Today we present an interview with Ivan Kun, Director of Interproject GmbH.
Interproject GmbH is a Ukrainian design and technology company that has extensive experience in the fields of agriculture, water supply and heat supply and provides services in design, 3D design, automation, energy management, general contractor.
L4D: How has your business changed since the start of the full-scale invasion? (changes – from market changes to changes in your company)
Ivan Kun: Our business consists of two types of contracts: short-term (3-6 months) and long-term (1-5 years).
We purposefully developed the company in such a way that we had long-term contracts. Now we are working to have contracts for 10 years or more. Most of the short-term contracts stopped, and the long-term ones remained in force, except for some items.
Starting from August, we started signing new contracts, expanding our work and staffing.
For several days we were in a state of determining whether to go to the front or continue working. After it became clear that every Ukrainian has to participate, that you need to be where you are more effective, the break was almost a few days, which were spent on solving the issues of housing, relocation, etc. Communication with customers was not interrupted. Gradually, we returned to those contracts that could be fulfilled. For half a year we dealt only with existing contracts. Starting from August, we started signing new contracts, expanding our work and staffing. To date, we have signed a large contract in Croatia for the design of a large poultry complex, signed several contracts in Ukraine. As we had several long-term secured contracts, these are World Bank contracts, works were performed under these contracts, payments were made.
We have two large groups of clients – municipal enterprises and agricultural holdings. For agricultural holdings, this is the investment part of their activities, and they are currently busy with their current processes, such as harvesting, setting up work, etc. There are enterprises that are engaged in construction, I have recently visited the construction of a large deep processing plant for corn. The construction was going on all this period, and we accompanied it, designed it.
We have preserved all our capabilities, we think that our capabilities in the post-war recovery will be in great demand.
And utility companies did not stop their work, did not stop financing contracts. Utility payments from the population in Ukraine are made, even quite disciplined, there were even cases when consumers closed their previous debts. When I tell my foreign colleagues at the meetings that I was at the construction site, they were very surprised that construction is underway in such a period of time. In fact, those who have retained the ability to invest in Ukraine are now continuing their construction projects. We are now seeing how houses are being restored, near Kyiv, for example.
Our business is not in a very healthy state, it is difficult to plan, but it works, we have kept the team, except for those who left and do not have the physical ability to work. In fact, this is a semi-standard, semi-military mode of operation. We have preserved all our capabilities, we think that our capabilities in the post-war recovery will be in great demand.
This is a purely psychological state, we already had a difficult market, customer relationships, business models, we were not very spoiled with additional opportunities, so this transition happened quite quickly. Since we have to work in the existing conditions, we have been re-adjusting. This is quite an organic transition, we have examples of our soldiers who work in much more difficult conditions, we can not give up, even if it is a heavy load, but still you understand that this is not the worst situation, and you need to find a way out of it.
Ukrainian business is stronger than we thought about ourselves, this stress test will give us the opportunity to understand ourselves and our capabilities differently.
It was necessary to make a decision on relocation, and when this issue disappeared, I realized that it would be a change in the way of activity, leaving the comfort zone, it would reduce the ability to fight.
I see examples of how those who are going through this situation, those who were successful before the war, are looking for ways out of the situation, taking into account the conditions that prevail in the market. Those who did real work and really formed added value continue to do so. I have colleagues who have destroyed elevators, damaged and stolen grain, and I want to tell you that for a businessman it is a great stress and challenge to understand that you had a calculated business plan, and everything on the way is falling apart, grain is in the wagons, the quality is falling, downtime is accrued, these are such daily worries, but you understand how people are ready to solve it. I recently met a friend, he says that he has harvested half of the corn, and half of it will be wintering there, you understand how it is for a farmer not to be able to harvest his crop.
Ukrainian business is stronger than we thought about ourselves, this stress test will give us the opportunity to understand ourselves and our capabilities differently. On the other hand, I always wanted to enter foreign markets, but all the time there was not enough time, resources, understanding of how to change the business model, but now you motivate yourself by the fact that if you were able to work at such a time, it is definitely not more difficult than entering foreign markets.
Even just paying salaries, loans, taxes is a great merit of businessmen in such a difficult time. I talked to many businessmen, and everyone was determined that as long as I can pay full salaries to all staff – I will do it. I have never seen such a thing among my acquaintances.
