHCARE INFORMATION SYSTEMS: ORGANIZATION
Source: Provided by Partners Healthcare System, revised February 7, 2009.
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Page 14 *
Exhibit 3
PARTNERS HEALTHCARE’S INFORMATION TECHNOLOGY ARCHITECTURE:
The following two illustrations model the design of the service-oriented architecture as an enabler of
information systems integration and interoperability across PHS.
Web-Based Portals
Physicians, Nurses, Researchers, Administrators
Provide customized access to relevant
clinical applications and patient
information based on end user roles and
individual requirements.
Overview of a Service-Oriented Architecture
Knowledge & Data
Data Repositories, Controlled Medical
Terminologies, Catalogues, Dictionaries and EMPI
Logic and tools that access data
repositories for patient information,
knowledge and terminology
Infrastructure
Data Center, User Devices, Networks, Security
Technical foundation and support for
clinical applications and end users
Applications
Order Entry, Clinical Documentation, Order
Processing
Services
Clinical Decision Support, Event Scheduler,
Notification, CDR access
Aggregate services into logical
components that support specific
functions
Re-useable software modules that address
specific clinical IT capabilities
Portal Layer
Application
Layer
Services
Layer
Data Layer
Infrastructure
etc.Rad
Lab
Rx Blood
Ordering
systems
Terminology
Repository
Terminology
Services
Knowledge
Repository
CDSS EventScheduler
CDRs
(Labs, Vitals, Problems,
Meds, Orders,
Allergies, etc.)
CDR
Services
E
ve
nt
M
an
ag
em
en
t a
nd
O
rc
he
st
ra
tio
n
F
ra
m
ew
or
k
EMPI
EMPI
Services
Order Fulfillment
etc.
LMR
OE
Order
processing
Delivery &
Documentation
etc.
Labs
eMAR
Patient
Components
Site
Admitting
Systems
Registration
Patient
Status
UCM
OR
Scheduling
Physician’s
Portal
Nursing
Portal
Research
Portal
Admin
Portal
. . .
ED
Tracking
Admin
Components
KM
Catalog
Editor
BPM
Notification
Service
Order
Catalog and
Dictionaries
Order
Catalog
Services
Data Integration
Data Center Services, Devices, Networks, Security, Virus Protection, Middleware, Performance Monitoring
Portal Layer
Application
Layer
Services
Layer
Data Layer
Infrastructure
etc.Rad
Lab
Rx Blood
Ordering
systems
Terminology
Repository
Terminology
Services
Knowledge
Repository
CDSS EventScheduler
CDRs
(Labs, Vitals, Problems,
Meds, Orders,
Allergies, etc.)
CDR
Services
E
ve
nt
M
an
ag
em
en
t a
nd
O
rc
he
st
ra
tio
n
F
ra
m
ew
or
k
EMPI
EMPI
Services
Order Fulfillment
etc.
LMR
OE
Order
processing
Delivery &
Documentation
etc.
Labs
eMAR
Patient
Components
Site
Admitting
Systems
Registration
Patient
Status
UCM
OR
Scheduling
Physician’s
Portal
Nursing
Portal
Research
Portal
Admin
Portal
. . .
ED
Tracking
Admin
Components
KM
Catalog
Editor
BPM
Notification
Service
Order
Catalog and
Dictionaries
Order
Catalog
Services
Data Integration
etc.Rad
Lab
Rx Blood
Ordering
systems
Terminology
Repository
Terminology
Services
Knowledge
Repository
CDSS EventScheduler
CDRs
(Labs, Vitals, Problems,
Meds, Orders,
Allergies, etc.)
CDR
Services
E
ve
nt
M
an
ag
em
en
t a
nd
O
rc
he
st
ra
tio
n
F
ra
m
ew
or
k
EMPI
EMPI
Services
Order Fulfillment
etc.
LMR
OE
Order
processing
Delivery &
Documentation
etc.
Labs
eMAR
Patient
Components
Site
Admitting
Systems
Registration
Patient
Status
UCM
OR
Scheduling
Physician’s
Portal
Nursing
Portal
Research
Portal
Admin
Portal
. . .
ED
Tracking
Admin
Components
KM
Catalog
Editor
BPM
Notification
Service
Order
Catalog and
Dictionaries
Order
Catalog
Services
Data Integration
Data Center Services, Devices, Networks, Security, Virus Protection, Middleware, Performance Monitoring
Note: clinical data repository (CDR); enterprise master patient index (EMPI).
Source: Partners HealthCare System, “Partners Strategic Plan for an Integrated Clinical Information System (ICIS),” Version
1, Partners HealthCare, December 2005.
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Page 15 9B09E023
APPENDIX A – GLOSSARY
• Architected Solution – An IT system built on the foundation of the agency’s existing technology
standards and architecture. Such solutions take full advantage of the technologies, operational
processes and technical expertise already in place across the agency, facilitating IT systems
integration, maintenance and support.
• Architecture – A set of standards, guidelines and statements of direction that constrain the design of
information technology solutions for the purpose of eventual integration.
• Computerized Patient Order Entry (CPOE) System – An information system employed by physicians
and other health care practitioners to directly enter orders for medications, diagnostic tests and
ancillary services. Current versions of these systems typically include decision support tools and an
automated knowledge base to inform decision making. Both the vendor of the system and the health
care professionals who use the system may enter information and rules to influence the systems
recommendations.
