Serikbay Bisekeev

Loudspeaking sample

Internationally competitive IT business can be developed in formed Soviet Union are. As a minimum for that, basing on the experience of Arman group of companies – strong, motivated, permanently developing team and maximum concentration of investments in breakthrough directions.

Serikbay Bisekeev’s story is, probably, one of the most unconventional for the business made in former Soviet Union. First of all, the president of Arman group of companies is Kazakh, who made his business way in Russia. Secondly, the segment his business is entering top division in the world – information technologies – is typical neither for Russian champions, not for successful post-soviet companies, concentrated in sectors which imply smaller added value.

The even more outstanding is his view on business development and a person of businessman. Having started working (Mr. Bisekeev prefers a verb “playing”) on a merely empty stage and having created this market in CIS (talking about loudspeaker communication), he is sincerely thankful to his emerged competitors for making his company’s life more interesting and challenging. Since he opened this business, living in a rented flat and reinvesting almost all the profit back into business, he considers buying expensive estate and other property as unnecessary for entrepreneur. Neither he welcomes granting funds to first-time businessmen, thinks they are spoiling and corrupting.

Serikbay Bisekeev became more or less known to wider audience of non-specialists in loudspeaker communication after being named Entrepreneur of the Year 2012 by Ernst & Young in Russia in category B2B. Mr. Bisekeev himself is very proud of such independent acknowledgement of his merits and considers popularization of his views and ideas as a part of business mission: developing his business, to develop and improve the world around.

Create a market for scratch

- Serikbay, let us first talk about the main product of Arman LLC. Tell us please, what your Armtel equipment is? Where can it be applied? Who are your main competitors?

- The products itself is a switchboard, which allows to connect other various equipment: console, loudspeakers, intercoms of different types (explosion-proof, all-weather, chemically resistant), as well as industrial telephones, trunking equipment, CCTV cameras, signaling devices, etc. This universal equipment is applied for arranging operational communication system in two large economy sectors: industrial facilities and transportation.Our products are released with Armtel brand on it – this is derivative from the name of the company - Arman. It could have sounded too much like Armani, so we decided to name our brand in such a way that it could not be confused with anything else. Armtel’s share in CIS market is around 40%, in the world market – around 10%. Currently we are developing a solution which has never existed in the world before. Now we will systematically promote it in each region, one after another. Our direct competitors are German and US companies. The most well-known are Neumann Elektronik, Industronic.

Which technologies are we talking about? Earlier all the companies produced analog devices and applied ISDN standard, but we have shifted to a new one – IP. This standard allows us to work long distances without switchboard. Such devices are necessary, for example, for oil and gas pipelines, railways and motorways. We simply set addresses and the customer does not need to buy high cost switchboards putting them at each single kilometer. Our advantage lies in software. Operator may be thousands kilometers away, but he pushes one button and a group of his colleagues is connected in a single talk, or he can make simultaneous announcing to various zones.

Together with industrial objects we participate in such programs as “Smart House”: we supply special equipment to increase security in crowded areas (such as subway, stations, exhibitions, squares, stadiums, etc.) It is enough to press the button, and you reach a call center, where you will get all the necessary information about the city in any language or can get connected with police or emergency services. Similar devices can be installed in our places as well. They can be of a particular use for EXPO 2017 is Astana. In Europe you may see SOS emergency call points made in accordance with international standards. If we look up to Europe and care about people in emergency situations, especially in winter, we can do it too – we have experience with ring road in Petersburg, bridges, tunnels in Russia. Besides, we also had a chance to work in Kazakhstan as well – we installed communication system in Almaty subway, in Astana airport, worked with oil and gas industry, Ministry of Defence and several power stations.

- How did the idea to occupy this niche come to your mind?

