The Innovative Dilemma of Uzbek Business: What Hinders Process Implementation

Azizbek Kurbonov, city — Tashkent, founder and CEO of AK Capital, Instagram

In the last five years, Uzbekistan has demonstrated impressive growth dynamics. GDP per capita is increasing, the population is growing rapidly, foreign investment inflows are intensifying, and venture deals and new startups are emerging. On the surface, everything seems smooth everywhere.

But one thing remains virtually unchanged: how large local companies manage their internal processes.

To understand the reason, it is worth recalling the concept of RPV — Resources, Processes, Values, as well as the evolution of technological products — from functionality and reliability to usability. We have all seen how a technological advantage can come to a lagging player. Cellular communication appeared earlier in the US, but led to expensive infrastructure that is difficult to upgrade. Meanwhile, Uzbekistan started later, but immediately with more modern technologies — and now wins in connection quality.

A late start is not always a disadvantage. It can become an advantage. But the question arises: why don't companies with an annual turnover of over $10 million use this advantage? Why do they continue to build business "the old-fashioned way," and what is the role of technology in bridging this gap?

Clayton Christensen's book prompted me to write this article, so I will use the business analysis frameworks and tools from the book "The Innovator's Dilemma."

Working with clients at AK Capital and outside my consulting activities, I identified several reasons why the necessary systematization in business does not occur:

Lack of pressure from disruptors

According to Christensen, companies improve processes not out of a desire to be the best, but out of fear of being displaced. In Uzbekistan, there is often insufficient competitive pressure from more efficient, "disruptive" players. This creates a false sense of stability:

Disruption in the region has not yet reached the level at which existing businesses are forced to radically rethink their processes. This trend does not apply to the banking sector, because disruptors like TBC and Click are significantly changing the field and creating pressure for "old school" players.

But, in my experience at Sug‘urta Bozor, I remember a case where we were doing an integration with the largest company of its kind in policy sales, and after nine months of negotiations, integrations, creating endless Telegram groups, and conducting seven Zoom calls with everyone, the company put the integration on hold. The reason was simple: their market is growing at a rapid pace, and even without innovations, top management felt good.

Focusing on operational efficiency rather than systemic development

Uzbek companies more often focus on manual control and family management rather than systemic development. This leads to a focus on personalities rather than sustainable business processes.

According to Christensen, mature companies survive if they abandon intuitive management and implement formal processes. But this requires a management culture and long-term thinking.

I remember one company, a holding, where the founder "placed" people in positions based on first impressions of the person. Therefore, a culture of "being in the right place at the right time" emerged in the company.

Another example, a textile company that I indirectly analyzed, worked strangely: three different directors, who do not communicate with each other, manage different areas of the business. Each of them separately receives "instructions" from the founder, starting with pricing, production volumes. I would compare this management method in the spirit of Amir Temur, where he developed a strategy where his commanders were not supposed to be friends with each other.

Focusing on short-term profit instead of sustainable innovations

Many local companies are focused on quick ROI and cash extraction, rather than reinvesting in management, technology, R&D, and process improvements. This is a classic sign of sustaining innovation, not disruptive innovation:

The Innovator’s Dilemma states: "Companies that focus too heavily on profit and ROI do not see the approaching threat and miss the window of opportunity."

I will not give examples here, they are everywhere.

Low level of external expertise and institutional pressure

Western companies operate in an environment where consultants, audit firms, investors, and government regulators require formalization of processes. The Uzbek market is less demanding. Hence:

1. No pressure from investors on process transparency.
2. No requirement for management standardization.
3. No culture of business excellence at the industry level.

So, I propose several methods to solve the above-mentioned problems:

1. Create a dedicated team or specialist for systematization.
   As Christensen advises — do not reform the "current business," create a small autonomous team, whose goal is to build processes "from scratch": financial accounting, sales, recruiting, warehouse, customer service.
2. Introduce KPIs and regulations for key functions.
   There is no need to automate everything immediately. Start simple: checklists for sales, TPI template/instructions for customer service, a financial model with P&L. The principle: if a process is repeated — it must be documented.
3. Invest in middle-management. I recommend reading the book High Output Management.
   It is impossible to build processes without those who will support them. Hire middle managers with experience in systematic companies and give them tasks not to "do with their hands," but to build the system.
4. Reorient thinking from profit to scalability.
   Instead of asking "How much will we earn this month?", ask:
   — what processes are hindering our growth?
   — what will happen if the number of clients increases 10 times?
   — what are we doing manually and can be automated?
5. Regularly conduct an audit of chaos. To better understand this solution, I recommend reading the book Gemba Kaizen.
   Once a quarter, gather the team and ask:
   — where are we losing time?
   — which decisions are tied to one person?
   — where is there no transparency?
   
   This is your roadmap to systematization.