CRN Polska talks to Adam Rudowski, Veracomp CEO, about the management issues in a fast-changing business environment, problems that broadliners face on the VAD market, employing the Generation Y, and an alternative for Microsoft's cloud.
CRN We've come to some critical point in distribution line of business. Broadliners are looking, sometimes hectically, for new sales markets and ideas for their businesses. It seems, however, that VADs are faced with quite some challenges, too. How does Veracomp cope with that?
Adam Rudowski Our management board devotes one day a week to improve the strategy. Owing to which, we have been constantly developing in Poland and across the region. We put lots of work into that. Frankly, I fondly recall the ‘90s when things went in the right direction without so much effort taken on our part. These days, you have to devote more time to define where and what you wish to be in a few years' time. There is no room for lack of professionalism.
CRN So the entire day a week is devoted solely to strategy development? Is it not enough to sit together just once and get it right? Is it not better to plan the strategy and then just implement it, without those continued “sit-ins”?
Adam Rudowski Business development, just like your own personal growth, is a never-ending endeavour. I’ve already learnt that each improvement is just the first step towards subsequent changes that in turn make up only a single stage in your further development. In short, we are always at the beginning of the road.
CRN Especially given the fact that you are slowly turning into an international corporation. Each country has its specific nature and it’s hard to talk about one business model as a pattern for all your branches. For example, the management board of Czech Veracomp in an interview for the local paper Reseller Magazine emphasised the importance it places on separating professional life from personal life and that they are absolutely against overtime. Well then, I'm asking you, half jokingly, don't they slow down your business development there? How can you keep work-life balance, especially in the fourth quarter?
Adam Rudowski It's related to organisational culture that we've developed over many years. Let me start by saying that each one of our companies is free in developing on its own. The one condition is implementing two basic values: freedom and responsibility.
CRN Freedom does not mean unrestraint, and besides, it's a very broad term. How do you mean?
Adam Rudowski It's freedom to choose the way of achieving set goals, and responsibility for their effective attainment. These two values, so important for us, draw to Veracomp, creative, entrepreneurial, and independent people, who, at the same time, are disciplined.
CRN Does your internal structure offer them possibilities of pursuing their ambitions?
Adam Rudowski There's a strong decentralisation in our company. Besides, our organisational structure is relatively flat. We focus on independent decision-making by persons who are the closest to our partners. It all results in speed of operations and stimulates creativity, openness, integrity, honesty…
CRN With a flat structure it's hard to get promoted, because there are fewer managerial levels…
Adam Rudowski Not necessarily, the company may develop vertically and horizontally. At Veracomp, we constantly introduce new products and create teams and groups to manage them. Over the last year a new sales department has been created providing services to smaller partners who need technical expertise.
CRN So you support your employees’ manner of wok in Czech Republic?
Adam Rudowski Petr Janda’s management manner fits into our organisational culture. We value their care for the so-called work-life balance. Apart from additional training, never in our history have we encouraged people to work overtime and, of course, we don't want to do so. Balance between work, family, and hobby is of the key importance.
CRN You need to be highly matured to reach that balance…
Adam Rudowski Persons who achieve it are resilient to stress. Maturity also denotes assertiveness, but not arrogance, and it means shrewdness, responsibility, learning from mistakes. Internal calmness is important. Naturally, nothing just comes by itself. A good mental approach to your professional life must be worked out, knowingly cared for.
CRN Coming back to strategy building…
Adam Rudowski As I've said, the team our managers that works on it, devotes one day each week only to its development. We review the market situation, changing expectations of customers and suppliers, we develop unique services. All that is done to have a “fresh” strategy for Veracomp that is constantly improved on the basis of current information and experience. Majority of Polish companies don’t devote to it even a single day a year.
CRN Since when have you been pursuing these tasks with such high frequency?
Adam Rudowski Since 2012.
CRN Unbelievable. I have an impression that in many other companies the CEO would meet with extreme resistance from the overworked managers. Was it hard?
Adam Rudowski If a manager is 100 percent busy with closing current projects and resolving pressing problems, then naturally, he doesn't have time to work out the strategy to have a company growing smoothly. Management is primarily about building and implementing a strategy. Setting up a system in which the boss may leave for two, three months, and a business or a department will nonetheless operate perfectly well. Anyway, I'll soon go away for a long time and I am confident in the development of Veracomp during my absence. It's the merit of our entire managerial staff.
CRN Well then, but does it have to be a whole day a week? It may disorganise work in many companies…
Adam Rudowski The time is not an issue at all, because you can meet and plan once a month or a quarter. The problem many businesses have is that their managers don't know what strategy development is about. Not to mention that it accounts for 5 percent of success only, while the remaining 95 percent is about its disciplined implementation.
CRN How is it possible to build today something solid, while it's hard to think ahead and imagine the future just two years away from now?
Adam Rudowski The best way to foresee the future is to create it. If a business succeeds to collect appropriate intellectual potential, it'll be possible. Of course, we need a good idea for our business. And, from the beginning, I'd make a reservation that a claim saying “I wish to make lots of money” is not any idea at all. Actually, this shouldn't be the main goal for setting up any business.
