Ivan Shumsky: When your product is used all over the world, it’s cool, it tickles the nerves
About how Belarusian engineers managed to make their way to the West with their devices and become leaders in the world market, about managing the company as a scientific laboratory and cooperation with competitors - in a long interview with the “About Business” portal. says Ivan Shumsky, founder and co-owner of the Regula company.
The Regula company is the largest manufacturer of expert products for verifying the authenticity of documents, banknotes and securities. Its portfolio includes more than 50 solutions for border services, police, and banks. They are used in Europe, North and South America, the Middle East, Asia, Australia, and New Zealand. Compact and efficient Regula devices are unique in their technical characteristics.
Ivan, you have a very interesting and rather specific business. Please tell us how it started.
My partner Yuri Rogozhinsky and I have been working together since 1989. Not everyone will live with his wife as long as we worked with him. We were classic Soviet scientists, doing smart things. I worked on superconducting thin films, Yuri worked on microwaves for microelectronics. It was all very interesting, we had excellent results. But alas, then no one needed it. Therefore, by chance we came across a topic related to the authenticity of banknotes.
How is that by chance?
I was in Riga, they showed me a Taiwanese magnetic currency detector and asked if I could make one. I said that I would return to the laboratory and try. Three hours after I entered the laboratory, Yuri and I soldered the prototype.
The guys from Riga promised to send a translation tomorrow so we could start working. Tomorrow stretched on for several months, and I asked: “Guys, maybe I can live without you?” To which they answered: “Okay, we are no longer interested in this - we have received a license to sell alcohol!”
Then there was another accident. We made a prototype device, I took it and ran to the banks. And I was refused everywhere. Then a man comes up to me and says in a quiet voice: “You came to the wrong place. Come with me, I’ll introduce you to an interesting person.”
And I met the now calm Evgeniy Kravtsov (former head of MinskComplexBank -ed.). A progressive guy, we are about the same age. We agreed with Evgeniy that he would pay our production costs, and we would split the profit in half.
Back then, taxation was simple and everything was easy to organize. We made a thousand devices, together with Yuri, with four hands. We found beautiful boxes with buttons. It's simple: put the bill in, press the button, swipe. And the device should give a signal if there is a magnetic pigment. Or don't honk if it's not there. In general, a primitive thing. We sold a thousand devices, it was extremely profitable.
Over the course of the year, we spent a great deal of money that we earned. Something had to be done next. We have created a more complex device, similar to others, but made completely differently, from our own components and with original solutions. After some time, the guys who wear shoulder straps came to us and said: “Oh, cool. We need something like this, only here is a bow like this, remake it like this here. Can you?” We agreed and redid it. This is how our cooperation with border guards began. These are our favorite customers to this day. Then the Ministry of Internal Affairs, the KGB and the rest appeared. This all happened in Belarus. We didn't venture outside the country until 1994.
How did you start entering export markets?
In 1994, we invested all the money we had earned over the previous couple of years into equipment. They made a beautiful device. In a plastic case, very elegant, in cool packaging - a real brand. Not a word of Russian was written on it.
In the 1990s, everything that was our own was necessarily bad. One day, we mastered the beautiful device and gave a presentation at Sberbank of Ukraine. A large commission, a lot of people, all important, pomaded, in beautiful suits. I was asked the question: “What kind of device is this? Where did he come from? I had to lie: “This is American technology. We only have final assembly.” And they started buying our devices.
We developed connections, gained experience, we came up with new solutions. At that time, planes from Minsk practically did not fly anywhere, and I drove about 70,000 km a year by car. Like a taxi driver. True, the trips were long - Moscow, Vilnius, Riga, Kyiv, Warsaw. And when it began to seem that everything was very good, our sales in Russia fell 8 times. It was 1999. In 1998 there was a crisis, everyone felt bad - some lost currency, some lost money, some lost goods. And we had everything in the product, in the components, so we didn’t have any problems. Only sales have fallen.
It became clear that one market was too risky. You definitely have to make an effort to sell all over the world: somewhere it will be worse, somewhere better, but on average it will be good.
The experience of 1999 taught us a lot. Breaking into those markets is a lot of work and huge costs. For many years the company worked to ensure that we were recognized there. The money spent on exhibitions and presentations is simply monstrous. But there is always a choice: you can put this money in your pocket, or you can spend it on promotion if you believe in yourself. If you want to advance, then tighten your belt and advance.
