SKOLKOVO has some problems, but this is normal for any growing organism

Date: 02 August 2012

Source: Moskovskie Novosti

Ruben Vardanyan on the ideal SKOLKOVO graduates, the business school’s prospects and the reasons for the Moscow protests

President of Troika Dialog Investment Company and one of the founders of SKOLKOVO business school, Ruben Vardanyan, explains to MN the source of the rumors regarding SKOLKOVO’s merger with the New Economic School (NES), whom he considers the business school’s ideal graduates, and why Moscow’s middle class has started to protest.

Let’s answer one question at a time. SKOLKOVO is currently one of the most successful and profitable educational projects not only in Russia but also in Europe. The business school’s total revenues for the year (as of June 30, 2012) exceeded $50 mln. What’s more, the project itself has only existed for six years, while the school’s educational program commenced in 2008. So when assessing the success of SKOLKOVO, it’s important to understand that such projects cannot be judged by two or three graduates. At least ten to twenty years must elapse before it’s possible to draw any conclusions. I can say that, undoubtedly, not everything that we planned has been realized, and there’s a lot left to do. But on the whole the trend is very positive and we’re pleased with the results.

It’s important to understand that the investments in the campus’s construction and its infrastructure – this is one story. The school’s operating activities and the organization of the academic process are something else entirely. In 2005, when everything was only beginning, we were faced with a choice: to build a standard school building, a typical “box”, or to make something greater – to construct a unique facility that could convey the principles lying at the basis of the entire project, namely the business school’s idea of the new kind of leaders. Subsequently we chose the latter, and it seems to me that such a building architecture that reflects the traditions of the Russian avant-garde in the best way possible corresponds to the SKOLKOVO philosophy and speaks to the school’s progressiveness and uniqueness. In addition, when building the campus we initially looked to the long-term, so we undertook large-scale construction, understanding that in the first year it wouldn’t be occupied to the full 100%. We could have built in stages, but we decided to build the entire complex at once, so it was initially designed for maximum needs.

As for the school’s financial success, our activities were of course affected by the crisis. And yet, we were able to do successful fundraising and to attract to the project such partners as MasterCard, International Paper, BP, Ernst & Young, Schlumberger and other world-famous companies. Yes, the school faces a substantial financial burden based upon the project’s ambitions, its dimensions, the high benchmark that was set and the challenging financial situation in the country and the world. But it has to be understood that six years isn’t an indicative period. SKOLKOVO is a long-term project, and right now it’s only at the stage of being set up. Therefore, when you ask me how successful the school is, I can answer that it’s a very successful project, far more successful than its counterparts. Of course, there’s still a lot left to do, but we already have results that we’re proud of. To be sure, SKOLKOVO also has its problems, but this is normal for any growing organism. Already today we can say that the school is established, and in 2013 it will have an operating profit.

I cannot agree with you. We initially envisaged alternative mechanisms as well. Any school is financed not only by means of its current activities, but also through fundraising. As for SKOLKOVO, four years ago the endowment fund was launched, which has a certain amount of money. In addition, we set up a venture fund in the amount of $60m and from the very beginning we agreed with the investors that profits above 8% annually will be put towards supporting the school. The results of its work will be apparent in five-seven years. You have to understand that all these mechanisms are long-term, and the results can’t be instantly visible, especially in conditions of crisis and an impaired economic situation. And this is normal. Even though we already have numerous partners, there’s considerable potential. SKOLKOVO has sufficient opportunities for attracting new participants to the project. For example, we haven’t by any means used the potential of “open audiences”, meaning there are still many “nameless” audiences that we can offer our sponsors.

The topic of joint operations with NES has long been discussed. Already we’re actively collaborating, and we have a number of joint projects, for example – NES rector Sergey Guriev regularly lectures to SKOLKOVO’s students. In addition, we’re discussing the possibility for both schools to use a common space and infrastructure, and every year at the end of the academic cycle we discuss different strategies of development and collaboration.

Not yet.

No decisions have been taken yet, and right now we’re holding a normal working discussion on possible models of collaboration. But it has to be clearly understood that SKOLKOVO and NES have entirely different areas of activity. Whereas we’re above all preparing entrepreneurs, NES is geared towards preparing economists and scholars. Therefore, we have a fairly small area of overlap.

You’re right – a very particular entrepreneurial atmosphere is being created here. SKOLKOVO has a certain entrepreneurial spirit, and of course, we’re not the usual school where people just study. We also consider students as business partners and colleagues. Perhaps they’re younger and inexperienced, but precisely as colleagues and partners. This is the root of that atmosphere and system of interactions within the campus that you’re speaking about. It seems to me that business cannot be taught; it has to be in one’s blood. Therefore I have a very simple approach to evaluating graduates’ success. Here’s the indication: look at how many people of those who came to your defense and studied the project said afterwards: “I want to work for you,” or “I want to invest in your project.” If none of these are found, that means you’ve failed; draw the conclusions.

In the ideal?

In terms of the actual graduates, you really have to interact with them. These are truly bright and talented people. Very different. It has to be acknowledged that one of the problems of business schools in the West is that they do a very rigorous recruitment at the entrance, meaning at the stage of enrolling. As a result, they prepare professional, but quite standard, 2nd to 3rd-tier managers. However, 1st-tier executives and business founders more often than not don’t have an MBA from the leading business schools, which, incidentally is also confirmed by the Fortune 500 list of CEOs. At SKOLKOVO we initially select successful people in order to help them become even more successful. We cannot turn a loser into a flourishing businessman, but we’re able to evaluate a person’s potential and to try to help them develop further. At the same time, we don’t set rigorous recruitment frameworks. As a result, for example, only 5% of graduates go on to open their own business. At our school these account for 35-40%! Yes, their pay is lower, but on the other hand there’s freedom. Some of them are already doing their own projects with Alexey Mordashov (Severstal), Mikhail Kusnirovich (Bosco di Ciliegi) or independently by raising money from the market.

