LIFE WITH SODA: Mykola Kmit on how to beat Coca-Cola and Pepsi with the help of vacation and NLP
Our interlocutor is one of those who was building modern Ukraine, its politics and economy. He managed to be a successful official and to create the largest domestic production of mineral water. This diverse experience is now implemented in his new business. Today, Mykola Kmit, the former head of the L’viv Oblast State Administration and the honorary president of the IDS Group, teaches the Ukrainian entrepreneurs how to think systematically and helps them to make their businesses as efficient as possible. «I am now engaged in the education of those entrepreneurs who in agribusiness want to create another Morshinskaya (IDS Group brand. — Ed.)» — Kmit himself describes his business.
Leadership Journey, in cooperation with the Kyiv International Economic Forum (KIEF), where Mykola was a speaker, asked him about the main things: the spirit of entrepreneurship, the younger generation and the courses of NLP (neuro-linguistic programming. — Ed.), which helped him to beat Coca-Cola and Pepsi.
LeadershipJourney (LJ): Mykola, what are entrepreneurs in your understanding? What makes them successful?
Mykola Kmit (MK): Successful entrepreneurs are not numerous. Statistics show that only 3% of people inherit entrepreneurial capabilities or cultivate them under the influence of external factors. If a country could boast of 10–15% of born-entrepreneurs, it would be ahead of others in development. The advanced countries of the world are working on the generation of ideas using artificial intelligence.
An entrepreneur is a creative person who is distinguished by a lack of fear. In childhood, such people stand out in their actions. They are fond of trading. e.g., he would trade «his dad’s phone» to a «neighbour’s bike”. These kids fascinate me. I tell their parents: “You should be happy to have such a child. Help him. He is a future entrepreneur».
The advanced countries of the world are working on the generation of ideas using artificial intelligence.
Let me give you an example. My friends’ son, when he was in the ninth grade, managed to buy a car for $ 1000. The parents found out that he owed money to one person, to another person. The guy was going by car to a disco. The parents did not know about this. Then, I told my friends: “Listen, he is an amazing person – with no income he found a thousand dollars, convinced his acquaintances, and bought a car. He drives to a disco.” Now their son is in the travel business. Whether he will grow from an entrepreneur to a businessman is a question. This step is much more difficult than the first one.
In developed countries, the bulk of the business and income of the country is based on entrepreneurs. They should be the most numerous part of the population. Basically, the budgets of countries are formed not by large enterprises, but by small and medium businesses. In our country, the situation is a reversed one. Because many people who become small entrepreneurs stay at this level. They focus on financial values, earn money for a family living; some do better, some – worse, but they do not move further.
There are still those who study very well and make a corporate career. However, I do not really believe in a corporate career. Take me, for instance. I have started as an installer and have grown up to the general director position. Sometimes it happens. I have witnessed such cases in my life. They are very rare. In essence, an entrepreneur is an entrepreneur from the beginning. Usually, his mother or his wife is an accountant, and he is the boss.
I do not really believe in a corporate career. An entrepreneur is an entrepreneur from the beginning.
LJ: Are there any common principles that are suitable for managing a company and a state?
MK: Government officials would say “no”. Judging by my own experience, I could say that there are common tools. I believe that the basic principles of management are the same – both in business and in government. Unfortunately, they are not widely used in our country.
Basics of management are the same in business and government office.
There were closed Soviet systems. For example, Leonid Kuchma was in charge in the government sector. The state was ruled by the old methods, not competitive with Europe and the USA, but these were the first steps. When I was an entrepreneur, the head of the rayon administration used to come to our company and ask (about the volume of bottled mineral water production): “Guys, do you bottle more water already? How much will be a month? Will you bottle more next month? ” Because Kuchma was pursuing a policy of increasing production and GDP growth. We were lucky with such leadership at least at the level of the rayon administration. At that time, everyone (authorities) was interested in entrepreneurs.
LJ: What management situations did you encounter while working in the oblast administration, and how did you manage to solve them?
MК: I was always wondering how the Prime Minister could manage 80 people. In management, there is a basic rule: you can supervise no more than 12 subordinates. We now have more than 20 heads of oblast administrations, more than 20 heads of oblast councils, 8 mayors of big cities, 25 people in the Cabinet of Ministers and ambassadors. I counted 80 people. For me, this means that Ukraine is an ungovernable state.
