Q&A with Populous World’s Non-Executive Chairman, Kevin Ashby.
An in depth discussion with Kevin, reflecting on his successes in his career so far as a Non-Executive, and how he positions Populous World in the invoice finance market place.
What attracted you to take on the role as Non-Executive Chairman at Populous World?
For me the attraction is a combination of a bit of history, confirming that the invoice financing market is ripe for disruption and concluding that Populous World is well positioned to be the disrupter.
I met Steve a few years ago when he was building a database by extracting data from Companies House. He was analysing the financial reports of every limited company in the UK and producing trend analysis. He then identified companies that were likely to need external financial assistance to fund their growth or ease short-term cash flow related issues. He provided this service in the form of highly qualified prospect lists to financial institutions, who would then approach the companies and offer services such as loans and invoice finance.
Steve then contacted me some years later and asked me to become involved with Populous World. Given his previous work I could see that Steve had taken the natural step of moving into the business that his insights were supporting.
Having taken a closer look at the invoice factoring/financing market I could see that it is still quite traditional and while there are a few new players, not much had been done to disrupt it. Given my fintech background, I could see that there is an opportunity to disrupt the market and exploit the inefficiencies of the current model.
For example, the current model is very inefficient in the way that providers of invoice finance attract and on-board clients and the way they use traditional risk management techniques to access and manage the relationship. Highly inefficient processes lead to high costs, which in turn make the service unattractive; especially to smaller companies, many of which only require occasional support.
I quickly concluded that Populous World is well positioned to break down the barriers and allow more companies to participate in this market place – raising finance from their outstanding invoices, but on a selective basis.
There are a lot of great ideas out there that just never got funded. I have worked with many companies who have identified an opportunity to disrupt a market. They have great ideas, can build great technology, but usually don’t have sufficient capital to take their idea to market and in the process attract sufficient capital/liquidity to prove their model works; delivering a service that companies value and a model that liquidity providers can trust.
Populous World is still in its infancy, I was therefore comforted that Steve has raised the finances required to both develop the systems and processes required to enter the market and support the business through to the point it can demonstrate that its business model is viable.
What opportunities or direction do you see fit for Populous World?
In terms of opportunities, I think the existing marketplace is dominate by well-established businesses who have processes and procedures, which are more cumbersome than they need to be.
The incumbents put far too much of an administrative and risk burden on the invoice seller. I believe that these organisations have had to make significant investments in infrastructure and people to support their old business model and are therefore potentially un-competitive, versus a swift and nimble organisation.
For me, it’s not just about creating a swift and nimble low-cost organisation, it’s also important to make it much easier to on-board a client and use modern, highly automated day risk management technique to identify and manage risk.
For example, Populous World uses the techniques Steve developed to quantify and assess risk, supplemented by other techniques such as the well-established Altman Z Score, which is a measure of balance sheet strength/solvency.
The other thing which is quite apparent when you look at the invoice financing industry is that it’s not very transparent. If a company needs to improve its cash flow and has been told about invoice financing, they will naturally start by researching the web.
If they get past the broker sites and manage to find a company that will provide information, without having to register and provide contact details, it’s not very easy to find out how much invoice finance costs, identify the administrative hoops a company needs to jump through, details of the security or guarantees required and what happens if the repayments are late etc.
The only way to find out about the detail of the industry and its processes is to engage with a sales person which most people want to avoid.
It would appear that the providers web sites merely reflect their historical sales/broker driven model which in today’s market is an unnecessary barrier in today’s self-service market.
We are not there yet, but Populous World aims to reach a point where we can provide everything the customer needs online and use highly automated processes to on-board clients, manage risk and make and receive payments, without the need to engage in a complex, expensive and intrusive sales and administration process.
During your 30-year international career, can you name a time when your advice to management lead to an improvement in a company that you have worked for?
