— Philip, why do you like Russia so much?
— I am fascinated with Russian unique features, traditions and culture, and with the epoch of changes that it goes through now. I witnessed tremendous shifts in the business environment, people’s mindset and awareness. In 1995 very few people spoke English or dealt with foreign entrepreneurs even in Moscow. Now everything has changed. Russian businesspeople travel the world and are in close contact with Western colleagues. Even in small companies managers are aware of foreign best practices. Now we speak a common language with Russian people, both literally and figuratively.
Philip Gudgeon graduated from Cambridge and London Universities and has Master’s degree with honors. He passed the Executive MBA program at the Kellogg Graduate School of Management, USA. He has been working in consulting for 23 years, 20 of which – in Russia. He works primarily with clients in Financial, Oil & Gas, Telecommunications and Public sectors. Philip has managed complex projects aimed at defining corporate strategy of financial institutes, retail and corporate business strategies of commercial banks, optimization of end-to-end business processes, cost reduction and risk analysis at the scale of an entire organization.
— Why haven’t you wrapped up your operations in Moscow when the offices of foreign firms here were closing one after another?
— When the crisis began, we created four scenarios of further development of events. One of them assumed that we would have to leave the Russian market. Fortunately, that never happened, and that scenario was not our priority anyway. Oliver Wyman is a young company; it is only thirty years old. Still, we are ranked #4 from the standpoint of our income among the leading consultancies. Our deeply integrated business model enables our success. We have a single pool of partners and consultants throughout Europe and our Moscow office is an important piece of the-European business.
— How does the Moscow office of Oliver Wyman integrate into your projects?
— First, we have know-how: we are renowned for the detailed level of content we create. Our consultants choose a specialty at an early stage of their career and focus on narrow areas of consulting discipline and industry. For example, someone might not be an expert in banks, but is an expert in credit cards. Or a person might not be an expert in retail, but is an expert in gas stations. Those who work for Oliver Wyman normally have deep expertise. Of course, this model can only work when the experts we have in Russia are in close contact with their foreign partners, wherever they might be located: in Houston, London or elsewhere.
— Are Russian specialists competitive?
— We select them from among the graduates of leading Russian universities. We focus on financial and economic disciplines. And it’s good if we can select at least one person out of two hundred applicants.
— So you chose out of two hundred applicants per position??
— That’s about right. We are highly selective, because we are not aiming to build up the team in quantity. Our aim is quality.
— Does Russian higher education meet your requirements? Do you have enough applicants to choose from?
— Of course. In terms of academic training, Russian higher educational institutions are as good as global ones. I see no big difference when it comes to economic and financial experts. Russian higher education is fully up to global standards. The thing is that we are not so much interested in knowledge, rather than in a certain scale of a person, their mind, intellectual abilities, and And much more. Successful candidate must be of a certain cultural level, must have a desire to learn and an inclination for this particular job.
1. Respect the laws.
Just like in any other Western country. It is not worth thinking that you can find ways to bypass it.
2. Try to understand Russian mindset.
You’ll find it harder if you don’t.
3. Do not lower your professional standards.
Products made in Russia should not be worse than those made abroad.
4. Keep your sense of humor.
It will help you to solve many issues in Russia much easier.
5. Take a break from Russia occasionally.
Change your place of work or at least go away on holidays.
— You open up new areas for development for your clients. What do you offer them in the Russian market?
— The key to success when entering a new market is to select two or three sectors where your main efforts will be focused. It is impossible to do everything at once. We chose Financial, Oil & Gas, Retail and Transportation sectors.
For example, our anchor client in the banking sphere was Sberbank. We contributed to creation and introduction of new models of credit processes. This involved a whole list of projects which we carried out over a period of several years.
In retail we are continuing to work with one of the leading grocery retailers. We’ve implemented several projects in this area that involved full transformation of their supply chain, including ordering, warehousing and store format development. As for production, we also had projects there, but we do not aim at taking on this market. Our approach is as follows: the company’s partners have substantial freedom in choosing the clients and locations. We expect our partners in Germany, UK or France to express a desire to work in Russia. If partners have an appetite for Russia, they will come here and contact the clients. Then we shall join in and help them develop the project.
— Has the “appetite for Russia” decreased over the last few years?
— Perhaps, mainly due to the financial and economic environment. There are definitely less consulting projects happening in Russia nowadays. Their scale has been reduced too. It resulted in many foreign partners’ reluctance to work in Russia. But it could not have been otherwise. Still, I don’t even expect it to last on a mid-term horizon. And there’re no sound reasons to consider the Russian market unpromising. It’s just about each partner’s decision on the portfolio trade-off.