• Database – A structured and efficient mechanism for the storage, description and management of
discrete data elements and bodies of agency information.
• Decision Support System (DSS) – An IT-enable system that facilitates the integration of critical
agency information so that management may employ that information to inform planning and decision
making.
• Electronic Medical Record (EMR) System – An information system that facilitates the collection and
consolidation into an integrated digital record of all the information about a given patient over time,
including such medical data as age, weight, height, vital signs and related information; textual
information, namely the transcribed comments of the health care professionals with whom the patient
has interacted; and objects, such as X-rays and MRI scans.
• Infrastructure – The backbone of IT delivery, the networks, communication services, operating
systems, servers, desktops and related platforms, products and services that provide IT capabilities to
the end-user.
• Knowledge Management (KM) – A range of practices used in an organization to identify, create,
represent, distribute and enable the adoption of insights, best practices and experiences. Such insights
and experiences comprise knowledge, either embodied in individuals or embedded in organizational
processes or practice. KM efforts typically focus on organizational objectives, such as improved
performance, competitive advantage, innovation and the sharing of lessons learned.
• LMR – the Longitudinal Medical Record; Partners HealthCare’s internally developed electronic
medical records system.
• Medical Informatics – The intersection of information science, computer science and health care that
explores, designs and delivers the information management services required to optimize the
acquisition, storage, retrieval and use of information in health care and bio-medical organizations.
• Service-Oriented Architecture (SOA) – An approach to systems design and deployment that aims to
loosely couple applications to facilitate access to particular bodies of data or system capabilities
without recourse to more formal systems integration. In the context of the PHS information
management platform, a service-oriented architecture more readily accommodates information sharing
among organizational and business entities operating different information systems but needing to
share a common body of content (e.g. data, text documents and digital objects, such as photographs
and X-rays).
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910E02
CREATING A PROCESS-ORIENTED ENTERPRISE AT PINNACLE
WEST
T. S. Raghu wrote this case solely to provide material for class discussion. The author does not intend to illustrate either effective or
ineffective handling of a managerial situation. The author may have disguised certain names and other identifying information to
protect confidentiality
.
This publication may not be transmitted, photocopied, digitized or otherwise reproduced in any form or by any means without the
permission of the copyright holder. Reproduction of this material is not covered under authorization by any reproduction rights
organization. To order copies or request permission to reproduce materials, contact Ivey Publishing, Ivey Business School, Western
University, London, Ontario, Canada, N6G 0N1; (t) 519.661.3208; (e) cases@ivey.ca; www.iveycases.com.
Copyright © 2015, Richard Ivey School of Business Foundation Version: 2015-02-04
As the 2008 holiday season approached, Denny Brown, vice-president and chief information officer (CIO)
of Pinnacle West, wondered how he would navigate his organization through a tumultuous economy in the
coming year. The year had begun very well for Pinnacle West Capital Corporation (PNW), a company that
provided energy and energy-related products throughout Arizona. One of the largest affiliates of Pinnacle
West, Arizona Public Service (APS), was named the top energy utility for information technology (IT)
innovation by InformationWeek. It was also listed among the top 10 U.S. companies in the
InformationWeek 500. APS also received the prestigious Edison Award by the Edison Electric Institute for
developing the Transformer Oil Analysis and Notification (TOAN) System. TOAN monitored
transformers on a near real-time basis for anomalies in power transmission. Brown firmly believed a CIO’s
mission was to transform the business. Thus, he began to accelerate the transformation processes set in
motion more than three years ago. Clearly, the coming decade would be pivotal to the energy industry.
During the 1990s, Brown left APS to pursue a career at IBM for nearly a decade. When he returned to APS
in 2000, he reacted to pressure from his customers to produce more services and products at a lower
delivery cost. However, when he pushed for “more” from his own information services organization, he
quickly realized that his organization lacked formal processes and was highly dependent on people
knowing who to contact to get work done. Brown began to institute a process discipline within the IT
organization.
Soon after, Brown began to realize if the information services organization could embrace a process-
oriented approach, other business units in APS should be able to do so as well. To help achieve this, he
created a Center for Process Excellence (CPE) within his unit, which would act as an internal consulting
organization to other business units in their process improvement efforts. One of the most successful
engagements of this team was its work with the sub-station maintenance group that eventually culminated
in the TOAN project and the Edison Award.
COMPANY BACKGROUND
Pinnacle West, based in Phoenix, Arizona, provided energy and energy-related services and products to
residential and business consumers in Arizona. PNW had been in business for more than 120 years. The
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Page 2 9B10E002
company’s largest subsidiary, APS, served more than a million customers across Arizona. APS also co-
owned and operated the Palo Verde Nuclear Power Generating Station. Palo Verde was the largest power
generation facility in the United States and was a primary source of power for the Southwest United States.
Arizona’s utility industry was highly regulated with two power utilities serving most of Arizona utility
customers. Apart from nuclear power (24 per cent of total power supplied), the generation portfolio for the
company included coal (37 per cent), natural gas (18 per cent) and solar (less than one per cent) — about
20 per cent of the power was purchased from outside sources. In the early part of the 21st century, Arizona
was one of the fastest-growing states in the United States. In 2008, it was the second fastest-growing state,
with a population of about 6.5 million. During 2008, APS served more than a million customers in
Arizona. In addition to APS, Pinnacle West also owned a real-estate subsidiary, SunCor, which accounted
for four per cent of operating revenues in 2008. The electricity generation, transmission and distribution
activities contributed to 93 per cent of the operating revenues in 2008. Pinnacle West employed
approximately 7,500 people, and of those approximately 6,900 were APS employees.