I’ve done a number of turnarounds as CEO. For example, PAT Systems which I joined in the early 2000s. The company had raised £50 million in the dot.com boom on the back of very small revenues. It had grown a huge cost base, which was a multiple of its income. PAT Systems was a company that should have been doing better but wasn’t being lead properly. However, the underlying technology was good, but badly managed and supported. The market was buoyant and there was a core team of excellent people. We managed to turn the business around, but what PAT Systems required was not advice but leadership and focus. We managed to turn the company from loss making into a very profitable company, and one of the top two or three suppliers in the world.
I think in terms of advice I supposed I would focus more on my earlier career when I was a strategy consultant – both independent and via PA and KPMG.
I probably look more back to those times because when you’re a chief executive, you’re taking your own council and that of advisers and non-executives, deciding what to do and acting on it.
When I was an independent consultant I was lucky enough to be asked to advise the LINK organisation, an ATM network, which was at that time exclusive to UK building societies. I managed to get the board to agree that they needed to change the business model and engaged with the banks, who they saw as competitors. This move, from a building society utility into an inclusive financial institution network, was a major step towards what we have today – a UK wide network of ATM’s that are issuer agnostic.
Around that time, I carried out a number of engagements for Barclays and helped develop their strategy for e-payments. I was also asked to advise the Granada group on the impact of the Internet. I remember telling them that in the future there would be more value in booking hotels than managing them. This was years before LastMinute.com and Expedia etc. – sadly they did not agree, and I did not have the balls or finance required to prove them wrong.
I now operate as a Non-Executive and it’s completely different to being a CEO in that you don’t have the authority to tell people what to do. You can drive the adoption and audit of processes required by regulatory authorities and shareholders and you can help define strategy. But primarily you’re there to give the CEO guidance when asked for or needed and sometimes point out things they should and shouldn’t be doing. But you’re ultimately reliant upon the executive team to take your advice and to act on it. What you have to do as a Non-Executive is be brutally honest with yourself and if you ever get to the point where you think your advice is not required, or being ignored, you shouldn’t be there.
How do you organise, plan and prioritise your work?
It depends on the organisation and what they need from you. For example, the Board and CEO of one company where I’m a Non-Executive have asked me to take on a number of specific tasks. For example, given I have been a strategic consultant, they asked me to develop their strategy framework, and help them articulate their longer-term business strategy. In this case the CEO had some reasonably clear ideas of where he wanted the business to go, but there wasn’t an execution framework and the level of communication and buy-in required to enable the organisation to buy into that strategy and set about its execution.
I also did a lot around some shareholder and (PLC) related matters such as a plan for re-listing the business in a more senior market. In some situations, especially well-established businesses there are clear tasks that need to be done by non-executives and advisers and you can be asked to take on those tasks. Populous World is still in start-up mode and there are no external shareholders to manage and report to. So, it’s a lot less structured at this point.
It is also early days for me in that I am spending a lot of time talking to other people in the finance market so that I can take a wider view before coming to any conclusions about the detailed positioning and activities of the company.
Can you share the financial performance of a company you have previously been employed by, what was the biggest contribution to the success of the company?
Referring back to PAT Systems, within a few years we turned the company from a loss-making business into a profitable one and in the process increased the value to shareholders by about £35 million. We also distributed £10m to shareholders by the way of a scheme of arrangement.
In terms of contribution, by way of options, I made every member of staff a shareholder and I am sure this was fundamental in bringing everyone together and creating focus.
If you look at Saxo, from a standing start with no physical presence in Asia, we opened a Singapore office and we grew turnover from zero to £60 million in three years and grew funds under management to around £500-600 million.
The lessons from the two situations is that PAT Systems had a good product but didn’t really have their act together in terms of how they brought the product to market, how they managed and supported clients and how they were presented in the marketplace.
With Saxo, they had a good product but with everything being run out of Denmark, they had little appreciation of how to grow a business in Asia. We took a well-established product, developed it for the Asian market and established local operations in the process creating a local brand.
But it’s also about timing, PAT Systems was bringing real-time trading systems to a market that was moving from trading from a desk and telephone to trading from a screen, and Saxo arrived in Singapore in 2006 which couldn’t have been better timing, and we were the first of the global players to arrive.
Good products and services can conquer markets – quickly – but timing is everything.