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The algorithm of efficiency

In the new economic conditions, the Kazakhstani top managers started more often resorting to assistance of independent consultants to increase the efficiency of their businesses. Along with that, the local consulting companies announce their readiness to compete with their well-known Western counterparts, since the first of the two mentioned is not inferior to the methodology and experience of the latter. Thus, in the relatively short period of operation of the Kazakhstan-based branch of the Russian company A DAN DZO, both domestic businesses and governmental agencies were given a good chance to make certain the professionalism and effectiveness of the Russian company’s team. According to the Head of the A DAN DZO Alexander Portnov, the knowledge of specifics and mental similarity help our consultants not only to make recommendations, but introduce them into industrial practice as well.

Alexander Sergeyevich, consulting is quite a specific kind of business. What thing pushed you to set up this business?

This idea came to my mind when I worked as a technologist at Sheremetyevo-Cargo, JSC, one of the largest air terminals in Russia where I was engaged in optimization of business. This involved handling techniques, cargo movement, and resources management. Exactly at that time I acquired an understanding that the developments and skills we gained there can be useful for other Russia’s companies as well. One of our first clients was the Production and Distribution Complex Moscow-McDonald's, which provided its products to all restaurants of the McDonald's network in Moscow and adjacent areas. In a few years we had significantly raised our competence, acquired considerable intellectual capital, created a strong management team and successful projects portfolio, and from 2005 the company began working in the market with the brand name A DAN DZO.

A DAN DZO is the name of the medieval Japanese samurai warrior, the mythological hero, who was loyal to his last breath to his sovereign, defending the interests of the latter, irrespective of the difficulties he experienced. Exactly these principles – the loyalty to the customer and its goals – we strive to bring this to our business philosophy. A DAN DZO – our company is permeated with all that spirit. A well-developed system of project management, which proved itself in practice, allows controlling the risks of the clients. At the same time, we try to anticipate risks and take relevant measures to prevent them, rather than to eliminate the consequences. Initially, we offer a few options as solutions to our customers: expensive, but with very good quality; with relatively good quality and relatively expensive; not expensive, effective, but with some risks. Whatever option the client chooses, we always bring the project to its logical end and get a positive result.

In 2004 there were four of us in the company; today, the staff numbers four dozen people, while according to usual practice, a consulting company has the staff of 10 people, in average. Since it often happens that we simultaneously implement 5 to 7 projects, this requires constant selection and rotation of relevant specialists. The applicants for jobs in our company sometimes wait for a year or two to be invited for interviewing. We try to immediately engage new staffers in the atmosphere of A DAN DZO. The Corporate Management Code, which establishes the rules for building up relations with the customers, interaction between the managers and employees, and the complicate system of introductory and post-project seminars allows our team to grow fast and become more and more effective. 

What is the area your company specializes in and what industries are in the range of its interests?

We engage in consulting services in the area of production and logistics, i.e., figuratively speaking, the consulting which you can touch with your hands. Manufacturing, supplies, storage, delivery, and even management – all these are the logistics processes, since in production the streams of raw materials, intermediate goods, commodities and physical valuables move between the production centers. In management, the flows of documents and information move between the managers and employees. What is especially good is that the result of our work can be seen without words – the new warehouses, convenient shops, economical transport.

When in 2000 I was developing the strategy of our company, I supposed that consulting would be an analytical center, the basis for development of other types of business. Gradually, we created a comprehensive range of services, allowing us to work with projects from A to Z. Today, this includes consulting, outsourcing, automation, and monitoring.

In view of the above-said, it is not by chance that we specialize in advising large industrial enterprises in such sectors as metallurgy, chemical, food, oil production and petrochemical. The matter is that for the retailers, logistics and transport companies the logistics processes at the core of their business, and they constantly work to optimize these processes, while the manufacturing companies in these matters are often in need of assistance from outside companies. When we come to such an enterprise, in the short run we manage to find points where to increase efficiency, where even the old managers do not guess.

I would like to give just one example. Now we are starting actively introducing projects to comprehensively enhance enterprises. These projects are based on the "Theory of constraining systems." This methodology aims to identify the weakest link in the production processes chain. Figuratively speaking, one malfunctioning machine causes disruptions across the enterprise. We find such "bottlenecks and develop actions to fix that. By increasing the costs on such a problematic link, the company gains an increase in income by 30–40 % during the year.

What was the reason that made the company make a decision to set up a branch in Kazakhstan? What project was the starting point for A DAN DZO in our country?

In 2006 I was invited for the first time to Kazakhstan for a transport conference, and even at that time I saw great potential here. This is a country with huge freight traffic and transit potential. There are a large number of industrial companies here, where the optimization possibilities literally "lie under our feet."

In 2007, we got acquainted with the representatives of Kazakhmys Corporation, and in the following year launched a large-scale joint project to improve logistics, warehousing and transport activities, also information support of logistics processes. Our approach to this task was comprehensive: We covered all regional offices, engaged a large staff of experts from Moscow, studied in detail the company's operation, determined the points for optimization, and developed the concept of logistics for two years ahead. After this, the Kazakhmys Corporation management offered us to carry out this task, because we differ from other consulting companies, since we implement our recommendations in practice. Usually, the practice shows that if recommendations of the consultants are just given to the company’s management for implementation, and the consultants themselves do not see them to an end, the result is usually 15–20 % maximum.

