Dmitry Maslennikov, The harder is for a corporation to work in the market, the faster it comes to the idea of ​​introducing innovations

“I have experience with “T Plus“, then let’s take Inter RAO and maybe Rosatom as my client… They definitely stand in the way of innovation. Yes, it’s hard for them, because they are very big and they do not implement innovations in the blink of an eye. This is not fintech, not telecom, not something that can be launched in a couple of months and unexpectedly get a huge effect. It’s harder for them, it gets slower for them, it’s more difficult for them. But the return is completely different“ — Dmitry Maslennikov, the venture company founder.

“Honestly, I do not see any big, radical differences between the structure of the Russian corporate innovation market and the American one. Because, on the one hand, common sense and understanding of how it works is more or less uniform, and we are not in the Stone Age. Russia is not lagging behind the Western countries in understanding what we are doing. On the other hand… It seems to me that now the business is driving technology, not vice versa, in a particular company. Because the business sees great technological trends, creates an internal demand for technology to itself or to the open market and at its expense tries to create something. Not vice versa.“

“Besides, the things we have are not perfect. If we take the current Russian problems: not all large corporations a) believe, b) understand how they can make money on innovations. Well, and c) in fact, they do not have an internal mechanism of processes to earn money on it … But most of the top companies in their segment are already included in this or that innovation activity. The rest just look at them…

We are going to hold a conference on corporate innovations “Innovate or Die“ on November 18th … And I see the signed up companies that are there. These companies of the second, third or lower level… They come and I am very pleased that they are coming, companies I did not expect at all. Moscow state unitary enterprises come, which is also very important, I did not expect to see them there. I don’t know if they will be happy, but let’s say: the Moscow Metro was registered … For the conference on innovations!“

“It will be a case conference, when a corporation speaks about its experiences, fails, expectations, recommendations and plans. I do not want them to boast about any results. I want them to honestly share their experience, so that the companies of the second and third levels did not make the same mistakes that the big guys made. Big guys could afford it and it was inevitable. Small guys can not afford it. They do not have time, money and nerves.“

Interview full transcript:

Mikhail Shekhovtsov: Hello! Today we have with us Dmitry Maslennikov, the venture company founder.

Dmitry Maslennikov: Good afternoon!

Mikhail Shekhovtsov: Good afternoon! Today we will talk about the corporate innovation system, research and development, venture investments and how they interact with each other. Can you briefly talk about your company?

Dmitry Maslennikov: Yes, of course. My company has been formed quite recently from a more famous one that existed for three years — a company called MetaBeta. Now, after my business partner and I got separated, my company is called Disruptive.vs and it still focuses on two activities: working with companies at early stages in a venture model and working with corporations in the consulting format. These are two basic points that, in my opinion, are key to build a venture business and any sustainable company that I build here in Russia.

Mikhail Shekhovtsov: As far as I understand, these are the two key aspects of the venture process: a large technology corporation and a venture business.

Dmitry Maslennikov: That’s right. And one does not work without the other.

Mikhail Shekhovtsov: No, it does not work.

Dmitry Maslennikov: Understanding this and realising that my success in working with early stage companies in a venture model depended on the success of the outputs, and there was an obvious problem, I needed to build interaction with corporations. This is where it all began: I had to find the ways to enter these corporations to understand what they needed, how they could be sold and how to build this collaboration altogether. So I got on the corporate field, the corporate innovations field, where I started digging deeper.

Mikhail Shekhovtsov: What is the venture industry problem? Why is there a problem with outputs? Are there many options for getting out of business?

Dmitry Maslennikov: Actually, no. There are very few exits, especially among the founders.

Mikhail Shekhovtsov: Is this a specific problem for Russia?

Dmitry Maslennikov: You see, any ecosystem is based on a certain “food chain“, where the higher you rise, the bigger has to be a player who will “eat“ and buy you. If you are very small, you start the company at an early stage, you grow up, you can be feed by business angels, investments, seed funds, then maybe other funds. But everyone who invests in you at an early stage should understand how they will get out of this company, how they will earn money. And most importantly: you, as the last one in getting out, become this ship’s captain and should understand who will buy your company. And here we understand that there must be either a strategist or an IPO. And there is no other option.

Mikhail Shekhovtsov: Well, if this is an American market, then everyone is probably striving for an IPO? Is there also such dilemma?

Dmitry Maslennikov: I think this is an equivalent opportunity. You can go to an IPO, you can exit through a corporation. And we know many examples when the corporation buys without waiting for an IPO, and this is the company’s strategy: to play in a relatively short horizon, in five years.

Mikhail Shekhovtsov: But in the Russian environment, the IPO prospects for many companies are very illusive, even, probably, for most companies …

Dmitry Maslennikov: It’s like that: just as the exit possibility becomes ghostly. And this is something that we should work on in our ecosystem. If we now look at the current trend, companies that are created here, on the one hand, are trying to enter new markets due to the fact that there are more money or opportunities, but also because there is an opportunity to sell these companies. It is very important — this is what I dedicate my efforts to: education, motivation, raising the Russian corporations culture — that it is possible, necessary, and it is profitable for everyone — to buy technology early stage companies.