The idea appeared after graduation from Stockholm business school, the main concept of which was concentration, concentration and once again concentration on a particular niche. And we defined our niche – a niche with minimum competition, because the market offered only analog devices from Soviet Union times. After making a market research we understood that oil and gas companies are investing in machinery and technologies, and now they have large investments into infrastructure at their disposal, namely into automation and internal operational communication system. Having chosen the best player on the world market and entered into agreement with them, we started offering their solution to the largest oil and gas enterprises in Russia, which resulted in successful cooperation. Following oil operations we started with other industrial segments, which started emerging and growing in the early 2000s. Competition, let me repeat once more, was small, we knew we had a chance to start a market, to become a trendsetter. The process of creating a market from a scratch is interesting all by itself. In my live I managed to start several markets.

While selling the imported equipment we came to understanding that a client is often not fully satisfied with the functionality put in by foreign engineers. Local customers asked specific points to be introduced; together with that we have our own mentality and we are simply not used to doing thing the way foreigners do. That was when we realized that it is time to manufacture our own products, where we could incorporate all our technological experience and best practices of integration with Soviet systems. At the same time we could offer a product more flexible in price.

- How much time did it take for your product to begin being actively sold from the moment when the idea just appeared in your mind?

- It did not take long. Our customers believed us as experts in this sphere. We made quality product, never trying to close the whole of production and engineering cycles in our hands. Casting, boards and press-tool production we gave away to recognized market leaders. Also, we were very clear with our sphere of competence – parts can be manufactured by Chinese, but our highlight is in software. That is why we gathered programmers in Russia and developed our own software.

- Which countries do you consider as being your prospective market?

- We are looking forward to BRIC countries, which grow fast and massively. We are operating in India, promote ourselves in UAE. The next point of destination is Brazil. We were very pleased when a Mexican dealer came from overseas and said that he wanted to work with us, because our product was technologically more advanced than that of our western competitors.  We do not target China, as they have different mentality: they are used to copying things. There no sense is selling a product to a country where one day it will be copied and produce it themselves. We have representative offices in Germany, India, Singapore, and we world with dealers as well. For example, a person who leads our international sales right now, for ten years has been working as director at our main competitor’s company – Industronic. Ten year ago he offered me to be his dealer, now he works with us. He realizes that the day when we become champions is not far away and wants to be the champion together with us.

— What market growth do you expect in your niche?

- I would say around 20-30 per cent a year, but it is not the point. The whole of former Soviet Union market sells raw materials. Nobody sells final goods. Except for Kalashnikov and products of military industry created in the USSR, we do not export anything.  As for us, we created the business from nothing, and never asked for anybody’s grants. Grants are spoiling; they corrupt first-time businessmen. You should succeed first, and investors will notice you themselves, in case you will need to extend you manufacture.

- What part in the development of such business as yours, does the market capacity play? In any case, in Russia, where there are more prospective customers and money, it is simpler to grow into a larger company in comparison to our country, which has everything ten times less.

- The trick is that it has not only more customers and money turning on the market, but more professionals in each sphere. It is not a secret that Moscow and Petersburg are the main sources of manpower in CIS. The brain competition is very intense there. Not accidentally, we make over two hundred trainings a year for our employees. As a matter of principal, the problem of personnel training for Kazakhstan is usually read in the following context: we teach him now and he will leave for our competitors. At the same time I say – without long term motivation, and, most importantly, without mission – he will definitely leave for your competitors. Our company’s mission is to invest into further training and upgrades in qualification of our employees; as a result of this he will be able to raise his material welfare and company will consist of the best professionals on the market. That is the reason why top professionals who are willing to grow further come to work with us.  And how many people in Kazakhstan are qualified, i.e. trained to manage big projects basing on international standards? Ten or twenty people, trained by the largest national companies, whereas there are hundreds of projects in Kazakhstan. And if we do not want to outsource large-scale construction, and wish to build everything timely and with the required quality without unreasonable increases in budgets, then we need to learn, preferably, with practice.

- In the Republic of Kazakhstan the state supports business quite actively. Generally, Russian businessmen are very positive about state support measures. You have spoken on another approach…

- As a rule, entrepreneurs all over the world ask the state about one and the same thing – not to impede. Businessmen should be distracted from what they do as less as possible, and let the market decided who should stay and who should leave the niche. The help is need on the stage when the entrepreneur has already proved his success. Our usual practice is that the money are granted and then the entrepreneur disappears. My opinion is that everything should be done step by step: start with pilot projects, put your own money at risk and only then you can take help from the state for your further development.