Did this “tighten up your waist” cause dissatisfaction among employees?
And what about the employees? Employees will receive a decent salary, interesting tasks and comfortable working conditions. “Tighten up your belt” doesn’t concern them. This applies to owners.
Employees should receive comfortable conditions. I have advised my marketers who travel around the world not to stay in cheap hotels, not to eat in cheap restaurants, and not to use public transport. This spoils the company's image.
Those you meet know everything about you. And if you want to be perceived normally, you must have a good hotel, good clothes, good spoken language, everything must be good. Otherwise you won't be taken seriously.
Was it possible to present yourself so beautifully when you first started working in export markets?
When I first went to negotiations in Holland, I bought special clothes - a suit, boots. I spent some money, but I bought everything new, brand new. I spent a week here specifically to get used to it. And I went there like that.
Then I ended up in Switzerland wearing the same clothes at Projectina. An amazing man ran this company, such a short man, “Ole Lukoje,” smart, with a piercing gaze, always drove terribly cool cars, but only according to the rules. About five years after we first met, he looked at me and said: “Oh, now I see a businessman!” And for the first time, it turns out, I saw a golfer. Well, we’re learning, that’s the thing. What seemed good to us in the 1990s was a little kitsch. However, there were people who waited patiently for us to change. And now we are successfully cooperating with this company, there are joint products, joint movements in the market.
After 2000, we expanded our staff: we got guys with initiative, and we started moving up.
For many years we moved and ran into an impenetrable wall. Serious people buy serious devices. But serious people from Western-oriented countries do not want to buy anything made in Eastern countries. Therefore, in 2005 we opened a company in Latvia.
At first it became a platform for screwing in the last screw. Now we could write “made in the European Union” on our products, everything is fair. A year later, our company in Latvia already had 50 people who assembled devices. Now our second production site is there.
Formal approaches only work for a limited amount of time. In Latvia we have a special certificate required to be an official supplier of NATO countries. When you receive such documents, be prepared for mandatory audits. If a girl is sitting there with a screwdriver, tightening the last screw, they will say to us: “Guys, what are you doing?”
Therefore, we quite honestly produce devices in the European Union that are sold in America, Germany, France, Italy, Spain—where European products are needed.
It turns out that you didn’t have an original plan to work for the West?
We weren't taught business, we weren't taught marketing, we weren't taught anything. We were taught to make things. We did things well, reliably and efficiently.
After college, I worked for three years at the famous Kirov, formerly Putilov, plant and went through a good engineering school there. I understood what was being done and how, where the responsibility of the engineer was, how to organize everything. But we were not taught how to move on. And—again, a matter of chance—I was lucky.
In 1992 or 1993, the head of the department came up to me and said: “Listen, Ivan, we have included some strange course in the program: “Fundamentals of Marketing.” Maybe you can take it? I had already started a business, I thought that if I teach the course, then at least I’ll read the books myself. I read the books, prepared the course.
I already had a beautiful car then, I parked it under the windows of the audience. The students didn't really want to listen to anyone. And I said: “Hey guys! Do you want to drive a car like this? Then listen." And they listened.
This was also interesting: for three years I experienced, together with the audience, what marketing is, what an idea is. How it is born, how it is promoted, how it is implemented, who is responsible for what, how to make a product, how to calculate the needs of consumers, how the need that you are ready to realize is introduced into the consumer’s consciousness. It was very interesting. The students were very different, some of them still work for me today. I'm lucky when I need the right people - they appear automatically.
Do you have any principles for working with personnel?
And here everything is very simple: you look eye to eye. If the person is yours, it’s obvious right away, but if not, why waste time?
At one time, I formulated for myself principles that would be important to me as a 30-year-old engineer:
- the task should be interesting
- the boss must understand what you are doing
- salary shouldn't be embarrassing
Here are three principles that should work. If a person is satisfied, this is our person, if not, we part.
What does the principle “the boss must understand what you are doing” mean?
There are many companies where directors do not know what their employees are doing. I will now list the areas in which I need to navigate: mathematics, physics, optics, mechanics, precision mechanics, electronics, marketing, psychology, accounting, economics. These are areas in which you need to navigate well enough to understand what is happening.
