History of western brands’ ag-dealers in Russia, besides fragments of soviet distribution channels, lasts about 20-25 years. Quite a short period of time to live thru typical stages from origin to almost maturity via several deep falls, from welcoming western brands to their replacement policy, from market domination at minimum after-sale support to survival at well-developed.
Youth might be a right word for most of market players, since just a few of them have been existing and ‘ve survived from the market beginning. But, disregard of period of existence most of dealers are, I would take a risk to state, still young and almost frozen on this stage in terms of organizational development and mindset, and this consists a serious challenge for the their being.
Most of dealers, besides few based on western capital, came to existence thanks to entrepreneur impulse of their founders who, from the very beginning and, very often, all the time throughout, are actively involved in operations. Other words, there were no professional investors, investment logic, hired C-level teams and bulky cash input behind with an aim to convert it into public, make a kind of holding structure merging other players or/and sell it, as a well performing business, in several years. Let us say, with minimum or reasonable investments, founded dealerships (some grew up even from parts business) seen as a kind of alternative self-employment on a ground of gained expertise and network.
This way still shows its attractiveness for all kind and levels managers in our industry seeking independence, self-realization, higher income or whatever else, since they see that it worked out for current employer.
Guess, on developed markets dealerships had the same runway many years ago. Some of them developed into big companies with multimillions turnover and still being family run businesses. I would assume, this kind of dealers are seen as the most comfortable for vendors due to long-time relations, high level of loyalty, good personal relations with corporates’ management, quick response on vendors’ needs and etc. Although the league of public investors (non-family) are actively taking its place on the market thanks to access to funds, professional management and best business practices they bring into our conservative industry.
In our case “entrepreneur birth” gives a specific shade to the industry starting from initial lack of capital substituted by energy of founders and ending up with intra-culture, level of top management development and others aspects.
So, what is wrong with “entrepreneur style” business in our case since history outside Russia shows many bright sample of them?
First and very predictable, natively most of such companies are choicelessly keep linking to owners in terms of any more or less serious decision to be taken. Do you observe variety of management teams there, empowered enough with delegated authority with limited owner within? Sure, not. So, the owners are the only on the top of management system determining strategy, tactic, key events, shape culture within a company and form in the end general business success and the rest of the management is just king’s suite, what is on the first stage maybe not that bad.
In same time, there is an opposite side of it getting brighter while business is becoming larger. Owner loses control as soon is company is growing, but the approach to count on one-person management is still on, business starts to lose flexibility, speed and quality of decisions, delegation is not on its place, initiatives become annoying. Start-up competences and approach is not enough or suitable anymore. Weaknesses of the owner start to be the weakness of the business. The common results: tensions within, uncertainties on every level, loss of the most talented managers, focus on formalization with the owner staying outside of any rules, what is creating even more mess in the system.
So, lack of knowledge, competences for larger business, narrow choice and affection toward old algorithms and practices, out-system rule breaking owner, operational mode of management (might be efficient enough times before), denial of owner's abilities limit achieved and avoidance of necessity to delegate – clear signs of crisis of management company starts to face.
There is a good chance to see, that owner – being energetic and bright, mostly in sales (machines, mainly) and relations – could create quite a good basement for those functions, but all non-operational like HR, Finance, Legal exist on rudimentary level or even absent at all. As output, staff development or financial wariness are out of focus, managers responsible for non-operations have weak voice or considered as deep back-office and inessential. I hardly understand how company on its further path can proceed in one-leg mode while “servicing” functions become as vital as operations for survival.
Do not you think entrepreneurial ideology is one of the reason why companies in the industry would rather die than merged or somehow re-shaped? To choose other option than fight to the death (or blindly drive it to) need different mindset and vision – investment worldview, - when the founder is able to look at business not only from the point “all I can do” or “the only I have”. To see the moment when it is necessary to trade-off independence and control for synergy or next-level flip or survival. Thus, companies rather die than being transformed losing all gained and achieved.
Another point, which is just coming – inheritance issue. Russian vendors, but maybe Deere, are far from it yet, being concentrated on operations aspects. However, in 5-10 years it is going to be a question: who will take care of the business from retiring and already not flexible founder on the more competitive market full of challenges and new technologies.
Western markets already face the issues of reconsideration dealers’ place in the supply chain; questions of AI are raised and took its place in banking and trading, as well as remoted services and complex control solutions. It looks as something far ahead, but the speed of changes is dramatic and all issues are away from operational business companies are busy with. New reality requires new vision and new ideology, different pace and decisions, flexible management model not yet started to be implemented.
Thus, historical entrepreneur basement side effects consist more and more danger for the industry future, I would assume.