ServiceComm, Inc., is a technology company that manufactures, installs, and services cellular towers for cellular phone companies. These towers provide greater connectivity for cellular users. It is a subcontractor for tower installation companies and provides service for most of the large cellular companies. Two years ago, ServiceComm had an initial public offering (IPO) where it raised $500 million in operating capital. With that money, it built a new factory and administrative building, and developed much of the infrastructure needed to serve as the regional leader in cellular infrastructure. The company gets most of its revenue from service contracts on the towers, and not the price of the tower installation itself. In its prospectus for the IPO, ServiceComm stated that its only critical performance measure of success was the number of cellular towers under service contract. It stated that if, in two years, it has 50,000 individual towers under service contract, then it would consider itself to be successful. Now, two years later, there are over 100,000 towers under contract within ServiceComm’s system. Unfortunately, however, ServiceComm is still losing considerable amounts of money and is experiencing serious complaints about dropped calls and signal strength.
Required:
1. What do you think about ServiceComm’s “number of towers under service contract” performance measure?
2. If, in fact, ServiceComm measures its success solely on the basis of the number of towers under service contract, what important performance measures is it ignoring?