To survive or find new opportunities? Julia Kiryanova, CEO of Smart-Holding, took part in a brainstorming session for strategists of Ukrainian businesses within the framework of the Business Wisdom Summit 2023


In the discussion, Julia Kiryanova shared the experience of Smart-Holding’s work during the war period and outlined what challenges the business faced and what are the plans for the future. Readers can find answers to these and other questions in a blitz interview with Julia.

1. What was done so that the product of your business could be used and paid for, which enabled the business to help the country? What challenges did you face?

To begin with, people have been and remain the main value and backbone of the business. We made some strategic decisions in the first week of the war – we decided not to pay salaries for several months at once amid panic, but instead very quickly introduced an effective system of coefficients and gave a guarantee that everyone would be provided with work. It was a safety cushion that motivated people to keep their jobs.

Much attention was paid to the production units – we even paid more to support the core production facilities. We had downtime – we suspended gas production in some fields for two weeks, in others – until the summer, because those business assets were under shellfire. However, the main goal was to resume and recover the production cycle as soon as possible. It is an axiom in business that if you put it on hold, you will run into very high costs and very large recovery and resumption problems. Whether it is about wells or other businesses.

Secondly, all cash flows were concentrated in the investment company. It was an unprecedented decision because Smart-Holding is an investment company with a diversified portfolio. That is, we do not have any mono- or horizontally integrated products. We developed an online cloud-based payment factory in a month and launched all payments throughout the Group through this factory, except for Metinvest. We had to control the process, because when we have assets in the east, and there are people on whom the processes rely, then we cannot stop paying salaries and taxes. We transformed our decentralized system into a technological one with centralized management, because money is what we had to rely on, including in matters of helping the country. And we actively provided and continue to provide this help.

Next, we addressed the question of how to preserve our product, how each business would be able to adapt to new challenges. For example, crushed stone (macadam) that Smart Granit extracts in Zaporizhia. The logistics chain was completely destroyed, and we were looking for some alternative and sometimes “out of the box” solutions. That is why part of the classic B2B business was gradually rebuilt and re-oriented on retail. What have we done? We put packing machines and began to pack our products in big bags. We rented some sites in Kharkiv, with the understanding that people would need crushed stone in order to use it for their household purposes.

We began to replace some imported products with our domestic products. Before the war, it was impossible to break through some obstacles, because our retail chains were very fond of imported products and did not always pay attention to domestic producers. During the war, when all the logistics chains were disrupted and there were no imported goods, we delivered TM Veres products to the then empty shelves of supermarkets. We even controlled the running of trucks manually. We pursued only one goal – to save people and jobs, and to do everything possible in order to keep businesses up and running. The only idle businesses were those in the occupied territories.

2. How has your vision of the people you want to work with changed? What do you look at now to understand if it is your person or not? Has anything changed over the year in the management teams with regard to personalities and business processes?

I believe in teams, and I believe in leaders. These two things are very important. They passed their test of strength precisely during the war. Our company was at the stage of corporate restructuring even before the full-scale invasion. We were the most insecure and unprepared in terms of top management, unprepared for such events, because we were not yet fully formed at that time. I am very grateful to my HR partner, with whom we did almost impossible things – filled our vacancies right on the go, integrated people, without having any fear that we could do some mistakes. We did the same restructuring, but a way faster. Clearly, this placed a huge burden on the team, because each of us also took someone else’s load.

Yet, anti-crisis teams are one story, but when you get back into the development phase after recovery, it is a completely different matter. And there is no sustainability in this process. It is a rare case when one person can combine all the functions: anti-crisis, strategic, operational, and visionary. That is why there are transformations and there will be. I believe that we need to look at it boldly. We need to be honest with people, with the team. We need to very fairly outline the horizons and roles, and in the same way as in peacetime, select those who are self-motivated. There are many such people in Ukraine, and we continue to build such a team.

3. Are Ukrainian companies competitive compared to European companies?

There are many aspects to this question. It all depends on the industry, on the condition of your fixed assets, on logistics and other elements of cost, on energy resources, on the availability of qualified workforce. These are all relevant elements, which are complemented with macro indicators that are inherent in a particular country – what will be our inflation rates, whether the currency is strong or not... That is, this is a whole universe regarding the assessment of whether Ukrainian goods are competitive in the markets. These are customs barriers and many more factors.

This question concerns the future – what it can look like with that amount of foreign investment, the outlines of which are just emerging. It should be noted that there is a huge role for the state too. Especially during the war and with such an unprecedented level of destruction. Local investors are very exhausted in terms of their reserves, because their reserves are spent on maintaining business and people, on humanitarian assistance and support to the Armed Forces of Ukraine. Ukrainian businesses are not operating as usual. Domestic investors are to a significant degree weaker than they were before the war. I consider a partnership with Western businesses as the most balanced model. For example, if a European investor comes in with one hundred percent investment, this is far not a well-balanced model. Since the domestic investor kept paying taxes, increasing its volumes and holding out for 30 years, despite anything. And it cannot be left on the side-lines of the process.

Surely, our potential accession to the European Union will have its effect too. Step by step, we can solve the issues of customs barriers, trade, and logistics. Synergy through partnership. The national investor has industry expertise and understanding of the labour market, while the foreign investor has access to capital markets and technologies.

And it is the story of Ukraine’s transformation through partnership that can solve the issue of competitiveness. We need reconstruction, re-building and a profound modernization. Even what has not been destroyed should be transformed according to the new standards of quality, environmental norms, occupational safety requirements, and so on. Therefore, I would switch from competition to cooperation.

4. How would you describe your role after the victory?

From a business perspective, there are some basic things that were supposed to work “before,” “during,” and “after” the war. However, the emphasis will be on “after the war”, because they do not work before the war and during the war.

Firstly, it is the rule of law. The country should have a secured and cast in stone property right and a legislative framework that allows for existence and development. Secondly, zero tolerance for corruption and an effective judicial system. These are some pivotal things that must be laid as a basis after the war, and it does not matter what business, national or international, it relates to. The emphasis on this is already there, and we are moving towards this, but if we get there even before the victory, it will be an advantage for us.

The next thing we need is clear and comprehensible rules of the game, the same for everyone in terms of their understanding, fairness and compliance. There should be an industry or sectoral strategy. And businesses should be involved in the development of such a strategy. Since the economic strategy of the state is essentially based on sectoral strategies. This is something that is really missing – the rules of the game, so that any investor could understand in which direction he or she is moving.

All businesses are of a long-term nature. If you are building something on a piece of land, if you are a sectoral investor, you should have a planning timeframe. And the economic security of planning depends on the factors that have been mentioned. What is added after the war? Sustainable physical security, the security of the country, in which you can plan everything that we talk about.

The areas where businesses will work side by side with the state relate to jobs, specialists, the return of people to the country, attracting new personnel, migration policy, as well as capital markets, access to financing, and then we will do everything ourselves. Because when a business operates in a particular region, it will take care of everything. The responsibility is never transferred to the state or anyone else here. You have to take care of the area or region you work in. Profit is not a primary goal. We contribute to society and exist for the sake of society. Profit should come along with how you develop the area where you are located and where you improve your business.

What will Smart-Holding do in this direction? We have a strong expertise in such sectors as agro-industry, metallurgy, gas production, real estate, and industrial parks. We are ready to move forward in all these areas. We also need to lift the level of processing and production of value-added products. There is a broad field for activity here, but all this comes after the victory that we have to bring closer together. And then we will rebuild our state and develop our economy together.