Casting a successful strategy

Radius Payment Solutions, the group behind a range of innovative fuel cards, vehicle telematics, telecoms and insurance products, is one of the UK’s largest private companies.

Ranked 19th in the 2019 Sunday Times HSBC Top Track 100 list, it has a turnover of £2.5bn. CFO Simon Oldfield attributes this to the company’s MO of a hands-off management style and open-mindedness, combined with a refreshing tendency to steer clear of the distraction of short-term opportunities.

Radius Payment Solutions (Radius) was founded 30 years ago by Bill Holmes, with the aim of providing fuel payment service for fleet operators. From the outset Holmes wanted to build something lasting with a strong customer focus and capable of adapting to market changes. This is not formally documented in a vision or mission statement, but Holmes’s leadership sets the appropriate tone.

The fuel card business has proved to be highly cash generative, so Radius has been able to expand organically with some fill-in acquisitions, while remaining privately owned. The majority of the shares are owned by Holmes, employees and former employees, supplemented with a private equity (PE) stake.

All owners are happy to think long-term and see profits re-invested into the business. The PE firm is supportive but not interventionist. Moreover, it is accepted that new locations and business lines may take a number of years to become profitable.

“I’d spent quite a lot of time around public companies over my career and it’s really quite refreshing to be part of a business where there is a clear focus on creating value but it’s not driven by quarterly earnings statements or hitting annual targets to satisfy external investors,” says Oldfield.

Of course, not all companies will be in this enviable position, but the advice below remains pertinent.

Radius works to a three-year rolling plan that is produced bottom up so that long-term thinking is spread across the organisation. Although it can be difficult for some parts of the business to predict technological changes, it is still expected that they can think through long-term customer needs and how they might be met. The three-year plan is produced in the first quarter, with a mid-year review.

“We don’t really tinker with it much during the year,” says Oldfield. “And we don’t stifle managers with endless forecasting.” Once the plans have been agreed, managers are trusted to do the right thing and to get on with delivering the plan. However, a small number of weekly KPIs are monitored at group level and corrective actions taken when necessary.

Acquisitions are carefully thought through. Detailed criteria are set in advance and Radius is patient in finding the right target. All acquisitions are linked to existing services (often based on requests by existing customers) but still offer some diversification benefits.

As Oldfield puts it: “We don’t really see ourselves as a portfolio of independent businesses, it really is a collection of related services built around the customer base.”

Deal sizes are small and focused on powering organic growth. Examples include a Telematics acquisition in the US, where it has been difficult to establish brand awareness, and an insurance acquisition to obtain the experience necessary to supplement the initial organic investment.

Given the financial flexibility Radius has, one of the most difficult things is turning down the large number of exciting opportunities available. But everyone on the management team realises the importance of a disciplined approach and not being distracted by short-term opportunities.

Radius recognises the importance of investing in research and development (R&D) to maintain its competitive advantage – technological change is even starting to affect the previously stable fuel payments business.

Therefore Radius is looking to play a leading role in app-based, automatic fuel payment methods as the industry moves away from plastic cards. “We are trying to be the ones in the market that drive that change rather than have it done to us,” says Oldfield.

They do not operate a formal stage-gate process for innovation. But, because most R&D is centralised, progress can be monitored informally. This enables Radius to keep an open mind while still stopping projects that start to head down blind alleys.

A large proportion of the work force is in sales, so it is important they also take a long-term approach. To achieve this most salespeople stay with a customer for at least a year to ensure the customer receives the value they expect. This avoids the risk of salespeople over-promising and not taking responsibility for service delivery.

Salespeople are also expected to engage customers in discussions on service lines for which they are not directly responsible. Cross-selling, where there is clearly additional value for the customer, improves customer retention, which is vital for Radius’s long-term strategy.

The trend towards alternative energy sources could have major implications for Radius. And there is the potential for rapid change if there is a significant technological breakthrough or regulatory change. “I don’t think any business can sleep easy thinking that the market they are in is going to be unchanged for any period of time,” says Oldfield. In order to think about possible disruptive changes, Radius holds regular, informal discussions about different scenarios and how they might respond.

Fortunately, they are able to draw on industry scenarios from their oil company partners who are leaders in the field of scenario planning.

Oldfield leads by example when it comes to focusing on long-term value. Within the first week of joining Radius five years ago he wrote down six targets for his long-term contribution to the company. Since then he has measured progress against those targets regularly.

“One of the challenges in the CFO role is that you are often dragged into a very wide range of activities across the business,” says Oldfield. “But not all of them add a lot of value, so you have to be disciplined with yourself and force yourself to focus on the activities that are going to make the most difference.”

Download PDF version:

• Business & Management magazine, Issue 283, April 2020 (pp.28-29)

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