Recently, the co-founders of The Gradient, Olena Zanichkovska and Oleg Gasioshyn, gave an interview to Telegraf.Design about how the full-scale war forced them to review their business plans and reduce their ambitions. In the interview, they talked about how war risks affect interaction with potential clients, how to motivate employees in the current circumstances, what needs to be communicated about Ukrainian business in the world, and what impact blocking the supply of Ukrainian grain to Egypt and the startup crisis in San Francisco could have on Ukrainian outsourcing.
How did the full-scale war begin for you? Did you believe the predictions about the escalation of military aggression would come true? Did you prepare?
Oleg. Let's be honest, we didn't think a full-scale war would start until the last minute. People in Ukraine were divided into two camps: some bought ammunition and covered their houses with sandbags; others, like us, said that no one needed a full-scale war, that it was just a bluff, and found 100,500 explanations why it was not beneficial to anyone from an economic point of view.
A few days before February 24, I returned from Austria - it was the peak of the snowboarding season. If people had the ‘alarm suitcases’ packed, I only had a backpack for freeride ready. In the middle of the night on February 24, our employee called me with the words "Oleg, we are being bombed; the war has started. If you had a plan, you would put it into action." But there was no plan.
The worst thing was that the day before the attack, Denys' (the third co-founder of The Gradient) father Oleksii died. For Denys, of course, this was a huge loss. But Oleksiy was also a mentor for Olena and me, who always gave us advice or said words of support.
Olena. So for us, a full-scale war, I would say, began on February 23.
What were your first decisions amid such tragic events?
Oleg. The first decision was to communicate the situation to our team and determine the next steps. We immediately agreed that work tasks were not a priority at that moment. The first most important thing was to ensure safety.
Next, the situation had to be communicated with our clients. Because some of them were concerned about predictions about the war more than we did. Two weeks before the attack, one of the clients said to us to "run to Poland," and we calmed him down. But we needed to reassure our clients that everything was okay because it was a massive risk for them. We had a prepared answer with explanations: yes, there was a war in the country, but we were safe; Lviv was in the west, and rockets could not reach it.
Olena. We had such a beautiful text prepared! But then a rocket hit Yavoriv, just near Lviv.
Oleg. Later, some clients panicked, but they got along with it. In general, the clients reacted very well: some proactively offered their help, some said they understood everything and were ready to wait.
In the next stage, volunteering activities became our focus. People rushed to help where possible: some met displaced people at the train station, others helped with humanitarian supplies, etc. The first week was entirely out of work. We agreed that we cover each other and pick up project tasks. We did not communicate the team's volunteering work to our clients, but we supported it from our side.
But then we understood that we had to get back to work. And this was probably the most difficult stage. There was a war going on in the country, people were dying, and doing design work felt weird, like "should I put a button on the right or the left?" So in volunteering, people saw their real contribution to victory, but it was harder to find meaning in day-to-day work.
How did you overcome this transition phase? What made the team back in working mode?
Olena. People needed an answer to the question "why?" People were dying, there were bombs, and you had to get up, brush your teeth, and, as Oleg says, "move pixels" for eight hours a day. We had an answer to this question. While we don't know how to fight, we can bring dollars to this country, donate this money, and spend it to help our economy and army.
At that time, we decided that, in addition to personal contributions, we would give the operational profit of the company to the support of the Ukrainian Armed Forces. Then the team realized that by doing their work, they contributed to victory with every penny they earned.
Oleg. It gave a new meaning to our work. Plus, we introduced daily standups for the whole team to discuss what was happening, how negotiations with potential clients were going, how volunteering work was going, and how much money we were donating to our army. It helped a lot to be on the same page with the team.
Did you have to lay off people or cut off wages during the first months of the war?
Oleg. No. We delayed salary payments several times, but only for several days. Our main goal was not to lay off people and not to cut salaries.
“Most of the foreign partners couldn't imagine that we were working. They had the impression that we were hiding in the bombshells all the time because of the war.”
How things are now with new clients? What has changed in sales since the beginning of the full-scale war?
Oleg. Sales have become more difficult. At first, we understood that it would be difficult for us in terms of new sales, and we also communicated this to the team: we hold on to our existing clients.
But about a month later, we started to get new client inquiries. However, those were mostly startups that needed “a prototype." Those were not our type of clients as we work with more complex projects requiring greater team involvement.
We work with big clients. They come much less often, and the sales process has become much more complicated: if earlier the client made a decision to cooperate with us quite quickly, now it is not the case.
