— Philip, where does your love of Russia come from?
— Firstly, I am interested in the special features and traditions of Russia, and its culture. Secondly, it’s an era of changes. Virtually before my eyes, tremendous changes are taking place in business, and in people’s way of thinking and the level to which they are informed. In 1995, even in Moscow, very few people spoke English or had contact with Western entrepreneurs. And although people were open to everything new, they could not integrate into a business model with the participation of a foreign partner. Accordingly, consultancy at that time was like writing training manuals. Now it is all different. Russian businessmen travel the world, and are in close contact with Western colleagues. Even in small companies, managers know about modern foreign practices. Now we talk to Russians in a common language, in both the direct and indirect meanings of the term.
Philip Gudgeon graduated with distinction from Cambridge and London Universities with a Master’s degree. He went through the Executive MBA programme at the Kellogg Graduate School of Management, USA. He has been working in consultancy for 23 years, of which 20 have been in Russia, mainly with clients in the financial, oil-and-gas, telecommunications and state sectors. He has headed complex projects in working out the corporate strategy of financial institutes, business strategies of commercial banks in the retail and corporate divisions, optimizing end-to-end business processes, cost reduction and risk analysis at the scale of an entire organization.
— Why did you not wrap up your operations in Moscow when the offices of foreign firms here were closing one after another?
— When the crisis began, we constructed four scenarios of the further development of events. One of these assumed that we would have to leave the Russian market. Fortunately, this did not happen, but we were not intending to do this anyway. Oliver Wyman is a young company, it is only thirty years old. But we are in fourth place for income among the leading consultancy companies. The fact that we have a deeply integrated model of conducting business helps us to achieve success. Russia is not a separate subsection. The income we receive here is part of Oliver Wyman’s European balance. This means that we have a single pool of partners and consultants throughout Europe. The Moscow office is a subsection of the all-European business.
— How does the Moscow Oliver Wyman site integrate into your projects?
— It’s primarily a matter of know-how. We are proud of the detailed level of content we create. At an early stage of our people’s development as consultants, we make them specialize in narrow sectors of consultancy disciplines and the sector covered. For example, someone might not be a specialist in banks, but a specialist in credit cards. Or not a specialist in retail, but a specialist in refuelling stations. Those who represent Oliver Wyman are typified by their detailed level of knowledge. Of course, this model can only work when the specialists we have in Russia are in close contacts with foreign partners, whether they are in Houston, or London, or somewhere else.
— Are Russian specialists competitive?
— We select them from among the graduates of leading Russian universities. Particular stress is laid on financial and economic disciplines. And if we only end up selecting one person from two hundred applicants, that is a good thing.
— So competition for your jobs is at the level of two hundred for one position??
— That’s about right. We are highly selective, because we are not aiming to build up the team in quantity. Quality is the aim. Therefore we work actively with the universities and regularly speak there. The mission is to encourage as many as possible to apply.
— Does Russian higher education meet your requirements? Do you have enough good people to choose from?
— Undoubtedly. In terms of academic preparation, Russian higher educational establishments are as good as foreign ones. If we are speaking of economists and financiers, I don’t see any great difference. Russian higher education is fully up to the world level. But we are looking not so much for knowledge as for a person’s calibre. Mind. Brains. And that’s not all. A person must have a certain culture, a desire to learn, and an inclination for this particular profession.
1. In Russia, the law must be respected.
Just as in any Western country. It is not worth thinking that you can find ways round it.
2. Try to understand the Russian mentality.
You’ll find it harder if you don’t.
3. Do not lower your professional standards.
A product manufactured in Russia should not be worse than an analogous Western one.
4. Keep your sense of humour.
In Russia, this will enable many problems to be solved.
5. Take a break from Russia occasionally.
Change your place of work, or at least go away on holiday.
— You open up new directions of development for your clients. What do you offer them in the Russian market?
— When you enter a new market, the guarantee of success is to select two or three sectors of it on which your main efforts can be focused. Because it is impossible to do everything at once. In the Russian market, such sectors are the financial, oil and gas, retail trade and transport. In each of them, we try to obtain an “anchor” client, one who will return to us several times. That is how we gain a certain reputation.
For example, in the banking sphere, our anchor client was Sberbank, where we were involved in the creation and introduction of new models of credit processes. This was a whole list of projects which we carried out over a period of several years.
In the retail field, we are continuing to work with one of the leading food retailers. Several projects have been put into effect here involving a complete restructuring of their logistics chain, including ordering, storage and layouts for the shops. As for the manufacturing field, here we have also had projects, But we have not yet set ourselves the target of conquering this market. Our approach is as follows: we give the company’s partners quite a lot of freedom in how, where and with what clients they work. We expect our partners in Germany, Britain or France to express a desire to work in Russia themselves. If a partner has an appetite for Russia, he will come here and start contacting clients. Then we shall join in and help him develop his project.
— If you track the strength of “appetite for Russia”, has it diminished in recent years?
— Yes, and the main role here was played by the financial-economic factor. Consultancy projects in Russia have become objectively fewer. Their scale has been reduced too. This has led to a lessening of the desire of foreign partners to plunge into working in Russia this very minute. But it could not have been otherwise. On the other hand, I do not consider this to be even a medium-term factor. And it does not reflect an assessment that the Russian market is a poor prospect for the development of a business. It is simply a balancing of the personal portfolio of each partner.
