To earn “National Champion” ststus, a strong desire to become somethibg bigger is required.
The selection of candidates for the first stage of the Leaders in Competitiveness – National Champions program was run by the global management consulting firm McKinsey & Company. Jukka Maksimainen, Managing Partner of McKinsey Kazakhstan, told us how it went and what recommendations were given to our entrepreneurs.
Why did Baiterek Holding choose your company when deciding on a consultant?
We are a global consulting firm active in more than 65 countries, and in a number of them, such as Brazil, Malaysia and some countries in Eastern Europe, we have already worked on small and medium-sized business development programs. So the model for the Leaders of Competitiveness – National Champions program had already been tested in many regions.
Eighteen months ago, a discussion was initiated with the government and other organizations concerned with state development: we wanted to understand whether such programs could be of interest to Kazakhstan. Some time later, the management of Baiterek Holding decided to launch the National Champions program and we were chosen as a partner and business consultant. I think that decision was largely based on the fact that we have a huge amount of experience in implementing similar projects and can draw on our global resources to work on the program, as McKinsey employs 25,000 people around the world. Another important reason was that McKinsey has offices in Almaty and Astana.
What is your company's role in the actual implementation of the National Champions program?
The project consists of several stages. In March–April of 2015, during the selection stage, we were asked to define who could participate in the program. We assessed companies based on certain criteria and took part in the selection procedure. Based on the results, we recommended a certain number of companies to the Selection Committee, comprising representatives from various ministries, the National Chamber of Entrepreneurs, Baiterek Holding and independent consultants.
The second stage, from May through July, was focused on company diagnostics. We reviewed the companies’ financial and operating performance, and business plans. On the basis of these reviews and in cooperation with the companies themselves, we worked out potential growth opportunities, aimed at improving financial performance, accessing new markets and further increasing productivity and efficiency.
During the third stage, which began in August 2015, we helped the companies to implement the proposed priority initiatives. We organized various forums, attended by McKinsey’s industry experts from around the world, during which we transferred our methodologies for implementing initiatives in specific functional areas (e.g., sales growth, working more efficiently with distributors, accessing export markets, etc.). The companies were also given the opportunity to communicate directly with our experts and discuss the methodologies in more detail.
Did you have to come up with a lot of new things, given Kazakhstan's particular characteristics?
Obviously, like any other market, Kazakhstan has some specific features, but it would be incorrect to say that everything had to be done from scratch. Many economies around the world have developed on the basis of the same model and had similar structures. Take Brazil, for instance: it shares numerous similarities with Kazakhstan, including economic growth rates, ups and downs in the value of the national currency, and stimulation of industrial development. Some time ago, similar metrics could be observed in Malaysia and a number of countries in Eastern Europe. What is most characteristic of Kazakhstan is its small and medium-sized companies, which display all the signs of high-growth corporations. Working with them is very different from working with market giants on the Forbes Global list.
Based on your experience to date, what are the strengths and weaknesses of Kazakh businesses?
Many companies we interacted with had quite good financial and operating results. Manufacturing plants are equipped with the most up-to-date production lines fitted with state-of-the-art equipment – evidence of the powerful impact of recent “investment waves”.
On the other hand, many companies pay insufficient attention to marketing and sales. There are some critical questions to be asked here: What is our pricing mechanism and what are our prices based on? How do we build relationships with distributors? How should we launch export sales – by developing our own retail network or seeking support from local distributors?
In addition, the majority of medium-sized companies pay a lot of attention to the technical skills and operational capabilities of their personnel, but forget about the need to work on fundamentals such as leadership skills and the ability to take independent decisions. Historically, in Kazakh companies, most of the management decisions are made by a few individuals.
But without delegating administrative authority it is impossible to foster the next tier of effective leaders. When one looks at successful international companies, one can see that they delegate a lot of responsibility to the second tier of management where, over time, managers capable of taking effective decisions are cultivated.
What recommendations did you provide to the champion companies?
In the course of the program, over 100 initiatives were devised to help the National Champions boost their turnover and profitability. These initiatives focused on various issues, such as improving marketing performance and optimizing sales organization; measures aimed at cutting operating costs and process optimization, as well as developing a strategy for accessing export markets. Most of the initiatives, however, were aimed at improving marketing and sales. As an example, the introduction of an efficient system of managing direct sales enabled one company to boost its revenue by tens of percentage points in the course of the program. Another company carried out consumer surveys as part of a study aimed at better product positioning. The findings contained important information on consumer perceptions of product quality, which was used, on the one hand, to fine-tune product positioning and, on the other, to set additional tasks for process engineers and manufacturing facilities to further improve product quality. And there were many other similar examples.
The second stage of the program is about to start now. What advice do you have for the companies that will be involved?
First of all, they need to work with Baiterek Holding and make sure that they submit their applications for the program as early as possible. The businessmen have to be prepared to collaborate and disclose as much information about their business as possible. Selection will be based on a review of a number of metrics for a period covering the last few years, and they have to be clear and understandable.
Obviously, the company has to be not only open but also reliable in terms of its reputation and past history?
That is correct. But that by itself is only sufficient to make it on to the “short-list”. To earn “National Champion” status, a strong desire to become something bigger is required. We need to see in a company a desire and preparedness to grow, which has to be reasonable and based on concrete facts and plans. A company must have something special and unique that sets it apart from its competitors and demonstrates its potential. Add to that some healthy ambition and you will have the combination we are looking for.
And one more very important selection criteria. A company cannot be strong without good staff. Investing in people and cultivating highly qualified specialists locally are signs of a successful company.
What industries do you think will be made the program priority this year?
The selection will be based on the decision of Kazakhstan’s government regarding the priority industries. And these will be, first of all, industries in the manufacturing sector – mechanical engineering, pharmaceuticals, construction materials, food industry, advanced processing in metallurgy, chemicals and petrochemicals, and light industry. As far as I know, this year, companies from the services sector – transport and logistics, IT, telecommunications and tourism – will also be invited to participate in the National Champions program.