Mikhail Shekhovtsov: Why is it interesting for large corporations? How do they generally invest in new technologies, new projects? How do they organise the process inside?

Dmitry Maslennikov: Everything is very individual. I can take an average case from my own experience. More often, corporations turn to me with this message: Dmitry, we have some problems in the innovation development field — without specifics, without formulating a concrete topic. And here we begin to understand, in fact, where this company’s innovative potential is: either it is inside, or it seems that this potential is outside. This is the basic hypothesis, which must be determined at the earliest stage. If the company believes that innovations are somewhere inside, it has the potential of employees, technology, development for that, then yes, we are going to that direction and there we will begin to develop it. If the company recognises that it either does not have human, scientific, technological potential, or, for example, it lacks processes that allow to engage 10% of employees not in operational activities, but in innovation process — if they recognise it, then they can go to the foreign market and search there. And here the story begins with the search for technology, the search for companies, teams, products. Everyone is searching according to their own level.

Mikhail Shekhovtsov: How do the company search for buying? That says, it obviously has different alternatives: it can buy a company, a license for technology … What other alternatives? You have said the team, right?

Dmitry Maslennikov: Yes. I can name all the variations that are available. They can make venture investments, in an attempt to make money on it, wanting to sell the team and the company in the future, for example, or become a strategist, in lesser degree … Second, the company can take the product for distribution, if this is a distribution company and it does not have not some nomenclature unit which can be an up-sale for its own client base. Third: this company can buy a license, because it is easier for it to get this technology. Often it works with foreign technologies, when you buy a license and cover a region, for example, the CIS, with it. The next option is a technology partnership, when a company, I mean a startup, delivers some solutions to you and you pay it for using this solution in different formats. One of the formats is fixed, another format is revenue share, which is not so common, but, in my opinion, promising. That’s to say, as a technology companies seller, I like it very much: when I, as a small startup, bring technology to a big company, it acts as a scaling tool for me. Ready sales channels give me a wonderful revenue share.

Mikhail Shekhovtsov: I see. Well, the working process logic for a startup, from the venture side, is understandable: this is a matter of exit, of monetising their products, licenses and technologies. But for corporations, how well developed is the business model? Investing in research and development, investing in new development products — how much do they pay back in the medium term?

Dmitry Maslennikov: Well, depending on what medium-term perspective each company has. Just yesterday on “Open Innovations” we discussed what companies and corporations are coming to accelerators, but this is one of the tools. We agreed that every company that is in a highly competitive industry … The stronger, the more the competitors and the market bite the company — for example, the falling market — new technologies, some trends … The harder it gets on the market, the faster it comes to the idea that it needs innovations.

Mikhail Shekhovtsov: Yes, but if competitors bite the company now, then, after investing in new technologies, it will not escape from these bites. They will be saved from these bites in 3–5 years …

Dmitry Maslennikov: That’s right. Therefore…

Mikhail Shekhovtsov: The company needs to buy some already established venture business.

Dmitry Maslennikov: There is probably no existing venture business. Or, if you buy it, it is very expensive.

Mikhail Shekhovtsov: So, do you need to pay so much money? May be?

Dmitry Maslennikov: It depends, of course, on each specific situation. It seems to me that if we replace the word “medium-term“ with a short-term perspective, for example, an annual one, of course, you will not change anything unexpectedly. You can buy some individual products, build them in the distribution and to earn a small amount of money. But if the company feels that it is dying, they understand that it will happen in the next five years, for example, due to a falling market, a falling business model, some falling conjuncture, they realise that it needs breakthrough innovations, that will become the next business model… Well, you imagine a growing business model: at some point, it dies, and you need to impose next one.

Mikhail Shekhovtsov: Then, obviously, this is not a tactical decision. That’s to say, in fact, in the long-term strategy development, this company understands that it is not promising and in the long term it must either change its activity profile, or generally restructure its business in a different direction.

Dmitry Maslennikov: That’s right. And each company has a significant reserve, what it did in the previous 20, 30, 40, and maybe 100 years. It has certain achievements, they are connected with technology, with culture, with a brand, with markets, with experience. That’s to say, a lot of things are done, and the question is what will be the next product; the product depends on the technology and what will be the business model for this product. Because business models are very different according to people’s behaviour and the availability of formats — from the logistic point of view it is possible to deliver value to the client. And here it is necessary to invent something.

Mikhail Shekhovtsov: As one of my bosses said: having a lot of small things, you can not build a big one. In fact, there must be some great innovation strategy, to which these purchases — technologies and startups — must somehow be embedded. And to create a great technological future.

Dmitry Maslennikov: Yes. But, probably, I would warn against the idea of ​​creating a big strategy which everyone will follow very long time, so that later it is not revealed that the strategy was wrong. I support that any company should, on the one hand, strategically commit with the top management level that it is going in this direction and it is valuable and important, everybody should support it. On the other hand, it must act very locally and be able to flexibly manoeuvre between what it does. To search, to invest, to become a business partner, to buy a license. Well, feel and find something that will work specifically for this corporation.

