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Mentoring – showing how your client can go one step further in business

17 March 2013
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Categories: Afternoon Tea in Jerusalem, Business, Israel, Jerusalem

We all know the phrase that the customer is always right. We all at least pretend that we do our level best for our client. As I wrote last week, we all make a claim to strive for excellence. And we are surrounded by books and blogs about how “to go above and beyond the call of duty to provide customer service that truly stands out.”

However, when we set about on some introspection, especially over customer complaints, the truth is often very different, if not painful. We just cannot be bothered. Excuses abound – we do not have the time, deliberately forget about the mess, do not think the person is worth it, and ……….well, the list is very long.

As a business mentor, I am often asked by my clients what they should do, as they recall a story when a customer feels dissatisfied. Sometimes, it is told out of despair or frustration, but with little intent to follow up. On other occasions, the person just cannot see through their fuzzy thoughts in order to provide a solution. Many just run for a financial compromise – a heavy a discount or voucher – as if that is a universal cure.

The main question is what are we  trying to achieve? To be quite cold, I believe that the answer is extra revenue. Maybe we are seeking to convert a no-sale into a purchase. Maybe, we are in the area of damage-limitation. And yes, we want to feel good ourselves. However, much comes down to the money factor.

Last week, a new business owner in central Jerusalem hit a classic pitfall, when on a specific day they had too many customers that could be handled properly. Eventually, somebody took offence and immediately let this be known on social media. Ouch!

What to do? I suggested reaching out to the troubled client. After all, this is the last thing you need when you are at the beginning of the commercial journey. However, little did we know that just as we were discussing options, another blow was in the offering. A blogger was writing a negative piece and about to publish, which the owner was to find offensive and inaccurate.

Significantly, they did not lose perspective. Instead of ignoring the problem and with my words in their head, they contacted the blogger, met up and talked / communicated directly with each other. I assume that it will not be a surprise to hear that both sides learnt a few facts about life and what they have to change. Oh, this should result in few extra, happier customers.

My client had gone out of their comfort zone in order to make a difference on behalf of others. There had been no guarantee of success or reward, but they had done something for somebody else, willingly. That is what pushes businesses on and up to the next level.

Obama, technology and the Jerusalem mindset

15 March 2013
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Categories: Business, Israel, Jerusalem

President Barack Obama will be visiting Jerusalem next week. I assume that he will be making key speeches, cajoling / indicating / imploring leaders in the Middle East not to bomb the guts out of each other.

Allowing for the fact that he will also be travelling to the Palestinian territories, he will be on Israeli soil for less that 48 hours. And yet, part of that time will be taken up by travelling to and touring a special exhibition on Israeli tech. And you have to ask, why?

Yes, Israel has been called the start up nation or the Silicon Valley of the Middle East, very flattering for a country of barely 8 million people all-in. However, there is another factor, just as important.

To create this success, you first must create an environment that allows you to accept new ideas and to be able to develop them. This requires an open and tolerant society. And maybe the best way to measure that openness is through the number of Nobel Prizes attained per capita – Israelis have received ten awards since 1948. As if to emphasise the point,  Israel was recently ranked first in the world in research and development intensity.

To quote  Dr. Dan Schechtman, a technology professor from Israel and who was awarded the 2011 Nobel Prize in Chemistry for the discovery of quasicrystals. “What does a Nobel Prize winner has to say about entrepreneurship? First and foremost, he emphasizes that “entrepreneurship is the only way to maintain long-term peace.” Unfortunately and crucially for Schechtman, the combined number of all the other winners in the Middle East region is less than ten.

From here on, I will quote an abbreviated form of the official government’s press release in Jerusalem, which explains the tech ‘on show’ to the American leader. It makes for fascinating reading and is an eye-opener for potential investors.

The products that were chosen are in the fields of renewable energy, the war on traffic accidents, medicine, search and rescue, and robotics. They are located at the “Israeli Technology – For a Better World” exhibit at the Jerusalem Science Museum.

1) In the field of energy alternatives – Phinergy. The company has developed an aluminum-air battery designed for electric vehicles, and which allows a significant increase in travel range (three times that of a regular electric vehicle). The technology will allow for a reduction in global oil consumption. The system is based on metal air technology, including aluminum air and zinc air. A metal-air battery features an air-electrode that breathes oxygen from ambient air, instead of the conventional cathode. That is, the battery consumes the required oxygen from the air, rather than having heavy materials that bound oxygen inside it. Metal-air batteries therefore have a huge potential for delivering high capacity with low weight.