This year I’ve already started noticing certain signs of recovery and growing interest in the Russian market. Even though the number of projects in Russia has reduced compared to the pre-crisis situation, nobody is going to count Russia out. Of course it is too early to speak of the pendulum swinging back, we’re still waiting. But both political events in the Western world and the Russian economy’s surprising stability during the downturn cannot fail to impact the attitude of our Western colleagues towards Russia. They are coming to believe more and more that the Russian market is ready to grow.
— Philip, how have sanctions and counter-sanctions affected your business?
— Scenarios we developed at the outset of the crisis envisaged toughening of the sanctions regime both on the part of the Western world and Russia. No doubt that it has influenced the business volume. At some point we were negotiating with various Russian ministries about some large-scale projects, but we had to give up on those. In the midst of the whole 2015 situation they became too difficult in a political sense. Yet the worst case scenarios did not come true.
— Some Western investors struck by sanctions aim to localize production in Russia...
— This is exactly what we’re trying to avoid. It’s inconsistent with our strategy, since Oliver Wyman aims to integrate Russia into the international operational model. At the basic 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 fulfill our obligations.
Oliver Wyman is a part of the Marsh & McLennan Companies group. Oliver Wyman has profound practical knowledge and aims to use the most advanced approaches in the area of strategy development, operational efficiency, risk management, and transformational programs. In cooperation with its clients, Oliver Wyman elaborates and implements sustainable business development strategies.
— What other projects would you like to mention?
— 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 dozens of thousands of such companies, this project is extremely important. We have developed a system which makes use of all publicly available data about the client, including the media data. This data is to become the basis for calculating the credit rating.
One of our most important projects was the one for the European Central Bank (ECB) on stress testing and asset quality assessment across 126 leading European banks. This was a major multi-year project for the ECB aimed to restore confidence in the banking sector and arrange its regulation. We have unrivalled experience and expertise in developing efficient management systems and implementing innovative approaches in the context of state regulation. These are large-scale and extremely complex tasks requiring a large number of consultants and in-depth analysis. So we’re proud we can cope with them.
— You’ve paid special attention to the fact 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. Does this (or any other factors) get in the way?
— I’ve been working in Russia for more than twenty years, and I have only once had a client mention that he personally would need to get something out of it for us to be given a project. Obviously, we had no further meetings with him. This is not to say that we do not come across corruption in Russia. But our reputation is extremely important for us – as it is for any other company working with the largest and most reliable companies in Russia, Europe, and the rest of the world.
— So what do clients in Russia want?
— On one hand, they want to deliver on the target which is to increase sales and business efficiency. On the other hand, they realize there is no need to re-invent the wheel. So they need not only an efficient management team capable of developing and implementing something quickly. It’s also important to learn about international best practices and the potential of using those in Russia and Oliver Wyman can help clients do exactly that.
— So the European model can be employed in Russia…
— I see no fundamental difference, just as I see no reason for Oliver Wyman to change its ways of working. Of course we could engage in predatory (is predatory a word we use?) pricing to obtain a higher volume of business, but it would mean that the services we provided would not be of the same quality. It’s not in line with our principles. The corporate culture is of great importance for us. Equally important is the environment young people enter when they come to work for us. And we succeed in retaining employees because of our corporate culture.
— It is considered that now when the rouble is down it makes sense for foreigners to start new projects in Russia and invest their money here. What do you think about it?
— It’s not the most important thing. There are opportunities here to make substantial profit in any business sector, for the simple reason that the Russian market is not fully covered yet. In nearly all the spheres there are big gaps to be filled. The more so since technologies are constantly progressing and innovations are very popular in Russia. And the crisis has only given fresh impetus to technological modernization here. It has given rise to transformations which have to be undertaken in many industries. The sort of technological revolution that Russia is undergoing 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 weren’t shut down, just suspended. Their hour will come.
— In the meantime, Oliver Wyman’s new report refers to an expected slowdown in the annual assets under management growth – from the current level of 7% to 5% by 2020.
— This is a worldwide trend. But potential investors should take other factors into account as well. For example, the fact that there are many owners in Russia who’re willing to sell some assets 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 a large scope of business process regulation to be dealt with. We face it every day. Russia is attractive due to the volume of forthcoming transformations which will provide some 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 go against the flow.