“The international success of your business largely depends on your character. Those who like to travel and explore the world have a much greater chance of success than those who don’t” say the people behind Nowy Styl Group’s international expansion. The recipe for success is a pattern of ambition intertwined with humbleness.
We wanted a better life
Almost half a century of isolation had to take its toll. In the early 1990s, Poland was a crude and stifling country. Hopes for a breath of fresh air were pinned onto the emerging private sector. But the enthusiasm was cooled by austere conditions of doing business. There were no clear regulations and inflation was raging.
In mid-1992, Adam Krzanowski returned from the US, where he had seen a different world and tasted a different life. Although there were still plenty stumbling blocks in the way, Adam and his brother Jerzy decided to roll up their sleeves. They rented a run-down shop floor at Jedlicze near Krosno and put the building in order on their own. There, they started assembling three models of café chairs. Nothing special – upholstered seats on a chrome-plated frame. So, the beginnings looked rather modest. At that time, nobody in their right mind would probably have believed that their company would one day be holding the cards on the international arena.
“We set up our own business because both Jerzy and I wanted to have a better life” says Adam Krzanowski, co-owner and President of the Board for the Nowy Styl Group.
The country, which had been kept behind the iron curtain for many years, craved for anything that even smacked of the West. Chairs made by the Krzanowski brothers were selling like hot cakes, the company winning the market by storm. The farther to the east you went, the appetite for new products was greater. Russians and Ukrainians would literally fight for more attractive products, furniture being in the forefront of the most desired goods. “Just a few months after we had launched Nowy Styl, we started operations abroad, in the East. Of course, at the beginning we didn’t even think of capital commitment - it was just the simplest exports” Krzanowski recalls the early days of their company’s international growth.
A lesson of Western quality
In the United States, Adam Krzanowski worked for a New York-based chair manufacturer Whyte. The company’s boss believed that trade fairs were absolutely essential in that business. “We need to be there” he would repeat like a mantra. Adam remembered it very well.
In 1996, the Krzanowski brothers decided to take part in a trade fair in Cologne. They were hoping that the lower price and short delivery times would let them compete on Western markets, particularly in Germany and France. But the reality ruthlessly verified that vision. What was a hit in the East, lagged behind in terms of quality across the other border. “At that time, we were still far from their standards” admits the co-owner of the Nowy Styl Group. “We had to swallow a bitter pill. But we weren’t put off. We really wanted to learn. We quickly made up for our shortages and we set the door to Western exports ajar.”
Building a brand
Entering into cooperation with Western importers seemed to be a pretty good reason to pop the cork on a champagne. The Krzanowski brothers could have started celebrating and cashing in on their success, at least for some time. But they did not do that. They wanted to become independent of importers as soon as possible. They knew perfectly well that their then cost advantage could end up any moment. They wanted stability. To have it, they had to take a bolder step.
In late 1990s, they began establishing joint ventures with well-proven partners. This was the case in Germany, France and England. “Only from that point on can we talk about an international expansion of the Nowy Styl Group. The previous phase was pure exports, which you can hardly call being engaged in a market because, although you are selling products abroad, you don’t have any influence on what happens to them next. You don’t build a brand or gain knowledge about the end customer” Adam Krzanowski explains the difference between export activity and internationalization.
The foreign companies, partly under the wing of local partners, grew up fast and could start thinking about operating independently on foreign markets, and about their further growth. Anyway, the brothers felt that the joint-venture model was wearing out: “As a group, we were guided by global aspirations while our partners were usually thinking in terms of ‘here and now’. This disparity was becoming more and more clear. We were also slowed down by internal negotiations which took up a lot of energy.” So, the next step in Nowy Styl Group’s expansion was the natural course of events: after 2000, the company started buying back its interest in the joint ventures.
A Latin American experiment
In 2003, Adam and Jerzy Krzanowski received an offer that could be a turning point in the history of the company. The group got a proposal to acquire shares in a furniture company operating on one of the largest Western markets. Though tempted by the opportunity, the brothers gave it up: “We calmly considered all the pros and cons. We came to the conclusion that we were simply not ready for it yet.”
Their decision was influenced by a lesson in humbleness they had received shortly before. Partners from Argentina and Mexico pushed the owners of the Nowy Styl Group to form joint ventures in South America, just like in the European markets. The Krzanowski brothers finally yielded to their persuasion. It soon became apparent they had made a mistake. Not so much a financial one, as the project generated some profits, but a strategic one. Running a business in Latin American countries required regular, time-consuming visits. At the end of the day, it could have adversely affected the quality of management of the much more important European business.
