‘By participating in HSE life, I help develop Russia’s startup community’

Someone who has achieved global success does not customarily speak about their mistakes and frustrations. But it is impossible to have a successful business without failures because they point the way to the correct strategy. Andrey Zakharchenko, who holds a master’s degree from the Faculty of Management (now the HSE Graduate Business School) and is the founder and director of the Standard Trade logistics company, told Success Builder how his deepest crisis led him to success, the nature of trade relations with China and what helped his team achieve record indicators during the pandemic.

Why didn’t you just use your engineering degree to get a high-paying job?

My bachelor’s degree is in a complex subject: hydraulic, vacuum and compressor technology. I don’t agree that it’s easier to find a job with an engineering degree than it is with other degrees. The basic education that you get from a university is only a starting point. Whatever education you have, you still need to make a major effort to build a successful career. All big businesspeople and corporate leaders have immersed themselves even deeper into their chosen fields and competencies, gradually developing and becoming more skilled at their work.

I graduated from Bauman with a very high GPA, but I realized that being a classical engineer, drafting schematics and planning technical installations was not my thing. This happened when I was an upperclassman. We had finished studying mathematical analysis and the strength of materials and begun focusing on our specific field — gaining a full understanding of machine parts, heat and mass transfer processes and the theory of materials under real-world conditions. I thought, ‘What? I’ll be doing this for the rest of my life? No way!’

I remember that during my second year I was planning to go to the U.S. with the Work and Travel programme. I was very excited about it and had thoroughly prepared. I was supposed to work as a lifeguard. I had to fly out at the end of May and before that, I had to finish all my exams and tests and earn some money. I had to pass an exam in a subject called ‘the theory of the function of a complex variable’ that had no connection with real life, that lasted an entire semester and that was also taught by a lousy teacher. The realisation that it was a pointless subject and in no way applicable to the modern world was painfully obvious. I just had to accept it and change everything.

But weren’t there also advantages to having a technical background?

A technical education is great for training your brain. When I entered the HSE master’s programme, I soon placed fourth out of 200 students even though I had no background in management. I just did my homework and learned faster. It’s useful to be a techie — you learn to think fast and analyze large amounts of information. These very valuable skills will stay with you for the rest of your life.

Now they help me to break down large tasks into smaller ones, formulate a strategy and make certain calculations. In business, you can use these skills to find a solution and obtain a result quickly. I see this in my employees. Most people on my team have a technical mindset, and they are able to break down a task into subtasks and solve them quickly.

How did you end up in logistics and realise that China was the most monetised ‘product’ in this business?

During my final classes at Bauman, I was preparing to study in Europe through the Erasmus Mundus programme. I attended conferences, did research and worked a bit in my specialty. But I didn’t win the competition and became very upset. Then I wasn’t hired by Sun Inbev after I had gone through five rounds of interviews before being rejected in the last round. Then I wasn’t accepted to the master’s programme at HSE.

I had to gather all my strength in order to take at least a single step. I signed up for a preparatory course at HSE, threw myself into sports and took a job at Futurra, a company supplying souvenirs from China. Since I had already visited China on one of my student internships, I knew how communications worked there and this experience proved useful. It was a micro-company with two employees — the founder and myself — but in only one year we expanded to five employees, built up a pool of clients and relocated from an office in a basement to large, spacious premises. I became very adept at logistics with China and left the company with plans to start my own, Standard Trade. I had some understanding of how business works, as well as the technical side of things, how to resolve legal issues and keep records. I was also accepted to study at HSE and a new life began for me.

Why did you decide to base your business on China, one of the most difficult and unregulated countries in terms of logistics?

I’ve always been interested in China. When I chose a foreign internship while studying at Bauman, I settled on China and went there as a volunteer English teacher with the international organisation AIESEC. I noticed how the local economy was developing and became very interested in international trade. It is difficult not to pay attention to this, given China’s influence on the world market. China is a global exporter of everything imaginable, and because most business in the world is based on simply reselling Chinese products or transferring production to China, it is not only profitable to import goods produced in factories there and set up production, but also very interesting.