How do you do this?
This is all in my area of interest, so we read books and communicate. The most interesting thing here is that if you understand something about this, you can communicate with specialists, and the specialists will tell you everything. Such a symbiosis results.
Is it enough to just be a little aware?
Not a little. Let's just say that I can't write program code now because I haven't been doing this for a long time. But I once wrote programs, I understand how it is done, so I can talk to programmers in their language and understand what they are doing.
We talked about three principles of work, the first being interesting tasks. Do you manage to constantly stay on top of interesting tasks? How?
Interest. It must be interesting, otherwise why do it? Interest is a multifaceted thing. This is a technical solution, the process of creating products, and promotion.
The emergence of the idea itself is interesting, it is interesting to bring the product to a state where you can be proud of it.
Ask anyone here, they take pride in what they do.
An interesting result is when you can say: we won a tender from Panasonic for the Japanese police. Or they completely set up passport control in Brazil before the World Cup. If you enter Brazil, you will only be allowed in through our device. It's cool, it's interesting, it's nerve-wracking.
We may not be ahead of the curve, but we are at the peak. Our solutions are the best. The guys are equipped with such equipment, specially made, that no one else has. Of course, it's nice to do things better than everyone else. That's why it works.
My task is to make sure that our company is a chronic startup. So that a product reaches a certain cycle, and at this time new products appear. And since we are constantly growing technologically, technically, intellectually, ideologically, it is interesting, and it does not die.
How do you find these new areas where solutions will be needed?
Here's an example. 2000 My guys and I are starting a completely crazy idea, despite the fact that everything is fine with us and everything is for sale. I propose to an American company to make a device that will read American licenses.
What are American rights? They are made just the same, in each state in its own way. There are 50 states, each has about 10 types of rights, and not one of them is similar to the other. That is, the most serious task from the point of view of mathematics: to recognize and read accurately documents with a bunch of pitfalls.
We are starting to implement this task under the American project. For this reason, we make a device that we sell in small quantities. Americans write an excellent business plan for this device and sell their company for wild money. But we are left with a technology that has a promising future. And a little later it turns out that we are ahead of the rest in document recognition.
That is, we did not make the technology for American documentation, but for all kinds of documents. Thus, our devices begin to read all documents in a row, better than anyone else and more reliably than anyone else. Here is an example of development.
Another principle of your work with personnel is not a shameful salary. How do you define this?
This is different for each group of employees. We don’t pay exorbitant amounts of money; our salary is somewhere around the market average. But due to the fact that we are interested, this is enough.
You behave quite calmly and relaxed, although you have many tasks. You are involved in engineering solutions, external relations, and management. How do you manage to combine all this?
It’s not me who succeeds, we succeed. There are quite a lot of us, we are very professional, and I can trust my employees. I don’t meddle in particular, I’m interested in the system, so I have enough time. We discuss the direction of the shoot, but the details are their job, and I don’t interfere or interfere. I trust. This is the most important thing; we have a very high level of trust between colleagues.
I have a rather unusual impression from talking with you. As a rule, when I talk with business representatives, a lot of attention is paid to management tools, but in your case it seems that the first place in management is not management, but the engineering component.
The classic business model will provide a maximum profitability of 20%. And taking into account our inflation and instability of exchange rates, all this will be absorbed, and you will be unprofitable. That's why the recipes that are written in books don't work. With us everything is a little different. We have a non-classical business model - but a laboratory with pilot production. This is about us.
УWe are small-scale, that is, in general, pilot production. In Soviet times it was called that. We don’t have a single product with millions of copies.
What problems does your approach to management structure help solve compared to the classical model?
This is a great self-organization of people and a great responsibility. This is a hobby that gives much more than a control system that puts everyone into a formal framework, and from this everyone starts working, like on the Italian strike. Like, I do what I’m supposed to do according to the instructions, and that’s it.
People's initiative is the most important wealth that can be found in modern business. If people do their job with passion, if they are interested, if they develop, read books, if they are ready to stay after work not because the boss said, but because it is interesting - this is what is needed.