2) In the field of the struggle against traffic accidents – Mobileye, a global pioneer in developing Advanced Driver Assistance Systems (ADAS), is to develop and market vision-based systems that will help drivers keep passengers safe on the roads and decrease traffic accidents by warning about dangerous situations and even braking the vehicle when necessary. To date, Mobileye’s technology has been implemented and launched by BMW, Volvo, GM and Ford in over one million vehicles. Beginning in 2014, the system will become standard for new vehicles in Europe.

3) In the field of medicine – BNA technology by ElMindA, which provides a non-invasive tool for the visualization and quantification of BNAs of specific brain functionalities, disease development and rehabilitation from injuries, reactions to treatment, psychiatric and neurological problems, and pain.

4) In the field of search and rescue – robot snake, which is designed to enter spaces in collapsed structures with minimal disturbance. The robot thus assists in location and rescue operations. The robot is unique in its manner of crawling and is very flexible thanks to its great number of segments. Each joint is motorized and has a computer, sensors, wireless communications and batteries. Its head carries a camera. Thanks to its flexible structure, the snake is able to crawl through wreckage without causing additional structural collapses and provide vital information about inaccessible areas, including the status of people who might be trapped, the location of hazardous materials, etc.

5) In the field of medicine – Rewalk seeks to give persons with lower limb disabilities, such as paraplegia, an experience that is as close to natural walking as possible. The ReWalk exoskeleton suit uses a patented technology with motorized legs that power knee and hip movement. Battery-powered for all-day use, ReWalk is controlled by on-board computers and motion sensors, restoring self-initiated walking without needing tethers or switches to begin stepping. ReWalk controls movement using subtle changes in center of gravity, mimics natural gait and provides functional walking speed.

6) In the field of medicine – MiniDesktop, whose headset has been developed that enables computers to be controlled by brainwaves or facial movements. The computer is controlled without a mouse or keyboard by means of a headset that images the user’s brainwaves from 14 separate points. The system, which was developed by three software engineering graduates from Ben-Gurion University of the Negev, is designed to serve the physically handicapped who could not otherwise operate a computer or other devices.

Understanding excellence in business – a second look

13 March 2013
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Categories: Afternoon Tea in Jerusalem, Business, Israel, Jerusalem

Earlier this week, I wrote how a CEO is Jerusalem is “constantly listening and trying to innovate”. He is looking to provide his customers with that “feel good” factor. Crucially, he is aware that whatever that ‘factor’ is today, it will change by tomorrow.

With a sense of some ironical timing, the subject has already come up on two further instances.

First, I met up with a client of mine, who was asked to describe the service she is trying to provide to her target market. What was interesting about the response was how it was centred around what was important to her.

Yes, she brought some key and essentials values. She even mentioned the ‘feel good’ phrase. Fine, but the overall position was controlled from her perspective. She had failed to appreciative the psychology of why a prospective client may be getting in touch. She had ignored what are the real motivating determinants.

Look at it another way. A shopping mall is not just a convenient place to find all your favourite retail outlets under one roof. The owners of the premise have designed it so that you can have a complete or perfect ‘experience’; background music, easy access to different floors, rest benches, and plenty of friendly eateries. The thought process goes the extra mile on behalf of the customer, trying to understand their needs.

Second, I have to admit, I did not do my best recently. I was asked to make a submission, only to receive an email, which explained what I had failed to clarify. My initial reaction was full of expletives, anger directed at the bureaucrat. Eventually, I took a deep breath and read the comments in detail.

The anger mellowed to annoyance, which I found that I was turning it towards myself. It became cringingly obvious to me that I had rushed the work and cut corners, hoping to ‘get away with it’. When I finish posting this piece, I will have to invest extra time in fixing something that should have sailed through. There is a lesson here for all of us.

So what is doing your “level best’ all about? How can we convince ourselves not to be so lazy? Have a look at this Hollywood clip for 6 minutes.  https://www.youtube.com/watch?v=-vB59PkB0eQ&feature=youtu.be

What is ‘excellence in business’?

10 March 2013
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Categories: Afternoon Tea in Jerusalem, Business, Israel, Jerusalem

As a mentor, I hear the theme so often, especially from newer clients: “I want to be the best,” they proudly utter. And when I ask them what that means, the answers are less forthright.

The subject came up again yesterday in a most unusual way. I was reading a commentary by Rabbi Ari Kahn, where he noted that the Ark in the Sinai desert and the two Temples, were all filled with increasing amounts of gold. However, the level of grandeur was not commensurate with the level of holiness. Why?

