In-Depth

BI Guru Declares: Service Level Agreements Stink

Frank Buytendijk tells us what he really thinks.

• By Eric Kavanagh
• 08/22/2007

Yep. That’s what the man said. Those pesky service level agreements that bind departments of your organization, and (at least ostensibly) serve to ensure ongoing collaboration… they stink!

"Service level agreements make you lose the most important characteristic within the organization, making you a supplier to your internal customers. They are not your internal customers; they are your colleagues! What you should do within an organization is share the same set of goals, share the same set of customers. SLAs make the world smaller, and make your performance go down to your own center of the universe."

So decried TDWI’s Monday keynote speaker in San Diego, Frank Buytendijk, vice president of corporate strategy for Hyperion Solutions. The renowned BI guru, who hails from the Netherlands, essentially deconstructed the old-world view that performance management is all about optimizing internal performance.

"There’s a new hype going on," he said. "Everything has to be 2.0. People say it’s about more interactivity, more cooperation… I was doing stuff like that 20 years ago. But hey, it’s hype! Everything is 2.0!"

The specific 2.0 in question, said Buydendijk, is collaboration: co-creation, co-development, co-marketing. "You see it in every industry today," he said, pointing to all manner of cooperative manifestations, from espresso makers to beer dispensers, iPod accessories to frequent flyer programs. "You can buy a relatively cheap Korean PC, but because it has Intel in side, it gives a certain level of confidence."

The point, he said, is that a new era recently dawned, one that inverts the traditional models of development, marketing and even management. It’s the age of the network.

"It’s also in the way we organize," he said. One example: Procter & Gamble used to have a huge research center where scientists in lab coats conducted a wide range of tests, trying to find new answers, new ideas, classic innovations. "They’ve changed that. Now, their researchers are flying around the world." In essence, Buytendijk noted, they’ve embraced the Network Age: instead of trying to innovate internally, they’ve focused on finding and harnessing innovations from all over the globe.

Buytendijk went on to demonstrate the difference he sees between the 20th Century and the 21st Century. Last century, he said, the directive was: "How do I optimize my performance?" Today, the mission is much different: "What do my partners do to contribute to my success? And how do I contribute to my partners’ success?"

The upshot of his point is that in the Network Age, your secret to success is finding ways to optimize the manner in which you work with your partners, such as suppliers, resellers, even competitors.

Having laid the foundation for his argument, Buytendijk moved into the realm of relationships. He said there are three types of relationships: transactional, value-adding and joint relationships. The first level is focused on the self: me, me, me! The second level are value-added relationships: you! And finally, the most mature type of relationship is a joint relationship: us!

To explain his point, Buytendijk talked about personal relationships. In the first stage, you’re focused on pleasing yourself. In the second stage, you think in terms of your partner, and what you can do to help them. Then, in the final stage, you and your partner genuinely act and think like a team. "So, if this is how we manage relationships, why don’t we do the same in our professional life?"

Performance Management 2.0

Moving to the professional realm, Buytendijk talked about the value of collaboration in the world of performance management. Just as with the Procter & Gamble example, he noted that innovation these days often originates outside the corporate walls. The key is to build strong relationships with your partners, such that when they innovate in a particular realm or discipline, you benefit from that innovation as well.

"Innovation is not about product or service anymore," he said. "Innovation is: How can I adapt my product or service to this environment? If you move to a joint value relationship, it’s about relationship profitability. You don’t contribute products or services; you contribute your resources and your skills."

A perfect example of this new paradigm (not mentioned in the keynote) is the innovation driven by Wal-Mart in mandating that its suppliers use specific technologies like radio frequency identification (RFID). Because Wal-Mart is so big and affects so many suppliers, it is effectively forcing a wide range of organizations to up the ante on their technology front. A rising tide lifts all boats.

Of course, new paradigms require new ways of thinking, and new ways of measuring. Performance management, after all, requires consistent measuring and monitoring to enable effective management. Buytendijk stated that balanced scorecards and other methods of corporate monitoring are, in his estimation, out of date, because they ask the old question: How do I optimize my performance?

In the new world of managing performance—where you focus on how you can help your partners, and how they can help you—the key is transparency. Success hinges on sharing information with your partners and suppliers. This enables greater collaboration because everyone is on the same page, information-wise, thus limiting redundancy of efforts.

The age of information democracy has arrived, he said, as evidenced by the rise of business intelligence (BI). In this age: employees are empowered; suppliers are aligned; information is the product; shareholders and regulators are informed. "The killer business case is when you can share BI with your customers!"

The outspoken software strategist then offered three steps to success in this new era: First, you must determine the stakeholders in your environment who drive value, and work to understand the level of your relationship with them. What kind of transparency is necessary? Second, share information! Start sharing more info with them to tighten and improve your relationship. Third, remember that measurement drives behavior! As the old saying goes, what gets measured, gets managed. And keep in mind that reciprocal metrics drive collaborative behavior: how well are we working together?

Of course, there’s always a caveat somewhere. "Don’t overdo it," he exclaimed. "Don’t try to measure every single little thing you have. Too much measurement makes a relationship more transactional, where you do what you’re supposed to do, and nothing more." The textbook example here: that dreaded service level agreement!

In the end, Buytendijk explained that this movement toward effective measurement of collaboration essentially deconstructs itself, as partners escalate their level of trust. At first, you work with your partners on a contractual basis, doing what the contract requires. Soon, you hopefully rise to the level of competency trust, where you believe your partner will not just do the job, but do it well. Ideally, you then graduate to a goodwill trust, where you believe that your partner will act in the same way you would in any given situation.

In this sense, Buytendijk’s point hearkens back to one of the most powerful books in the history of philosophy, the Tractatus Logico Philosophicus by Ludwig Wittgetnstein. Near the very end of this masterpiece, the eternal philosopher makes this paradoxical, poignant point:

6.54 My propositions serve as elucidation in the following way: anyone who understands me eventually recognizes them as nonsensical, when he has used them—as steps—to climb up beyond them. (He must, so to speak, throw away the ladder after he has climbed up it.)

Great minds think alike!