As a result, under our supervision the corporate supply system was completely rebuilt, and labor productivity rose by 20–30 %, while the general costs per transaction decreased. The staff and management of the Corporation played a great role in all that. We introduced a corporate information logistics system at Kazakhmys. I cannot give any other similar example of implementation of such a large project in the CIS. Scheduled for a period of two years, this project was completed exactly by the set deadline, while its initial budget reduced by 20 %. We also helped to transfer to outsourcing the entire transport of the corporation by establishing a separate company. In September 2010, on the initiative of Kazakhmys management, without any complexities we transferred that company in control to the other team.

On our initiative and with our active assistance, there was set up a department to develop a product distribution system – a team of office consultants, formed from the Kazakhmys staffers and trained by our coaches. Today, this department continues operating in full compliance with the principles we laid. Owing to this, Kazakhmys will continue to remain at the peak of technologies in the use of the corporation’s internal resources.

While working in Russia and Kazakhstan, have you faced the specifics of the local market?

It is very interesting to work in Kazakhstan. On the one hand, unlike Russia with its huge territory, everything here in Kazakhstan is more compact and tangible. It is quite clear how we should act to benefit a particular enterprise. On the other hand, there is very flexible and dynamic leadership here, which is committed to efficiency and is interested in transformation. In Russia, business is also relatively progressive, but less nimble. There we often faced a shifting of responsibility, while in Kazakhstan managers are open to experiments; decisions are made and implemented quickly. This concerns not only the top management, but linear workers as well.

Moreover, here in Kazakhstan for the first time we faced the practice of engaging our consultants in developing state-run programs. In particular, on the initiative of Kazakhmys Corporation Chairman of the Board Eduard Ogai and under the auspices of the Nur Otan party, our company took an active part in development of the individual program of small and medium businesses development in the field production with the assistance of the backbone companies. Today, Kazakhstan’s government is examining the possibility to include this program in a number of state programs under implementation.

It should be noted that our approach in methodology did not differ from a project of logistics audit of a large company – a slight difference was that we just applied all this to the entire country. I should mention also that in the course of analysis of the current situation with the programs of support of small and medium businesses, we were surprised to find out that they were profoundly developed and thoroughly described in details in the paper. The only drawback is that the documents are poorly coordinated with each other, while the potential of backbone enterprises has not been fully utilized.

When implementing this project, we met with dozens of entrepreneurs, representatives of the ministries and departments, Damu Fund, banks and large companies, such as Kazakhmys, ENRC, Bogatyr Komir, Kazzinc, Kazatomprom, Kazakhstan Temir Zholy, KazMunayGas, etc. We gave our recommendations and were given a very good response. This is, indeed, an economically justified and, in fact, operating scheme, which simply needs to be adopted and implemented. Here, the key point is the role of independent advisers-operators, which will be tracking transformation in the course of implementation of this program. This is something new; I never have faced such an approach in any other country.

The proposed approach to implementation of state programs is the analogue of our own technology MPRF (Monitoring and Prompt Response to Failures). In our projects the application of the given technology always follows the development and start of introduction into practice. The consultants-operators of the key points and positions track certain events which had to occur at a particular time and place, in compliance with the regulations. If they do not occur, this means that soon this will badly affect the operation of the entire company. The weekly newsletters as to the progress of the process are distributed among the chiefs of the key departments, and recommendations are immediately given. Such control from outside allows the new technology to settle down in 2–3 months. I am sure if monitoring of this kind is carried out with regards to a state program, the result will exceed expectations.

We regard this project very carefully, since it involves both government and private business. It is one thing to optimize the work of a warehouse at a private enterprise: however it is another thing to advise the structures, whose work will affect the economic development of the entire country. Such scales are exciting and inspiring...

They inspire you for future growth? What kind of goals do you set before yourself for the future in Kazakhstan?

We are planning a major expansion of the office, bringing it to the level of our office in Russia, with the ability to not only implement projects, but also to incubate local staff. The talks we are now carrying on with potential clients make us confident to announce this with a high degree of certainty.

If we talk about particular services, then, in my opinion, the services outsourcing and consulting in outsourcing look very promising for Kazakhstan. The process of painless separation of non-core activities into an individual business is associated with high risks; so, it is very important to engage experienced consultants.

We also see that small and medium businesses are in great need of consulting on how to organize their production. The introduction of the methodology "Theory of Constraining Systems" has a great future; this will allow without considerable investments in fixed assets, sometimes due to organizational solutions only, to achieve fantastic results in increasing the efficiency of the enterprise.

In general, we want to develop the consulting of A DAN DZO at such a level, enabling us to compete with Western brands, but the consulting which will be coupled with our comprehension and taking into account the mentality of our people. Our people are not lazy, as is commonly believed. We just simply want to see essence in any matter. When this essence is understood by the employees, you would find it hard to get more efficient workers. Today in Russia and Kazakhstan there are large industrial enterprises which are able to take leading positions in the global market, but there is no national consulting firm of the analogous level which could operate effectively not only in the CIS countries, but abroad. With the objectives of massive growth of production set before our countries, we need an adequate system of consulting support. After all, the consultants are a sort of production growth accelerators, even the grease to this mechanism, enabling it to work with great efficiency.

With our professionalism and experience, we are ready to create a powerful national consulting center, where both the private businesses and governmental agencies could apply to for consulting.

Table of contents
The algorithm of efficiency  Alexander Portnov 
They Grew on Internet Yeast  Alexander Vasiliev 
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· 2008 №1  №2  №3  №4  №5/6
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