CRN So what should it be, then?
Adam Rudowski Delivering unique values to all those on whom our market success depends – customers, employees, suppliers, and financial institutions. In case of customers, it must be a specific value for which they'd be willing to pay, because it's actually valuable for them. What's more, it must be a unique value, or something completely new or at least a major innovation on the market that already exists.
CRN In a second you’re going to say that a good idea is just the beginning?
Adam Rudowski Such value should be scalable, or possible to be offered across the country, and, better still, abroad, too. You have to think about business in such terms, because we're living in times of globalisation. Our idea shouldn't have any limitations at all, since otherwise it'd be successful in, say, in Bydgoszcz only, but not in Warsaw.
CRN Why uniqueness is so important?
Adam Rudowski If you're the best at what you do, then it's very hard for others to propose something that will convince customers to change their provider, and employees to change their place of work.
CRN In the US only a few percent of start-ups become commercially successful. The rest of them go bust. This shows with how big a risk a visionary's fate is burdened…
Adam Rudowski Well, you must know when to hand the reins over to professional managers. Founders of start-ups too often miss this moment and fail in a merciless world of the real economy.
CRN What should today's manager be like?
Adam Rudowski A manager must be a good administrator. The one who'll care about proper operation of the established structure that each medium-sized and large company is. Such complexity stems from a complex business and a legal environment in which we work today. Naturally, a company should be led by a visionary, a strong leader, but without professional managers even the best vision will not be implemented.
CRN So what are the three success factors, three primary features that decide about being and not being these days?
Adam Rudowski Discipline, humbleness, and luck.
CRN Discipline is an obvious thing, but humbleness? In tough business?
Adam Rudowski Humbleness is needed to see the world it really is. To base your actions on facts, and not on imagination about the reality. A business idea rooted in such imaginary dreams will not satisfy real needs of customers, will not face the real competition and problems. It's also one of the reasons why leaders frequently mismanage companies. They impose on their subordinates their own, false vision of reality. As for luck… statistically, we all experience the same number of successful opportunities. However, successful people are distinguished by how they perceive them and how fast they can use them. Therefore, luck depends on us, too.
CRN For some time now in Poland there’s been a growing number of groups of small, specialised distributors that are often composed of few persons only. Will they become over time a threat to such a large company like Veracomp?
Adam Rudowski We seriously treat each new distributor in Poland. On the other hand, as I've said, we spend very much time on building a unique strategy and that's why we're not an easy opponent.
CRN Could you be more specific: why are they not dangerous rivals?
Adam Rudowski We may be threatened by an organisation that'll create a more valuable business for the market and which, at the same time, is more scalable in the field of distribution with added value.
CRN And that's why you don't look at business through Polish or global competition…
Adam Rudowski It's a model of Datsun that was a follower of Toyota and Honda – copying their best, proven solutions. However, when it implemented them, both rivals were a year or two ahead of Datsun again. Consequently, the brand disappeared from the market, and Toyota and Honda are doing very well. We want to be a leader in delivering values, making others follow us.
CRN On the other hand, an integrator that goes to a small distributor with a contract worth a million will be treated like a king. It's hard to imagine he'd be looked after the same way like in case of a large organisation such as Veracomp – a professional distribution machine.
Adam Rudowski Small distributors usually don't have top brands, as such brands wish to co-operate with the best, large distributors that have a regional coverage, financial potential, etc. Larger integrators, in turn, want to sell leading brands. And the circle closes here. But, it's just one side of the coin, as our efforts are the other one, i.e. we focus on looking after partners before, during, and after each transaction. We provide services whenever they need them and we keep in touch also during “inter-transactional” periods. Each integrator may feel very exceptional with us.
CRN For a longer period of time now, broadliners have been trying to do distribution with added value, but the results are poor. Or the reason is – “quoting Rudowski” – that the willingness to increase margins is not an idea of business?
Adam Rudowski Yes, higher margins is rather a side effect of a good strategy and its implementation.
CRN Speaking of that implementation which is so poor that a takeover of some VAD by our broadliners seems to be a more real scenario. Is it a good idea?
Adam Rudowski We're talking about two completely different worlds. Broadline distribution is based on excellent logistics and financing. A VAD model is much more complex and doesn't translate into broadline in any simple way. By the same token, assembling desktops is different from designing processors. You can be a champion in both of these specialised areas, but that doesn't mean that you can become one in turns, alternatively. Veracomp has been building its value for over 20 years and we've set the threshold very high during that time.
CRN That's why it's better to buy a well-doing distributor with added value than struggle with creating such value on your own…
Adam Rudowski Examples from the world show that combining a broadliner and a VAD is a bad idea. Not just to pay lip service: revenues plummeted by half in the first year after the takeover of Azlan by Tech Data. Reason? New procedures introduced by Tech Data and departure of key staff from Azlan. There are more such examples. An attempt of implementing broadline culture in a VAD will bring about a failure of the latter. Please remember that operating objectives of both types of companies are different, including different ways of reporting.