L4D:Is your strategy now aimed at retaining staff, entering new markets, relocation or other options?
Ivan Kun: Today it is difficult to apply the word strategy to our activities, it is rather an attempt to respond to the external situation. To build a proper strategy, you need to understand what the external environment will be like.
The software products and design products that we make show that we have high-class competencies that will allow us to enter foreign markets.
After signing the contract, we partially recruited staff, reformatted the team to perform the work that we have. The location of Kyiv now allows you not to worry about relocation and moving, most opportunities allow you to work from home or go to the office. Of course, technical issues, the availability of Internet, electricity, cause some difficulties, but we have already partially solved them, and continue to do so.
Several providers, Starlink, search for locations with stable Internet, migration to the cloud – such technical problems in the prospect of winter are worrying us, we are preparing for possible catastrophic events, providing heating, water in the office. The March experience showed that most people have a place to move to in a critical situation. And in case of a few days of possible blackout – we will be able to survive these few days in the office together.
Now it is more difficult to answer strategic questions, in six months there will be more strategic vision. The software products and design products that we make show that we have high-class competencies that will allow us to enter foreign markets.
Today, there is a question of opening a company in Poland, or Croatia, or Slovenia to expand the possibilities of new contracts, but I think that we will not have time before the new year, because we are loaded with work on contracts and problems with electricity, and we still need to fulfill contracts. This, of course, does not allow us to move faster, so I think that our main strategy is to search for external contracts, and, accordingly, we will develop further. This is in case the Ukrainian investment market remains paralyzed as it is now.
L4D: Have your relations with foreign partners changed?
Ivan Kun: Foreign companies had the opportunity to leave and take out the staff. For example, we need to perform commissioning works, we cannot perform them without the equipment supplier, because he does not assume a guarantee, and he cannot send his representative, because we are at war. The contract must be completed, and the warranty issue is not fulfilled on the side of a foreign company. There was such a vision in our business that foreign companies have more experience, better staff, that we should take experience from them, such inferiority developed. But I want to tell you that in this case it is not so, those foreign partners with whom we worked did not show responsible behavior in completing contracts. I have a negative experience here. I am not talking about the human relations side, here they helped. But at the moment when we did not stop working, and when we explain that we need to complete the contract, get the money, and we will pay the money in the form of salary, and this is already a lot at the moment, and we were given the answer – you have a war, we can not send personnel to you, it’s insurance, etc. and they can not act in force majeure. Maybe someone has a different experience, but I have seen such a situation.
We are seriously limited by the travel ban, for example, I have the opportunity to enter the market of Kazakhstan, I just need to meet with partners, establish contacts, but there is no way to leave the country. This significantly limits our ability to work with foreign partners. Here the situation is even worse than in the domestic market, because there is an objective reality, and here there are artificial obstacles that complicate the activity.
We also had projects abroad, we completed them, it was a design, a feed mill in Kazakhstan, there was no need to leave, we fulfilled all these contracts. There was no need for on-site work, so there were no problems, everything was completed remotely.
We also signed a new contract for the design of a large facility in Croatia, we are already working on it, but there are also problems there, because of the impact of the war in Ukraine on neighboring countries. The war in Ukraine has affected all the countries with which we cooperate.
L4D: In which areas of activity do you optimize business and reduce costs? Are there areas where you have increased investments?
Ivan Kun: Cost reduction is the task of any business, it is a continuous work to find opportunities.
Today, there are such opportunities as grants, for example, in the utilities industry, such opportunities already exist, and we will expand in this direction.
The main thing is the development of our product for the digitalization of water utilities. We have not stopped the development of this product, we are expanding its capabilities, modules. This process cannot be stopped, stopping this process will lead to stopping this project. We are always looking for ways to improve it in order not to use additional resources. That is, optimization is a daily process where you can reduce costs, such as trips to exhibitions, conferences. The main work is on improving our product, signing new contracts and fulfilling existing ones. If earlier we could afford to go to the client once again to discuss something, now we are trying to do it remotely. Such restructuring of activities is associated with finding the best ways to fulfill our obligations. Of course, there are also forced investments in the transition to the cloud.
L4D: What is your product policy now – do you have plans to release new products or solutions?