Mikhail Shekhovtsov: Yes, I agree with you: probably, the strategy should be flexible, but there should be a strategy, am I right?

Dmitry Maslennikov: Of course. But it should, probably, concern technologies and to be based on it.

Mikhail Shekhovtsov: Still, it is difficult for a large corporation to make venture decisions, like this or that technology will save the company, protect it from a competitor… It’s hard to think like a venture investor.

Dmitry Maslennikov: Difficult, but not impossible. A venture investor also appears in a corporation when it makes its venture fund or when a department or some people engaged in innovations appear there. They are based on technological trends, technological maps, an understanding of where the market is heading, and the background that this particular company has.

Mikhail Shekhovtsov: Can a large corporation see the development of the market? Even in a flexible strategy — not as a strategy … it can determine: this market is promising for me, but it’s hard for me to solve with my internal forces. I understand that I have my own internal research and development, there is a venture environment, there are technologies on the market, and I need some swarm of technologies and products that will form the correct movement in this direction…

Dmitry Maslennikov: Certainly. And this is what is happening now with medicine. Any traditional medicine that has become accustomed to providing medical services, such an understandable, very mundane, long-standing service, faces the current digital medicine realities. It turns out that this is a huge market, that in this huge market there are other laws, other formats — but it’s still medicine. This is still a medical service that can be provided if not at the same way, then conducting the same expertise that it has accumulated over a hundred years. This is important for a company to be aware of this and to look for those products with which it will work in this market.

Mikhail Shekhovtsov: Is there corporate innovation infrastructure built in Russia? How ready are Russian companies to buy technology, to buy and to invest in venture companies?

Dmitry Maslennikov: To fix the fact that Russian corporations can not only invest, not only buy, but also do a lot in the field of innovation…

Mikhail Shekhovtsov: Inside the company…

Dmitry Maslennikov: Inside the company, in different ways. I would put it like this: top level companies that in their niche are in the leading positions, either historically or thanks to the efforts made over the last few years, have completely realised and now are making first steps, and someone already first, second or third. They are certainty looking for a way, and someone finds it. First, the infrastructure is not concrete: there is no infrastructure that can work either inside the company, or for all these large corporations. But there is a very positive trend, positive dynamics, when big companies no longer reject, they understand and agree. And they do not formally agree like: well, yes, let’s innovate — as, you know, the state likes to force for innovation. There was even such a thesis …

Mikhail Shekhovtsov: A term, yes.

Dmitry Maslennikov: The term “compulsory innovation“: they insert into the state corporation the percentage of innovative purchases from innovative companies. In the public sector this is present. Companies in a competitive market situation do something in the direction of innovative products developing.

Mikhail Shekhovtsov: I see. Tell me, what is the difference between the Russian corporate innovation market structure and the American or other ones? If we take the American market, obviously, this system of internal R&D developed for a long time, sequentially, etc., whole systems were built. Then the venture market appeared, the collaboration between the venture market and the internal innovation ecosystem. In Russia, we partially inherited the legacy of Soviet large corporations, where everything was divided: science, scientific and production associations, production itself — all separately. In the aerospace or military sectors this was often united, in the civil sector this was often disconnected. Does the modern Russian ecosystem of intracorporate innovations already unite all these elements within themselves, within the same companies, without separate science, R&D, production? Are they naturally interrelated within the corporation?

Dmitry Maslennikov: They are naturally interrelated, because otherwise it does not work.

Mikhail Shekhovtsov: Is it already the same in Russia like in Cisco or in General Electric? Are there any differences?

Dmitry Maslennikov: Honestly, I do not see any big, radical differences. On the one hand, common sense and understanding of how it works is more or less uniform, and we are not in the Stone Age. Russia is not lagging behind the Western countries in understanding what we are doing. On the other hand…

Mikhail Shekhovtsov: I did not mean the technological point of view, but business processes.

Dmitry Maslennikov: Yes, I am talking about business processes, about interaction, about how it is built. Technologies are not much separated from business. Business does not live in a dream world, it relies on those technologies and those products that this company has. Where the initiative comes from, either from technology to business, or from business to technology, is the question, everywhere it works in its own way. It seems to me that now the business is driving technology, not vice versa, in a particular company. Because the business sees great technological trends, creates an internal demand for technology to itself or to the open market and at its expense tries to create something. Not vice versa.

Mikhail Shekhovtsov: I see. And how flexible in general should be the corporative internal structure to be receptive to new innovations and technologies? It is clear that there are such former startups as “Yandex”, it is clear: the system is built, so to speak, from the ground. From the market and client needs to the highest management. And as for other large corporations, which are built as holding structures, large structures with different directions: medicine, electronics, energy — how is the innovation system going on there? It seems to me that it is difficult to make decisions to multifunctional holdings, especially since it is often a delicate matter to make the right decision in innovations.