CRN What's the biggest obstacle here?
Adam Rudowski Profitability measured by revenue correlated with a number of employees, cost ratios, cash conversion. A majority of indicators to which investors in broadliners are used to would exclude a VAD from the game. Because it doesn't work like that with us.
CRN Meaning what? You will not allow yourselves to be bought?
Adam Rudowski Valuation of a broadliner and a VAD don’t add up in a simple way. After such merger, the broadliner would lose its existing indicators and simultaneously damage the “purity” of distribution with added value. That's why Veracomp will never go for it.
CRN And if, theoretically, some broadliner has decided to exit the stock exchange, which would provide it with freedom of decision-making without increasing the said indicators to their limits? Would you become part of such a deal?
Adam Rudowski An issue of differences in organisational culture remains. While doing integration with subsidiary entities, we just primarily focus on making organisational culture more common. Before the takeover happens, we think over if people who work there will be willing to stay with us and implement a joint vision, if they're guided by a similar system of values. By way of an example, when we acquired Mack IT, a Croatian VAD, we had checked if the way of operating and “thinking” in that company was similar to ours. In short: similar questions have been popping up for many years, but Veracomp is not for sale.
CRN Therefore, broadliners have a problem… All the more that we experience high staff turnover in IT business, also in distribution.
Adam Rudowski There is no loyalty among customers without loyalty among employees. In turn, there is no loyalty among employees without loyalty of shareholders towards goals and needs of the company. This applies to all enterprises on the market. All too often, new shareholders change strategic or operational objectives of companies without caring for the reality and environment. Consequently, a non-market strategy is developed that destabilises the company, which in turn brings about an outflow of best professionals, and, in the end, customers, too. This is the biggest ailment of companies today whose shares change hands being transferred to new shareholders or in which management changes. It's hard to be committed to something that completely changes once every two years. People like to become involved in long-term projects. If someone isn't able to guarantee implementation of a strategy over a long period of time, they'll struggle with staff fluctuation at various levels. Employees wish to feel that they create something permanent and great.
CRN What made you have such an internal imperative of well-though and even precise management?
Adam Rudowski Ever since my childhood I've had a nature of a constructor. I've always liked to know how things work. And I do so even today. Anyway, that's why travelling is my hobby. By getting to know various cultures, customs, religions I understand better how the world functions. I've always been and still am inquisitive. And this is my advice for other managers. Try to discern what others don't see in a given situation.
CRN Easy to say, when everything goes according to the plan…
Adam Rudowski Very many people treat business failures as their personal failures and break down. I treat them as valuable lessons learnt in life. Thomas Watson, founder of IBM, said that if you want to increase your success rate, double your failure rate. You have to continuously experiment, try, and test. Failure is an integral element of development. Provided that we draw conclusions from it.
CRN What makes Adam Rudowski develop?
Adam Rudowski Continued education, meeting with extraordinary people, excellent books. And finally, hiring people better than you, because we're as good as people that surround us.
CRN A new generation of employees is entering the labour market who are different than those from the ‘90s. How do you cope with that?
Adam Rudowski Persons we're talking about are self-confident, have sense of their own value. They challenge authority, focus on themselves and their own development. We respect that and adjust to the way new generations operate. We don't try to make those people adjust to old patterns. It's one of the topics that we tackle during our weekly strategic meetings.
CRN Do you adjust to them? Is it not enough that you give them jobs?
Adam Rudowski Companies from the “previous era” expect loyalty for having given a job to someone. Now, it's out of the question. And as Andy Grove said: adapt or die. A company should treat its employees on an equal footing with customers and should be attractive for both these groups. There's no such thing as motivating employees. Each of us has internal motivation that depends on a life stage. Each company has a task to identify what motivates whom and to create an environment that will trigger such motivation.
CRN It should be released by such a new challenge as a takeover of a Red Hat department by Veracomp from Czech Servodata. What's the purpose of such transaction?
Adam Rudowski We want to provide integrators with an alternative in relation to a cloud strategy of Microsoft that is a step away from taking over direct, independent servicing of end-users. Please note that Microsoft has been shrinking, while Red Hat has been growing at over 20 percent per annum, given quite a significant turnover of USD 2bn. Not to mention solid margins for the entire channel.
CRN Especially that this market segment has lots of room for services…
Adam Rudowski In a near future, business advisory will be the key to the customer's door. For the time being, the entire IT market is not too strong in providing it, but this is changing.
CRN It's been a debatable topic for a decade now, but nothing has come out of it. Why?
Adam Rudowski It's not common, because IT trends observed by us are not that much troublesome to stimulate integrators to a radical change in their operations. A strong pressure exerted by the market in connection with the arrival of the cloud is still ahead of us. It's worth remembering that the infrastructure for private clouds and traditional IT or hybrid solutions (local equipment with a public cloud) will continue to sell excellently well.
Interviewed by: Tomasz Gołębiowski and Krzysztof Jakubik, CRN Polska