Israel - the Start-Up Nation

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Lessons to be Learnt From "Israel - the Start-Up Nation"​

Does size matter ? Just ask Israel. Israel is a tiny country both in terms of its physical size, being just over 800 square miles in size, and its population (weighing in at just over 7.8 million). Yet despite its small size Israel consistently punches high above its weight economically

After America and China, Israel has the highest number of companies listed on the NASDAQ. Last year, Israeli exports totalled $89 billion USD, not including the exports of start-up companies and acquisitions of Israeli start-ups by foreign companies

And despite the slow growth currently experienced by many Western economies, Israel is firmly bucking the trend, closing the fourth quarter of 2011 with a healthy growth rate of 3.8%

This success begs the question - why ? Why is Israel punching so far above its weight in the world and what lessons can be learnt from this "start-up nation" ?

At the offices of BDO LLP on Tuesday 7 February, in an event organised by UK ISRAEL BUSINESS and the Trade Economic Office of the Embassy of Israel, Saul Singer, co-author of the book "Start-up Nation: The Story of Israel's Economic Miracle" led a panel discussion on this very question

Singer made the point that when people think of "innovation" they think of "ideas", that searching "innovation" on Google images will bring up pictures of light bulbs. But he also noted that a plethora of good ideas is just one of the essential ingredients needed for innovation - the other key ingredient is drive. Mr Singer believes that one of the reasons for Israel's success that that it is "driven to overcome adversity through innovation"

Albert Einstein famously stated that "necessity is the mother of all invention" - this is a statement which certainly rings true when one considers how many innovations and developments Israel has made a result of the challenges it has faced. Israel has taken the numerous dilemmas it has faced and has leveraged the innovative solutions produced as assets in other areas of business

One of the most obvious examples of this is Israel's lack of natural water. Unlike many of its resource wealthy neighbours, Israel is low in natural resources. By necessity water technology has been placed at the forefront of the Israeli economy ever since the State's inception and as a result Israel is a visionary, well ahead of its peers when it comes to water preservation and recycling - typically recycling 75% of its waste water. Israel's innovative solutions to its water shortages are now highly sought after by foreign companies

Another example of how Israel's dilemmas have actually helped rather than hinder the country's development comes from the threats Israel faces from its neighbours. Again due to necessity, Israel has both the highest ratio of defence spending to GDP, and the highest spending as a percentage of the budget of any developed country, and has as a result made extraordinary strides in the development of its defence technologies

As a result of these developments, Israel's defensive solutions are highly sought after and Israel is one of the top defence exporters in the world, making over $7 billion from defence exports in 2010. Defence initiatives have also provided technological breakthroughs which can and have been used in civilian telecommunications and ICT

Defence exports are not the only advantage that Israel has harnessed as a result of the threats that it faces. Israel's isolated position has provided the perfect testing laboratory for Better Place's electric cars, as detailed in Dan Senor and Saul Singer's aforementioned book Start-Up Nation

The number of battery swap stations that would have to be built by Better Place in the early phases of development was limited by the fact that Israelis could not drive beyond their national borders - making Israel a perfect testing site for electric cars

It is easy to see how the adversity Israel has faced has driven innovation - but to say Israel's success as a nation is purely down to its drive to overcome adversity would be to do Israel an injustice. Israel's strong commitment to research and development has also been of paramount importance in its success and development

As a nation, Israel spends about 5% of its GDP on research and development, one of the highest amongst OECD countries, and double the UK's GDP commitment to research and development. Israel has eight universities which feed directly into businesses

Israel also has a "Technological Incubators Program" which was first established in 1991 by the Office of the Chief Scientist and provides scientists with potential ideas, appropriate research and development facilities; financial support, exposure to investors, management assistance and professional guidance as well as central administrative services

Israel's dedication to training a highly skilled populace is a further reason for its success. Israel has overcome the limitations of a small population by accepting that countries with small populations are unable to compete with countries like the United States, China and India in mass production of low- and medium-tech goods

Israel has instead focused its funding and training on highly skilled workers who develop and export extremely valuable high-tech and high-end goods, technology and services

Israel's research and development expertise is not limited to state funded projects. It is now home to the research and development facilities of over 60 major multinational companies, including such heavyweights as Microsoft, Google and Motorola

Success begets success and in December 2011, Apple acquired Herzliya-based flash memory developer Anobit Ltd, in the west of Israel's Tel Aviv district. Anobit will be the new Apple Research and Development centre, as flash memory technology is critical to Apple's main line of consumer products, including the popular iPhone, iPad and Macbook Air to name but a few

Israel also engenders an entrepreneurial culture as a result of its highly skilled workforce. Even its mandatory military service has helped facilitate economic success. Singer pointed out that military service in Israel provides a third phase of life, in-between school and work where Israelis are taught the importance of personal sacrifice for something larger than one's self

They learn military discipline, mission focus and leadership skills which are key skills in any business, and many meet future start-up business partners during their military service

In 2011 Israel had over 3,500 start-ups - the highest number outside of the United States. The success of Israeli start-ups is evidenced by the number of Israeli companies that are acquired by multi-national companies. Most recently IBM Corporation acquired smartphone and tablet application developer Worklight Ltd. This is IBM's 11th acquisition in Israel