The Ark, often considered the most special, had been constructed by a man named Bezal’el, whose entire being was permeated with a holy spirit. In modern parlance, Bezal’el was empowered and thus determined to create something as brilliant and as appropriate as was possible.

Doing your best or striving for excellence does not put you above everyone else. It does not secure sales. It does not guarantee success. So, why is it so important? Why do mentors encourage people to consider the concept?

There are many websites, which debate the subject endlessly. They rush to quote Aristotle, who opinionned that “excellence is not an act, but a habit.”. For all that, if it is not the elixir of enduring commerce, what is it? What did Bezal’el understand thousands of years ago that most of us still fail to grasp today?

Let me try to explain through a true story, also with a slightly religious angle. I recently popped in on ‘Joe’, the owner of a large shop in central Jerusalem. We had first met when I had attempted to recruit him as a client, but we have remained in touch. With the help of a different mentor, he has reduced his stock, improved sales, redesigned the interior, and………..well, life is beginning to feel good for him.

Joe has no academic background. He has a small back office. He has little professional literature, mostly religious books, as  he has caught the ‘spiritual bug’ in recent years. However, lying on a shelf by itself was a book entitled “Excellence”. It said everything for me.

Joe knows that he does not provide all the stock his customers need, but he is constantly listening and trying to innovate his lines on offer. Joe realised that the appearance of the shop was unattractive, especially to the eye of a female – his main clientelle. That was dealt with. Staff receive training. Prices on key products were deliberately dropped to ensure he was dominant locally. And Joe still looks to improve.

What does this add up to? Whoever walks in to the shop will quickly realise that they are associated with an establishment that genuinely wants to help and toplease. The customer will undergo an enjoyable retail experience that will direct them towards making a purchase and to feeling good about it.

It takes a passion for excellence to achieve that result.

The search for the traditional Jerusalem breakfast

8 March 2013
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Categories: Afternoon Tea in Jerusalem, Business, Israel, Jerusalem

Is there such a thing as the traditional Jerusalem breakfast?

A few years ago, I returned to London, where I grew up. Leaving my hotel room and going past the dining room, I was struck by a smell that immediately recalled school breakfasts; rashes, greasy sausages, fried eggs, drained down by tea with lots of sugar. I hasten to add that I did not eat it at school, but you can never forget.  You know it at the instant. Is there a Jerusalem equivalent?

Possibly the first place to start is the best-seller cookbook from Yotam Ottolehgji and Sami Tamini, “Jerusalem“.  It is a great read. Significantly, the opening section is on vegetables. The spices ooze out of the pages. However, there is no specific heading on breakfasts nor is there a mention in the index.

Moving on, I remember that when I first came to the Holy City over thirty years ago, you felt that people were eating falafel in pita bread morning, noon and night. The taste of the frying oil was smothered and hidden by the heaps of humus and a hot tomato spice. As local brands of corn flakes were expensive and revolting, this seemed to make a (relatively) healthy substitute for the morning starter.

In 2013, the world has changed. As bloggers 21C noted: “Lonely Planet included the shakshouka at Jerusalem’s Tmol Shilshom café on its recent Top 10 list of the world best breakfasts.” Actually, for many from Europe or America, shakshouka is simply loads of poached eggs with lots of pepper and more tomato-type spices. For novelty, it often comes served in ovenware. However, Ottolenghi himself traces the origins of the delight to Tunisia.

“Morgens” is a brand new restaurant, just off the bubbly Emek Refaim Street and not far from the magic of the Old City. The owners are hoping to latch on to the theme that Jerusalem has been and remains a very cosmopolitan city, attracting influences from all over the world. They offer eight different types of breakfasts, including a Mexican alternative and a highly delicious ‘Garden of Eden’, which is not recommended for those watching the calories.

Of special interest to me was the first item on the menu – an Israeli breakfast. I will leave my readers to go and sample the delights of Morgens, which is already attracting a steady clientelle. For me, what I like to see on my plate is first and foremost a tomato, cucumber, lettuce and red onion salad, finely chopped, doused with a careful balance of lemon juice and olive oil. I insist on a sweet tahina to be available, according to the taste buds of the moment.

To the side should be a healthy supply of large green and black olives, preferably home pickled. Next to these ought to be a portion of white cheese, Lebana, mixed with a light coating of zatar – a form of wild thyme – and olive oil. A helping of beetroot,seasoned with fresh parsely is a must. And the final item is a lightly fried egg, packed with green herbs such as oregano, basil and even mint. Naturally, the pitta (or brown bread) should be freshly baked.

