Poland’s entrepreneurs face an uphill climb

Let me introduce you to John Lynch, an American who runs a 200-person screen printing company in Krakow, Poland, and is a Nike supplier.

A group of TEC-related business people met with him when we traveled to Eastern Europe in September to understand business and economic development policies there. Our visit with him tells us a lot – that businesses can thrive both here and there despite the impacts of both counter-culture behaviors and government practices.

The common complaint about government, heard by businesses everywhere, is also interesting.

The high incidence of corruption, in the form of payoffs to get licenses and contracts, still exists in Eastern Europe and other countries, as reflected in Ease of Doing Business rankings.

When we planned to go to Eastern Europe, those countries were glistening (if not “shining”) stars compared to Western Europe. Two decades removed from communism, they survived the world “depression” relatively unscathed because of conservative economic policies.

By the time we traveled, though, they weren’t glistening so much. The Western European downturn had sharply reduced the Eastern European revenue stream, resulting in GDP declines, except in Poland. We saw how important it is to build a “world” economy as a marketplace. We learned the truth of comparative advantage: do what you’re stronger than others in, and buy other things from those stronger than you in them. In addition, we saw several other things:

  • People who are trying to adjust to the chaos of capitalism and its choices, after the simplicity and caretaking of communism, begin to not like that chaos and yearn for the earlier times. They become less adventurous, less entrepreneurial.
  • The fertility rates are in the 1.3 range, well below the population maintenance level of 2.1. So they aren’t generating the next generations that will support seniors or the economy.
  • Poland ranks 45th on the Ease of Doing Business Index. The U.S. ranks fourth.
  • Corruption and payoffs are still a way of doing business, especially with government workers.

How Poland shines

Don’t be so hopeful about Eastern Europe’s prospects, except that Poland’s emergence from communism was guided by continuously supported liberalization policies, including incentives that stimulate entrepreneurialism, which has driven the growth. Also key have been expansion of universities and higher education with an emphasis on science, and a global business mentality.

The result, according to our embassy’s economics officer, is that they are producing “too many computer programmers to count,” and many of them are developing new software ideas and want to start their own businesses. Our embassy, as well as AmCham, a group of American businesses, are holding workshops to help these entrepreneurs understand business and break-even operating techniques. Google, IBM and Hewlett-Packard all operate extensive incubators in the country.

Enter John Lynch

Back in the communism-emergence period just after 1990, Lynch was assigned to Poland for a short time as part of a bank marketing consulting project. He saw an opportunity, and stayed. His assignment was with a bank competing with state-owned banks, and one reason it thrived was because, “we didn’t yell at our customers like the state-owned banks did.”

“Alas, there was no concept of marketing,” Lynch said. “We stayed open in the evenings when our customers needed us, while the state-owned ones closed in early afternoon as they always had. It was that simple.”

Eventually, he had a chance to provide screen-printed T-shirts to a company. He and a partner got a piece of equipment and began printing in an apartment. “No capital, just scraped together savings, a shoestring,” he said.

Then, they got other orders. At the end of the first year, they had $300,000 in revenue, and bye-bye banking.

Today, Lynka employs more than 200 people with $20 million in sales. Two simple differentiators: quality of printing and, even more important, speed.

“We created a reputation for fast reactions, so when another provider couldn’t meet an emergency deadline, we had substantial inventory and could … and then got their ongoing business and built a reputation,” Lynch said.

Another technique: stay away from politics. Finally, they’ve adapted good operating and employee relations techniques. The entire operation is now Lean-based, with charts everywhere. And an enthusiastic HR person has helped drive a series of good management practices and employee appreciation efforts, as any company should.

Phil Hauck coordinates three TEC CEO groups and a group of senior marketing/sales executives.

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