Keeping it in the family
A Finnish business sets sight on the local district cooling industry
A Finnish family business has set its sights set on a hefty share of the Middle East’s lucrative district cooling industry
The question of why a Finnish engineering company, which makes valves and water meters, would be bringing its district cooling technology to the Middle East is certainly a fair one. The answer has to be one of compatibility, both in terms of the technology it uses and the way it carries out its business.
Vexve Oy, the company in question, has its headquarters in a small town called Sastamala, a few hours of scenic drive from Helsinki. There, in the industrial heart of a country readily associated with freezing winter temperatures, the family-owned business puts its engineering skills to work for district cooling.
Vexve’s experience providing valves for the country’s cooling and heating networks has seen it supply home grown customers such as Helsingin Energia – Helsinki’s municipal district cooling provider – as well as a surge of new customers in China.
Its offering for the cooling sector grew out of its experience in the Finnish heating market. “We have learned that our products are very suitable to district cooling as well, and with the Middle East being a big market for district cooling, we see a fit that will be complementary to the market,” says managing director Jouni Rouru. “As we understand it, we have a difference in what we offer in products, operations and service to customers.”
Cooling expertise from a cold country may seem an oddity, but is in fact a by-product of excellent building insulation. Structures developed to keep staggering cold out during dark winter months, also do a grand job of retaining heat in the short but warm summer; hence the growth in the country’s district cooling sector.
Added to products that make sense for the Gulf region is the family factor. Not unlike many businesses operating here, Vexve is a family operation, founded in the 1960s by a father and passed on to a son. It’s a fact which may well stand the company in good stead locally.
“It is very characteristic [in Finland] to be a family company. As a private family company, we have grown step-by-step,” explains Rouru. “It is very important that every employee thinks in ways that are similar to our core values. Our customers also think in a similar way. Often our customers and distributors are family-owned companies as well.
“We are a small company and one of our main strengths is how we work in long-term partnerships with a few distributors. Basically, we have one distributor in every market or country area.”
So far in the Middle East that has proved to be true; the company’s sole local distributor in the region is Al Tayer Engineering. Rouru describes the family business approach as one influenced by values, affecting the way the company is managed and the way things are planned. For instance, targets are managed over years, not quarters. The company’s water-metering arm is a case in point. First started in 1982, it has grown steadily each year, but it is only with the recent surge in interest in smart metering that demand has accelerated. In fact, the company is due to start a retro-fit trial of its system in a Dubai residential tower before the end of the year.
“Maybe in some other corporations, if there hadn’t been more growth in the past it wouldn’t have been interesting for the owner, but here there was long-term basis and perspective, which is paying dividends now,” says Rouru.
While Rouru observes companies cutting research expenditure in the face of a tough economic climate, he believes that is a short-term view, which could leave a company dangerously under prepared for the future.
“We fully believe that there is life next year, and after that, and now we need to put things in place to improve our activities - instead of making cuts - in order to grow long term,” he observes.
Rouru backs this view with decisions made to expand capacity with new plants, noting that now is a good time to build for the future. Not only because there are some lower costs to take advantage of, but because quieter times are ideal for putting plans in place to respond to any future market up turn.
At present, the company can produce 300,000 units a year from its range of ball and butterfly valves. While the ball valves represent the volume side of the business, the manufacture of the larger ball and butterfly valves has an almost artisan quality about it. Operational capacity is gained through having skilled staff, trained to perform more than one part of the manufacturing process. In part this comes back to the approach the company takes to business. The family-based entrepreneurial spirit is passed on to the employees, who take responsibility for their role in the business.
The valves’ unique selling point is the connection and insulation systems developed to make the lines tight and keep them free of corrosion. Weight is also a factor that the company tries to keep to a minimum. The keys to making this happen involve making the valves out of the same materials as the pipes and allowing for the use of welded connections, instead of flanges. This, says Vexve, is more cost efficient and results in a lighter product, simply because less material is used.
The absence of flanges in the resulting network also makes it easier to thoroughly insulate the valves and connections with foam. This means they can be buried direct into the ground, without the need to build concrete chambers.
Rouru feels these features in proven products, compatible with the local district cooling market, will make Vexve an attractive prospect for Middle East operators. A further carrot he offers customers is the approach to service.
Almost all companies say something of the sort about service, but in Vexve’s case there is a tangible difference to its approach: it holds products in stock. The fact that Vexve delivers all its products from factory stock will offer comfort for those who remember what lead times were like in 2007-08.
“It’s unusual to see a company with a stock of big-ticket items sitting in factory,” says Rouru. “We are not trying to optimise our inventory, but instead secure the service level with stock. What we hear back from our partners is that this is a key aspect for them.”
The company adopted a more formal planning approach a couple of years ago, when Rouru joined and the then-MD moved into a position as chairman of the board. Since then there has been a measured adoption of some large company practices.
“Growth is the first enemy of strategy; the biggest risk is that you lose sight of your key competitive advantages,” remarks Rouru.
“We want to maintain the flexibility and intelligence of the small company, but put things in place to lead the company effectively. We’re being careful not to put too heavy a structure in place, because there are advantages to being a small company, such as being dynamic, intelligent and flexible.
“We have recognised the merits we have and the merits of our products, and now we are exposing ourselves to new opportunities, but we are a small company, so we have to remain focused.”
Vexve plans to use the next year or two to establish itself in the Middle East region. With a business connected to the energy-saving benefits of district cooling, steady growth is expected both through steadily gaining market share and the organic growth of the market itself.
Leaving out the obvious phone manufacturer, UME checked out a few other Finnish contributions to Dubai’s development.
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Kone is one of the world’s largest manufacturers of lifts and escalators, not a bad thing to be in Dubai, where tall high-capacity buildings place huge demand on people-moving systems.
Marinetek is a developer of marinas and has been at work on Dubai Maritime City as well as having previously supplied piers for the Palm Jumeirah marina.