As for the hot drink, clearly black coffee or tea with mint should be a must. At this final stage, honesty forces me to admit to a small degree of hypocrisy. Having grown up in the UK, I love my morning tea with milk. Some habits are too good to do away with, even in the holiest of cities.

Prospects for economic growth – Israel 2013

5 March 2013
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Categories: Afternoon Tea in Jerusalem, Business, Israel, Jerusalem

In the final three months of 2012, the pace (of economic growth in Israel) was its slowest in three-and-a-half years, growing at a 2.5% annualized rate, compared with 2.8% in the third quarter……. A year ago, gross domestic product was expanding at a 3.5% rate.

Not very optimistic reporting. Add to that the perspective of the Governor of the Bank of Israel and notable international economist, Professor Stanley Fischer, who observed that the country’s performance is going to be hindered by faltering economic performances in Europe and in the USA. Then yesterday, China announced a budget that restricted annual growth to a relatively low figure of 7%.

What hope for Israel in 2013, an economy that looks to exports? Well, actually, quite a bit.

To start with, Fischer recognises that “we expect 3.8% growth in 2013 and an important part of this includes the start of natural gas production, which will start flowing from the Tamar drilling and that will add 1% to the GDP in 2013.” Then compare that stat of 3.8% to many other countries within the OECD and you will see how Israel is not doing too badly.

Other recent macro economic data is encouraging. After a clear dip for much of 2012, new housing starts are at a ten year high. And January 2013 saw a slightly unexpected drop in unemployment to 6.5%.

For me, the immediate black spot is the cabinet itself and the lack of central direction. The country has been in ‘election mode” since the late summer, at least six months. This runs through from the period of ‘will there be an election?’ to the current maze of misinformation regarding the formation of a new government coalition.

When I ask ministry officials when resources will be released to new projects, they refer me to the newspapers and the talks between the various political parties. One headline from today’s press implies that the Prime Minister will try to create a new budget within 10 days. Not exactly a professional approach. In parallel, the PM has evidently told his two new coalition partners that they can choose between them who will have the Finance portfolio and who will fill it. A bewildering abdication of responsibility.

None of this pathetic nonsense detracts from the basic stability of the Israeli economy nor the dynamism of innovation that underpins it. However, let’s be honest. I bet Fischer did not factor these local instabilities in to his predictions for 2013. They will impact negatively in the short term.

What is a business coach?

1 March 2013
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Categories: Afternoon Tea in Jerusalem, Business, Israel

I am often asked to explain what is a business coach or mentor. To many it seems a nebulous phrase, especially when compared to the definitive titles of a teacher or a lawyer. When I tell people what I do is “add value to their business” and my success rate is high, I still receive some quizzical looks. How?

I sometimes refer to a comparison used by lecturers at Carnegie training courses. Consider 99% of all top sports’ players. For all their talents, they use coaches, day in and day out. “So why shouldn’t you?”

The subject was raised again this week on a LinkedIn chat group by Patrick McMichael. He asked: “What do business coaches do for small business enterprises (SME)?” I would add two assumptions here. When he wrote small, I guess there is a connotation that SMEs cannot afford to pay. In parallel, if Patrick had written ‘big’, would this have implied “too big to need a coach’?

There were three responses to Patrick that I particularly liked

Heidi Tuftee noted: “A coach helps leaders identify barriers and gaps that are hard to see when they are entrenched in daily operations. A good coach helps you put together a plan to address those gaps and barriers. A great coach, will see you through the execution of that plan and help you realize the long term impact your efforts have had on you, your team and your company’s long term bottom line.”

Tara Hooey observed: “The most difficult part of being a small business owner is not running your business, it is recognizing the need to step away for a minute in order to take the greater, necessary actions that will help your business grow.”

Wayne Bidelman was more expansive: “A business coach (or partner) helps fill the gaps for the business owner – be they gaps in business management expertise or gaps in where the business is today and where they want it to be. It could require, to just name a few, assisting with planning, cash flow analysis, sales, marketing, employee acquisition and retention, exit strategies, etc.”

Personally, I point out to potential clients the ‘X Factors’. Even though, I am not an eXpert in their field, my commercial eXperience allows me to bring them a greater awareness. This word has been stressed by John Whitmore.