Take a risk – and people will come to you

- The model you have just described, how close is it to your own story of success?

- Everything we did was done at our own costs and expenses, using our own funds. Very often people do not believe that on the territory of former Soviet Union it is possible to develop an internationally recognized company, selling its products all over the world, from a scratch. You just need to be able to accumulate and reinvest money, and not to buy cars and apartments from first profit. We rent our office, and invest into our development and skills – this is of a higher interest for us. I think that money should always work: it does not make any sense to tie the money up by buying property, which will have no direct influence on business development. That is why I reinvest all profit back to business.

- Why have you chosen to establish a head-quarter in Saint-Petersburg?

- In Soviet Union times I graduate from polytechnic institute, where Nobel prize winner Zhores Alferov was working in his times. In my young ages I was much in sports and was offered to enter any university of the country. I paid much attention to basketball, which is sometimes call “chess in moving”. I was even more interested in that sport due to the fact that I am not a tall one, and the only way to win my rivals was to use my brain. So, in school times studies were always a priority, and in case you had “three”, you were not admitted to games.  It was a perfect motivation! Lots of thanks to my coach Sergey Nikolaevich Kudenko and class curator Luydmila Petrovna Storozhevaya.

- How did you compose you team, who are those people?

- The first person to share my views was my groupmate for Stockholm business school. There are not many people who can take a risk for themselves and work truly hard. I sold my apartment, invested the money in that project. And gradually we started creating a company. Some other acquaintances from business school, who had previously worked for large IT companies, joined us a little later. I would like to add, that motivation plays extremely important role in our company. Each position has candidate pool. And everybody knows that right behind his back there is another one, who was attested. We start a new direction of activity, and he can become a head of this new direction. Besides, each and every employee has an opportunity to become a co-owner of the company. In corporate governance we decided not to invent a bicycle again, but applied Richard Branson’s model: our holding consists of several small companies with up to 50 people employed in each company. If people demonstrate good skills and competences within 3-year time, we offer them stock options plan. As a result you do not need to push anybody, and all our subsidiaries are quite efficient.

- How much time did you need to reach this model?

- We achieved holding structure within three-year time. For example, we were quite soon convinced that we need a management company to transfer our standards.  And now, when we establish one more subsidiary, we simply send our specialists from the head-quarter to fix all the processes. In a real life we actually duplicate the base model. If we do not know something yet – we get advice, learn from other successful cases.

- What is the optimal staff turnover rate in your company?

- Around 10%.  We have our own tactics for that. For the company to be efficient we define the so-called “key staff” – managers with best knowledge and understanding of our corporate values. And we pay more than the market. Salaries of other employees – the majority of staff – are lower than the market level. Why? Because they are trained at our expenses and can create reputation for themselves, working in such a company as ours. It also allows picking up those who have our “gene”, and gives them an opportunity to develop the company and themselves at the same time.

- Aren’t you afraid that your employees will leave to your competitors?

- No. I often hear our employees saying: “There is no interesting work place like here”. And it makes me happy. The team constantly studies and goes to trainings. All corporate events are held in the open air. We constantly arrange competitions between departments. In addition, together within the company we altogether help children's homes and victims of the terrorist attacks. As we started helping children's homes, the staff even adopted several children. We see our mission in this as well. Very often the managers are offended when the staff leaves them. And it can be understood: they got knowledge and experience from your team. I'm convinced that if you can't create an environment which all your employees find useful and interesting, it means that you do not know how to motivate people and it means that you mismanage the space around yourself. My philosophy is that we should not look for scapegoats, you must change yourself.

- You emphasized one of the features: holding company which is divided into a number of small companies and one management company. What else can be singled out?

- I repeat once more: we don't invent a bicycle, we get positive experience from others. In a number of features I would single out the following: our company is the self-learning structure. After finishing a good book, after visiting an interesting training, our staff member must share professional information with colleagues. It seemed that everywhere it is understood, but the learning process is not perfected in all companies. Then we record the new information in the certification test and check how the staff learned this material. Through this the competence of our employees is constantly improving.