How would you describe trade relations with China?

I could talk about this for hours. I often speak and write articles on the topic. I also told HSE students about the intricacies of business communication in China. The problem is that the Chinese think differently, based on a logic that we find completely inexplicable. At the same time, they are extremely pragmatic, which often makes their behaviour seem inhumane because we are used to the fact that everything in Russia is based on mutual trust and respect. We wouldn’t ignore the elementary ethical considerations that the Chinese sacrifice easily for the sake of a commercial goal. In contrast to China, in Russia, long-term relations based either on verbal agreements or at least on compliance with laws are more prevalent. For example, in China people do not abide by the outcome of successful negotiations and are unfamiliar with the concept of ‘giving your word.’ For them, money has a greater value than the personal aspect of business communication.

In order to involve Chinese colleagues in your project, you need to do a huge amount of work on ‘mental integration’ – communicating with them more outside of business, touching on topics important to them, talking about family and values that are understandable to them and that, as a rule, are connected with their status in the local community. The Chinese think differently at an ontological level because they grew up with Confucianism, which differs quite a bit from the Christian values of Europe and Russia.

That is why the key to good relations with the Chinese is showing them all the benefits of working with you. They are also influenced strongly by the status of your market prestige. We had a case in which the cargo of a large Russian retail chain was damaged because the factory had packed it incorrectly. We contacted the factory management and showed them the Russian company’s website. The size of the operation impressed them and they resolved the problem in one day. This is because the factory director could then tell his friends: ‘Look at what a major client we have!’ And this, in turn, would greatly increase his social status.

What difficulties did you encounter in starting your company and how did it develop?

In 2019, we stopped looking for suppliers. Initially, we built our business on clients who needed ‘turnkey’ services — finding a factory that produces the needed goods, negotiating production and managing the process right up to final delivery. This approach led us into a very deep crisis in 2017-2018. We fell into debt because some of the factories for which we had taken responsibility simply dumped us. It was necessary to change our strategy to our customers in some way. In late 2018, one client approached us who wanted to order very expensive equipment for making industrial ventilators. We found a factory and reached an agreement on all the details of cooperation. Then the client went to China himself and concluded an agreement with a different manufacturer, but hit a dead end on logistics and documentation.

Then we offered to translate all the documents and schematic plans and organize a three-way chat to discuss technical issues and we provided a guarantee for our services. For this, we took a percentage of the major transaction and the client, in turn, was happy to shift the logistical risk to us. In this way, we stopped assuming responsibility for the quality of the Chinese manufacturer and switched to providing ‘turnkey’ services for outsourcing foreign economic activity. We conduct negotiations and take responsibility for all possible logistical problems, but not for any hassles caused by the manufacturer of the goods. This business approach pulled us out of the crisis and led to very strong financial performance in 2020.

How difficult is it to launch such a business without being an expert in either logistics or Chinese?

In 2012, I started my company alone, as a proponent of the approach in which the main professional knowledge comes with experience. In the process of working with clients and analysing errors, the team we had formed by 2016 had developed unique expertise. We had become outstanding logistics specialists, not only in terms of communication with China, but also regarding the legal aspects of working with different products. For example, with cargo of different hazard classes, with complex industrial equipment, and with medicine and children’s goods that require numerous permits.

One of the main factors contributing to the company’s development was when we stopped calling ourselves experts on the entire Chinese market, a status that only truly huge corporations can manage. We focused on the logistics aspect specifically and became skilled at the ins and outs of the transport and customs documentation for all types of goods. No other company on the market has our level of expertise, which we gained from working with clients and logistics companies. We didn’t like how many of them operated and now we do whatever will simplify life for everyone working on the Russian-Chinese market.

How is Standard Trade structured now and who works there?

We have an import department that manages projects and employs people who know Chinese. We frequently take on HSE interns for this department. There is a logistics department responsible for overseeing every stage of operations and a general management department that I head. Initially, I didn’t hire people with training in logistics or relevant work experience believing that this could be taught. But now, when many processes are optimised, logistical experience and education has become important for us. We have people from HSE, including those who studied the Chinese language and culture, students from the Moscow Automobile and Road Construction State Technical University and from other universities as well.