Dmitry Maslennikov: You are absolutely right. Let’s repeat: to be innovative, a company needs to be super flexible, as flexible as possible. The maximum flexibility, fast, responsive, ready for changes and to change the standard point of view in the company. That’s to say, if today we think in this way, it’s okay if tomorrow we think differently influenced by some facts. Not ephemeral considerations, but the facts that we are able to get from the market. Going back to the holding companies… I have a client who really has a lot: he has medicine, agro, retail, HoReCa. A lot of things, very different businesses. And now the biggest task of this holding is to launch innovative processes in each portfolio company and create the synergy effect between them. Everything begins — and it started with the example of this company — from working with Big Data, because it is everywhere: there is a telecom, there is a bank, there are sources, Big Data suppliers that can be used in the medical sector, in other directions. It is very important.

Mikhail Shekhovtsov: This means building internal innovation processes within the corporation.

Dmitry Maslennikov: That’s right. First, inside, in a company. In a separate holding company, there are 100 thousand people working, a huge number. In some there are less: 10–15, for example. First, it is built separately, then the synergy between them is sought. And this company just arrived, just yesterday it started to do this, after many years of a thorny path in a separated company and in general in a holding company.

Mikhail Shekhovtsov: How successful are the processes? How involved are the top management and shareholders in these innovative processes?

Dmitry Maslennikov: There is an example of this company, unfortunately, I’m not sure that I can name it.

Mikhail Shekhovtsov: Not necessarily.

Dmitry Maslennikov: Everything comes from the very top.

Mikhail Shekhovtsov: From the very top, yes.

Dmitry Maslennikov: There is a direct commitment from the key shareholder who drives this process from the top. It goes down to a lower level, but still it is the top management that drives all other processes. And you know what’s important: if it is compulsory, everything turns out bad. And even when there is a vector on top and full carte blanche to implement this strategy, still you can face some reluctance, unreadiness to communicate. Now we are carrying out what is called an innovative audit: we look inside these portfolio companies and see what can be done specifically. We need to come out in two months with a list of concrete initiatives that can be launched there. If they ignored us, did not want, did not believe, did not trust, we would not have succeeded, no matter how the top level wanted it. But it does not happen and the people we meet are very open. And they say: yes, we want, we have concerns, we are with you, we will help, we will implement, here we have our own list, help us. This is very open. And it’s very nice that there are not these stumbling blocks that would interfere.

Mikhail Shekhovtsov: And how motivated is middle-management in the company? That’s to say, they are engineers, general directors of individual business blocks — how motivated are they to implement innovations? After all, they have a specific KPI for sales, for expanding their position in the market.

Dmitry Maslennikov: That’s right. It strongly depends on the company, on the number of employees, on the time, how long these employees have been working for this company — this is very important. The more stagnant and bureaucratised, the older system is, the harder it is to move somewhere. In some companies we change motivation …

Mikhail Shekhovtsov: How do you change motivation? It is clear that the shareholder is motivated, what is the motivation of a manager?

Dmitry Maslennikov: Other KPIs.

Mikhail Shekhovtsov: Other KPIs, that’s to say, an option can be obtained …

Dmitry Maslennikov: I imagine that ideally, in not so distant future, there has to be a process when a person who generates and develops innovations, taking on risks that are not related to his salary, but connected to his/her bonuses, he/she must share motivation with the company, with the main stakeholders, who are also interested in this. So far, this is difficult to do for many reasons: even HR is hard to take, even to imagine that there will be a profits sharing. But if we look at some examples when a company makes a spin-off, a large company, for example a bank launches a spin-off, a separate company, where there is a separate CEO with a separate share allocation, with separate options.

Mikhail Shekhovtsov: If there is a spin-off, is there a contradiction here with the main shareholder?

Dmitry Maslennikov: No, why? After all, the main shareholder…

Mikhail Shekhovtsov: The shareholder will also be a shareholder in the spin-off.

Dmitry Maslennikov: Of course. That’s the point, the spin-off appears and it is conjuncted.

Mikhail Shekhovtsov: Then it turns out very interesting. It is possible to build a lot of interesting businesses around a corporation, which has a great innovation resource.

Dmitry Maslennikov: Yes. But there is a number of problems. So that the world does not seem so completely pink and beautiful, we can name them. There are public companies, and it is very difficult for them to audit, update, report. It is not known how the effect of one portfolio company will affect the stock value. Not even a portfolio one — an individual spin-off, where they have stocks, even maybe not a majority package. Some companies are very difficult to manage …

Mikhail Shekhovtsov: Indeed, this is a very complicated process.

Dmitry Maslennikov: Yes. There is one company, there is some focus on it: PR, because everyone knows who is involved… Many reasons. And to control all of them is a separate exercise.

Mikhail Shekhovtsov: Yes, it’s interested. In general, you are doing an interesting job.

Dmitry Maslennikov: Definitely.

Mikhail Shekhovtsov: Let’s try to imagine a more complicated story. For example: a big energy holding. They have a large structure, they sell energy, no matter what type of it. Basically, a traditional business model, although many different high technologies are used. How do they move towards innovation? Obviously, they have their own R&D, but the sector is relatively inert. How do they promote innovations there?