The utilities industry was a highly regulated industry in the United States. In Arizona, the Arizona
Corporation Commission (ACC) regulated electricity rates. Although there had been sporadic attempts at
deregulation, competition in retail electricity markets seemed to be unlikely in the near future based on the
disastrous deregulation experience in California during 2000 and 2001. In 2006, the ACC approved a
renewable energy standard increasing the renewable energy generation percentage from 1.5 per cent in
2007 to 15 per cent in 2025. A significant percentage of renewable energy had to be generated from
distributed sources (i.e. small-scale generating equipment at customer locations). In order to meet the
projected 60 per cent increase in customer peak demand by 2025, APS identified several key initiatives
including increasing energy efficiency, doubling renewable energy production and adding additional
nuclear power capacity. Operating revenue for 2008 was more than $3.1 billion with a net income of $262
million. Consolidated financial information for Pinnacle West from 2003 to 2007 is provided in Exhibit 1.
Arizona’s projected growth posed unique challenges for APS. Given the environmental concerns, APS had
to continuously improve the reliability of its power generation and distribution capabilities. The capital
investment requirements for energy production were quite substantial — APS expected to spend around $1
billion per year for energy infrastructure. Major utilities in the United States, including APS, faced the
challenge of replacing aging distribution infrastructure. Major initiatives were underway by APS to
upgrade the power grid and install “smart” meters. In a regulated price market, APS found it challenging to
keep up with the commodity price and increasing fuel cost. Investment per new customer had risen from
less than $10,000 in 1987 to more than $25,000 in 2007. These challenges called for efficiency
improvements throughout the organization to achieve savings in operations costs. The collapse of the
housing market and the general economy in the recessionary environment that began in 2008 called for
even more concentrated efforts to improve process efficiencies and innovation.
PROCESS IMPROVEMENTS EFFORTS IN THE INFORMATION SERVICES ORGANIZATION
The transformation process began with identifying a clear vision for information services — “One team
working with our customers to advance and transform the business.” To achieve this, the team developed
an implementation strategy with three key areas (see Exhibit 2).
At the top of the implementation agenda was business process transformation, which focused on building
process change skills, methodologies and tools. Initial process transformation efforts started in 2001 and
culminated in the identification and monitoring of 36 separate processes. These processes were divided
into four broad areas — strategic processes (I/S portfolio optimization, business and technology planning,
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Page 3 9B10E002
and financial planning), development processes (project planning, requirements, design, development and
maintenance), operations processes (incident and problem management, capacity management and disaster
recovery), and a number of support processes.
The information services initiatives were designed to support the business process transformation efforts
and ultimately transform the business. The initiatives covered professional development and key projects.
The professional development initiative was geared toward acquiring the skills and training necessary to
embark on business process optimization. The strategy was to continuously shift IT personnel to identify
and act on strategic initiatives. The key projects initiatives supported the shift to strategic work by setting
in motion a series of projects geared toward integrating service-oriented architecture into the design of IT
projects. The service-oriented concept was identified as a key enabler for achieving business process
transformation.
Supporting the transformation and innovation aspects of the strategy were the foundational areas. These
included specific strategies for achieving service performance, security and budget management. The goal
was to achieve high availability and high service levels. The motto “Technology drives business. Business
is a moving target” drove this strategy.
Brown’s emphasis on process orientation was driven by his conviction that the functional model had run its
course in Corporate America. According to Brown, “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.”
A process engineering services (PES) group was created to provide support for information services
processes and continuous improvement. At the end of 2008, the team consisted of four individuals to
support the more than 600 employees in the information services organization.
THE CENTER FOR PROCESS EXCELLENCE (CPE)
The successful process-oriented transformation in the information services organization encouraged the
creation of a Center for Process Excellence (CPE) within the information services organization in 2004.
Brown described the genesis for this idea as follows:
To push for process orientation, you create a burning platform from the top down. I looked around
in our industry, and found there were two companies following the top down approach — Pacific
Gas & Electric (PG&E), and Southern California Edison (SCE). For these companies, the burning
platform was their financial collapse caused by the energy debacle. They were able to push for
process orientation throughout the enterprise from the top down. However, they did it out of
necessity; they needed to cut costs and survive. Our industry does well under crisis — but it is not
sustainable. Creating a false sense of a burning platform is not sustainable either. It will work for a
while until the first budget cuts come, so I didn’t want to do that.
The goal of CPE was to institutionalize the process transformation knowledge gained within the
information services organization to provide facilitation and redesign services throughout the enterprise.
Since its inception, CPE had engaged business units opportunistically in IT-centric projects. CPE personnel
engaged the clients from the early stages of the projects. The engagement continued even after a project
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Page 4 9B10E002
was completed, so that continuous improvement opportunities were periodically reviewed and
implemented.
At the start of 2009, the CPE group included eight individuals from a variety of backgrounds and skills.