Coaches (or mentors) help managers, owners, entrepreneurs become aware of their true surroundings; all the skills they have, resources they are lacking, matters that cannot be ignored – at a commercial level and individual level. I help people to appreciate those nuances. I then encourage them to change and monitor those differences. All this converts into a positive effect in the bottom line of the profit and loss sheet.

I want to be my own boss – a true story

27 February 2013
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Categories: Afternoon Tea in Jerusalem, Business, Israel

It is a phrase that I hear so often. “I want to be my own boss”.

As a business mentor, I am forced to ask, if not challenge, why? Why do so many of us seek the difficulties of becoming independent or self-employed? The standard answers include because it looks glamorous / you can earn more / it is more challenging / people hate working for others.

Each to their own. Sometimes, the glamour, tinsel and dreams are simply a collection of fairy dust. Setting up on your own can be far more complex than first imagined. As I point out to many clients, to begin with not only are you the CEO. It is also your job to clean the toilets. You have to realise that it is your responsibility to do ……………everything, and on time.

About three months ago, a distant acquaintance asked me to help her to make some career decisions. Talented and with a level of commercial experience, she wanted to know what she should do next. The options were many and varied. How to continue as a partner in an existing business, which was going nowhere? Should she take an alternative offer of employment? Go back to her old profession? etc etc.

The client began to attend job interviews. However, in my role of business coach, I forced her to state what she really wanted to do and in what framework. The more we pursued this line of questioning, she learnt that where she was currently located had scope for being a ‘dream of dreams’. She was challenged to wake up to the full potential of her environment.

What my client realised was that the key issue is not just to become your own boss. You have to identify what you want to do and what you are good at. Many mentors call this approach as becoming ‘ transparently aware’ of your vision, your strengths and your weaknesses.

The next stages in the business cycle for my client are not simple. For example, she will want to ramp up sales on a shoe-string budget. That said, there is a clear understanding what is the path ahead and why they have the passion to take the journey.

Lessons in surviving a retail meltdown

26 February 2013
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Categories: Afternoon Tea in Jerusalem, Business

I have just returned from a visit to the UK. Spin it as you wish, her majesty’s economy ain’t doing too well. The country’s credit standing has just been downgraded by Moody‘s. I walked past a previously thriving parade of small shops, whose fronts were all boarded up. Chains like HMV are in trouble.

The horsemeat scandal is just another part of the syndrome. Too many large retailers were trying to save costs at the risk of cheating the customer. In the end, everyone loses out…except for the sellers of fresh meat.

Through all this turmoil, two companies in the retail sector have shown how to make good sales and move ahead, even in an economic downturn.

Sports Direct sells sports equipment to the whole family. Its shops are prominently located in many a high street. It deliberately sets out to discount as aggressively as possible, despite the highly competitive arena. For all that, the company has just reported a 23% rise in profits and is hitting its own financial targets.

As its main rival, JJB Sports is going into receivership, it is fascinating to analyse how Sports Direct has taken a lead. Two factors seem to be at play. First, it adopts a sophisticated and active approach to internet selling. John Lewis, another retailer doing well, has also been prominent in its web-based service for customers.

Further, Sports Direct has increased the number of its sales staff on its floor space, as well as offering them better bonus schemes. In other words, it has followed an important rule of thumb; In a downturn, you do not cut your marketing and sales budget.

Lego is the world’s fourth largest manufacturer of toys. It is still less than a decade ago when this private Danish multinational giant was reporting significant financial problems and stagnation. Last year, 2012, profits shot up 25% on stronger sales. Why?

The answer was in identifying a new market, the female market, which had been underplayed for decades. Lego created a new brand called ‘Lego Friends”, and the company cannot sell enough of these pinky-coloured items.

It would appear that two prominent lessons from these case studies; never to take success and growth for granted and always look at difficulties as an opportunity or challenge to improve rather than a recipe for disaster.

How investing in Israeli tech is still seen as cool

21 February 2013
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Categories: Afternoon Tea in Jerusalem, Business, Israel

The Israeli economy is struggling to cope with poor leadership and slowing growth.

Whether or not the picture of gloom is exaggerated, there is much for an outside investor to look for inside the Holy Land. As one treasury official put it, the economy still clocked up a 2.5% improvement in the last quarter of 2012, despite fighting a war in Gaza.

On the ground, there have been some very encouraging stories. For example, at the Mobile World Congress in Barcelona this month, Israel has the fourth largest representation. Significantly, four companies are up for awards, including “Waze” in the main category for best overall application. In recent weeks, the company has been linked with buy out talks to Facebook and to other giants, although the rumours appear more forceful than the facts at this stage.