People think that the interview is just a conversation, but we also have homework, by the performance quality of which the person must prove that he/she is able to bring something new

- You often talk about the trainings. What is the structure of the annual volume of trainings on subject? How much money is spent on improvement of professional knowledge, abilities and skills, also on team-building and so on?

- Of course, as businessmen we are primarily interested in professional skills and that each person develops his own specialization. Such trainings cover 95 percent of the total. We are working on things related to teambuilding, but in much smaller volumes. Company’s all employees are absorbed by the idea of becoming number one in their own specialty in order to lead one or the other direction, this or another industry in the future. Because we, as a system integrator, move to the other industries. We began to attract our attention on the energy-efficient solutions as light emitting diodes and generators operating without rubbing surfaces.

- What does the training system look like in general terms? How do you understand, when and what kind of training shall be conducted?

- We have a standard training program for line managers, and this is a required block. Besides, each Department has its own annual work plan, and if they delay in key indicators, we reveal their weaknesses. If it is the manager then we work on him, giving him the opportunity to develop some skills. If he after this goes on to show weak results, we will look for another person to his position. And the same is presumed to the work teams: we try to develop their abilities and skills. These tools are the same as weapons, without which you can’t gain anything in the war.

- What kind of starting skills are required, when you hire a person to a management position? And what does this process look like?

- As a rule, the managers are raised from our own staff, so this is the same standards as for the junior level employees, plus managerial competence. It often happens that we invite people from outside to the directions which are new for us. The process looks like a job interview at different levels: i.e. at least three or four interviews, after which he will be given homework and he must defend his business plan. People think that the job interview is just a conversation, but we also have homework, by the performance quality of which the person must prove that he is able to bring something new and developing into the company.

Business in the halls of Power 2.0

- Serikbay, you’ve mentioned that the company is engaged in the social projects, and how in principle do you react to such element of the relationship between society, business and authorities, as a social responsibility of business?

- Everyone must do his work. All of us pay taxes in order to make the state to be engaged in a social sphere and infrastructure. The businessman should not build stadiums and roads. But everyone should be engaged in his professional activities, because that is a guarantee of development of the whole society. The big problem in this connection is the weak controllability in the state bodies. This is because, not the most talented and hardworking people go there to work. The person, who can earn in the private sector, never will go to work with a small salary, but also with great responsibilities. And at the top level we have to stop picking up people upon their loyalty to the management. If we want to get into the top 30 world's economies, it is necessary to hire people on their competence. So that every guy from the village could get the official position by passing the independent computer-based test, and receive a salary comparable to the best private sectors’, as he has to manage billions. Singapore has done the same, and greatly reduced the corruption – there is nothing new...

- There is an experience in our political system, when the businessmen are appointed to the ministerial positions. How do you feel about this kind of shifts?

- I think that the successful businessmen at such positions will think more about the state’s success than those who financially didn’t succeed in life. Therefore I would like to actively lure businessmen. Businessmen want them to be evaluated according to the specific target indicators, and this should be implemented at all levels, so there was no bias.

- And to what kind of minimum executive positions can the businessmen come, so they would be interested in it?

- To any positions, if he really can change some things. But if he had to rush from pillar to post and have his hands tied, then from the entrepreneurial point of view, this work cannot be clearly called as tempting. Life is so short, and everyone wants to live it, being engaged in interesting activities, but not knocking on the doors and persuading “Agashki” (Big Men) who are interested in personal gains.

- If you were given a position of the Minister of Transport and Communications of the Republic of Kazakhstan, would you agree?

- It’s difficult to answer. But, probably I’ll say ‘No’. The fact is that by my philosophy of life I am primarily a businessman. And I think that the policy is so complicated that to be a politician you must be born a politician. I was born a businessman. My classmates from Polytechnic University who work in the White house in Moscow, had repeatedly offered me a job there, but I had refused. I want to fulfill myself and create an environment where everything depends on me. Maybe I could work, if the state administration system in our countries was not corrupt and everywhere would sit competent people who don’t need to be told the basic things of any business process.