Randy Sorensen, director of the CPE group, had extensive experience in nuclear power plants. Prior to
joining the CPE group, Sorensen was the station chemistry manager at the Palo Verde Nuclear Generating
Station for a number of years. Other members of the team and their backgrounds included Christine
Dicken (project management), Kirk Gould (mechanical engineering), Kathy Perry (training), Steve
Freeman (inter-governmental relations), Scott Archibald (entrepreneurship), Carla Howard (Lean/Six
Sigma Practitioner), and Guled Yousuf (intern — electrical engineering). Overall, the group was designed
to have a very business-focused orientation. Each member of the group was trained in the basic skill sets of
facilitation, process discovery, modeling and problem resolution. Sorensen had this to say about his
organization:
I came to this group in 2005. I believed Business Process Management is something most
businesses know little about; for a lot of reasons it is overlooked. Given the perception that IT was
becoming a commodity, Brown felt the real value is for IT to have business acumen and help the
enterprise get more out of technology…. It makes a lot of sense to first understand business and
then get technology involved. The promise of a group like CPE was great in this context. Given
my business focus, I thought I could help IT deliver on this.
When asked about his vision for the CPE unit, Sorensen commented, “our vision is to be a competency
center for the organization. We want to create franchises, help the line of business set them up and think
about their own organization. We should be the people that businesses approach to understand how to do
that.”
A typical engagement for the CPE group involved setting up an “engagement review” session with a client
that had requested help. The objective of the session was to gather a charter for the engagement. If the
group decided that the project was outside its scope, it could turn down the engagement due to a lack of fit.
If the project moved forward, the client and the CPE personnel went through a “process discovery phase.”
Initially, the groups discussed the process at a high level and identified all the relevant stakeholders
(covering the SIPOC chain: supplier->input->process->output->customer). Further refinements to the
initial models gathered the events, results, roles and responsibilities, business rules, issues, opportunities
and risks. The group consciously kept the process discovery sessions short and gathered most of the
required information in a few sessions (usually not more than three) of less than two hours each. In most
cases, once the process transformation solution was identified, the CPE group guided and monitored the
implementation process as well.
As the process-oriented approach matured within the information services organization, the group procured
an enterprise-level modeling tool in 2004. A large number of processes created during client engagements
were modeled and maintained in this repository (see Exhibit 3 for a sample process model from the
repository). To create consistency in the process-oriented approach, CPE developed a Process Facilitator
Certification program that included classroom lectures and practical exercises. In 2009, the group focused
on the integration of Lean principles into the business process management initiatives.
CPE had been involved in a number of initiatives over the years, but two specific process change initiatives
served as examples of the value of the CPE expertise. The two initiatives are described in the following
sections.
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Page 5 9B10E002
A BURNING PLATFORM
On July 4, 2004, a fire broke out at the APS Westwing substation in Phoenix, destroying several
transformers and impacting numerous customers (see Exhibit 4 for before and after pictures of the
substation). Eventually the entire substation was rebuilt.
A thorough investigation determined the event was not attributed to maintenance failure. APS was
required to present a corrective action plan to Arizona Corporation Commission (ACC). As part of the
plan, APS agreed to incorporate leading practices into maintenance processes.
Ironically, the first set of cascading events that eventually led to the fire happened at the time when the
maintenance group was in a workshop reviewing maintenance processes. Mark Ostendorp (who started on
this project as a consultant from EPRISolutions Inc. and continued to work on the project as an employee
of opX consulting, LLC) could still recall the day:
We were in a self-assessment workshop with the maintenance group. We were about 15 minutes
into the workshop and there was a flicker of the lights — the guys in the room were joking about
it, and about 10 minutes later almost everyone’s beepers went off. We stopped the workshop while
the workshop attendees answered the calls. After a while, they said we will need to postpone the
workshop. Essentially, one of the transmission lines tripped (later identified as a “grid
disturbance”) and had to be attended to immediately. So, we packed up and left with the intent to
reschedule the workshop for a later date.
After the Westwing fire, Pete Atwell, director, operations and maintenance, called Ostendorp and asked his
group to come in and perform a detailed assessment and substation audit and do a failure root cause
analysis. Ostendorp’s group assessed the maintenance practices based on interviews of several
maintenance staff, engineers and company leadership. The assessments also focused on evaluating
maintenance practices and processes and benchmarking against other utilities. EPRISolutions also
conducted detailed audits of 12 APS substations to check if there were any hidden surprises.
Atwell had always been a proponent of process orientation within the maintenance group. He asked for an
assessment of the maintenance practices in 2000 after the Commonwealth Edison fire in Chicago. At the
time, EPRISolutions made several recommendations. Atwell viewed the Westwing fire as a critical turning
point for his maintenance organization: “In the past, maintenance was controlling us! Most of the time we
were in a fire-fighting mode…. West Wing facilitated us to accelerate the process changes. It gave us
momentum and made it easier to implement the necessary changes.”
After the Westwing fire, APS hired an independent consultant to evaluate the organization. The
assessments resulted in a set of recommendations. A summary of these recommendations is provided in
Exhibit 5.
Interestingly, Atwell’s direct report, John Lucas, had just joined the APS maintenance department as a
manager prior to the Westwing fire. In a way, Lucas’s entry into the maintenance organization had been a
trial by fire and Lucas viewed it as a life-changing experience.