Dmitry Maslennikov: Let’s take a few concrete examples. I have experience with “T Plus“ that provides our houses with at least half of central heating every day. Let’s take Inter RAO and maybe Rosatom as my client and as someone who unites a big number of individual large companies. They definitely stand in the way of innovation. For example, “T Plus“ obviously understands that the Russian heat power industry market and, in particular, abroad is very competitive. In Russia they are monopolists, but they have multidirectional movements in the market, which they must seize and manage. For example, Rosatom has a specific strategy: to enter the international market and make international products, international sales — well, the product in the Rosatom understanding.

Mikhail Shekhovtsov: Today there has been published an article about the engine on nuclear fuel.

Dmitry Maslennikov: Well, there are a lot of things they can produce.

Mikhail Shekhovtsov: A new space engine powered by nuclear fuel.

Dmitry Maslennikov: Yes. Or maybe an atomic power station in some region — I mean the region of the world. I’m telling this to emphasise that it is hard for them indeed, because they are very big, and they do not innovate in a blink of an eye. This is not fintech, not telecom, not something that can be launched in a couple of months and unexpectedly get a huge effect. But the resource companies, including the oil companies, which we have … Well, in particular, there are private ones. They have separate R&D departments. I repeat: it’s harder and slower for them. But the return is completely different.

Mikhail Shekhovtsov: But is it a defensive strategy, because they have a threat from neighbouring markets, or an aggressive strategy, because they want to enter new markets, to win new opportunities, solutions.

Dmitry Maslennikov: It depends on a company.

Mikhail Shekhovtsov: Indeed.

Dmitry Maslennikov: Rosatom has an aggressive strategy. It is clear that they are system-forming, a mastodon, a giant, a natural monopoly on the Russian market, everything belongs to them. I can not overestimate the Rosatom role in general in Russia. But this is a company that aspires to enter the world markets.

Mikhail Shekhovtsov: But Rosatom is still high-tech: nuclear energy, new researches are being carried out in various directions …

Dmitry Maslennikov: But someone can say that the atom is something old-fashioned.

Mikhail Shekhovtsov: Yes, someone. For example, Germany: they wanted to ban it.

Dmitry Maslennikov: For example. Someone will say that all this is an outdated technology and they will find something else.

Mikhail Shekhovtsov: Thermonuclear fusion?

Dmitry Maslennikov: I have no idea.

Mikhail Shekhovtsov: Oh, I see.

Dmitry Maslennikov: Each country chooses its own specific way.

Mikhail Shekhovtsov: A niche.

Dmitry Maslennikov: Yes.

Mikhail Shekhovtsov: I see. And also, in order to implement all this — it does not matter if it is traditional or innovative corporation — is it still a long-term strategy?

Dmitry Maslennikov: Well, in Russia we do not have very good long-term planning at all. I mean, we plan well, however, everything changes halfway. I see that the company is able to plan from one to three years. Then even those people who do this do not believe in further planning.

Mikhail Shekhovtsov: Other interests can arise in three years.

Dmitry Maslennikov: Anything can arise, both for people who are engaged and the company, the market.

Mikhail Shekhovtsov: But it also affects investments — when you, for example, propose a project, and the payback period is five years — it is not said what to do with it.

Dmitry Maslennikov: It’s true, of course. We need to be able to think on a long-term prospect. But to do this, we must have some stability.

Mikhail Shekhovtsov: Stability?

Dmitry Maslennikov: Sustainability, understanding of what will happen at least at the macroeconomic level.

Mikhail Shekhovtsov: In macroeconomic conditions.

Dmitry Maslennikov: Yes. That everything will be like this. Until people feel it, they can not plan for long-term period.

Mikhail Shekhovtsov: I see. So can you say: whatever happens, innovation is forever?

Dmitry Maslennikov: I want to believe in it.

Mikhail Shekhovtsov: I see.

Dmitry Maslennikov: This is progress.

Mikhail Shekhovtsov: Yes, it seems to me that no matter what happens, innovation will still be valuable.

Dmitry Maslennikov: Yes. It does not depends on our wish.

Mikhail Shekhovtsov: Yes, it will continue anyway.

Dmitry Maslennikov: Yes, in one form or another: with or without us. Better, of course, with us.

Mikhail Shekhovtsov: Better with us, yes. Well, remaining this company shareholders.

Dmitry Maslennikov: Of course.

Mikhail Shekhovtsov: How are things going from the structural point of view with the support institutions and development institutions in general? How included are they in the process and how do they interact with both large corporations and with the startup environment?

Dmitry Maslennikov: I see that they are maximally included in this ecosystem, I see that they will drive these processes very hard. We see what RVC does, what Skolkovo does, what other development institutions do. And they really put a big expectation on the corporations. And their task is largely related to the development of these relations between corporations and the startup market. And they manage to do it. For them this is not a fiction. They really do a lot of work in this direction. It is indicative, probably, that on the “Open Innovations“ forum there was a separate section dedicated to corporations — everything about them from A to Z: purchases, mergers, needs, requests, open innovations, accelerating programs, everything.