When I was appointed the Head of the L’viv oblast state administration, I had seven deputies; and two assistants, whom I counted as one. In addition, I had to work with the Mayor of L’viv and five mayors of the significant big centers. Additionally, I had to coordinate the law enforcement agencies. Total – personal communication with 15 people.
In management, there is a basic rule: you can supervise no more than 12 subordinates.
I refused to travel to the rayon centers, to the villages and refused to manage them, except for an emergency. At first, it seemed wild. Indeed, in Ukraine, there were traditions to visit cities of the territory (under control). However, I said that it was impossible. I focused on 10 major projects of the oblast; these were Euro-2012 projects – construction of a stadium, airport, roads, infrastructure, water supply to the city of L’viv, trivial as they might sound, etc. There was also a constant communication with Kyiv (decentralization was not yet in force and you had to “knock out” the money in Kyiv.
In my view, it would be more efficient to divide the country into five administrative parts and appoint a manager in each.
Speaking about the management of the state, I think, it would be more efficient to divide the country into five parts and in each of them assign a manager. Then the Prime Minister (President) would not need to gather all the governors. It would be more productive to communicate with these top five managers. Once a week the information from these managers should be sent to Kyiv. What is happening, for example, in the Western Ukraine? It will be sufficient to know 10 basic things about a region – and the Prime Minister knows everything. Not the way we do it in our country: we are fighting against smuggling this month, fighting for the harvest another month, and then fighting for gas. In fact, these tasks should be performed by other people. Not by the top authorities of the country. Simply, people responsible for the tasks should report on a weekly basis. This way the work will not fail.
LJ: Why do you think we do not have good investments in processing, and Ukraine remains a source of raw materials?
MK: There is no straight answer. We have serious people, but they do not go into the investment business. First, the war stops them. Secondly, the poverty of the population. We have a very small domestic market. It seems like we have many people, but the average check (receipt) is small. There are many businesses, which do not enter Ukraine because of the small average check. They are not afraid of corruption and security forces, they are afraid of the poverty of the population. As soon as we overcome poverty, people who can export products will come here.
There are many businesses, which do not enter Ukraine because of the small average check. They are not afraid of corruption and security forces, they are afraid of the poverty of the population.
We have not yet joined the European Union and we have fewer restrictions. As soon as we join, we will have to have a license for each cow. For example, an increase in livestock will be controlled so that it does not lead to overproduction. In Europe, they give money so that the farmer does not sow to balance the price on the market.
LJ: If a small entrepreneur wants to grow into a large-scale businessman – what does he need to do?
MK: It is not easy for an entrepreneur to transit into the manager category. For this, you need to study. There are MBA courses. An entrepreneur, who wants to go to the (large) business sector, trivially, should take an MBA course or find a coach who can help, or use an internship somewhere. They will teach him strategic thinking and planning.
There are two traps in management: not to delegate and to delegate everything.
Delegation is possible when you know the basic principles of management. In management, there are two traps: not to delegate and to delegate everything. Both are catastrophic. However, there is a gradual delegation, up to a certain percentage, with specific indicators. If your subordinate has not achieved these indicators, you can no longer delegate to him. This is the hardest work in management – to be able to dose the load of subordinates.
LJ: There is an opinion that MBA courses are harmful to entrepreneurs because they instill a particular (theoretical) way of thinking or traditional solutions. What do you think of it?
MK: MBA motivates development. Business education is the growth of motivation, exchange of experience, case analysis and meeting other businessmen.
You need to ask yourself the right questions. What do you want from entrepreneurship? Do you want to scale the business? Do you want new partners? What are the rules for doing business with a partner? Where will you learn to write a shareholder agreement? How to make a financial plan for an enterprise that will be understandable for your passive shareholders? All these you learn from MBA courses. There are options in Ukraine too. I see such universities and such teachers, for example, L’viv Business School, and Kyiv-Mohyla Business School.
LJ: In your opinion, is it necessary to study management? Or, it (management skills) is given to someone, and to other – not.
MK: At first, I was most worried about how to make money so that there was something to eat. This level problem solved, I began to think about things that were more serious. I wondered how an owner of a market stall is different from the director of a large plant. Nobody gave answers. I continued to look for an answer and found.
I’ve learned management from Frank Pucelik, an American, one of the founders of the NLP system. He lives in Ukraine. He has an open course on NLP practices. Eventually, I came to study his course. At that time, the cost of the course was $ 50,000–60,000 a year. It was a lot of money. We consulted with my partner and decided to take this course. Even then, we understood that it was necessary to invest in the education of our employees and ourselves. This (investment in education) became the competitive advantage of Morshinskaya in the market.