Process Changes
Both Atwell and Lucas felt the urgency to change the maintenance organization based on proposed
recommendations (see Exhibit 5). Lucas enlisted EPRISolutions as domain experts and the CPE group as
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Page 6 9B10E002
process facilitators. Lucas viewed CPE as pivotal to the process change effort: “We were trying to
change…. The CPE facilitator’s job was to help us not forget that we were trying to change while we were
still doing our daily work…. Their [CPE’s] role was to guide us to write down our process; ensure that we
document reality and list the discrepancies/gaps. They challenged us on our process and helped us
identify/list the gaps or issues.”
With facilitation help from EPRISolutions Inc. and experts from the CPE group, the process change
initiatives initially focused on two of the recommendations — work prioritization and backlog
management, and productivity planning and scheduling metrics. The management team felt some of the
other recommendations would fall in place naturally as the team addressed these two high-priority items.
Ostendorp summarized the overarching goals for the process change initiative as follows: “We set clear
goals at the outset — any equipment failure is a failure of maintenance. We coined the phrase ‘there are no
unexpected failures.’ Second, we will not permit anything to be scheduled and assigned to the?
maintenance crew unless it is fully planned. Third, we will not close out a work order until it has been
identified that all of the things have been done — materials have been reconciled, testing records are
entered and all those other things.” The goals coincided with the major milestones of the maintenance
process. Based on the above overarching goals, the team identified a high-level process model as shown in
Exhibit 6.
Developing a Predictive Maintenance Culture
One of the ways to implement predictive maintenance was to place diagnostic tools at various points in the
substations. However, the dilemma with diagnostic tools was that they generated large amounts of data and
placed a huge resource burden on an organization that tried to analyze the generated data. The maintenance
organization at the time of the change initiative had one individual with expertise in handling diagnostic
tools and data. The team quickly realized the need to prioritize the equipment based on criticality. A master
list of equipment was drawn up and criticality of the equipment with respect to the organizational goals
was determined. This allowed the process change team to determine the frequency of diagnostic
information that would need to be collected for equipment on the master list. For example, equipment at
the highest priority would be monitored on a daily basis; equipment on the next level of criticality would
be monitored on a weekly basis and so on. Based on this approach, the resource requirements for proactive
maintenance were determined. The leadership planned to staff the required resource levels in a two-to-
three-year time period.
Planning and Execution
At the beginning of the initiative, the maintenance organization did not have dedicated planners and
schedulers. As part of the reorganization associated with the process change initiative, the team identified
process owners for each milestone of the process (see Exhibit 6) and assigned team members to each of the
groups. The planners’ responsibility was to create a fully comprehensive work package before execution
could begin. Since standard procedures were not in place for work orders, this started as a tedious process.
Initially the planners could at most complete five to eight work packages in a month. Over time, with the
help of continuous crew feedback, the planners created standards for work orders. Eventually, the work
order generation process was completely automated through a custom-built work management system. A
planner could enter the work order and identify the work order type, and the entire work package was
printed for crews to take to the site. To facilitate continuous improvement, a simple survey at the end of the
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Page 7 9B10E002
work package allowed crew members to provide feedback on what worked and what did not work during
work execution. Crew members were initially hesitant to fill these out; however, after repeated assurances
of the intent of the feedback surveys, the response rate reached close to 100 per cent. Within a few months,
productivity improvements in planning were perceptible — planners could easily create up to 100 work
packages a month.
Each work order was assigned a dedicated caseworker who retained ownership for the order from
beginning to end. The initial goal of the organization was to schedule work orders out to five weeks. After
initial hiccups resulted in another review of the process, the team was able to schedule work orders out to
15 weeks.
Leaders of each group within maintenance met on a regular basis to review work orders and completion
rates. The culture within the organization had shifted to a collaborative orientation where it was entirely
acceptable for the leader of one group to interact directly with team members in other groups.
Process Metrics
Both Ostendorp and Dicken emphasized the need to keep the process metrics simple. Dicken commented
on her approach to metrics as follows: “An ideal metric is automated, timely, available, somewhat
anonymous, and allows people to answer a lot of ‘why’ questions.” In addition to costs of direct labor and
materials, the team collectively identified the key performance indicators for the process as: proportion of
predictive work orders, average time of completion per work order, work completion to close out time, and
number of work orders open/planned/scheduled/executed.
Within the first two years of the process change initiative, there were considerable improvements in the
maintenance process. Before the process change effort, more than 80 per cent of the work orders were
reactive; this had been brought down to 20 per cent. While more than 80 per cent of the organizational
reliability metrics set for the substations had not been consistently met before, by 2007 APS met or
exceeded all of the reliability metrics. In 2008, outages per customer were reduced 34 per cent, and the
average outage duration per customer decreased 14 per cent.
When recalling the improvements made thus far, Dicken highlighted some key indicators: “In 2005, we
had over a thousand open work orders at any given point in time. By 2007, the maintenance organization
brought this down to below 200. The average age of a work order in 2005, when we could track them, was
about 450 days. By 2007, the average age of a work order was about 100 days.”
While there was a clear improvement in the key performance indicators, Atwell and Lucas focused on
qualitative improvements to maintenance processes. Both viewed overtime and nighttime calls as being big
impediments to an effective maintenance organization. The best indicator for them was to make sure their
leaders and crews had fewer calls to handle — which implied a better overall condition of equipment in the
distribution system. After the process changes, Atwell viewed his role as a facilitator who managed the
budget and resources for the maintenance organization.