Mikhail Shekhovtsov: Can it be said that the term “compulsory innovations“ is outdated? That’s to say, everyone is already doing it, why should anyone force?

Dmitry Maslennikov: It’s not outdated yet.

Mikhail Shekhovtsov: Isn’t it?

Dmitry Maslennikov: At the state level it is not outdated, because, I repeat, there are highly competitive markets and private companies that understand: yes, they need it. But also there are a lot of research institutes, academic towns, scientific towns, that are huge in terms of potential.

Mikhail Shekhovtsov: But they are not yet included in this ecosystem.

Dmitry Maslennikov: They are not. Besides, it’s not very clear how to include them. There is not enough commercialisation, there is not enough… This is how Israel plays — it has good technologies and ecosystem that finds, picks up, finances, buys and develops.

Mikhail Shekhovtsov: But for what reason? After all, they are located side by side, everything is interconnected. Initially, a very deep coherence of all elements was made: universities, corporations and startups? Is everything scattered in Russia? Why?

Dmitry Maslennikov: I think it is scattered. With such huge territory, of course everyone has his own things. I think that Israel is a coincidence of many factors: starting with the army, ending with the proximity of R&D centers and a small country where everything is close. Or, for example, the emigration of professionals from other markets.

Mikhail Shekhovtsov: One can not underestimate the military-industrial complex, which is also quite strong on a global scale.

Dmitry Maslennikov: Of course. And the MIC is present in all ecosystems, both in the US Silicon Valley and in Israel — it was one of the drivers… Actually not “one of“, it was the main innovation development driver. In Russia there was the same story. Our problem was that we move very badly from the tanks to the pots. It would be great to learn how to do it, and at least make pots.

Mikhail Shekhovtsov: Yes, I’ve even heard that KPI is assigned to many companies that deal with the military-industrial complex, that they must switch to civilian products, and even some share is laid down …

Dmitry Maslennikov: Certainly. It would be foolish if it did not exist. It would be simply stupid if they did not do it, given the funding they received, given the technologies they had.

Mikhail Shekhovtsov: Actually, should it be profitable and interesting for themselves?

Dmitry Maslennikov: I do not know, I’m not sure.

Mikhail Shekhovtsov: So is it a matter of internal business processes, motivation of middle management, top management?

Dmitry Maslennikov: Of course it is. You can build tanks, you can build cars. You can build …

Mikhail Shekhovtsov: You can build nothing, right? If you have money.

Dmitry Maslennikov: Well, when there is no money and you do not build anything — probably you run out of money quickly.

Mikhail Shekhovtsov: People are just bored, they need to do something.

Dmitry Maslennikov: I’m not sure they are bored. Many people, I think, are ready to live when they are “bored“ by our standards. Everyone makes his own choice.

Mikhail Shekhovtsov: I see. That’s to say, if you look roughly at the Russian innovation system, it is somehow torn and scattered. But now, as I understand it, there is a tendency of its unification, some consolidation, integration of development institutions?

Dmitry Maslennikov: Development institutions unite, they are friendly, they become partners. Even people there become friends, communicate, discuss. And this is very positive, in my opinion. In fact, we initially had different development institutions from different financial sources, from different political interests — now the consolidation moment is taking place. People stop doing the same things in different ways… I think it is a very positive tendency.

Michael Shekhovtsov: It sounds like we have everything perfect, right?

Dmitry Maslennikov: No, it’s not. To put it mildly, everything is far from perfect.

Mikhail Shekhovtsov: And what are the weaknesses? I don’t want to use abstract categories and goals again, but… What would motivate the Russian governors or our leaders to say: yes, it’s okay, we satisfied all our expectations, everything goes well.

Dmitry Maslennikov: Well, I hope nobody will ever say that, because then we will just stop, if they say: we have innovatively developed. It would be strange.

Mikhail Shekhovtsov: Well, we have almost developed like the US, we are catching up and overtaking China — could we say this one day? And what we need to do?

Dmitry Maslennikov: Well, it’s just like …

Mikhail Shekhovtsov: Is this a wrong comparison?

Dmitry Maslennikov: This is like discussing whether Russia would ever have World Cup. Probably, it would.

Mikhail Shekhovtsov: No, I do not think so. It’s probably not our sport, in my subjective opinion.

Dmitry Maslennikov: Surely… I do not know.

Mikhail Shekhovtsov: Hockey is our sport. Chess…

Dmitry Maslennikov: Maybe some more.

Mikhail Shekhovtsov: Football is not for sure.

Dmitry Maslennikov: I believe that everything can change. If we look at the history of mankind, the innovation development history…

Mikhail Shekhovtsov: When could “Rostecnology“ compete with General Electric? I mean, in civil engineering.

Dmitry Maslennikov: I have no idea.

Mikhail Shekhovtsov: Are such goals set?

Dmitry Maslennikov: I do not know.

Mikhail Shekhovtsov: No?

Dmitry Maslennikov: Firstly, I do not know. Secondly, these forecasts don’t make much sense.

