A High-Tech Start-Up in Post-Communist Russia - The Case of Frontstep in Russia (A) (B)

By all accounts, Maria Ilyina could sell ice to the Eskimos. This charismatic beauty with an equally stellar intelligence founded her first company in 1994. By 2000, she and several partners were heading up an Enterprise Resource Planning company with 55 employees. Like other high-tech start-ups, theirs was characterized by great highs and lows, where passion and enthusiasm seemed the most valuable company asset. And like other high-tech start-ups, the day came when the warm, fuzzy feeling of being part of something new was no longer enough to keep its highly qualified, highly ambitious employees satisfied. Professor Manfred Kets de Vries, Konstantin Korotov, and Elizabeth Florent-Treacy, pick up the story in this recent case.

by Manfred Kets de Vries, Elizabeth Florent-Treacy,Konstantin Korotov,
Last Updated: 23 Jul 2013

Company holiday parties are usually not the time to talk business, but the 2000 corporate New Year’s party at SOCAP, a Russian high-tech start-up, was different. Founder Maria Ilyina was facing a virtual employee mutiny and she would have to do something big to convince them to stay.

Ilyina had come a long way since she and three colleagues founded their own company in 1994. They had jumped on the wave of excitement that accompanied the new, free market system, and barely held on through much of the late 1990s (a page from one of the company’s early record books reads, ‘Loan Vladimir $20 for food.’). Now SOCAP (renamed FrontStep CIS in 2001), which localizes, sells, and installs enterprise resource planning (ERP) systems to manufacturing corporations, had a strong client base, some 55 employees, and impressive, modern offices.

But this would not be enough to keep her talented staff appeased. As companies with Western affiliations began opening their doors in Russia, SOCAP’s employees became prime targets. Most had never worked for another company and therefore didn’t have a frame of reference when evaluating SOCAP. Once the company had passed through the exciting start-up phase, many employees began questioning their situation. Salary quickly emerged as one of their major grievances, although they also wanted career development and a more professional, structured work environment.

Manfred Kets de Vries, Raoul de Vitry d’Avaucourt Clinical Professor of Leadership Development, Konstantin Korotov, INSEAD PhD candidate, and Elizabeth Florent-Treacy, Research Project Manager, pick up the story here, amidst the festivities of the New Year’s party, where Ilyina, the charismatic leader and the sentimental heart of the company, makes her case, explaining that she will launch an internal development project to improve the company’s structure, motivation of employees, and career development options.

In Part B, the authors follow the rebuilding efforts required to fulfil Ilyina’s promise, looking at each step and its corresponding consequences. Were there other alternatives Maria had not considered? Given the company’s history and its current management style, will she be able to pull together the best Western management techniques and then merge them with effective Russian leadership practices?

This case, with accompanying Teaching Note, is particularly useful in MBA and Executive Education courses that address change and innovation, leadership, entrepreneurship, and globalisation.

INSEAD 2002

Manfred Kets de Vries, Elizabeth Florent-Treacy,Konstantin Korotov, recommends

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