Olena. Let’s talk about geopolitics here. Currently, several processes are taking place in the world in parallel—first, the global economic crisis. Top tech companies are laying off thousands of people, while others announce a slowdown in hiring, at least through the end of the year. Leading venture capital funds (from Y Combinator to Sequoia Capital) warn companies about “tightening the belts." So now, only businesses that can show how they will earn real money have a chance to get capital investments.
In general, Russia's war with Ukraine changed many things. For example, we have several clients from Egypt, and you would think about how the war in Ukraine can impact Egypt. But Egypt is one of the largest importers of Ukrainian grain. Now, this grain is unavailable, affecting their economy: from rising prices to a 30% drop in the exchange rate of the Egyptian pound to introducing restrictions on currency transactions. Our contract with this client is in dollars, so the client cannot pay us, as their government does not allow to convert Egyptian currency at the moment.
Companies are cutting costs, and this is a general trend. This can have two consequences for outsourcing: a decrease in budgets for working with outsourcers or, on the contrary, a decrease in costs for the internal team and greater cooperation with outsourcers. Teams with large budgets and were thinking of working, for example, with the Americans, can now revise their plans and find cheaper, but no worse, solutions in Ukraine. That is, it can be both a problem and an opportunity.
Are you reconsidering your approach to what projects you take on? For example, if it is now more difficult to find customers who need complex solutions, it may be worth refocusing on something smaller.
Olena. We are now fully booked with current projects for our team. The question is how fast we are ready to grow and whether we want to grow, specifically taking smaller projects. The current situation will not change our sales strategy and the type of clients, but it may curb our ambitions. We had a goal for 2022 — a growth of 50%, but now we are reducing these goals a little.
Oleg. In this matter, there is still a critical aspect — to keep the promise to the people in the agency. We work with complex interfaces, on exciting projects, and people join our team precisely because of this. And if we promise that we work on complex logic and design systems, but instead, we ask them to design landing pages, people will not be motivated by such tasks.
Olena. Now, more than ever, the world is open to great specialists. The war for talent continues: the shortage of high-quality personnel has not gone anywhere. Therefore, it is extremely important for us to motivate our people, keep our promises, and give them interesting work. Let us earn less, but we will work on what motivates the team.
Did you have to reduce prices for new customers during these months of war?
Oleg. Not to reduce prices, but to reduce our appetites. We had a fairly aggressive rate growth strategy. But now we understand that this is not realistic.
Before the war, everything was going very well. We could easily raise the rate, and we were already making plans. But prices are quite difficult now. Customers are looking for a benefit for themselves in this situation as well.
Olena. And there is also the factor that many Ukrainian companies have significantly reduced prices. Although in my opinion, this is not a reduction of prices but dumping, because we all understand the business model according to which our industry works, and I do not believe that it is possible to make money at such rates. They basically work at cost, which allows them to retain people. But we will not play with it. Because in the end, if everyone lowers their prices, they will become the average rate on the market, which no one will be interested in.
The fact that Ukraine now has the world's attention because of the war, did it somehow affect the interaction with potential clients?
Oleg. We noticed that expats have become more active. We received two requests through expats: one from a startup from Berlin, and the other from a financial startup from Saudi Arabia; in both cases, we were recommended by expats from Ukraine.
Olena. Our clients are large enough businesses, with much less emotional components and much more risk management. This is not the case when a bakery in Europe wants branding and turns to Ukrainian creatives for a logo as a sign of support. These clients may have a Ukrainian flag at home. Still, they have procurement, procedures, and a series of questions like "how do you secure this scenario if a new missile comes your way tomorrow, and how can you guarantee that it doesn't blow up half the team who works on our project."
Oleg. It is important for customers that force majeure is covered and that there are as few risks as possible. Due to this, winning a client has become much more complicated.
And it wasn't easy before because, in the tenders, we often competed with the industry leaders such as R/GA, Instrument, and Metalab, companies with massive portfolios of well-known clients. Our advantage, let's be honest, is that we are cheaper. For objective reasons — the cost of living in the country, the cost of doing business, etc. And we understand why people come to R/GA and why they come to us. But further, we still play at the quality of our services. So now we need to prove that our level is as excellent as that of global agencies, but it is so high that it is worth all the risks.
Olena. In addition, some people begin to manipulate the situation. When we show our prices, their facial expressions and rhetoric change to "you have a war, your prices should be lower." People always try to get a quality product at a lower price if they can negotiate properly.
"The number of efforts to negotiate and close contracts has doubled."
Because many other things appeared: security issues and risk management, customers can request additional guarantees. For example, before, we never started work on a project without advance payment. Now we are considering options for starting work immediately after signing the agreement, without advance payment. Everything is under the contract, we are legally protected, but we make such steps that we have not made before.