Notice that if a child is interested in doing something, does he look at his watch? He just does it until he stops, until he is completely exhausted. Who said that adults are somehow different from children? We are big children, we are interested in playing with our screwdrivers, cogs, soldering irons, transistors and everything else. If we play, we are interested. And you don’t need any bosses who will stand with a stick behind their back. This trick works at all levels.
I once took a girl to work - she is a technical editor, her task is to create beautiful documents, descriptions, prospectuses. If I had been imprisoned for this work, I would have hanged myself on the third day, because it takes all day, morning until evening, to watch and read. I tell her: “Do you even understand what you are going to do?” And she says: “Yes, this is so cool, so interesting!” Everyone should be in their place.
How long do your people work for you?
People stick to the company. We have a catastrophic lack of turnover. According to business rules, 5-10% turnover is the norm. And if it’s less than 5%, it’s something abnormal.
Is yours less than 5%?
Less. In our country, dismissing a person is a whole separate story. You have to behave in such an annoying way to get fired. About 1 person per year may leave us. Usually people leave not out of good will, but out of ill will.
You have patents for your inventions. How much time can you devote to engineering activities now?
This is my job. I was designed for this from the start. To be an engineer, to engineer. So how could it be otherwise?
Well, look, here is a simple product. Very beautiful, isn't it? This is a magnifying glass for viewing small details. Take my word for it, no one else in the world does this, because there are real optical elements here. And an ordinary magnifying glass is a piece of plastic that does about the same thing, but much worse.
This is again a matter of chance - I was in 1994 at the optics plant in Lida. I needed some special glass. I found them there, they sold them to me, then they poured out a bunch of other pieces of glass and said: “We have a treasure trove here, maybe you can figure out what to do with them?” Maybe you remember, in Soviet times there was such a red round badge with a golden Lenin under a glass? So, this piece of glass is from there.
I twisted them in my hands... And the result was a prototype of this product, which we have been producing since 1995. They just redesigned it now. A tenfold magnifying glass, which is needed in every exchange office, in any place where documents are controlled.
This is how Vladimir Ilyich Lenin helped our company. In the 1990s, we bought all the remains of these pieces of glass for very little money. This wonderful product is used all over the world, and is especially popular in Australia. There are simple magnifying glasses, some with backlight, and there are also high-quality products for the most sophisticated experts. And there are no analogues in the world.
With this device you can examine everything that is in the document, absolutely all degrees of protection can be seen. In Germany, the police have this device on their report card: the policeman must have handcuffs, a gas canister, and such a lens on his belt.
Another very interesting product of ours is a banknote database. We first made it in 1995, and it was a breakthrough; no one had done anything like it in the world. Very high quality product, with high quality illustrations. My hobby, photography, helped me with this: initially I photographed a lot of things myself. Such money is beautiful, just crazy, like decorated, you can look at it for an infinitely long time.
To develop the database, we have designed a number of special devices. This is jewelry work. We now have a whole team working to examine secure documents and banknotes.
Probably, banknotes from different countries require different devices?
No, our devices are universal. What sets us apart from many competitors is that we can offer a comprehensive solution. On the one hand, we are making a device - a special tool for studying documents, on the other hand, we are making reference databases that allow us to rely on something and make a decision.
Well, let's say, you need to determine the authenticity of the Argentine peso. It is not a fact that our experts have a genuine peso on hand for comparison. We provide this matter. Therefore, you can work with our devices and databases in any country in the world.
In addition, we make devices for reading and recognizing documents. And this is where the fun begins. We make devices that can be used both for expert, that is, detailed study of a document, and for automatic, that is, quick, research. For example, at passport control they can’t study you for a long time. There is a standard of 40 seconds per person. We make it so that the device automatically provides information—what is real in the document and what is not, with a high degree of probability. The combination of expert and automatic components in a water fixture is a unique offer that no one else has. This is our specialty.
What impact does constant contact with your main customers — security forces, law enforcement agencies — leave on your work?
Since I communicate a lot with security officials, there is probably some imprint on our behavior. When we first started working in the West, they even asked me: “What is your title?”
Our favorite customers, as I already said, are border guards. The military elite, selected and trained people, especially the old guard—Soviet. I learned a lot from them. These include professional skills—what a document is and how to work with it; and human qualities - commitment, punctuality. It's in their blood. And they gave us such a vaccination. In general, working with government organizations is a great responsibility. You must be scrupulously honest. Under no circumstances should you let your customer down - this is the main thing.
