The Hungarian Quarterly
2004. április 1.
Few people even in Hungary knew of KÜRT Co, when Business Week wrote in 1995 that they had put Hugnarian high tech on the map. By then, it was the fourth largest data-recovery firm in the world, with a fund of experience in retrieving data from soaked of fragmanted hard drives, for governments, radio stations, banks, carmakers and Interpol, and also in information security technology. The business started in a laundry in 1989, during the turbulent months of the change old systems, by the brohters János and Sándor Kürti, with assets of just 1 million forints. From repairing hard drives (in a country desperately short of them), the company went on to be one of the world’s first to develop data recovery technology in 1993, then remote data recovery in 1999 and information security tools in 2000. By then, Hungary’s flagship data-processing outfit had multiplied its turnover several hundred times over. As IT went into recession, some foreign rivals collapsed, but not Kürt Computer , which is now preparing to set up its second foreign subsidiary. It has kept its enthusiasm, pioneering spirit and relaxed culture of innovation. CEO Sándor Kürti (56), a former chemical engineer (with a doctorate in mathematics) is among the country most respected executives, chosen Informatics Manager of the Year in 1997 and 1998.
So how did the Kürti brothers progress from running a laundry and repairing clunky hard drives to peak data-restoration and data-security technology for customers large and small in the United States, Japan, Britain, South Africa and Switzerland?
You could not just walk into a shop in socialist Hungary and buy a high-tech product. This was a poor country, and the Cold War Cocom bans did not help. Few people remember that it was years after the change of system before all the Cocom bans on technology sales were lifted from the socialist or post-Communist countries. So anyone who knew anything about these machines had business opportunities to exploit, repairing the old, overused, broken data stores. We found that niche in the market and repaired them. That wasn’t our dream, of course, but we were glad to have something to keep the wolf from the door. Later, thank goodness, that little market disappeared- we thought it was a tragedy at the time. The forint became convertible in the 1990s and the bans gradually disappeared, along with the penurious conditions. It then became possible to get everything, and from then on, nobody bothered with repairing computers any more. But fortunately, it also turned out at the time that the data stored on the old machines had far, far more value than the machines themselves. Yet if the magnetic disc, hard disc, floppy, magnetic tape or up-to-date vehicle- CD, DVD, flash memory- breaks down, the data becomes practically inaccessible unless there’s someone who can retrieve it. There was hardly anyone in the world apart from us who had learnt how- we had a two or three years’ start. We still try to maintain that lead and our efforts in the past fifteen years have been directed mainly at staying on top of the peak-technology products as well, because that’s how we make our living.
So it wasn’t so much big ideas and innovation that got you where you are, but responding to various constraints, struggling to make a living and striving to stay in the business. And if you took a risk, it was not so much in the hope of big winnings, but because you had no other option.
Anyone who wants to remain in any business and puts his head on the line to create his life’s work will necessarily end up in the top echelon. He has got more time than anyone else. He is dealing with the matter continually, so he will be better than the rest, who don’t deal with it so much. All that happened to us was that we became better than a hundred thousand or a million others who started out in the same business, and we still are. Anyone starting up now is going to have a fifteen-year handicap.
Is your success then due to factors that others use to explain their failures by? Tight money, primitive equipment, poor quality, a lack of imagination or of a readiness to take risks. All you did was adapt to changing circumstances and get on with your work. You did not want to succeed so much as to avoid failure and this was the result. Isn’t this mock modesty?
I am just talking of one side- continuing to compete. Everyone knows how it’s done. There’s nothing new in saying that if you practise and train a lot more, you’ll do better even with average talents than a genius who forgets to practise and train.
Still, there were great turning points and decisions, crucial periods and watersheds in our lives as well. January 1, 1989 produced a miracle in Hungary, when the new company act was gazetted, making it legal to set up a private firm. But strange as it may sound, not one of the team of 20–30 that my brother headed in the state-owned enterprise wanted to follow us. They could not believe what I tried to make them understand: that the kind of world had come to an end in which it was enough to work two days a week in a state-owned enterprise and the stupid regulations did not make it worthwhile to work more than that.
I told them, we’d work ten hours a day five days a week and we would spend the rest of the time studying, but from then on, we will be more knowledgeable by the second and we won’t have any rivals. Not that I knew how things would turn out either. But I was sure it would never again be the way it had been. When I broke up my brother’s team, he didn’t know what his younger brother was doing, but in the end he came too. We went across from the big state ship to a little private skiff of our own. First we assembled our team, taking experienced professionals from MOM and elsewhere. And it’s been the same ever since: we get on with our work, do our job, know a little bit more every day, and get a little bit wiser. You can’t start the hop, step and jump with the jump. Anyone who wants to get into this market will have to follow the whole course. There may be someone who does it a bit more cleverly and imaginatively than we have but we have invested far more time than anyone and our team is united. By now we have learnt so much, and we have got used to living, thinking and performing to a world standard, and we have received attestations and marks of appreciation from the whole world that can’t be won, obtained or created in a day. Thanks we have received include letters from Rudolf Giuliani and George Pataki after 9/11, and they would never have been written if all these things had not been there backing us.
