Map Source: Lonely Planet
10 Things About Russian Business You Probably Don’t Know
by: Andrey Shapenko, Evgeniya Feoktistova, Moscow School of Management SKOLKOVO
What does an average person know about Russia? It is the largest country in the world. It has been under communist reign for most of the 20th century. Politics is a big deal here, and business climate is uncertain. Press covers mainly negative news from this part of the world, but do we really know what is behind these titles? Is there anything interesting or positive going on? How much Russia is actually different from the rest of the world – or does it see same trends and issues as all of the economies face? We invite you to take a closer look into a few of the country’s business and social trends and recent developments.
How easy, do you think, is doing business in Russia overall? Is it easier or harder than, say, in Luxembourg or Netherlands? In the latest Doing Business ranking from the World Bank you will see Russia being ahead of many European and all other BRICS countries – with overall rank of 31. China for instance is 46, India – 77, Netherlands – 36, and Luxembourg – 66. Russians themselves are surprised by this statistic and by the level of government and financial services that became available for small and medium businesses lately. Within just a few years things have changed dramatically here. In a couple of hours one can register a company and get full banking support, and in the end of the financial year it will take you just a click on the internet to file a tax report. This ease helps drive Russian economy and creates a new wave of entrepreneurs who are ready to try their ideas, maybe fail, but then try again.
Entrepreneurship, in fact, is deeply rooted in the Russian culture. Before the country took on the great experiment of trying to build socialism some 100 years ago, trade and industrial entrepreneurship was blooming all across the Russian Empire. Initial oil discoveries in the Caspian Sea, construction of Trans-Siberian railway, exploration of Alaska – all was done on private money. This tradition was brought back with the free market in the 1990s. More and more people choose to work on their own start up; management education is in high demand; Steve Jobs and Elon Musk are the new heroes of the youth; and being entrepreneurial is the new norm.
This new generation of entrepreneurs – men and women currently in their 20s and 30s – are of a different breed than the ones you might see in 1990s – 2000s. They are more prone to take risk of starting a new business and more tolerant to failure; their companies have flat, less hierarchical organization structure; they are compliant with the internationally recognized rules of transparency and business ethics. You might even not recognize them as Russians at all, as they don’t prove any stereotypes about the Russian people right; gathering in coworking spaces and queuing for a cup of Starbucks coffee in the morning, they look exactly like the same crowd in New York or London.
This new generation of young, open-minded and creative people is taking over in all spheres, including business, culture, media, urban planning, and municipal government. You might have heard of some of these young entrepreneurs and their companies, as they are conquering global markets. Yandex, Kaspersky Lab and Lukoil are among Russian top corporations established in the previous century and now managing assets around the globe. But the young ones are even more interesting. Dodo, the largest Russian pizza chain, has now more than 300 restaurants in 10 countries including UK, China and the US. You can buy quality Splat oral care products in supermarkets across Europe and Asia. Millions of kids and adults around the world are playing Russian video games developed by companies like Nival, Mail.ru Group and Innova. In Practicum Global Shift, an executive education programme by the Moscow School of Management SKOLKOVO, designed for globally oriented owners of small and medium-sized businesses, participants carefully study various international business models, create their own global strategy and are challenged and guided by faculty and business experts from around the world. Admission is not easy, and to get in one will need to show real drive and global mindset.
Non-profit sector is another interesting scene. In the past decade we saw a true revival of social entrepreneurship in Russia. After turmoil and market shocks of 1990s, Russians are turning back to their communities, working to improve social services and foster inclusion through public-private partnerships. The biggest example of the latter is the national project of support and sustainability for so-called “mono-cities” – towns of 10-100 thousand people with just one or two major employers – industrial plants and factories. After collapse of the Soviet Union not all of them managed to embrace the market economy, many core plants were shot down causing unemployment and social distress. Over 300 such towns are the home of 14 million people – more than the population of Switzerland! The challenge of making those towns sustainable is tackled by the joint efforts of federal government, private investors and educational institutions. Executive education programme designed by the Moscow School of Management SKOLKOVO and Mono-cities Development Fund won gold medal in this year’s EFMD Excellence in Practice Awards.
Rising gender diversity in all spheres is another strong trend. According to the recent Index of Womеn Entrepreneurs by Mastercard, 34.6% of business owners in Russia are women. (And this is the second score in the world!) This trend is strong in business education as well: SKOLKOVO Start Up Academy, an executive education programme of the Moscow School of Management SKOLKOVO for entrepreneurs has 35% of women students.
Digitalization is the main trend all over the world. But did you know that Russia is among digital pioneers and first adaptors of online municipal services? Easily pay for your parking via a mobile app or make an appointment with a doctor through an online registration system. Have your child’s grades from school delivered to your e-mail daily or get a pay pass ring to enter a tram. Pay all your bills, taxes, government fees and fines in the same app on your smartphone. Oh, and sell your car already – we strongly recommend you take advantage of numerous car sharing / bike sharing services rapidly spreading in the Russian cities!
Russia has a vast territory, you know that already. It has rich history, amazing cultural diversity and beautiful landscapes… but earns 7 times less on tourism than France. No surprise tourism is becoming one of the most interesting growth areas for the country’s economy. Sochi Olympic Games of 2014, Football World Cup of 2018, Universiade and WorldSkills Championship of 2019 – these big world class events are definitely helping develop tourist infrastructure and showcase Russian hospitality to guests from all over the world. Small and medium enterprises, local historians and enthusiasts in different parts of the country are taking this trend on, building Russian tourist industry anew, working hard to preserve ancient artefacts and make your journey worthwhile.
Speaking of new industries: have you seen the famous “Masha and the Bear” cartoon? If not, google it right now and join 3 billion viewers on Youtube admiring this simple yet compelling and funny story, based on a Russian folk tale, every family can relate to. In 2015, the cartoon was included into a list of “TV Shows Destined to be Classics,” which was compiled by the cartoon industry’s periodical Animation Magazine.
Not only the new and creative industries bloom. Big giants, inherited by the young Russian economy from the Soviet Union, are changing too. Formerly state-owned Sberbank, The Russian Post, large industrial companies such as Norilsk Nickel and Evraz, oil companies like Gazprom Neft, car manufacturers like Kamaz, United Rocket and Space Corporation and others can be named true champions in transformation. In 1990s they had to learn how to live in the new environment, move away from the planned economy to survive and thrive in the free and global market. Now together with the whole world, they face challenges of employing AI and new technologies, and again changing their culture, systems and processes. Transformation is the real buzz word here.
Transformation can’t be achieved without proper education and training which are being offered by state Universities, private business schools, and growing number of education startups. Almost every big company has its own Corporate University. Education market is steadily growing 3-4% each year.
Moscow School of Management SKOLKOVO has been established in 2006, and with its 20,000 corporate executive education graduates is now one of the leading business schools in Eastern Europe. Executive Education programmes devoted to transformation of business models and cultures are SKOLKOVO’s trademark, with clients from every sector of the economy. “It is truly fascinating”, – says Marina Karban, Director of Executive Education Department at SKOLKOVO, – “to partner with learning and development professionals within corporations and corporate universities to create unique educational experiences for every client of ours – which eventually leads to the development and growth of people, our participants and graduates, their teams and communities.”
Russia is like a box full of surprises – you never know what you will find inside. Many fear the unknown, but those who dare succeed! If there is high risk, there is, of course, high reward. And the highest risk (or maybe reward) of coming to Russia to do business (or just for leisure) is that you might fall in love with this country and its people. Anyway, we invite you to see for yourself, and will be very happy to see you in April at the Annual UNICON Directors’ Conference in Moscow!