Russia Report: Build and Create: The Reinvention of a Screwdriver Assembly Industry - Pharmaceutical Executive


Russia Report: Build and Create: The Reinvention of a Screwdriver Assembly Industry

Pharmaceutical Executive


There can be no question, notwithstanding all prospects and the words of ideologues, that Russia is a difficult market. Bureaucracy and excessive legislative complexity present barriers to entry, operation, and expansion. Crises and fluctuations are commonplace. Of course, there is also the intangible inexplicability of the Russian mindset and business culture—that elusive and endlessly stereotyped Russian umbra—forcefully unique, and only superficially resembling anything European.

Pavel Chistyakov, Pierre Fabre General Manager
Pierre Fabre's Pavel Chistyakov relates the difficulties of establishing a Russian subsidiary—something he was charged to do in 2008: "We faced two significant challenges. First of all, we had to cope with the complexity of Russian bureaucracy. Administrative barriers are quite heavy here. Secondly, and related to the first issue, is the fact that our French headquarters was not fully aware of the specificities of this market when we entered. I will give you a concrete example: To set up a legal entity in the Russian Federation, we were asked to present a set of 12 or 14 official, notarized documents along with the application form. You must present all of these documents together. If one is missing, you may not submit the application. While in some countries you can submit what you already have, and some time later compensate for missing documents, it does not work like this in Russia. This was difficult for our headquarters to understand."

Viktor Geisler, Bayer Country Division Head
Pierre Fabre headquarters had planned to commence business within two months; in reality, it took six. Can there be no harmony among multinational and market?

Astellas' Dejan Jovanovic offers practical advice; he believes that one must live as the Russians themselves do. To his fellow manager, and fellow émigré, he describes three stages of acceptance:

Dejan Jovanovic, Astellas General Manager
"Let us imagine that a typical general manager, who does not speak Russian, is parachuted into Moscow. He observes for the first three to six months; he soaks in what is going on and reaches the conclusion that Russians do not know what they are doing and that he will teach them what to do. This is stage one. Most ex-pats who have a two- to four-year contract do not pass the first stage." And if they do? "The second stage is deep depression: What am I doing here? Nothing is possible, nothing works, and I must leave as soon as possible."

All is ostensibly lost, until the manager discovers the third stage. Jovanovic says, "The third stage is a stage of small happinesses: When you arrive to Sheremetyevo airport, and you are happy that a jumbo jet from Beijing with 500 passengers did not arrive before you to clog up the customs queue; or that the traffic police do not stop you on the way home; or that no one turned off the hot water in your apartment. When you get to the stage of small happinesses—the stage that Russians themselves are in—you can manage the business very nicely."

Bruno de Labarre, Reckitt Benckiser Russia, CIS General Manager
However, what to do when one finds news of adventitious legislation on their desk on Monday morning? Or the market is in a flux, menacing the profitability of the quarter? The silver lining is small comfort; Russian leaders must keep a level head.

Bayer's Geisler counsels, "You must be relaxed, and refrain from nervousness. You must accept that sometimes, there will be problems and setbacks, but you have to believe in the long-term trends. It is simply a fact that Russia does not follow a linear upwards path. There are ups and downs. You must understand the reasons for the downs and be convinced that this is just a temporary effect."

The gut feeling is sovereign. "You must have a certain feeling," Geisler maintains, "and understanding for the Russian environment. When I say environment, I do not mean simply the pharma market—because the pharma market is just one part of the entire Russian environment. It is an integrated part, but if you are not willing to understand Russian particularities holistically then you will never be successful here. I cannot describe it better. You must simply have a sort of visceral feeling for what is needed. Perhaps that is why not everyone is suited to manage in Russia. Different markets require different mentalities."

Reskitt Benckiser manager Bruno de Labarre—one of the well suited—describes his experience, emphasizing the importance of observing first, and doing second. De Labarre had come to the Russian market with the intention of staying for a few years. To date, he has managed his affiliate for nine—not an uncommon position for an expatriate to find himself in, awakening one morning. For one, a sporadic market needs managerial constancy; for another, Russia is a dynamic environment that is notoriously hard to part with. "Come for two months, and do not speak—listen," he says. "Look to the people, look to the market, listen to your customers, and listen to your suppliers. Spend two months just listening! After that, try to put on a piece of paper what you have understood about the market, and then decide what you must do. When we acquired BHI in 2006, I spent two months visiting pharmacies, visiting distributors, suppliers, etc. I always asked them the same question: 'Tell me what you think of my company, what I need to improve, and what I do well that I should maintain.'

"The best advice I can give is that you must understand that you do not know," exclaims de LaBarre.

Pierre Fabre's Chistyakov, a veteran pharmaceutical manager who prior to his current position managed Ipsen in Russia, offers his own lessons: "Be active. And importantly, be flexible. In Russia, you must take decisions, and you must take risks, as well. Russia is a developing market—obviously, there are risks. But to gain, you must sometimes accept risk. Multinationals often overevaluate. Sometimes you must act, even if your decision is wrong, because then you have time to do something else."


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