Innovation and Recognition
As the maintenance organization met or exceeded the operational goals of the process change initiative,
innovative ideas began to emerge throughout the organization. A highlight of the process innovations was
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Page 8 9B10E002
the Transformer Oil Analysis and Notification (TOAN) System. TOAN was born out of the need to
monitor transformer data on a continuous basis to prevent catastrophic failures. A major problem with the
diagnostic data collected from transformers was the difficulty of manually analyzing the data. One of the
ways to detect potential failures was to detect the gas-in-oil through data mining and pattern recognition.
The engineers within the maintenance organization designed and built a sophisticated neural network-
based approach to analyze the continuous feeds of data from transformers. The system identified
abnormalities in near real-time and turned large quantities of data into actionable maintenance tasks.
The TOAN system earned APS the 2008 Electrical Engineering Institute’s (EEI) Edison Award, the
electric utility industry’s highest honor. Thomas Kuhn, president of the EEI, commented on the TOAN
system as follows: “APS’ new system for monitoring transformer performance is a remarkable
achievement and could potentially benefit electric utilities everywhere. Electric transformers are a key
component in the transmission and delivery of electricity, and by providing real-time monitoring of their
performance the TOAN system greatly increases system reliability and saves money in replacement and
repair costs. This system represents a significant step forward in managing and monitoring the electric
grid.”
Process change initiatives in the information services organization and the TOAN system also contributed
to other recognitions. APS was named the No. 1 energy utility for IT innovation in the 2008 edition of
Information Week 500 magazine. APS was also recognized by Information Week as being among the top
10 U.S. companies for IT innovation.
PROCESS CHANGE INITIATIVES AT PALO VERDE NUCLEAR PLANT
After two years of declining performance, the Nuclear Regulatory Commission (NRC) placed the Palo
Verde Nuclear Generating Station in Category 4 (second to the highest level of NRC oversight) in 2006. In
communicating the decision, the NRC commented that the Palo Verde plant would fix the symptoms when
problems arose, and not adequately get to the root causes of the problem. Given the high standards of
safety, the Palo Verde plant was placed under a high degree of scrutiny by the commission.
Under the direct leadership of executive vice-president and chief nuclear officer Randy Edington, a
fundamental culture change to the organization was initiated in 2007. A key part of this effort was an in-
house process improvement organization named “Site Programs.” While Palo Verde Site Programs had a
similar orientation to CPE, its role was more central to the operation of the Palo Verde nuclear plant.
The director of Site Programs, Gary Shanker, had worked at the Palo Verde power plant for a number of
years. Shanker also worked as a key member of Brown’s team, which implemented the process orientation
strategy in the information services organization. In 2007, Shanker came back to the power plant to lead
the process improvement efforts. On the state-of-affairs in the power plant, Shanker made the following
observation: “In 2007, we were being run safely but not reliably. We had a lot of cut back in resources over
the years…. When you reduce resources, organizations have a tendency to suck themselves into silos to
focus on their own goals. As a result, we were operating to a large extent based on informal processes. In
the long term, this cannot be a successful strategy, especially with an aging workforce and increased
turnover.”
Shanker put together a plan and recommendation for the vice-presidents at Palo Verde to bring together the
elements necessary to guide the process approach. While Shanker had a technology background as well, he
firmly believed technology was the last piece of the process puzzle. A critical part of Shanker’s approach
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Page 9 9B10E002
was to create a steering committee for overseeing the process changes. The steering committee included
the leaders of major groups at the Palo Verde plant. The Site Programs group reported to the committee on
a monthly basis to get its feedback and buy-in. Many felt the leaders would bring in the needed
organizational perspective and knowledge to identify the critical aspects in process change initiatives. The
committee also helped the Site Programs group effectively communicate its initiatives to the enterprise.
Jim Glass, the process improvement leader in Site Programs, also observed the need to manage demand for
process changes: “One of the big reasons why we have a steering committee is to control the demand for
process improvements. We recognize that multiple groups feel the need to be engaged in strategic
initiatives. There are a lot of ‘type A’ people here who, once they see an issue, will want it to be fixed
immediately. So we are trying to manage the demand for process improvement…. If you have too many
projects going on at the same time, you tend to lose focus.”
Site Programs used a number of ways to communicate its efforts. It maintained an internal website for
listing major initiatives and materials on process improvement techniques (such as Lean, Six Sigma,
facilitation and problem resolution skills). Site Programs worked with the web council to create links from
other key corporate intranet sites to its website. It also arranged a number of brownbag sessions and invited
key functional leaders to participate and share their experiences with others in the organization. In 2008,
Site Programs identified sixteen employees to be trained in the tenets of Lean improvement techniques at
Arizona State University over an extended period of time.
By the end of 2008, Site Programs began to track its own performance. Palo Verde did an assessment of
the “corrective actions program” (the program cited by the NRC as being deficient in 2006). As a result of
the process change efforts as well as the leadership focus, the internal assessments revealed the corrective
actions program had considerably improved. An NRC inspection completed in early 2009 cited similar
improvements in a number of areas including problem resolution, change management and backlog
tracking systems. The Site Programs group also initiated a plan to assess the process maturity of the Palo
Verde plant and identify areas for improvement.