But there is another side to our business, apart from minimizing the damage from problems, which is protection. I’d never have thought that we could go onto the world market in security, the multinationals have their own providers and there would not be much for us to brag about at home either. But thank God, we managed to win orders from the multis in Hungary. Then they asked us to enter international tenders as well, and we have now reached the point of providing the security for financial institutions based in the EU, such as Volksbank and Generali. We have colleagues in ten countries, like assault craft, checking and examining our clients’ information security and performing hacker-like tasks, to test the security of each system. But a great many tests can only be done on site. For instance, how the bank can defend itself if some kind of trouble or catastrophe occurs, while still running the institution and ensuring continuity of service. Our task in these cases is to seek the optimum, set limits, in other words, handle risk and set rules for managing them. So these banks with a European network of branches and the information systems in them have a functional backup strategy. They are protected by a Hungarian firm.
You already have a subsidiary in Germany and you’ve just decided to start one in Austria too. I hear there was some kind of constraint involved in this case as well.
Yes, we have been working with so-called partners, on a contractual basis. We lacked the time or the money to start founding firms abroad, and this system worked well in 16 countries. But after 2001, the Americans bought up all our partners, and so we ‘lost’ Italy, Switzerland, Poland, I won’t list them all, it brings tears to my eyes. Another era in our lives came to an end. On January 1, 2003, we started our own subsidiary in Germany, and on the last day of the year we decided on the second, and we hope to continue founding our own subsidiaries at about that rate, out of our own resources. It has the advantage that no one can buy them up, because they’re ours. But they are starting from scratch, so they are going to soak up huge amounts of money.
So all that has happened again- for the nth time in your history- is that a period is over and you have to adapt to a new situation. You have fled forward, making yourselves bigger and more successful still.
That is the essence of competition. I haven’t mentioned the times when we lost out, but there were plenty of them. But the firm is a closed system in the sense that we are not working on credit and we have been able to cover our losses out of our own resources. This kind of business competition bears a logical resemblance to a sports event. It’s all simple to start with, success (known in business as money) is everything, but then come the other requirements: we have to develop at vast expense to be state of the art. We have to see clearly where we stand and work out our strategy. For instance, what effort and resources we have to invest in seeing, or trying to see into the future. And we have to be very careful that the unsuccessful ventures don’t predominate, or we’ve had it. There is no free choice. It’s a chase in which every step is forced upon you, but it’s an enjoyable chase and they are enjoyable steps to take. And these things give us some kind of confidence that we’re moving in the right direction. But God save us from lack of confidence, because the firm is small in size, so small that it finds it hard to protect itself from the dangers of the world. Let me tell you a favourite little story of mine about two men who find themselves in some exotic place and hear the roaring of a lion. Whereupon one of them starts to do warming-up exercises. ‘Have you gone mad?’ says the other. ‘You think you can run faster than a lion?’ ‘I don’t have to run faster than the lion,’ says the first man,
‘I have to run faster than you.’ That philosophy may sound a bit crude, but it’s what drives every minute of our activity. We’re competing to make sure we aren’t the one the lion gets.
You stress that you are just an ‘ordinary’ man, that you are never going to excel as an egghead?
That’s my opinion. The big systems are never run by eggheads and geniuses, they are just used as window dressing, if at all. The systems that really work call for collective thinking.
The Japanese model.
Precisely. It is one of the firm’s biggest assets, its operational system, and it is very close to the Japanese model. It is built up from the bottom. The ideas come from below, not the top. We have a seven-member board, in which everyone is equal and everyone has one vote, me as the owner and the other six, the key people, as well. And this collective brain operates the company very well, because those taking part in the decision-making know that their results and those of their team depend solely on the firm’s performance. The firm has learnt how to operate in an evolutionary, lifelike way, how to distinguish important tasks from inessential ones. In that respect we operate in a copybook fashion, based on a Harvard model that we adapted for ourselves, but not adding much to it, in fact. So you’ll find with us a kind of blend of modern management techniques.
How is this modus operandi of yours compatible with the general conditions in Hungary, which don’t follow this logic at all?
That is our biggest problem, the greatest barrier we have to overcome. Not a shortage of funds, but the ‘product-making culture’ of Hungary. The forty years of socialism meant that the ability to produce high-quality products was damaged. The cooperation this requires is absent at every level, within companies, between companies, within industry, between industries and between countries too. Restoring that is one of the big tasks ahead for Hungary in the years to come.
That doesn’t mean we just shrug and stand around. On the contrary. We try to raise ourselves by our own bootstraps. One way has been the work we have done before, study abroad, another employing German, Austrian and Canadian staff, for instance. Their culture allows them to solve certain problems quite simply, while we can’t solve them standing on our heads. We want world-standard products in the long term, because that is what we want to live on, so we do everything we can. That is why we think the Japanese model is worth following. What Japan made up to 1960 was trash, but forty years later, they have reached a stage where ‘Japanese’ is synonymous with quality.