- The same question, but at a different angle: suppose your team have now received a proposal from AKORDA on moving to Astana. Here all your staff will be given apartments, offices and all conditions. Would you agree?

- You see, for us it is not so crucially important in which geographical point we have to work. I think that the team is ready to consider options; the main thing is the interesting tasks.

- Moreover you already have one interesting project in Kazakhstan...

- Yes, over the last year and a half we have developed a feasibility study for wind power stations in Kostanay Region. The cost of the project is one hundred million US dollars. The pilot project is a station at 48 megawatts. We negotiated several issues, but still have some unresolved issues for project implementation. Three factors, which are important for any investor in the energy sector, are the ground, tariff and stable purchase of the electric power volume. The main problem is that the legal framework is not perfect, because the rules of the game on the energy market on return of investments aren’t clearly detailed. Unfortunately, as a result we cannot shift to the construction phase. Also I suggest that our children and grandchildren will not suffer allergies, cancer and other diseases caused by the huge emissions of harmful substances into the atmosphere; we need to make hard crucial decision to change the conditions of the ecological situation in Almaty. The cars, heat stations and boiler-houses should be changed on gas-basis and the private traders shall be gasified. A large part of the intelligentsia is located in Almaty and they are poisoned as in the Nazi gas chamber.

 

About the fisherman and fishing

- How do you treat your compatriots and relatives at work?

- From the beginning of our activity in our company, we together with our partners agreed that we don’t employ any relatives. But when we opened an office in Kazakhstan, I slightly changed this rule. I told my relatives: “I'll teach you to catch a fish than giving it to you, so when I'm not able to help you, you could make your own bread and butter. One of my younger sisters independently became a Colonel of Customs Service of Kazakhstan, honestly working in the Office. When I once again visited her in Astana, I saw how she was working six days a week earning five hundred dollars and having a really hard time making ends meet. I invited her to work in my company. She has passed the certification and works in equal conditions. That is to say, the responsibility and requirements asked from her are the same as asked from others. I immediately warned her that I would not protect her.

- How much does your education help you to become a businessman?

- As I have already mentioned, you can’t become an entrepreneur, you have to be born him. According to the statistics such people make, probably, five percent. These people are a little bit abnormal. The remaining ninety-five percent are the performers. And engineering education only helped to develop an entrepreneurial gene. The engineer can be a financier and a humanist, but the humanist will never be able to become an engineer. In the Polytechnic Institute we developed logical thinking and have been taught the processes structuring skills. Indeed, it very much helped to build the company.

- Nurlan Smagulov, a well-known businessman in the Republic of Kazakhstan, believes that the manual control is more appropriate than corporate one, especially in the moments of crisis. How do you feel about the personal factor in business management?

- Everyone has his own approach. I delegate everything, because I can't be involved in qualified management and forecasting on several directions over the next few years. It's easier for me, when everyone in the company has its own targets and there is no need to monitor someone with a pointer. In case of conflict of interests we normally arrange collegial meetings, where we sort the disputable moments out.

- Does the industry in which the company works leave serious imprint on the approaches of doing business?

- Of course! We really sweat our guts out and earn, appreciate every ruble earned. And when you get a multibillion-dollar excess profits in the oil and gas industry, the attitude to money and the staff is quite another. Well, and the competition is not as strong as in the sphere of information technologies and computer business.

-      How much is your experience demanded among the businessmen-beginners?

-      I spoke about the history of success of my company at one of the events within the framework of Shanghai Cooperation Organization (SCO), and my speech evoked very lively response from the audience: they asked a lot of practical questions. I hope, my thoughts helped them in the business construction. If Akims (the chief executives of the region) of Kazakhstani Regions support me, I want to read lectures in all regional universities of the Republic of Kazakhstan. I don't need money for these lectures, but I want to give people the opportunity to believe that having been raised in the Kazakhstani village, you can become the best in the world in your industry.

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