While the initial approach to process change involved a focus on critical processes related to safety and
effectiveness, the Site Programs team also recognized the need to manage processes from the top down. To
accomplish this, the team began an ambitious process infrastructure plan that would enable top
management to directly monitor the most critical processes. In a sense, the goal of this strategy was to
integrate the bottom-up process improvements with a top-down management strategy for processes. A
process infrastructure map created by Site Programs is shown in Exhibit 7.
Shanker described why the process infrastructure was important to institutionalize process orientation:
“With processes, it is pretty hard to find what you need to work on. The steering committee is one way of
doing it in a qualitative way. But, over time, with the infrastructure development, we will start to use
performance indicators to assess what processes to improve upon.”
Glass contrasted the Site Programs initiative to the more grassroots-based efforts of CPE: “The way CPE is
functioning is more grass roots. Out here it is more centrally established. The scope is bigger. We had a
significant burning platform — we got into Category 4 of NRC. If we continued to do what we were doing
we would be shut down…. Part of the problem was the complexity of our processes. As a result, the site as
a whole got behind the process improvement efforts. It helped us to drive process change from the top
down. The Senior VPs fully support our efforts. We review the progress with them every month. They are
endorsing the improvements we are implementing. This is a key to our success.”
On March 24, 2009, the Nuclear Regulatory Commission (NRC) upgraded the status of the plant to the
least regulated “Column 1.” The NRC said that the plant’s upgrading from the most-regulated “Column 4”
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Page 10 9B10E002
category, which is one step away from a forced shutdown, in a little more than two years is among the
fastest recoveries on record.
Both Shanker and Glass acknowledged CPE’s help in their efforts. CPE helped the process infrastructure
strategy by championing the use of an enterprise modeling tool and training site programs in mapping and
facilitation techniques. CPE training materials were adapted to the Palo Verde context. Palo Verde was
also able to benchmark its processes against another nuclear power plant through the help of CPE.
GOING FORWARD
Brown’s next step in building a process-oriented organization was shaping up. In describing his plans for
the next steps, he observed the following on the nature of the interaction between IT and business:
IT and business customers often get into a deadly embrace defining requirements. The IT folks
tend to wait for the business to define the requirements. The business people cannot define the IT
requirements because they don’t fully understand what the technology is capable of doing. The IT
people don’t know what the business is, so they don’t typically suggest innovative business
changes…. Process orientation puts the creativity and innovation on the table and it is really easy
for the business to define the process. Clearly, business leaders need to think in a process mode….
Now the challenge is how we move forward!
Because of the Westwing project, TOAN and the Edison Award, Brown felt the process orientation
strategy had arrived at a crossroads. The CPE group had also achieved a high level of recognition. He
believed the information services organization should increase the ante, especially since major parts of the
organization like Palo Verde were taking the lead around methodology and technology in process
improvement and assessment.
On the other hand, there was a resurgence of commitment to TOAN-like projects in the distribution
organization. This type of commitment was bound to stretch APS on resources in terms of facilitators,
process mappers and change agents. Therefore, Brown knew APS would have to be careful in how it
expanded this approach. Brown’s following comments best summarize the opportunities and challenges
facing the information services organization:
For 120 years, our business model has not been challenged all that much. For the most part, we
pretty much boil water, create steam, turn the turbine and put the electrons on the wire and send it
home…. With the notion of SmartGrid, automatic meter reading, and the consumer product
information we are going to have…we become the Google of energy. The business model is
therefore going to change. Distributed generation and renewable generation are coming to the
forefront . . . all of these are colliding like a perfect storm. That begs a different view from the IT
standpoint. We have an early start — but the key is going to be integrating the backend into the
normal day-to-day operations. My view is you get only one opportunity to win this market . . . one
bullet to shoot. So, when you flip the switch to top down, you have to have it fairly well couched
and have your ducks in a row — if you launch it too early you go by the wayside, because there is
not enough commitment. If you launch it too late, you have missed the boat.
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Exhibit 1
CONSOLIDATED FINANCIAL STATEMENTS
(All numbers in millions)
2003 2004 2005 2006 2007
Sales 2,818 2,900 2,988 3,402 3,524
Cost of Sales 1,898 1,992 1,986 2,424 2,531
Gross Profit 920 908 1,002 978 993
Gross Profit Margin 33 31 34 29 28
Interest Expense 205 196 185 197 213
Nonop. Income/Expense 59 19 20 52 43
Net Income 241 243 176 327 307
EPS from Operations 2.53 2.34 3.18 3.33 2.98
Total Current Assets 969 1,137 1,891 1,475 947
Total Assets 9,536 9,897 11,323 11,456 11,244
Total Current Liabilities 1,151 1,626 2,272 1,459 1,385
Total Long-term Debt 2,898 2,585 2,608 3,233 3,127
Total Liabilities 6,707 6,947 7,898 8,010 7,712
Total Stockholders’ Equity 2,830 2,950 3,425 3,446 3,532
Oper. Activity – Net Cash Flow 902 842 730 394 658
Invst. Activity – Net Cash Flow (717) (532) (585) (569) (873)
Financing Activ. – Net Cash Flow (34) (278) (155) 108 185
Dividends Paid – Cash 157 167 187 201 210
Capital Expenditure 723 555 646 759 942
Cash Flow 12 mm 661 638 571 676 673
Change in Cash & Equiv. 151 32 (9) (67) (31)
Source: Research Insight.
