Why do grand-old businessmen in Estonia fail?

On Tuesday, when I arrived from Italy, I took a bus from the Tallinn airport to Tartu. As I stepped on the bus I noticed that one of the most well-known Estonian businessmen, Rein Kilk, was already sitting on the bus (he had boarded in Tallinn). The businessman, who just five years ago owned one of the largest business empires in Estonia is now struggling and has lost several of the companies already.

Mr. Kilk was my customer in Advisio. We consulted several of his firms on different matters. From inside, he is a typical old-school businessman. I still remember one meeting at Pere Group where we tried to facilitate cooperation between his bread industry and scientists of estonian universities. At one point, Rein would take a pack of money out of is pocket, put it on the table and say: “So this is what I bring on the table. What do you bring?”. The scientists looked appalled. Needless to say, the collaboration did not materialize.

Fast forward a couple of years and now he was in the bus from Tallinn to Tartu. The bravado is gone.

Mr. Kilk is not nearly the first “business mogul” in Estonia who is struggling. There are a lot of other once mighty businessmen who are now in the threat of bankruptcy or have downsized their businesses considerably. Why is this happening?

Well, the stupidity is NOT to blame here. The “not-so-bright-ones” were long gone by 2008. Their businesses earned miniscule profits in 90’s when the salary levels in Estonia were 1/10 of that in competing countries (Sweden, Finland back then). When the salaries raised to the 25% of those in Nordic (some 10 years ago), the businesses failed, the businessmen sold them to those same Nordics and continued their career in managerial positions in various public innovation-promoting structures. But I digress here.

It happens in Greece, too..

The thing to blame with the new wave of bankruptcies is the specialisation. Ten years ago you just had to do business in order to earn profit. Today you have to be rather good in your business to earn profit. You have to be a specialist in your business. The competition is just so much more fierce today. And customers know better, too. There are online communities for price comparisons, user reviews, online shops, etc. You rather  be good and agile to survive and thrive.

But it is not realistic be good and competent in 10 different businesses at the time. The times of entrepreneurs-of-all-trades (such as Richard Branson) who can excel in many very different industries at a time, are probably over for good. The very successful formula from the past – I (a clever owner) say, they (managers and workers of my different businesses) do, is not working any more. This is why the business empires are falling like dominoes.

Concerning mr. Kilk, he has my total respect here. While for a younger generation like myself it is totally ok to take a bus instead of driving a car, for the older generation it takes a big overcoming of one’s ego to do that. Kudos, Rein!

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