Many members of our team have lived in China at some point and this is a very important background to have in terms of understanding the particulars of communication. Some of the employees have an excellent command of the language while the others are outstanding specialists in logistics. The result is very effective project operations. Despite any previous experience, all newcomers receive training. In particular, they attend a course of lectures on logistics that includes an analysis of modern customs and international transport systems.

Do you like to deliver lectures?

I frequently speak as an expert at the HSE Business Incubator. This is because I was a resident as a master’s student and it helped me a lot in getting my company started, providing me with connections and market and business know-how. Many of the people I met in the Incubator are now my clients. By participating in HSE life, I help develop Russia’s startup community. I gladly comment on students’ business ideas and share the particular mistakes I’ve made that they can avoid.

I was recently a judge for startups at the GSEA international competition for young entrepreneurs but in general, as an entrepreneur and an international logistics specialist, I try to share my experience with the business community at various events. For now, this takes place online, which does not fully satisfy my ambitions as a speaker, but the situation is temporary.

Why were you so determined to get into HSE, despite your initial failure?

HSE has always been a priority for me in terms of education because I heard directly from my friends about how good the education was there, and not just from the Internet. I really liked that HSE was not as conservative and insular as Bauman. And when I began studying there, I truly saw how a university can be open to the realities of the market, and how students, in turn, realise why they need this knowledge. HSE teachers understand the foundations of how the market works and relate first-hand experience of how business operates in Russia.

You learn to think faster in new conditions and solve real case studies. You can also create your own study track, supplementing the main subjects with those you most need at the moment for your business or personal development. On the one hand, you study fundamental disciplines, and on the other, industry experts teach you and provide the latest business insights. I am primarily interested in high-level management, so I chose the Project Management programme rather than Strategic Marketing. The former had more real-world application for me because I was starting my own company at the time.

How did your immersion in this new environment and the acquisition of new knowledge and competencies influence your work?

Because all my activities consist of projects, specialising in this area has helped the company develop greatly. I learned how to set deadlines and calculate risks and to develop a methodology and strategy. In other words, I gain the necessary tools for effective product management as well as a global vision — that ultimately determines all your strategic decisions as a manager.

How has the pandemic affected your business, your logistics and communication with China?

Of course, it had a terrible effect on logistics. In December 2020 and January 2021 were the worst in a couple of decades. For example, freight rates increased 400% - 1,000% because there were no empty containers due to the shift in the import-export balance in China. Naturally, there were speculators who offered containers at outrageous prices. When our competitors were in crisis and demand plummeted, we anticipated that demand would recover. We advertised and expanded in order to be the first to ride the wave of new customers. That strategy proved successful.

You don’t hesitate to talk about mistakes. What role do they play in becoming an entrepreneur in general?

From my own example, I can say that one of the most important elements of success is the ability to take off your rose-colored glasses in time. In 2016, when the company’s first profits came in, I felt like the best entrepreneur in the world, a genius who could do anything. This was the first step to vulnerability and loss of vigilance. You take on risky projects and fail. But on the other hand, the crisis years in which I had to pay off endless loans taught me to take a sober look at circumstances and to keep on fighting no matter what.

One of my hobbies is mountaineering. It helps me to concentrate on the task at hand and develops the ability to go forward while sensing the difficulty of the moment.

Even during the company’s most difficult periods, I did not delay paying salaries or deceive anyone. I looked for ways to overcome our problems so that everyone would be happy. Fortunately, we succeeded and 2020 as a triumphant year for us.

Sports have always been a help. When problems began, I didn’t fixate on them: I looked for a solution, drawing strength from my athletic achievements. When you are climbing a mountain for 19 hours straight in minus 25 degree Celsius weather and an atmospheric pressure of 300 mmHg, you realise that all your business problems can be solved. And this applies to all other areas in which you can feel like a winner. I advise everyone who faces problems to seek out achievements in areas that inspire and motivate you. That will get you back on your feet and give you the strength to solve problems that are more serious.