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Page 12 9B10E002
Exhibit 2
IT STRATEGY FRAMEWORK IN APS
Source: Internal company documents.
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Exhibit 4
THE TRANSMISSION SUBSTATION FIRE — BEFORE AND AFTER
Source: Internal company documents.
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Exhibit 5
KEY RECOMMENDATIONS FROM THE WESTWING FIRE ASSESSMENT STUDY
Recommendation
Area (Priority, Value)
Recommendation
Communication (High
Priority, High Value)
It is recommended that APS either develop, review and/or modify its current
communication protocols as they relate to communication from the field to
the operation’s center or vice versa. Formal, clear and precise
communication protocols as well as associated verification routines and
backup measures need to be defined and communicated to all stakeholders
to eliminate ambiguity, uncertainty and human error in all communications.
Maintenance Basis &
Discipline (Medium
Priority, High Value)
APS started the process of defining the maintenance basis for transmission
and substation systems and components in 2000. While a maintenance
basis (maintenance templates) exists for a significant number of substation
systems and components, the assessment indicates that the existing
templates are not currently executed with the appropriate level of discipline
and that the development of maintenance basis templates for the remaining
systems and components has stalled. APS should continue the development
of a comprehensive maintenance basis for all non-trivial transmission and
substation systems and components. The maintenance basis should be
documented and integrated into the Computer Maintenance Management
System (CMMS), effectively communicated to all stakeholders and executed
by operations.
Work Prioritization &
Backlog Management
(High Priority, High
Value)
APS’s maintenance organization should define system and equipment
prioritization criteria in accordance with the corporate strategic objectives and
values. The current prioritization of all non-trivial transmission and substation
systems and equipment should be reviewed, documented, and integrated in
APS’s Maximo work management system (CMMS) and effectively
communicated to all stakeholders. APS should also develop an effective
process for the analysis, forecasting and management of the maintenance
backlog.
Equipment
Maintenance
Procedures (Low
Priority, Medium
Value)
A significant number of APS’s current maintenance procedures for
transmission and substation systems and equipment are manually developed
for each work order and these procedures are not readily available to all
stakeholders. APS should develop standard maintenance procedures in
electronic format for all non-trivial transmission and substation systems and
equipment. This work will facilitate the creation of a library of standard
procedures to be issued with each work order, and ensure the availability of
these procedures to all stakeholders, the integration of standard procedures
in the CMMS for the automated creation of effective work packages, and the
capture of the maintenance staff’s current knowledge and expertise to
develop new employees and address future training needs.
Data Automation &
Maintenance
Intelligence (Medium
Priority, Medium
Value)
It is recommended that APS develop the appropriate processes and tools to
acquire and integrate all transmission and substation condition data to
facilitate the effective analysis, forecasting and management of corrective,
preventive and predictive maintenance tasks and processes. Processes
and/or tools should be integrated with the CMMS to provide the organization
with high-level, near-time intelligence and condition status.
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Page 16 9B10E002
Exhibit 5 (continued)
Planning, Scheduling
& Outage
Coordination (High
Priority, High Value)
APS should develop a planning and scheduling organization as well as the
appropriate processes and tools to increase the effectiveness of the planning
and scheduling processes. The implementation of improved planning and
scheduling processes and tools will maximize the effective use of the current
work force and minimize outage requirements as well as the number of
outage requests.
Productivity Planning
& Scheduling Metrics
(High Priority, High
Value)
APS’s leadership should develop the appropriate process metrics to evaluate
and track the transmission and substation maintenance organization’s
effectiveness in the areas of planning, schedule adherence, productivity, and
the management of the maintenance backlog. The development of these
metrics shall not distract from the organization’s strong focus and
performance in the area of reliability metrics but rather serve to extend the
organization’s focus.
Periodic & Online
Monitoring (Low
Priority, High Value)
APS should increase its investment in online monitoring technologies in out
years to maximize its maintenance intelligence while maintaining an
economic labor cost structure. Online monitoring technologies should be
leveraged wherever the risk or impact associated with a failure or loss of a
particular system or component is significant and poses a threat to the
organization. Online monitoring technologies should also be used where the
technologies significantly reduce craft wind shield time. APS should review
and modify current periodic monitoring tasks to increase the type and
frequency of diagnostic and inspection tasks to a level comparable to
industry standard practices.
Source: Adapted from the Final Assessment Report submitted by APS to Arizona Corporation Commission.
This document is authorized for use only by Alesha McKay in SP002: Implementing and Using Business Information Systems at Laureate Online Education – Walden University, 2020.
Page 17 9B10E002
Exhibit 6
REDESIGNED MAINTENANCE PROCESS AT APS
Redesigned Maintenance Process at APS
Work
Identification
Work Control
(Plan &
Schedule)
Work Execution
Work Closeout
Continuous
Feedback
Source: Internal company documents.
This document is authorized for use only by Alesha McKay in SP002: Implementing and Using Business Information Systems at Laureate Online Education – Walden University, 2020.
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This document is authorized for use only by Alesha McKay in SP002: Implementing and Using Business Information Systems at Laureate Online Education – Walden University, 2020.