Eventually, the company reduced its South American operations to exports only. But Adam and Jerzy do not regret the Latin Amercian experiment. They learned that geographical distance and a different culture have a considerable impact on business. They also came to the conclusion that it is better to focus on local growth, mainly on the huge German market, and on choosing the right associates who can work out sales strategies for the individual markets with no help from a local partner.
Learning advanced investment
In 2011, the Group was ready for the first foreign acquisition – it bought a German manufacturer of ergonomic chairs Grammer Office. “Maturity is the key word here” thinks Roman Przybylski, Nowy Styl Group’s Member of the Board and Sales Director. “Acquisitions mean you need to learn advanced foreign investment. In this case, maturity means the skill of managing companies that operate based on local customs and culture. You have to respect that. But on the other hand, you need to transplant your values on to them and build your own structures to ensure growth.”
The definition of maturity also covers negotiations, efficient completion of acquisition and integration. Rafał Chwast, Nowy Styl Group’s Vice-President of the Board in charge of foreign acquisitions personifies these competences. Chwast joined the Group in 2008. To manage the growing business more efficiently, the Krzanowski brothers put three more people on the management team. This meant they had to delegate some of their power. “Not every owner can make such a decision. This is yet another proof of the maturity of our organisation” notes Przybylski.
Two years later, Rafał Chwast led the takeover of another German brand Rohde & Grahl, which has a reputation for manufacturing technologically advanced furniture and chairs with excellent design. Two years later, he completed a transaction with a Swiss company Sitag offering high-end office furniture. Adam Krzanowski emphasizes that all the brands that joined the company operate in the same sector – arrangement of office and public spaces. This allows the company to focus on its well-known core business.
You need to know how to say ‘stop’
A tremendous added value of the expansion is that it gives the Nowy Styl Group a fresh shot of humbleness. The company understands it as readiness to keep learning and drawing conclusions. As a result, decisions that involve business risk are easier to take. This, in turn, protects the Group from fossilization. “Whether we like it or not, growth means transforming into a corporation, which allows you to operate more professionally. Acquisitions, on the other hand, provide balance, giving you a start-up-like boost of energy and enthusiasm. Allowing experiments is part of that atmosphere. But this may not mean forcing through something that didn’t work out. If the situation is going the wrong way, you have to know how to say ‘stop’. And then sit down and analyse what failed, without trying to shift the responsibility" says Roman Przybylski.
Be curious of the world and you will win
Poland has been a global leader of the furniture industry for many years. We are particularly strong in the home furniture sector, where most production goes to foreign markets. But you can still count on the fingers of one hand the number of companies that have dared to go beyond contract production and traditional exports. Adam Krzanowski has no doubt that, when it goes for capacity and quality, many enterprises have long been ready for internationalization. But the lack of adequate structures and the anxiety if they can manage a company in a foreign market stand in the way. It is a boundary much harder to overstep than a border between states.
Krzanowski brothers’ recipe for overcoming that mental barrier is the right choice of people. “To think about expansion, it is not enough to surround yourself with the best experts. Little will come out of their extensive knowledge if they cannot integrate with foreign partners. Therefore, your team must have an open head, be tolerant and be able to talk to people with different views” Adam Krzanowski elaborates on the thought.
“And just be curious of the world. Just like you, or actually you in the first place, because you’re in charge” adds Roman Przybylski. “The truth is that someone who likes to travel will do much better in an international environment than someone who treats travelling as a necessary evil. Someone who, while away, likes to discover new things, such as new sights or local food, rather than shut themselves away in the hotel and dream of their favourite pork chop. Your character translates directly into your ability to do business abroad.”
Work can repay very generously to those who feel fulfilled in such circumstances. “International expansion is a great testing ground where you can learn” say the Management Board of the Nowy Styl Group. “Projects we carry out in many different countries keep knocking our management team out of their comfort zone all the time. There is no way a pattern of thinking that works in one market could be duplicated in another. This way, we maintain high dynamics in acquiring new skills. We grow together as a company, and each of us individually. It gives you great personal satisfaction. And the appetite for further growth".
The Nowy Styl Group currently has branches in 16 countries around the world. Last year, the company's revenue exceeded 340 million euro, of which 86% came from foreign sales. Adam Krzanowski stresses the word ‘sales’: “We are not talking about exports. The vast majority of our products are sold under our own brands, with us managing the various markets.
Adam Krzanowski and Roman Przybylski talked about the causes of Nowy Styl Group’s international success at a conference Foreign Expansion of Polish Enterprises: Overcoming the Distance. The event took place on 23 October at the Koźminski University in Warsaw. The Nowy Styl Group was a strategic partner of the conference.