I have another interesting insight. I remembered my past experience in business development and decided to reach out to our network and partners." It turned out that most of them had no idea that we continued to work during the war. For example, we received a message from a potential client: "I understand that you are probably not working, but I was very impressed with your portfolio, and if you ever have an opportunity, please get in touch."
We realized that it was necessary to broadcast the message that "we continue to work." So we started communicating this on social networks, professional platforms, and LinkedIn. And it turned out that people had ideas for cooperation with us.
“The message "cooperate with Ukrainian professionals" can only become a trigger for development. And then you need to provide your unique value.”
How balanced is Ukraine's communication about help? Are we not going too far with messages like "save the unfortunate," while it would be possible to say more that cooperation with Ukrainian professionals is the best help?
Olena. In the tech industry, a lot of communication is focused on "work with us." This is now an essential task for IT for survival, especially for large companies.
"Now communication skills are more important than ever. Communicate the value we bring, how we mitigate risks, and why you should work with us. Communicate with people in the agency why and what we need to do."
Oleg. The message "cooperate with Ukrainian professionals" can only become a trigger for development. A person is interested in "what do they do in Ukraine," and then it is necessary to provide a unique value that no one else has.
Olena. The paradox is that we should have started doing this not after the war and not now, but yesterday.
Our level of digitization is much higher than in Europe. Ukrainians who went abroad can appreciate it. Can we build communication about Ukraine as a digital-savvy country? In terms of digital solutions, are we more modern than Europe?
Oleg. On the one hand, yes, but what does it give us? For example, we cooperated with African countries, and they also have very cool technological solutions. For example, one application in which all insurance, financial, and legal services are in one place. We did not even dream of such a thing. Does that make them a highly developed country?
Digitization should be a consequence, an added bonus. If a store has a super cool site, perfect UX/UI, but a bad product or horrible shipping, will you buy from them again?
We still often have an inferiority complex imposed on us. For some reason, we always have to prove to someone that we are a civilized country, that we are part of Europe.
But really, it all comes down to what value you provide. And the only option to choose your place in the market is to do things qualitatively and better than others. Does not matter if you are from Ukraine, China, France, or Italy. Yes, there is a concept of country context. We have an ongoing war, which is a ridiculous context. But the war will endm and no one will get far simply because "I am Ukrainian."
Olena. Our digitization can play into our hands if our products go global. If an app like Monobank launches in Germany/Austria/Poland and becomes the first digital bank in Europe, or the Ukrainian Diya app makes a white label product and sells it to some European governments. Then there is no need to prove anything to anyone; everything is already visible. It is not enough to be able to show a digital passport when the problems of the economy and corruption are not overcome.
Now many Ukrainian businesses, including service businesses, are starting to try to sell franchises abroad. And that could be an interesting possibility. This will be the best marketing if we become an exporter of franchises, technological solutions, and white-label products.
Tell us how your vision of the future has changed since February 24. What did you plan before? How long-term are you planning now?
Oleg. This war had a terrible effect on planning. Even if you are in a relatively safe environment and your life seems not to be in immediate danger, the feelings are radically different than before February 24. It is difficult to imagine the future because there is a threat in front of you that will destroy all possible plans.
It made me sick for a long time; it demoralized me. Until I realized I had to accept the situation, we would have a war, and we did not know how long it would last. Therefore, we must accept that this is our new reality. Imagine that it will not change. When you prepare for the worst-case scenario, and at least something good happens, it makes things much more manageable. Because if you expect that everything will improve, and something worse happens, it crushes you and all your plans.
Olena. There's a great book by Ray Dalio called ‘Principles,’ and one of its main principles is to learn to accept the reality in which you live. As long as you live in illusions, you will always feel bad.
We all realized it differently, which happened a few weeks ago. It would have been entirely different if we had given this interview two months earlier. Now we have accepted our reality. This rain is for a very long time, and we must live in this reality.
Oleg taught us one very useful thing: you need to allow yourself to lower your ambitions. If at the beginning of the year we planned to grow significantly and capture new markets, now it is normal that those plans are no longer relevant in the new reality.
It is also important to lower the level of demands on oneself as a human being. "You're a founder!", "You're a manager!" No, in the long term, we can not make it like this because business and life are a marathon.
Oleg. We do not abandon our plans. They are simple for us: to make world-class designs for the most incredible clients worldwide and be an agency from Ukraine. Maybe the tactics to achieve these plans will change, but we will get there. Now we have hail, rain, and fog, all at the same time. But we are moving little by little.