Skip to 0 minutes and 16 secondsSo, as a CEO, what are our top five key performance indicators? So generally, they're revenue generated, they're gross margin profitability, whichever level we choose whether that be the dialler or the operator level. Cash is one of the biggest key performance indicators and also progress with our commercial arrangements. So, those are the kind of key performance indicators I have. Now the financial team will have a different set of key performance indicators, the commercial team will have different indicators and our shareholders will definitely have a totally different range of indicators that they are looking for. So, things like they appreciation of the share price over time, for example.
Skip to 0 minutes and 56 secondsI think you mentioned cashflow and I think for most businesses that will be a big one as well, in relation of better equity as well. Do you prefer a ratio of two to one, which is the rule of thumb or…? No, we are kind of disruptive in the way that we are operating as well. So, the reason that we floated our business in 2013 was that we wanted access to the capital markets to grow quickly.
Skip to 1 minute and 25 secondsSo, if you look, and again I told you that I tend to steal my ideas from other people but if you look at some of the great technology wonders of the current age it started in a very, very similar way and what I am trying to do is very similar to what they did. So, as the CEO I am not actually as worried about revenue and profitability as maybe the financial team is or our shareholdersm what I am worried about is the progress we are making as a business and these collaborations because thatâ€™s where the future revenue will come from. Thatâ€™s where my vision in five yearsâ€™ time actually comes to fruition.
Skip to 1 minute and 58 secondsSo, as a CEO I have to have these key performance indicators in place but the reality is my own personal key performance indicators will be vastly different to what other people are looking for. My next question was actually going to be whether there are any unique measures of performance that you have developed as a company - collaborations will be top of that list, from what I gather. Yeah, so I am looking at our technical progress, our ability to be able to address the future markets and we don’t fall in, you know, if you look at a large proportion of the companies on the stock exchange they are valued on their performance earnings.
Skip to 2 minutes and 39 secondsWell, we are still burning cash; weâ€™re still developing technology and I as the CEO and as the Chairman have to decide whether we continue to develop that technology or whether we plough our profits into the future markets or we slow down slightly and generate more profitability. I, as I said to you before, my personal belief is that the opportunities are so vast for us that actually its wrong to actually focus on the profitability of the business. As long as we have access to the capital markets and the reason we will have access to the capital markets is because the progress we are showing which is why my personal belief is that thatâ€™s what we should have as our performance indicator.
Skip to 3 minutes and 22 secondsYou're in for the long haul? Definitely. Do you monitor the performance of companies and unrelated industries and if you do which companies ideas do you adopt? So, the idea is always to try to gather as much information as we can from across as many markets, as we can to try and stop trends in things like consumer behaviour and government behaviour, technology trends, the way we are adapting to new technology. There's very little point in spending five years developing a technology which could actually be eradicated in the future and so the CEO, as I said before should always be looking five or six years into the future and thatâ€™s what I am trying to do.
Skip to 4 minutes and 0 secondsSome people give themselves grandiose titles like futurologists and I have met a few of those in my time but the reality is what we are trying to do is stop these trends. I'm trying to work out what's going to be really, really important in your life in five yearsâ€™ time.
Assessing standards for comparison
In the video, Dr Adah-Kole Onjewu discusses the process of assessing failure and success with Neill Ricketts, CEO of Versarien – building on the tasks you’ve undertaken in the previous steps.
An improvement in performance may appear impressive until managers realise that competitors are improving at double the rate.
Also, a catastrophic decline in profits could be the result of an unavoidable environmental circumstance (like war, volcanic eruptions, Brexit etc.), and not because of strategic drift. However, cost leaders and companies with differentiation advantage will have deep pockets to survive such problems better than their competitors.
As already discussed, it is not always possible to directly compare organisations because they do not operate in the same way, nor do they offer the same range of products to the same markets. However, managers must try to access industry average figures and use these as a general basis for comparison.
Every industry comprises leaders and followers and the former provides benchmarks for the latter. In the auto industry, most car makers look at Toyota as the standard against which to measure their efficiency. The same can be said of Apple in the mobile phone market and Ryanair in the low-cost travel business.
To conclude, the purpose of analysing the financial statement of Versarien or any other organisation is to draw conclusions about its performance.
In Versarien’s case, you have the benefit of qualitative and quantitative data to contextualise the company’s low or delayed profitability. Managers live and die by their ability to process and present this context to stakeholders in a persuasive way.
Your analysis of Versarien’s performance will differ from the opinion of other students because there are no right or wrong answers to strategic questions. In assessing failure and success, everything is relative but your contextualised arguments must stand up to stakeholders’ scrutiny.
The key to interpreting financial statements is to find patterns and articulate them in simple language. Has there been an increase, decrease, rise, fall, flattening or drop in revenues?
What are your final thoughts about Versarien’s performance? Discuss in the comments area.