Ivan Bechko, the General Director of Kaercher, told LDaily how to meet the needs of customers by offering innovative products at reasonable prices, how to stay afloat in economically difficult times with a faith in the country following well-aligned strategies.
LDaily: Kaercher builds its development on innovation. However, innovations go hand in hand with risks. After all, not all innovations are successful in the market. How do you minimize risks?
I. Bechko: Yes, you are right, innovation is one of the key elements of our company strategy: 85 % of its products are not older than 5 years. In the context of innovation and output on the market, the process of selling such products is extremely important. So, Kaercher pays a lot of attention to the development and testing of products. For example, before an innovative product, product or technology are brought to the market they are tested by our customers. As a rule, several samples are provided for testing over a period from six months to a year. Very good ideas for improvement can appear during testing, which are approved for further implementation. Only when we get feedback from customers that such a model is ready to solve their problems effectively, then Kaercher brings the product directly to the market. It is important to note that the main purpose of innovation is to find effective solutions to the problems of our customers. We learn about these tasks and requirements through close cooperation with them holding meetings, workshops, demonstrations.
LDaily: Is there any difference between Kaercher products available on European shelves and those ones represented in Ukraine?
I. Bechko: Almost all of the line that is present on European markets can be also found here in Ukraine. So, our client in Ukraine can buy equipment that is in Europe. The other question is that not everyone is ready to buy and invest such money. However, trends are changing, and I think that the demand for innovative products will grow in the near future. We can see this by analyzing our sales structure and inquiries from customers. If the price was the main criterion before, we now see the interest in innovative products.
LDaily: The Ukrainian market is full of risks. What risks does the Kaercher company consider significant in Ukraine? How do you minimize them?
I. Bechko: For us, as for the importing company, of course, the most important risks are financial ones, currency fluctuations in particular. To minimize their effect, we use a number of tools, including the optimization of working conditions with partners, maintaining the required level of receivables, certain types of insurance and other tools. That concerns, let’s say, the main risks. There are other risks, for example, on labour resources, the retention and attraction of highly skilled professionals. The ‘visa-free’ situation made some changes, but there are always tools to reduce these risks. You need to increase your salary by improving efficiency, and then you can prevent the outflow of employees abroad.
LDaily: Innovation is not a dominant feature of the Ukrainian market. Our market is rather conservative. What benefits and challenges it creates for your company?
I. Bechko: I would like to turn to history while answering this question. The last 3-4 years were very difficult for the country. If we take the period of 2014-2015 years when there was really a serious crisis and the beginning of the war, then the first place in the country, especially in product strategies, took such a criterion as price. People were not willing to pay for innovations and products and the minimum price was important for them, so that they could solve problems they were facing. At that time, the demand for innovative products was very low, so we lined up our own product strategy based on products that can solve the customer problems in cleaning at a moderate price. However, the trends of the last two years are changing, and our customers and partners are already able to invest in innovation. In terms of professional Kaercher equipment, innovations provide an opportunity to increase productivity and efficiency. Moreover, our partners are beginning to pay more attention to this.
LDaily: Consumers of your solutions are probably not only innovators. What communication channels do you use today according to different tasks?
I. Bechko: The Kaercher product line is divided into two large groups: household appliances that are used for home and professional equipment that is used by enterprises that require more serious solutions for cleaning tasks. Each of these groups of products has its own strategy promotion. If we are talking about a line of home appliances, then we usually attract television, social networks, internet, outdoor advertising. If we are talking about professional technique, we use exhibitions, demonstrations, as well social networks and the internet. It should be noted that the Internet is effective not only for selling equipment, but also for getting an information about the product. Why? When a customer enters the store, they only hear an opinion of the seller who can easily persuade a customer to buy a product or take a certain decision. When a customer enters the internet, they have an opportunity to read reviews, compare specifications, see how equipment works in different conditions. In this context, the Internet network has a serious advantage. As for other methods that we use to bring our solutions to the buyer, these are so-called “cleaning projects”. Kaercher has wonderful cases when the company cleans the famous architectural monuments. For example, the statue in Rio de Janeiro, Brandenburg Gate in Berlin, Mount Rushmore in the United States were cleaned. Kaercher Ukraine is not far behind. Over the past 10 years, we have had many such projects. The most significant and most famous is Potemkin stairs in Odessa. We first cleaned 50 % of the stares and waited a week so that the city residents could see the difference, then we cleared the second part. And the difference was very much noticeable. No less important are other projects, for example, monuments to Taras Shevchenko in Lviv and Rivne, City Garden in Odessa. We carry out 2-3 such cleaning projects either by ourselves or together with our partners almost every year. We completely assume all costs for such activities.
LDaily: Vacuum cleaning robots… How does your company see the future of robotic technology?
I. Bechko: The question is quite interesting and very relevant. As for robotics, it will play an important role in the future. However, if we consider robotization technology, their autonomy is a very important element. In fact, in the 1990s, Kaercher produced a robot, floor cleaning machine, which was used at the airport of Amsterdam. However, the technology of that time did not allow to make it highly autonomous and effective enough, and the price was very high. The demand was insignificant, so this decision did not become popular. Robotization is now one of the main trends in which everyone is trying to take part. And Kaercher, of course, is not an exception. There are certain developments and tests, and the company will go further in this direction. Robot vacuum cleaners for home are already on the market, so Kaercher carries out relevant developments for professional needs. The main criteria is autonomy, so it could independently not only move and clean, but also fill water and cleaning materials, could make self-cleaning, charging and even more. All these things will contribute to its high performance. If the robot can move itself, you also need a human who will monitor it, clean it up, fill and so on. In this context, it is an important trend, but along with robotization, I would also like to highlight two such important trends as digitalization and batteryzation. More and more products, especially household appliances, are switching to battery technology appliances. As for digitalization, the IT component will soon become the most important component of any device. We will be able to control and adjust the parameters of any device which is at our house or at the production facility via the Internet or an iPhone.