Mikhail Shekhovtsov: I see. And what goals do you set for your clients? When will they succeed from innovations, what will happen to them, how will their business model change?

Dmitry Maslennikov: Initially, the client comes to me with some problem, a task that we begin to solve together. And here everything comes from the client, from the way he sees it. I can influence this, but not very much. And, probably, I do not have the right to influence this. An individual contractor, a consultant in the innovation development field can not and should not influence the development strategy of one company. He can give a recommendation, advice, correction…

Mikhail Shekhovtsov: Additional contribution to development.

Dmitry Maslennikov: Yes, and it can…

Mikhail Shekhovtsov: Show an additional option.

Dmitry Maslennikov: And it can create a tool inside this corporation to change it. Yes, I can do that. Therefore, these predictions, when and what will happen, are not for me. What do we do inside, when does the client arrive? I’m focused on achieving results in a moment, right here. These results are visible on the behaviour of specific people engaged in specific projects. For example, if earlier this company spent 9 months on launching one project and a billion… It was said yesterday: every time we try to launch something innovative, it turns out that it costs a billion. No more, no less, doesn’t matter if we make it small or large — still a billion. How so? Why?

Mikhail Shekhovtsov: Probably, this corporation determines the size by the number of participants motivated by the project.

Dmitry Maslennikov: I don’t know. But it is always a billion. It doesn’t matter if it is small or big, it is still a billion. I’m trying to base myself on some very specific KPI, in terms of time, money, maturity. Because every company has a long list of what it wants to do. They know what to do. The problem is that there are no such processes that would allow them to do it faster, cheaper, less risky and with the same people who are in this company. In addition to this problem, it has a problem that talented people leave and go to do something of their own. This is one of the problems that you should also work on. And the third point we are working on is that we are looking for innovation for this company, whether they are in Russia or not, if for some reason it can not find them. These are the three things that we focus on.

Mikhail Shekhovtsov: I see. But for the venture companies you work with, what is the main motivation? Will they become big players on the Russian market, will they enter the international markets? What’s your startups motivation?

Dmitry Maslennikov: Let’s clarify. Every startup entrepreneur very rarely initially understands what he will do in the end, what his ultimate goal is.

Mikhail Shekhovtsov: The scale of his activities is difficult to predict.

Dmitry Maslennikov: Yes, what he is going to and what he wants to build. As a rule, he does some thing that seems cool to him. And only some people, for example, investors ask him a question: in fact, where is the way out? How to sell this company? At what KPI, at what rates this company can be sold, with such EBITDA, with such multiplier, for such period of time. An entrepreneur very rarely can even think about it.

Mikhail Shekhovtsov: So is your task to capitalise his knowledge, skills, entrepreneurial talent?

Dmitry Maslennikov: Yes, I need to create for everyone an understanding of what we are going to do.

Mikhail Shekhovtsov: Well, in fact, do you give corporations an opportunity to make money on innovations? Do you explain how they should earn money? Pragmatically speaking, the large corporations and shareholders motivation is to get additional money on innovations.

Dmitry Maslennikov: Yes.

Mikhail Shekhovtsov: And many of them do not understand how to do it.

Dmitry Maslennikov: It’s true. And my main question always concerns that — how do we make money on this? Everyone wants to develop innovations, of course, it’s nice, commendable, very cool …

Mikhail Shekhovtsov: Noble.

Dmitry Maslennikov: It is indeed. And it is a trend. And you can tell, just fun, cool, super.

Mikhail Shekhovtsov: Yes, yes.

Dmitry Maslennikov: But my question, actually, is “Where is the money?“

Mikhail Shekhovtsov: How to make money, yes.

Dmitry Maslennikov: On what? And when it turns out that they have not thought about everything and so on… For example, in a year, two, three, five — if people did not think how to make money, then we must sit down and think. And then fantasise.

Mikhail Shekhovtsov: So can you say that you have already explained to your clients how they will make use of innovations?

Dmitry Maslennikov: We have identified a hypothesis with them how they will make money on this.

Mikhail Shekhovtsov: Hypothesis, yes. Did they believe?

Dmitry Maslennikov: Well, you can believe in the hypothesis, or not.

Mikhail Shekhovtsov: No, well, if you believe, then you sign the documents: I allocate money.

Dmitry Maslennikov: Yes, they do. But they believe, probably, in the test. It is very important…

Mikhail Shekhovtsov: Let’s check, yes? Run a pilot project?

Dmitry Maslennikov: Yes. It is very important that the hypothesis is not what you have to blindly fall in love with, because otherwise you will not accept it… the hypothesis was not justified. It is necessary to be ready and probably even to thank the circumstances that this hypothesis was not quickly confirmed, that it quickly died.

Mikhail Shekhovtsov: If we take the current Russian problems: not all large corporations a) believe, b) understand how they can make money on innovations. Well, and c) in fact, they do not have an internal mechanism of processes to earn money on it.

