Developing entrepreneurship in Russia

“What can we do to increase the number of entrepreneurs who are consistently able to develop their small businesses into larger concerns?”

– GOLD WINNER OF THE 2020 EXCELLENCE IN PRACTICE AWARDS –

The “PRACTICUM Programme” was inaugurated in 2012’ the year Vitaly Polekhin, Head of the Investor’s Club of the newly founded Association of Entrepreneurship Development “SKOLKOVO Community”, came to the Moscow School of Management SKOLKOVO with the idea for a new educational programme for the founders and CEOs of small and medium enterprises (SMEs).

Here it is necessary to clarify what “SKOLKOVO” is and why it is found in the names of both organisations.

Skolkovo is a village near Moscow that, in 2006, was chosen as the site for the construction of the Moscow School of Management SKOLKOVO and in 2010 also for the Innovation Center, a place where Russian entrepreneurial activity is now concentrated — the Russian equivalent of Silicon Valley in the US.

By 2012 the village had become a magnet for those engaged in the development of entrepreneurship and who dreamt of becoming key players in the global innovation process. The Association was created as a platform for communication between existing entrepreneurs and investors who shared the common belief that it was necessary to speed up the natural development of entrepreneurial practice.

However, in their daily work the participants in the Association were faced with a difficult environment: it was hard to find the right projects for investment and a struggle to identify partners able to implement complex innovative projects. A significant number of Russian entrepreneurs were reaching the point of exhausting the resources that they had set out in their entrepreneurial frameworks and had either withdrawn from the market or moved on to something new in another industry, using business models already proven in the market. It was challenging to find entrepreneurs consistently developing their businesses and creating new solutions for their markets.

As a result, Vitaly approached the team at the Moscow School of Management SKOLKOVO on behalf of the Association with a proposition: “We’d like you to be our educational partner. Can you do something with SME companies to make them more attractive to investors? It is impossible to invest in companies and teams who are not going to develop”.

The context and the problem

The history of entrepreneurship in Russia is quite short. In the Soviet period entrepreneurial activity was almost completely prohibited. However, the last 25 years of economic freedom in Russia has triggered much entrepreneurial activity. As of 2019, more than 250,000 companies that can be classified as SMEs were operating in the country.

Despite this, the contribution of SMEs to the country’s GDP has not yet exceeded 20%, falling far behind the same metric in all developed and many developing countries. In addition, in Russia many micro and small companies fail to scale their development and grow into medium-sized enterprises (there are three times as many “small” companies in Russia than there are “medium-sized“ enterprises and this proportion is being stubbornly maintained).

While studying these statistics, the working group created to develop the programme, quickly came to the conclusion that the problem with the poor investment attractiveness of companies is related to the fact that the entrepreneurial culture in the country is still being formed and developed. An innovative approach to entrepreneurship has not yet become a mass model.

The main question of the shared framework developed by both partners to address this challenge was: “What can we do to increase the number of entrepreneurs who are consistently able to develop their small businesses into larger concerns?”

The dilemma was to decide whether it was better to contemplate accelerating the natural course of historical entrepreneurial development in Russia or to wait until the situation in the country began to change under the influence of global processes.

It was jointly decided that there should be an attempt to intervene in the historical process to fast-track innovative entrepreneurship. For this, it was clear that it would be necessary not only to design an appropriate educational programme but also to start building an entire entrepreneurial ecosystem around it.

The Association could engage the emerging investor community in the effort; alumni of other programmes at SKOLKOVO could act as educators and experts for the programme, helping and contributing to its design.

The next problem to address was scale. SKOLKOVO could not work with tens of thousands of entrepreneurs simultaneously. So, how could we make a programme that would have a real impact on the SME sector, given the school’s capabilities?

It was decided that we should rely on the competitive nature of entrepreneurs. Every new profitable product and successful business model created by one entrepreneur is quickly copied by his or her competitors.

We concluded that we should bet on trendsetters. While developing their own businesses and working within their industries and territories, such outliers become role models for other entrepreneurs and trigger the development of business ecosystems.

The development and delivery of the programme

Even though there was an opportunity to do so, we abandoned the idea of financing the programme through grants and government schemes. Thus, we put ourselves in a situation of entrepreneurial risk: creating and trusting in the value of an educational product to attract talented entrepreneurs.

As we set out on this course, the working group for the programme set out not only educational goals but also several other practical targets. And since that time we have continued to evaluate the results of the programme according to the following criteria:

  • The number of participating companies that have crossed the threshold separating small and medium-sized business (based on revenue and profit/the number of new jobs created)
  • The number of entrepreneurs involved with the programme who have acquired the experience of implementing growth projects for their businesses
  • The number of innovations created by the programme’s entrepreneurs (new products, new services and new business models)

It has been a long and exciting journey to create and manage a programme with such a wide and ambitious set of goals. We have had to learn to how to manage the product life cycle of the programme, look for and combine innovative educational technologies (now we use six different approaches) and develop the programme in constant communication with the participants, alumni and partners from the Association.

The current iteration of the programme lasts for two years. We supplemented the basic PRACTICUM programme with a pre-event (admission), three meetings at the end and a set of additional programmes for alumni.

We started the first PRACTICUM programme on June 19, 2013. Over the last seven years we have conducted 20 programmes with 693 participants (SME business owners and CEOs). Still, the first enrollments onto the programme were not easy. What was created was a completely new type of business educational programme with some key characteristics that set it apart from other offerings on the Russian market:

  • A strict admission process, which refused applicants for ethical reasons such as the use of toxic business models, tax evasion or malpractice in their dealings with partners, customers or clients
  • A core educational technology based on the action learning method (most of the other competing programmes were based on traditional lectures)
  • A unique target audience—successful entrepreneurs willing to explore scaling up their businesses and realising their own value through their products and services.

As time passed it became clear that more and more of our participants were coming into the programme as a result of recommendations from

their friends and business partners. We became interested in the nature of this word of mouth phenomenon and found that most entrepreneurs belong to informal communities (on a territorial or sectoral basis).

If someone from one of these communities came to the programme and afterwards is seen by their peers as having a “different” approach and performing in a new and more effective way, then other community members will gradually reach out to us.

It would be premature to say that during the seven years of the programme’s existence, it has managed to completely solve the Russian problem of how to transform a small business into a medium-sized one. However, some of the data we have gathered from the graduates of the programme show very positive trends.

Lessons learned

Programmes for training entrepreneurs should be designed jointly with entrepreneur; this breaks down the barriers between education and performance. The programme team becomes a key partner in the development of the entrepreneurial ecosystem, not simply a service provider. This viable and developing educational programme for entrepreneurs is the result of combining these main elements:

  • Participants who are motivated to learn (they have their own goals for personal and business development and use the education tools provided to achieve them)
  • Carefully designed and compelling content
  • An interesting social environment (people learn from each other, they find both friends and future business partners);
  • A committed and enthusiastic programme team with a real passion for entrepreneurship
  • The livelier the educational space and the more diverse the resources that are available within it, the stronger the entrepreneurial educational ecosystem
  • Entrepreneurship thrives in networks and communities
  • Old formats should be reinvented: homework should be undertaken collaboratively within teams to keep it vital and interesting
  • Evaluations should not be based on a defence of academic work but on the willingness of the entrepreneur and his or her team and partners to implement new business models and new ways of performing.

Watch the partnership project video.

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Published on October 20, 2020|, ,

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