Israel has the drive and the ideas for innovation - but it also has the funding. This is essential - what is the use of filling people's heads to the brim with ideas, ability and drive without having the means of financing innovation ? Israel's excellent track record in sourcing funding for ventures which has driven Israeli success

It has received 2.5 times more venture capital investments than the United States and more than 30 times the number of those in Europe. Comparing absolute numbers, Israel, with a population of 7.8 million people, attracted close to $2 billion in venture capital, as much as the UK's 61 million population received

The triple cocktail of having the necessity and the drive to overcome the challenges it has and continues to face, cultivating new ideas through well supported research and development and its strong track record in sourcing funding for innovative ideas and projects has enabled Israel to become a global centre for innovation

Daniel Seal

 

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American CEOs get an Israeli medical education​

Descending the Tower, the imposing new state-of-the-art inpatient hospital at Hadassah’s Ein Kerem Medical Center, Joseph Mapa was impressed. The chief executive officer of Toronto’s Mt. Sinai Hospital said he’s seen innovations he would like to bring back to Canada

“It’s leading edge. Just the thinking behind it! Healing gardens, patient rooms, square feet, two beds per room, one bed per room, one window per patient ... I mean these are huge developments,” Mapa told The Media Line. “It’s not something we wouldn’t do in the States, or in Canada, and it’s something you certainly want to see and showcased,” he adds

Mapa was part of a first-ever delegation of CEOs from the top hospitals and medical centers across North America that were visiting Israel this week. This was the brainchild of Rafael Harpaz, the director of the Economic Department for America and Africa at Israel’s Foreign Ministry

“We think we have a lot to share with our friends and colleagues from the USA and Canada on medical technologies, cutting-edge technologies, readiness and preparedness and managing medical science through computers. I think these are areas where Israel has good experience,” Harpaz told The Media Line

Israel’s life expectancy is much higher than the US and its systems of socialized medicine ensures that everyone has access to basic healthcare while Israel spends a smaller percentage of its gross domestic product on health. There still are problems, most recently, with doctors striking for higher wages last year. Its major hospitals are equipped with some of the latest medical technologies, which impressed the delegates

“The American system has many great things, but also many things to learn from this country and I think that the level of medicine here and the level of training is every bit as good as medicine that I see now at the States,” Kevin Tabb, the CEO of Beth Israel Deaconess Medical Center in Boston, told The Media Line

“In the States, for better or for worse, medicine in many ways is a business,” Tabb said. “It’s about making patients better, but it is also a financial business. But in Israel that really is not the case, and that is very interesting for people, especially for people from the United States, less so for Canada”

Tabb said they shared data on costs and saw how care similar to that offered in the US was extended with fewer resources in Israel

“It’s amazing to see the relatively small budgets for an Israeli hospital, doing tremendous amount things, on what would be considered a pittance in the US and that’s fascinating,” Tabb said

The Tower at Hadassah is slated to be opened later this month and crews are busy scuttling around clearing away scaffolding and supplies. Not all of the floors are finished, but the fifth floor is spectacular with parquet floors and equipment still in plastic

“This has been a tremendous exchange of North American healthcare leaders with Israeli healthcare leaders,” Amir Dan Rubin, president and CEO of Stanford University Medical Center. “While our political and reimbursement and systems are different, and the organization of our health systems are different, at the core we have common missions; taking care of patients and ... research and education”

“The challenges are similar here,” Rubin said. “We all have issues of how do we provide insurance coverage so there is the payment issue and there is the delivery system, there are access issues, there is improving quality and innovations and while our mechanisms are slightly different those themes are common”

The group was briefed at Sheba Medical Center and is slated to visit Sourasky Medical Center, Beilinson Hospital - all in Tel Aviv - and Rambam Hospital in Haifa as well as the IDF Medical Forces center in Tzrifin where they will see the emergency unit that deploys at crises around the globe

“We didn’t anticipate that so many of the CEOs of the big hospitals in North America would come and we are blessed with a delegation which is close to 50 top heads of hospitals and medical centers,” Harpaz said

“We share the same challenges that we are facing in our medical treatment, and they appreciate that we are doing this but on the other hand they are really impressed by all which Israel has to offer. And we have a lot to offer when it comes to medical technologies”

At Sheba, the group observed a simulation of a mass casualty event, something that Israeli hospitals constantly drill for. Catherine Zahn, CEO of Toronto’s Centre for Addiction and Mental Health, found the spirit of Israelis compelling

“There is a societal receptivity to open mindedness and forward thinkingness,” Zahn told The Media Line. “Like Israel, Canadians believe health care is a basic right of a citizen, a basic human right, rather than a commodity to be bought and sold. There is definitely a kinship there, but I think we have a lot to learn from the perspective of the ‘innovation nation’,” Zahn said

“It’s also interesting to see how the situation in the Middle East, and the involvement of the military in the country actually probably contributes to that resilience and the attitude that if this doesn’t work out lets pick up and do something else,” she added. “Picking up on the advances from military science and translating them into health care advances. Those are all very remarkable”

These sentiments were echoed by her fellow Canadian, Mapa

“The Israeli system is spectacular - from clinical care to service, to IT in particular, clinical technology, to crisis management,” Mapa said. “It’s state-of-the-art, I mean, its fantastic. Were excited, but I tell you this not because I am excited, but you see it is evidence based ...and that's what turns us on. Turns me on for sure”

Lobby & The Jerusalem Post