Real experience is a valuable thing. And here it’s entirely irrelevant whether we’re talking about today or what happened several years ago. For me it’s important that SKOLKOVO graduates, rather than knowing cash flow models, can take the balance sheet of any company, ask five questions and say whether or not people are stealing in the company.

We’ve always said: in order to be successful, you have to break down walls and stereotypes. Recently I was the head of a jury for an international competition, and we selected the world’s best entrepreneur. And over this time we reviewed 51 success stories. Many of them were astounding, for example the story of an entrepreneur who started his business from scratch three times: including one time after his company was nationalized. Or the story of a Chinese man who privatized a dockyard in Shanghai, making it one of the most successful and profitable, and then gave all his shares to a fund whose dividends are put towards social welfare and employee development in the company. Or a Kenyan man who set up a banking system in his native country and also handled the education of three hundred thousand children. When you read these stories, you realize that nothing is impossible. Therefore, for me the ideal SKOLKOVO graduate is someone for whom nothing is impossible, who is able and willing to change the world. There are schools seeking to capture everyone under a single template, who prepare standard corporate managers. I don’t argue that Russia also needs them, but you can’t become fixated on only one kind of person. SKOLKOVO is precisely that kind of academic establishment where you learn non-standard, innovative thinking.

In my opinion, these are actually positive processes. Usually the middle class in any country is quite conservative, preferring stability. What happens here is the reverse. After all, precisely the representatives of the middle class took to the streets. What’s most interesting is that these were mainly young people who receive good salaries and build good careers. And this speaks precisely to the fact that they want continuing changes. In 2025 it will be 40 years since Gorbachev’s perestroika began. This will mean big changes for the country, because among the managers in all spheres will be representatives of a generation that never worked in the Soviet system. Perhaps they saw it or heard about it, but they didn’t work in it. And this will be an important systemic change for Russia overall.

Yes, you’re talking about what happened in the elections. But here the issue is by no means only the falsifications. This is overall fatigue, and people aren’t only tired of the party in power, but also of the pseudo-opposition, communists, liberals and anyone else present in our Parliament. Fatigue from the way this system is functioning.

I disagree. People dislike the entirely concrete behavior of the authorities. Just look at those disputes between the prosecutors and investigators that the press regularly covers. This irritates people and they don’t want to be considered fools. One way or another, the authorities will have to react to this irritation. The world has changed, and living in the former coordinates system is no longer possible. Furthermore, my opinion regarding the majority of the opposition leaders is quite negative. Nemtsov, Navalny… I won’t even say anything.

There’s one philosophical thought that I’ve stated many times about the three mechanisms for effecting changes. Nothing else, unfortunately, has been thought of in history. These are revolution, reformation and inquisition. In our country the way of reformation and revolution is highly undesirable, since these processes have always been very bloody, and much more brutal than in any other country. Therefore, Putin is trying to change the country in an evolutionary way.

Not true, we don’t have an inquisition. You haven’t seen what an inquisition is. But I’ve seen the repercussions of inquisition. Inquisition…

Yes-yes, this is when you’re forced to write denunciations of people you’re very close to. But right now we have freedom. We possess far more freedom than many are able to imagine. And we don’t have an inquisition. An inquisition is a prohibition on anything and everything, when something in particular is considered correct, and everything else – incorrect; when, for example, everyone with red hair is burned at the stake. Reformation is another brutal option. Peter I was a reformist.

Absolutely. And revolution is when everything is incorrect and everything is destroyed. Therefore, what is happening in our country today is an attempt at evolution. Sometimes it’s expressed in the fact that the authorities do mutually-contradicting things, meaning trying to please everyone… How can it be that on the one hand we celebrate Christmas – it’s an official holiday – while on the other hand, in the city’s center, on Red Square, there’s an unburied corpse? Here it’s either one way or the other.

Yes, but in the end this makes the evolutionary process very slow. As a result, fatigue and discontent build up. And people have little memory for good things.

I’m not a philosopher, I’m a businessman. And I think the third way is an illusion, a fabrication. You don’t have to go with the current or against it; you have to go where you think is necessary. In Russia the biggest disappointment isn’t that we’re doing something wrong, but rather inconsistency and a lack of respect for people.

Moscow School of Management SKOLKOVO was founded in 2006. Its co-founders were 18 businessmen led by Ruben Vardanyan, the then chairman of the board of directors of Troika Dialog. During the first stage the founders invested $120 mln in the project and provided for construction a land plot of 26 ha. In an interview with Vedomosti, Mikhail Kusnirovich, a businessman and one of the school’s founders, named SKOLKOVO “the best startup among analogous schools in the world.” “Reaching $54 mln in revenues in four years – this is great,” Kusnirovich said at the time. He thinks that in several years the school “should reach the serious semester gross level of $100 mln, which was planned.” As of today, SKOLKOVO does not disclose its budget.

The architectural project for the SKOLKOVO campus is based on Kazimir Malevich’s painting “Supermatism”. The building complex, whose construction lasted three years and cost $250 mln, occupies 80 thous sq.m. Also located on the school’s grounds are academic buildings, teacher cottages, a fitness club, hotels and restaurants. The campus architect is British citizen David Adjaye.