Even then, we understood that it was necessary to invest in the education of our employees and ourselves.
A dialogue with Frank Pucelik:
When Frank came to us, we had the following dialogue:
- Do you have money?
- Have you ever worked for Coca-Cola?
- How are you going to compete with Coca-Cola and Pepsi? This is a global experience, billions of dollars in investments, and you have nothing.
- We do not know, but we will fight.
- Good. You have one value – people. If your people are better than theirs are, then you will succeed.
And his rule worked. We started to train people. Moreover, these were not outstanding specialists – they were medical doctors and athletes who became our sales agents. These courses got us to thinking that we need not only to sell sparkling water, but also to enter another market. Additionally, we thought out a strategy of struggle and cooperation with competitors.
The company has trained more than 10 general directors and four business founders. We studied together with Frank, and not only him. Eliyahu Goldratt (an Israeli business management guru, 1947 – 2011; – Ed) and Apple Consulting have greatly influenced the company. We had courses for HR-department because HR is closely connected with leadership, motivation, and business structure. We learned the psycho-types of people and ways to deal with them. We have changed a lot in the company structure. We found out that not everyone could work in his or her positions. We saw examples when a person was uncomfortable in one position; he was transferred to another department – and he flourished there. It sounds trivial, but these changes have led to very serious results.
I will never forget such an example. We had an actor in the Kyiv branch of the company. He was playing in the movies and selling water. As a sales agent, he was the best. As an actor, he knew how to attract peoples’ attention. He could sell anything. There was a situation when we needed a regional leader. One of the employees was to be promoted. We decided to choose the actor for this position because he was selling more water than others were. As a result, his unit was the worst in terms of the outcome. He was working beautifully on his own but he did not know how to manage and delegate, because he was not a leader by nature. The desire to learn was also important. Without leadership qualities, it is impossible to manage other people. Frank Pucelik taught us all this. We used his recommendations and understood whether a person suits for a vertical career or a horizontal one. And these basic management tools work in the state and in business.
Now I am teaching these basics my people and those business owners who address me. Conclusion: HR-department is important and serious.
The next “explosion” in the company was an association with Borjomi. The main thing in the association was the experience that we received with the arrival of international level managers. I personally am very grateful for this meeting. I have learned a lot there.
LJ: The younger generation has a chance to change the realities of Ukraine. Do you see this generation?
MK: The younger generation has better information opportunities, so they are now developing very quickly. There are no smart or stupid people. There are people who have information and who have not. It is strange to have an access to information in your job and not to use it to change the situation. Of course, young people are better now than we were at their age in the Soviet era. My grandson plays chess and dominoes. He is three and a half years old.
Young people are now better than we were at their age in the Soviet times.
I know that at the Catholic University in L’viv, a department of IT technologies was opened with very good teachers. The passing score is about 200 points, and very knowledgeable applicants come to study. 5 out of 60% of enrolled in the faculty are among the best students in Ukraine. This is only 5% of the total number of students. During three years, students of the faculty twice won an international IT competition in Canada. They also were paid money for this.
LJ: Do you have your own decision-making algorithm?
MK: Information is a poison; you need to check it by three sources. There should always be time for this. If the information is no longer a poison, but, figuratively speaking, a pure water, then we can make an informed decision on this basis. First, you need to think strategically – what happens after the decision is made the day after tomorrow, and not today. I try not to make split-second decisions.
I try not to make split-second decisions.
LJ: How do you recover and protect against burnout?
MK: A long-distance run is easier. After my job in the (oblast) administration, I am not afraid of anything. I must admit that at first, by six pm I was looking at the text and did not understand what I was reading. It was such a heavy burden! I used to take a shower, do my exercises, and drink coffee. And in an hour I could think again. However, in a month or two I was able to sort out five kilos of correspondence letters at midnight. When you return to business (from government service), it is like a baby’s talk.
It is impossible to solve the problem at the same level at which it arose.
When I was interviewed by Viktor Andreevich (Yushchenko – Ed.), I asked him for a vacation twice a year. It is very important. At least 10-15 days. After all, many of the key decisions I took on vacation. The first week you «come to your senses» and the second week is for thinking in another dimension. The genius Albert Einstein stated the idea that can be applied to business: «It is impossible to solve the problem at the same level at which it arose.»