“The main trend” in Russia’s current economic development “is the absence of a trend.” Put simply, Russia’s past is an unreliable guide for its uncertain future. Yet, economic ‘solutions’ proposed by the federal government are the same ones, again. Will it be any different this time?
At the Sochi Investment Forum the prime minister announced a ‘new’ Economic Strategy 2030. To weary eyes it looks like previous grand diversification and modernisation strategies, going back to Sergei Witte and perhaps beyond.
Bright ideas are one thing, rigorous implementation another.
Announcing ambitious targets will convince few investors (whose ‘stimulation’ is the first priority of Strategy 2030) but will force regional governments - who have a key active role to play in facilitating investment at the local level - to scramble for compliance. It may be satisfying at the top level to mandate a policy for the entire country, but it’s misguided. As the Roman Stoic philosopher Seneca explained,
“The greatest loss of time is delay and expectation, which depend upon the future. We let go the present, which we have in our power, and look forward to that which depends upon chance, and so relinquish a certainty for an uncertainty.”
While Russia possess some of the greatest engineering talent in the world no-one is capable of engineering the future in a complex world. What is required are not grand outcomes - like import substitution, or an innovative economy - but realistic next steps. This means Russia should increase awareness of its present position, seek out higher ground nearby - then do more of the things that nudge it towards there and less of the things that move it away from there. It requires a very granular local focus, monitored but not directed from above.
Rather than taking months to create new strategy documents and years to ‘roll them out’ (by which time they become obsolete) Russia must start acting in the present to unlock a million ideas that will nudge the entire economy forwards, in any positive direction. Our own work with government agencies has been an early step in this process  - but it needs scaling up now.
As MGU economics associate professor Oleg Buklemishev has pointed out, whatever strategy you draw up it “falls apart if you do not pay attention to the real needs of people and reestablish a system of feedback between the government and the people.” In Russia these feedback loops must be free of delay and distortion so they help support local decision-making to impact meaningfully on lives in real-time.
‘In the absence of restoring some form of active feedback mechanisms, further economic momentum in Russia will be impossible.’Government’s economic role should be to get as many players as possible onto the field of play, referee disputes, and do the heavy lifting no-one else wants to (e.g. infrastructure investment, long-term education, pure scientific research). Its mission should be to stimulate a bottom up flowering of the economy, not impose a top down directive. Otherwise, the grand Strategy 2030 will go the same way as grand Strategy 2020.
This is part two of a series of posts looking at ‘what Russian businesses need to do next …’. Part one can be found here. For more information on the ideas and approaches included in this blog please contact firstname.lastname@example.org
Russia Direct recently ran an interview with Oleg Buklemishev, former assistant to the Finance Minister and Prime Minister of Russia, where he explained what needed to happen for the Russian economy to start growing again. Though the article contains great insights it fails to address the most critical questions of all - how can businesses can do anything about this at the local level?
Learning to see
“During a crisis" the article starts "it's possible to see clearly what one’s weaknesses are, and even at the current stage, Russia can actually turn itself into a new and successful economy”
Arguably, the biggest problem for Russia with the 2008 crises was that it was over too soon. The Russian economy this century was a ‘tornado’ and even turkeys fly in them. When the challenges of 2009 arrived it triggered many cold hard stares at the real (in)capabilities of Russian businesses (I spent the year at the heart of one large Russian business doing this). Yet, by 2010 ‘green shoots’ of recovery conned people back into the mindset that one only needed to ‘turn up and take the money lying on the table’ again (as one executive described it to me). So, the economy didn’t reform or diversify (again): Russia wasted its crisis.
However, the current L-shaped crisis engulfing Russia doesn’t appear to have an exit any time soon. Though no-one really knows where the oil price will be in 12 months the fundamentals clearly aren’t good  and, as this time last year showed, whither oil goes the Ruble follows. This uncertainty is placing immense pressure on businesses and while some - without the aid of 200kph winds - will go to the wall, others will learn how to adapt and prosper. The question is - which one will your business be?
For many business leaders the insurmountable challenge today is ‘how can we try something different when we don’t have any spare resources?’
Starvation of resources - like pressure - is a necessary but insufficient pre-condition for breakthrough growth. The status quo of incremental improvement is only challenged when the external environment makes that change non-negotiable. Further, it’s only a mis-match between ‘current’ and ‘required’ capabilities that triggers fresh ways of doing things. Without crises we would never need do anything differently, for we'd have enough resources to justify doing things the way we’d always done them.
Crises are nature's way of telling you it’s time to evolve
Russia has been hit by some of the biggest crisis to hit any country (outside of a war on its territory) in recent history (1991, 1998, 2008, 2014) and, while calls to diversify the economy have continually been made from the very top, it’s probably only from the bottom that the meaningful change that will turn Russia into a new and successful economy can happen. So, taking Mr. Buklemishev’s interview as a starting point, this blog over the next few issues will explore in more detail what businesses can do about the challenges they face today - not in spite of the pressure and absence of resources, but because of them.
If any of the ideas in this series interests you please contact me at email@example.com for a discussion about how you can apply them to help your business adapt better to the current realities of this market.
During a recent conversation at a major bank the head of internal communications drew a line on a whiteboard - curving upwards ('A' in the picture above). 'When things are going well' she said 'the mood of our people is up.' Then she drew an opposing line curving down (B) explaining 'and then something can suddenly happen and the mood plummets.'
Then she drew a horizontal line (C) cutting through the two curves and said 'but our internal communications remains monotone, regardless of the situation. We don't tailor our communications to where people are: when they're up we should celebrating with them, otherwise we look out of touch; but when they're down we need to show empathy, otherwise we seem aloof and uncaring.'
What was lacking was a reliable guide to the mood of the organisation. Fortunately we're able to deploy a simple, rapid yet powerful method for this.
So, how are your internal communications - responsive or monotone?
Shape the Future
Don't just adapt to it