Dmitry Maslennikov: Well, it is some kind of symbiosis, in different degrees. I mean, it is not like they have 100% zeros for each topic. No, they have somewhere more, somewhere less. More faith, less understanding of tools. Or there are tools, but no one believes…

Mikhail Shekhovtsov: This is your typical client, actually. You ask them: do you believe? Do you understand? How do the processes work?

Dmitry Maslennikov: Yes, yes. I need to deeply understand what strengths and weaknesses they have.

Mikhail Shekhovtsov: And do you have more and more clients like this?

Dmitry Maslennikov: Yes, I actually do. There are, indeed, more of them. In fact, this is a strong trend. There is a very small number of specialists who can somehow look at the company in a complex. There should be more of them.

Mikhail Shekhovtsov: And now if we take a percentage, in what grade are companies included in this process, I mean large Russian companies? Most are included, or most are at crossroads: they understand that this is necessary, but they don’t understand and can’t decide how to approach it?

Dmitry Maslennikov: Most of the top companies in its segment are included. I mean, top-5 companies, most of them are included in this or that innovation activity. Those one below are just looking for now.

Mikhail Shekhovtsov: Are they gradually getting closer?

Dmitry Maslennikov: They look around slightly. They try to understand. It is like, there is a locomotive, which pulls all this and those who run after it. We are going to organise a conference on corporative innovations, and I see it from the registrations. I see what companies come there. These are the second, third or lower level companies.

Mikhail Shekhovtsov: Is this the conference you are going to organise?

Dmitry Maslennikov: Yes, that’s it. So I see them. They come, and I’m very pleased that they are coming, because I did not expect them at all. Moscow state unitary enterprises come, which is also very important, I did not expect to see them there. I don’t know if they will be happy, but let’s say: the Moscow Metro was registered … For the conference on innovations!“

Mikhail Shekhovtsov: Well, there are a lot of innovations, I constantly use these innovations.

Dmitry Maslennikov: Well, it’s truly awesome.

Mikhail Shekhovtsov: Very interesting, yes.

Dmitry Maslennikov: And the fact that we had guys from the Moscow Government, and the innovations that they make in the field of Big Data and many other things are also very gratifying. They are also one of the players, they also compete for our attention, for our service, for our money. It is very nice.

Mikhail Shekhovtsov: But briefly: what will you tell them, in fact? What should they do now?

Dmitry Maslennikov: I will not tell them anything.

Mikhail Shekhovtsov: Oh, you won’t?

Dmitry Maslennikov: I probably will not even speak. It is very important for me to change a few things. First: I want to make a practical format. I mean, I want those who did something to come and tell me what they did, as honestly as possible.

Mikhail Shekhovtsov: Corporations?

Dmitry Maslennikov: Yes. It will be a case conference, when a corporation speaks about its experiences, fails, expectations, recommendations and plans. I do not want them to boast about any results. I want them to honestly share their experience, so that the companies of the second and third levels did not make the same mistakes that the big guys made. Big guys could afford it and it was inevitable. Small guys can not afford it. They do not have time, money and nerves.

Mikhail Shekhovtsov: But, as I understand it, not only large corporations will be present at your event, but also venture companies?

Dmitry Maslennikov: Yes, there will also be venture capitalists.

Mikhail Shekhovtsov: What is their role?

Dmitry Maslennikov: There will not be startups, because it is a little bit irrelevant and they have their own events. I try to withstand the tone of the conference, so that there are exactly the people from the corporations of any level. The lowest level is the middle business. Basically there will be big business, representatives of three main categories. These are those who are responsible for business development, for strategy, VP for commercial issues. All those who are responsible for business development. The second segment is everyone who is responsible for innovations: for technologies, innovation processes, R&D, laboratories. And the third block is those who earn on venture capital, on venture money.

Mikhail Shekhovtsov: Venture funds.

Dmitry Maslennikov: These are corporate venture funds. If we look, many corporations in Russia are, on the one hand, in a very good situation, on the other hand, in a very bad situation. It’s good because they have a lot of cash that is just somewhere on the deposit, and it is not very clear what to do with it. On the other hand, since it is unclear where to invest them, they don’t develop innovations.

Mikhail Shekhovtsov: So do you want to establish innovative business processes in all corporations?

Dmitry Maslennikov: At the very least, I want those who have already tried something, shared this experience. It is very important for me. This is the first. And the second big goal: I want them to get to know each other. It turns out that when I communicate with people, they call me to discuss, order something, share experiences, I say: do you know this person? And this one? So add him/her on Facebook. Organise a meeting. I do not know the reason, but people who work in the same sector often don’t know each other. I want them to meet, talk, make friends. And it will definitely lead to some positive result.

Mikhail Shekhovtsov: Yes, that’s to say, the process is already going, it will go by itself with your little participation.

Dmitry Maslennikov: Yes, networking is very important.

Mikhail Shekhovtsov: I see. Actually, we have discussed the main problems. I think there are much more details worth discussing, but these are probably secret techniques.

Dmitry Maslennikov: Certainly.

Mikhail Shekhovtsov: Thank you very much! I will definitely meet with you again to discuss other issues. Today we had with us Dmitry Maslennikov, the venture company founder.