LDaily: Are there robots-sellers in Kaercher? What is your opinion on the fact that some specialities will be replaced by robots? How robots will affect the human potential of companies (including labour force) in the future? How is your company preparing for this?
I. Bechko: There are no robots-sellers yet, but robots are widely used at different stages of production. Replacing certain stages with robots is an inevitability, and you need to be prepared and then adapt. Robotization is a trend that will increase productivity, and we will not go anywhere from this process. However, something else is important: there must be people who will create these robots, prescribe technical tasks for them, maintain, connect in certain technological processes. This is the sphere where companies have to adapt and allocate labour resources accordingly. Robotization is an intensive way of development when productivity grows due to innovations. There is also an extensive way of development when we need more and we do the same, but in large quantities.
LDaily: How business conditions and the overall market in Ukraine have changed during the period you have been leading the company (since 2016)? For example, employees, consumers, partners, the activities of regulatory bodies?
I. Bechko: I am an optimist by nature, who always believes that the glass is half full, so I observe the positive dynamics of the business in our country. Of course, the introduction of the visa-free regime has affected the market, labour, especially because of the departure of our compatriots abroad. However, the solution to this question is in our hands. It’s just that people have to be paid a higher salary. How can we achieve it? Very simply: you need to increase productivity. By changing the processes and approaches, changing technologies in the company, we can also increase salary. As for the changes in the work of the regulatory authorities, I would also say that there is a positive dynamics. So, if the company does everything correctly within the law, then there will be no problems. At least we haven’t encountered big problems. When they came to us with questions and we provided them with clear explanations, in some cases they even acted as partners and could consult in detail. We pay taxes, rather big ones, so if the company operates according to the law, then in my opinion, problems should not arise.
LDaily: What kind of visits did you have?
I. Bechko: These were scheduled inspections, clarifications. There was absolutely no intention to punish us for something or to take something back. In matters where we did not agree, we argued and defended our positions.
LDaily: How profitable is the Kaercher office in Ukraine compared to other countries?
I. Bechko: If we consider the profitability index, then we are entering the Top 5. The absolute figure is small: of course, we can not compare with Germany or France, but if we take a comparative indicator of the profit percentage, we are in the top five. It should be noted three main factors in this context:
1. Over the past three years, we have witnessed a positive dynamics of markets we work for.
2. A relatively stable hryvnia within the limits of permissible fluctuations.
3. The strategy of the company.
LDaily: What achievements do you have today?
I. Bechko: Answering this question, I would say that we have decided for ourselves that we believe in the development of Ukraine from the very beginning. So, we have built our strategy. The main components are:
What has been achieved? Successful implementation of our strategy allowed us to:
LDaily: What are your forecasts and plans for 2019? What do you expect from the situation on the market?
I. Bechko: The 2019 year in Ukraine is under the sign of elections, they will determine the country’s economic development and business activities in many ways. I believe that the flywheel of the economy in the country has already been launched and no serious changes will occur.
In light of this, we will build our activities in 2019. We plan the growth of at least 10 %, we plan to expand the staff, invest in opening of new Kaercher centres, develop the service. We place significant emphasis on service, as many can sell, but not less important is the quality of customer support to ensure the continuity of the equipment. The first place takes the service in which we invest and continue to invest.
LDaily: Do you plan large-scale investments in Ukraine?
I. Bechko: Of course. We believe in the country and plan large-scale investments throughout the next two years, we want to build our own office, with its own Kaercher Academy, demonstration centre, exhibition and service centres. So, we have a goal to move to this new business centre in 2021.
LDaily: Why you pursue the construction of an office center but not the production facilities?
I. Bechko: The process of opening new capacities is much more complicated. The production is in other countries, and so far there is enough production space. If there will be such a need in the future, perhaps, Ukraine will be also considered.
LDaily: Please, tell us more about the Academy.
I. Bechko: Kaercher Academy is a centre where we train our employees and
partners, provide the knowledge necessary in our field. The coaching staff of the Academy is certified at the central office in Germany.
The main emphasis in training is on the knowledge of our product, technology, service and skills in sales. We already have a Kaercher Academy, but we plan to make it bigger and better. The educational institution provides services not only in Ukraine, but also to our colleagues from Georgia, Belarus, Moldova, and other countries.
LDaily: How do you rate the investment climate in Ukraine? Are there any visible changes?
I. Bechko: Assessment can be approached from different perspectives, for example, compared to a certain ideal model or investment climate that exists in some developed countries, to which we are still very far away. But I prefer to analyze, taking into account the dynamics, so I want to note positive changes during the last three years. If you evaluate in terms of items that require separate attention from the investor before making a decision to go into the country or not, then this is corruption, financial system, judicial system and the threat of military conflict. There is a certain dynamics in these positions: somewhere it is bigger or smaller, but it exists. Most importantly, it does not stop, we have just started and we have to move forward. Regarding the risks of labour resources, visa-free issues and the phenomena that our compatriots are leaving abroad, here I would like to note that I hear mostly negative opinions, that everything is bad and people run away. I agree, this is bad, but you can see also the positive side in any situation. What are the benefits? First, people who work there learn at the same time how to work in different fields, and get money for this. It is almost unreal to teach a significant amount of our compatriots how to work in modern industries or in other areas. After all, it is necessary to involve a lot of specialists for this purpose, that is very expensive. Secondly, they get used to the system of European standards and values there. It gives us a powerful pool of skilled workers that we can return. And then it’s up to our government. If the conditions for investment and construction of new production facilities will be improved in the near future, people will return, but already trained and ready to work. This is a big advantage that I can see and we can use.
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