The fact that we work in all countries of the world does not mean that the intelligence services cooperate with each other. We had a funny moment. It was the beginning of the 2000s, we were just beginning to take our first steps in the world. And within one month, guys from the Russian FSB and guys from the US CIA bought the same device from us.
An expert from the CIA liked our microscope so much that he bought it with his own money; at the end of the year, of course, he entered this matter into his tax return and received compensation. But I still bought it myself in order to get the device faster, without waiting for central funding.
Talk about selling CIA equipment, but in the USA everything is so strict - even in order to join the police, you need to have a clean biography of several generations...
We have an employee with American citizenship working in our office in Washington. If you have an American passport, then that’s your entire biography; you can work with anyone. The CIA guys don't care about the origins, they care about the decision. You may not be allowed into some secret laboratory, but if you provide an interesting solution, they will work with you.
Is it enough to find an engineering solution? Or do you still need an approach to your specific clients?
We work as follows: we enter countries through our distribution partners. It would be strange if in Norway someone with guys from Belarus or Latvia were seriously talking about supplying something. Everywhere you need a local company that is responsible for this. Our first task is to find a partner with whom it will be comfortable to work, who is competent and quite aggressive in the market, who knows his business.
How do you find them?
They are there themselves. At one time we were looking for them, now they are looking for us. We are already a company with a name in the world, and this name is taken into account.
How do you feel being the owner of a company with a name?
But no way. He remained a Soviet engineer and remained so.
An oligopoly has developed in the market where you work. I read that there are three companies in the world...
Well, that's not entirely true. We have several key products. Database, for example. Several other companies have similar databases. There was a funny incident here too. A company from Holland that also has a database is called Kissing. For a long time they were the official publishing house of Interpol. And in 1995, when we created our database, a letter was sent to the Minister of Internal Affairs of Belarus stating that the Regula company was violating the copyrights of the Kissing publishing house. It turned out that in 1926 an agreement was signed according to which only this company had the right to publish images of banknotes. And here we went and broke this rule. Our Ministry of Internal Affairs turned out to be at the highest level imaginable. It answered them as follows: “If you have any complaints, go to court.” Very European. That was the end of it.
Another key area of ours is automation, that is, document reading. There are several famous companies here, including from Hungary, Germany and the USA, and we are also in the top for this type of devices.
For expert instruments, there are now three leading companies: Projectina from Switzerland, which has been in business since 1945, Foster + Freeman, which has been in business since 1968, and Regula, which has been in business since 1992. Now we are annoying each other. But we cooperate, we supply them with some devices that they cannot make themselves. We are a very open company. And if they won the tender, then why can’t we earn a piece from this?
Let's say, once in China, a colleague from the Projectina company took me to the stand of a Chinese company and said: “Ivan, a cool company, we can collaborate with you.” We are competitors in some areas, but in others we can work as partners. Yes, indeed, he turned out to be an intelligent person who knows how to work.
It is not customary for us to cooperate with competitors. You talk about it so simply, as if it were completely natural things.
There are different competitors. There are evil competitors, and there is no need to cooperate, but there are good competitors, who, in principle, are of the same breed. They are also engineers, they are also interested.
One day in 2005, an American, Bruce Monk, came to us and made the world’s first device that read an entire page of a passport. Before that, we were the first in the world to make a device that reads not only the machine-readable zone, but also a photograph. After 5 minutes of communication, we each took a screwdriver, he unscrewed his device, and I unscrewed mine. And we started to see who had the better technical solution.
When people of the same breed meet, they can and should cooperate. But if the company has profit at the forefront, and everything else is not taken into account, then it’s a little different.
Have there been any downfalls or crises in the history of your company?
Of course, there were moments, this happens to everyone in business, when I miscalculated my strength a little. Sometimes we lost tenders, and it was a shame. But whatever you do, you have to learn and draw conclusions. Any case when something didn’t work out is a reason to do better. And these cases must happen, otherwise you will never do better. This is a normal process, an endless learning process.
Link to the original source of the article:http://probusiness.by/experience/2399-ivan-shumskiy-kogda-tvoim-produktom-polzuyutsya-vo-vsem-mire-eto-kruto-eto-shchekochet-nervy.html