Ivan Kun: We have actually completed the development of the digitalization of the technological part of the water utility, but we see that we still need to finalize the financial and economic part to make a fully digital twin, so that data exchange is as seamless as possible. When restrictions on Russian software began, we started developing the product, we see prospects, a window of opportunity. This is an opportunity for us to make a complete product ourselves or with Ukrainian partners.
There are a number of other developments related to the digitalization of utilities, digitalization of the city, improving the service of municipal utilities, improving the lives of people in the city.
Regarding the expansion of the product line, in addition to water utilities, we now see other utilities, such as Teplocomunenergo (municipal enterprises providing hot water supply and heating services). There is no good, full-fledged product for creating a digital twin of Teplocomunenergo, our product is already 80% ready, it remains to finalize the thermal calculation and modeling of the heating network, if we have the resources and the opportunity to communicate with customers. Now it is difficult even to communicate with these customers, we are talking about stabilization, about virtuality, and in the season they are busy with the main work, they communicate better in the off-season, and it is better to communicate with them at this time. We have worked out such a product as energy service contracts with Vodokanals (water supply company), where we plan to improve energy saving through our software product, these products have already been developed, but implementation has not yet begun. We started the first negotiations after the new year, these products are waiting for their time until the situation stabilizes. There are a number of other developments related to the digitalization of utilities, digitalization of the city, improving the service of municipal utilities, improving the lives of people in the city.
We are now implementing a product for loss detection. This is a separate product that is good to implement on an already digitized network. It makes it possible to zone the city through a hydromodeling tool, to install a meter for each zone, which will allow to balance the supplied water and consumed water, for the team that is engaged in the search for losses to give the right direction where to look for these losses.
The utility industry needs reform, except for reform through digitalization, I do not see other options for change. Therefore, we look at these products from the following point of view: digitalization will make it possible to improve our utilities, respectively, to improve the lives of people who use utilities. Cities should be comfortable, should meet human needs, it should be optimal, clear and fast.
We have deeply studied the issue of water within Ukraine, we see how acute it is, without the reform of the communal sector, this issue will be very difficult to solve and it affects the development of the economy. Water is one of the resources that greatly affects the volume of economy that can be created in Ukraine, it is one of the key resources. These are such interconnected things, we look at them through the prism of the products that we are preparing for implementation today, write strategies for them, on the other hand, we fulfill the existing contracts, develop cooperation with existing customers, offer them an additional line.
We are now implementing a product for loss detection. This is a separate product that is good to implement on an already digitized network. It makes it possible to zone the city through a hydromodeling tool, to install a meter for each zone, which will allow to balance the supplied water and consumed water, for the team that is engaged in the search for losses to give the right direction where to look for these losses. This is overlaid with information on asset management, the age of the pipes, the number of accidents in this area. Thus, it is clear where to change valves first of all, where to change the pipeline. Water utilities do not have such tools now, they are still intuitive. Each water utility has an experienced employee who deals with all this. A person is unable to keep in mind such voluminous data, even specialists who have been working for decades at one enterprise. This is a complex task, we can help with this with our tool. When all this is transferred to the software, and you can show the real picture, at any time to look, download, change, model. We already have a number of interesting cases where we found losses, where water flooded the wells of the local communication service for years. Or, for example, when it was necessary to make a design decision quickly, but there is no data, the designer is busy, and so on, and the operator, having the software, can quickly simulate several solutions and choose the best one. And this happens very quickly.
Without digitalization, it will be very difficult for utilities, life makes us live fast, we now see how losing the ability to communicate, we lose the ability to make decisions quickly.
We have an application through which the repair team should work, it allows you to take pictures of the work and track which team is fulfilling the request. We have created a geoportal, where the applicant can observe the life cycle of his application, it is especially difficult here with applications for cleaning up the territories after repairs, where it is necessary to lay asphalt, plant grass, etc. Now utilities work on feedback from the client, but you can work proactively, and not wait until an accident occurs and residents start writing complaints.
Digitalization makes it possible to implement these things.
When the war started, I began to cooperate more actively with APPAU in June, and I really like this community, the work that is being done.
L4D:Has the level of cooperation in your community changed? Has consolidation among Ukrainian companies in your sector increased, in which areas, or vice versa – competition has increased?
Ivan Kun: On the one hand, we are very bad with consolidation, of course, it would be right to do this in peacetime and look for ways to consolidate on the basis of joint projects or consortia, now we are consolidating for another reason, this consolidation now is survival, it does not give the desired effect, but it pumps our ability to consolidate, I would say so.
