israeli innovation

www.sagaciousthink.com

Innovation + Culture

Notes from Start-Up Nation – the Story of Israel’s Economic Miracle by Dan Senor & Saul Singer (2009)

SagaciousThink: sage ideas| fresh perspective | sustained success


Examples of Israeli Companies + Practices

• Better Place – car, battery• Intel Israel• Netafim – drip irrigation company


Interesting Figures

• Israel has the highest density of start-ups in the world (3,850 start-ups, or 1:1,844 Israeli’s)

• More Israeli companies are listed on NASDAQ than all the companies from the entire European continent

• In 2008, VC investment per capita was 2.5x greater than in the US, 30x greater than Europe, 80x greater than China, and 350x greater than India.


Figures, continued

• Israel leads the world in the percentage of the economy that is spent on R&D

• Entrepreneurs that have failed in their previous enterprise have an almost 1:5 chance of success in their next start-up, which is higher than first time entrepreneurs and close to entrepreneurs with prior success. (2006 Harvard study) p. 32


Figures, continued

• Between 1980 and 2000 the number of patents in Saudi Arabia was 171, from Egypt 77, from Kuwait 52, from the UAE 32, from Syria 20, from Jordan 15 – compared to 7,652 from Israel.


Observations

• Singapore lags in entrepreneurship as they fail to keep up with a world that puts a high premium on attributes historically alien to their culture: initiative, risk-taking and agility.

• In Korea it is the fear of loosing face and the internet bubble of 2000, where public failure left a scar on entrepreneurship, Laurent Haug (Lift Conferences) Compared to Israelis, “They do not care about the social price of failure and they develop their projects regardless of the economic and political situation.


More Observations

• HBS case study on Apollo 13 and Columbia• “Defending stuff that you’ve done is just not

popular. If you screwed up, your job is to show the lessons you’ve learned. No one learns from someone who is being defensive.” – Yoval Dotan, p. 94

• The emphasis is on useful, applicable lessons over creating new formal doctrines, the focus is to be tradition-less, and not to be wedded to an idea because it worked in the past. (best practices)


Apollo – what worked

• What worked in the Apollo case is that the team had met previously in a myriad of configurations with practice drills each day to get the accustomed to responding to emergencies of all shapes and sizes. He [Kranz] obsessed with maximizing interactions not only within teams but between teams and outside contractors. He did not want there to be any lack of familiarity between team members who one day might have to deal with a crisis together. P. 90


Columbia – what didn’t

• Engineers sounded warned but were not heeded. They were overruled by management.

• Theirs was a standardized model where routine and systems ruled, including strict compliance with timelines and budgets. They had a “stubborn attachment to existing beliefs.” p. 92


Ongoing Observations

• Singapore tries to replicate the success of Israel, but the culture gets in the way. In Singapore, public dissent has been discouraged, if not suppressed outright.

• “Large organizations, whether military or corporate must be constantly wary of kowtowing and groupthink, or the entire apparatus can rush headlong into terrible mistakes. Yet most militaries, and many corporations seem willing to sacrifice flexibility for discipline, initiative for organization and innovation for predictability.” p 98


Ideas Expressed

• “Fluidity according to a new school of economics studying key ingredients for entrepreneurialism, is produced when people can cross boundaries, turn societal norms upside down, and agitate in a free-market economy, all to catalyze radical ideas.

• Different types of “asynchrony… such as a lack of fit, an unusual patter, or an irregularity have the power to stimulate economic activity. P.99


Still more

• The most formidable obstacle to fluidity is order. A bit of mayhem is not only healthy but critical.

• The ideal environment is best described by as the “edge of chaos” where rigid order and random chaos meet and generate high levels of adaptation, complexity and creativity.


Techniques

• BIRD grants: acted as a dating service between Israeli knowhow and US companies. It was very successful at matching and with a $250M invested in 780 projects, resulted in $8B in sales. Critical: taught Israeli tech companies how to do business in the US.


Clusters

• Michael Porter, “geographic concentrations” in interconnected institutions, businesses, government agencies, universities – in a specific field. P. 196 Obvious example, Silicon Valley, Napa/UC Davis for viniculture, Germany – automobiles, Hollywood - movies.

• Porter offers that intense concentrations of people working in and talking about the same industry provides companies with better access to employees, suppliers and specialized information. It extends beyond the workplace and is part of the daily life. It is a “social glue” that facilitates access to critical information.


Dubai, Inc.

• Created clusters around a variety of verticals such as education, IT, medicine, journalism

• Brought in key tenants such as Microsoft, Oracle, HP, IBM.

• However, there is no innovation or R&D hubs, rather large scale service hubs.

• Vast physical infrastructure, but not the culture to support it. Not necessarily a sustainable model, p. 201


Dubai, Inc. – what doesn’t work

• Foreign nationals come to make money, once the mission is accomplished they return home as they do not feel a connection.

• Lack of path towards citizenship• Wife looses citizenship and benefits if she

marries “outside”• Limited amount of time to stay – 3 years. No

connection with place, nor desire to uproot family especially if forced to live on outskirts.


Education

• Focus on rote memorization – no experimentation• Define success by measuring inputs (teacher class

ratio, infrastructure investment) rather than outcomes

• Because of segregation by sex, and sense teaching in Arab countries is traditionally less appealing for men, schools must employee lower quality teachers thereby widening the education gap.


General Cultural Challenges

• Lack of freedom of expression• Lack of tolerance of experimentation and

failure• Failure to reward merit, initiative and results

rather than status• Lack of social and cultural institutions. Books

translated into Arabic in all Arab countries was only 20% of the books translated into Greek in Greece between 2002 and 2005. p. 209


Expressions of Note

• Bitzu’ist a Hebrew word that loosely translates to a “pragmatist”, but with a more activist quality. This is a person who just gets things done.

• Rosh gadol – “big head” literally following order, but doing so in the best possible way, using judgment, and investing whatever effort is necessary. It emphasizes improvisation over discipline.

• Rosh katan- “little head” means interpreting orders as narrowly as possible to avoid taking on responsibility or additional work.

• Davka – “despite, with a “rub their nose in it it” twist


Words to Live By

• “When [entrepreneurs] succeed, they revolutionize markets. When they fail, they still [keep] incumbents under constant competitive pressure and thus stimulate progress.” p.20 via report from Monitor Group

• “The goal of the leader should be to maximize resistance – in the sense of encouraging disagreement and dissent. When an organization is in crisis, lack of resistance can itself be a big problem… If you are not even aware that the people in the organization disagree with you, then you are in trouble.” Dov Frohman, Intel Israel


More Quotes

• James Collins, from his book Built to Last, “Core purpose is the organization’s fundamental reason for being. It reflects the importance people tie to the company’s work beyond just making money”.

• Barbara Tuchman, Affluence tends to smother motivation.

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