Already this year, I see a certain animation, a rising interest in the Russian market. Again, it helps us that Russia never disappeared from the radar of the Oliver Wyman management. Even if the number of projects in Russia was reduced as against what we had been doing before the crisis, no-one intends to leave Russia out of account. Of course it is too early to say that the pendulum has started swinging the other way. It is suspended in expectation. And political events in the West, and the fact that the Russian economy has demonstrated surprising stability in crisis conditions, cannot fail to influence the attitude of Western colleagues to Russia. They are coming more and more to believe that the Russian market is ready for growth.
— Philip, how have sanctions and counter-sanctions affected your business?
— The scenarios we constructed at the beginning of the crisis envisaged that the sanctions regime would become harsher, both from the Western side and the Russian side. This has undoubtedly influenced the current amount of business. We had put through serious projects to the level of various Russian ministries, but we had to give them up. They became too politically difficult in the atmosphere of the beginning of 2015. But all the same, the worst scenarios did not come to pass.
— In the conditions of sanctions, some Western investors are taking the road of localizing production in Russia...
— That is something we particularly avoid. It runs counter to the tenets of our policy, because Oliver Wyman aims to integrate Russia into the international operational model. At the commonplace level, each business has to be local. Without understanding what is actually happening, how our clients think and what they want, we cannot sell our services here, let alone fulfil our obligations.
Oliver Wyman is part of the Marsh & McLennan Companies group. Oliver Wyman combines profound practical knowledge and the application of highly effective methods in the field of strategy development, improving operational efficiency, risk management and the transformation of organizations. Together with its clients, Oliver Wyman works out and implements strategies for the stable development of business.
— What other projects would you like to single out?
— For example, in the past six months, we have been developing our own system of credit rating for companies represented in Russia. Considering that there are tens of thousands of these companies, this is very important work. We have developed a system which makes use of all publicly available data about the client, including data from the press. These data become the basis for calculating the credit rating.
One of our most important projects was one for stress-testing and assessing the quality of the assets of 126 leading European banks, which we did for the European Central Bank (ECB). Since the crisis had given rise to serious problems with the banks’ balances, this had to be gone into in detail in the current situation. This was a major project for the ECB, reckoned to take several years. The theme is connected with the restoration of trust in the banking sector and the regulation of it. We have unique experience of working at the application point of state regulation and of constructing effective systems of management and the introduction of innovative approaches. These tasks were very complex and large-scale, requiring a large number of consultants and detailed analysis. And we re proud that we coped with them.
— You have stressed that the Moscow office of Oliver Wyman is no different from the others and works in the same way. There is much talk of corruption in Russia itself. Does this, or do any other factors, stand in the way of this principle?
— In more than twenty years of working in Russia, I have only once had a client hint to me that he personally would need to get something out of it for us to be given a certain project. Obviously, we had no further meetings with him. I don’t mean that we have not come across corruption in Russia. But for us, as for any company working with the biggest and most reliable companies in Russia, Europe and the rest of the world, our reputation is extremely important.
As for a Russian client being very demanding, that is another matter. Sometimes they have excessive expectations. But that is surely natural. It shows the client’s ambitions. Here it is important to find a common language.
— So what does a Russian client want?
— On one hand, he wants to solve his specific problem: to increase the sales and efficiency of his business. On the other hand, he realizes that there is no need to re-invent the wheel. Consequently, he needs not only an efficient management team capable of producing and introducing something quickly. It’s also important to him to know what the best in the world is in this respect, and how to make use of it in Russia. Oliver Wyman meets this client requirement.
— So the European model does work on Russian soil all the same?
— I don’t see any differences in principle, any more than I see why Oliver Wyman should change its working methods here. Yes, we could engage in predatory pricing to obtain a higher volume of business, but it would mean that the services we provided would not be of the same quality. And this runs counter to our principles. We do not want to take on inadequately qualified specialists. We have our own corporate culture, which is very important. No less important is the environment young people enter when they come to work for us. And we succeed in keeping people with us precisely because of our corporate culture. This is particularly important in Russia. A staff member will be sure to stay if he not only progresses in his career, by which he can later profit financially in some way, but also values the environment in which he finds himself. He will not want to sacrifice our collective atmosphere. People are particularly sensitive to this in Russia. I have become convinced of this in my many years of experience.
— It is considered that now, in a period in which the rouble is cheap, it makes sense for foreigners to start new projects in Russia and invest their money here. What do you think about this?
— That is not the most important thing, There are opportunities here to obtain a good profit in any sector of business, simply because the Russian market is not properly serviced. In widely different spheres, there are big gaps to be filled. The more so since technologies are constantly progressing, and innovations are very popular in Russia. Incidentally, I do not share the stereotype view that Russia is a technologically backward country. This is not true. And the crisis has only given fresh impetus to technological renewal here. It has given rise to many transformations which have to be undertaken in many industries. The sort of technological revolution that Russia is having is hardly going to be possible in any other country in the next few years. Some large-scale projects which should have been carried out in Russia several years ago have been postponed because of the crisis. But they have not been closed down, only put into suspended animation. Their hour will come.
— At the same time, Oliver Wyman’s new report talks of expecting a slowdown in annual growth of assets under management, from the seven per cent level of the past few years to five per cent in the period up to 2020.
— This is a worldwide trend. But potential investors should take other factors into account. For example, the fact that there are many owners in Russia who want to get out of some asset or other, but have not yet found a buyer, or not at a price they like. So we can expect a vast number of changes in Russia. And no less a volume of business process regulation, which simply has to be dealt with. We come up against this virtually every day. Russia is interesting precisely because of the volume of forthcoming transformations. Each of these transformations opens up a new space for potential players. And the fact that many have recently given up on projects in Russia gives additional advantages to those who are not afraid to swim against the tide.