Now you need this consolidation to generate additional added value together. For example, I wanted to cooperate with APPAU for a long time, but I did not fully understand why. When the war started, I began to cooperate more actively with APPAU in June, and I really like this community, the work that is being done.
I observe examples of cooperation of foreign companies, it works for them, they are consolidated, and we had such an immature market, our companies were afraid of something, we should not be afraid to consolidate. In foreign markets, consortia of companies compete against us, we faced this in World Bank tenders, our companies are not worse than foreign competitors, but we need to consolidate to compete with Western consortia.
L4D: What are your forecasts for the development of the situation on your markets in Ukraine? In your opinion, is there a prospect for foreign partners in Ukraine – in what way?
Ivan Kun: Our two markets, agro-processing and municipal market, they need similar approaches.
The agro-processing market is now aimed at foreign markets, improving domestic processing, increasing the added value of exported products is a strategic task for investors, it requires a special environment. I see the government’s attempts to create this environment, this industry needs a deep strategy, where opportunities for investment will be opened and opportunities for export of processed products will be worked out, many markets are now closed for Ukrainian products. I think that there will be changes in this market, dictated by our strategic movement in the EU. This market will develop, it is only necessary to organize it properly, now this market is organized situationally, the company itself invests, works within these opportunities. I see opportunities here for clusters, associations of agricultural enterprises, unions of farmers, they will be more effective, will have a significant role. And here you can look for opportunities to invest in such associations. This is one market that awaits us at the end of the war.
I see that Ukrainian companies are already planning to invest in the agro-industry, there are already many talks on projects for the construction of pig farms, deep processing, improved irrigation, biogas and ethanol production. These conversations are very intense, but the projects have not yet begun. The plan is to sign the design of the elevator next week. Such things still need to be built, grain must be stored somewhere, export opportunities are now limited, we all see it. We understand that it will take another 3 years to establish the logistics of grain export, we need to build storage facilities to be able to sow next season. Farmers are now limited in their ability to collect, process, dry, plan the next season, and are limited in funds, because they could not sell, they do not have plans for processing, although they understand that if there was processing, it would be easier to export. Here we need to build a more sustainable chain, the same consortia, you have to be part of the chain on long-term terms. To be able to process, store, sell to the foreign market, it is a difficult task.
Another market is the municipal market, it has suffered greatly as a result of hostilities. It needs a complete restructuring, the figures of investment needs range from 40 to 60 billion dollars, I think that the world community can provide significant assistance in the form of grants and investments.
This issue is not yet actively dealt with, if any strategies are written, they are now at such a level that it is impossible to read and get acquainted with them. We have to wait, I think that the real vision will appear in the spring, the vision of European and world partners, the new year will begin, in 2022 no such expenses for these strategies were planned, so I expect in the spring, it will be possible to see the plans, to have more information.
We have a sufficient level of competence to work in these markets together with partners in consortia, in these programs that are financed by the European Investment Bank, the European Bank for Reconstruction and Development, the World Bank.
As for the municipal sector, we already see grants, the search for a vision, I think it will receive funding and a strategy sooner than agro-processing. There is a prospect of organizing a competitive and more flexible industry, when the consumer has the opportunity to purchase services, such as water from different suppliers. But these conditions must be created, this market must be organized. This is a big job, not easy and requires a professional approach to create conditions, to build a market.
L4D: What are your main proposals for cooperation for foreign partners?
Ivan Kun: For foreign partners, Ukraine will be primarily interesting for investment. We can offer our company to participate in such investment projects, our company has competencies in project management, execution of works as a general contractor, competencies in automation of both technological and business processes. Our vision of our markets in Ukraine, their understanding is valuable for investment projects. Changing models will open up opportunities for foreign partners to invest in the Ukrainian market and economy.
On the other hand, we have developed competencies, for example, we won a grant from the EBRD, they evaluated us as an engineering team with which we can go to foreign markets, especially to post-Warsaw Pact markets, because we understand them. We have a sufficient level of competence to work in these markets together with partners in consortia, in these programs that are financed by the European Investment Bank, the European Bank for Reconstruction and Development, the World Bank. The level of competence that we have developed in Ukraine gives us the opportunity to perform work professionally, to be responsible for the quality and speed of our work. We have all the necessary qualification requirements, certifications, etc.