The spotlight this week is on “Wix”, which was founded in 2006, offering a free do-it-yourself website builder. Reports imply that it is seeking to raise US$75 million on Wall Street for a valuation of at least US$350 million. Very cool for a former start up.

The strategy may seem like a wild dream to some. However, Wix would only be following in the path of other successful Israeli offerings. In 2010, Soda Stream, last seen advertising at the recent Superbowl fixture, raised US$109 million. Its shares have since jumped by over 60%. The following year, Imperva, with its database and security applications, brought in US$90 million and shareholders are 36% better off. And in 2012, Even Caesar raised US$84 and the shares have soared in value by over 100%.

Small wonder that a heavy chunk of Samsung’s new US$100 million investment fund is set aside for new operations in Israel.

Successful loan schemes for small biz – case studies

20 February 2013
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The world over, small businesses are asking how they can find ‘easy’ loans which allow them to get going. Last night, I moderated the monthly meeting of JBNF, which addressed that topic and discussed three different, successful yet related approaches.

Before I start, it is no secret that more and more people these days are turning to crowd funding, which is great. However, it must be pointed, that this track is not all glory: For example:

  • A business may end  up with lots of small investors, a potential problem to manage when you are low on manpower
  • Regular investors force you to check your business model, an annoying but necessary process
  • Crowd funding can force you to publish secret info on the internet

With that in mind, let us consider the organisations represented on the JBNF panel, all of which are nondenominational, while trying to place an emphasis on boosting development in peripheral areas throughout Israel.

PARTNERSHIP2GETHER programme brings together donors from overseas with struggling new set ups in the south and north of Israel. Operating for just over a decade, they have created over 5,000 positions of employment, whereby 98% of all loans are repaid. The requirements are minimalistic – a brief business plan from a recognised economist and that is about it. The value of loans range from 50,000 nis to around 350,000 nis: (US$1 = 3.7 nis)

The stories were fascinating. I was impressed by the character of one middle-aged lady, an expert sewer, who had explained to the adjudicating panel how in her community, traditionally people sit and watch TV while she makes up the items of clothing. She needed money for a couch and a screen. Duly given, her triumph forced her to return a few years with a second request – to help finance a larger studio. Interestingly, around 30% of the projects were in the area of agriculture.

The Israel Free Loan Association takes an even simpler approach. It does not believe in business plans that dwell further into the future than six months. Prove that  you have a need and they will give an interest free loan for up to 90,000 nis, which can be paid off over 45 months. They approve 92% of all applications and the rate of non-payment is less than 0.5%.

Joe Rosen, Associate Director, made a perceptive observation, which is probably true of all such groupings. The loan does not just support the creation of a new commercial formula. Suppliers gain a new customer. A family receives an income. There is an additional service for the immediate community. The treasury receives additional tax revenue. The knock-on effects, just as in good old-fashioned Keynesian economics, can be stupendous.

The KIEDF assumes that around 70% of new businesses fail to obtain loans from banks. The fund, backed by the AACI, has granted around 10,000 ‘impossible’ loans over twenty years, probably leading to 45,000 new jobs. As above, the paperwork is relatively pain-free, although the sums are frequently lower.

Is there a  common theme to all of this? Quite clearly, there are many good people out there who realise that to start up is not easy. Banks and governments and bureaucrats still do not get it right enough of the time. It is these benefactors or philanthropists or altruistic motivators who are changing the lives of local communities in Israel of whatever background for the better and for the long term.

A request for some economic leadership in Israel

19 February 2013
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Categories: Afternoon Tea in Jerusalem, Business, Israel

The global economic meltdown has created another new buzz phrase: tax avoidance. It is estimated that “around €1 trillion is lost to tax evasion and avoidance every year in the EU.” Israel is always quick to jump on a global trend. For example, Teva, a multinational manufacturer of generic drugs, barely paid any taxes in 2012 and the public is cross.

All that has happened is that politicians have woken up to what many already knew. They had spent a generation – some international  laws apparently date back to the days of the League of Nations – creating systems that allow companies to transfer billions overseas and thus pay minimal sums to national treasuries. While this policy boosts employment and generates growth. it is fine in the good times. However, when these same treasuries are short of cash – UK, Israel, Greece, Spain – everyone asks (innocently?) like an idiot “oh, how did that happen?”. Duh!

Increasingly, academics are coming up with ways to tackle the problem, effectively looking to force companies to part with more earnings for the better good without impacting on expansion plans. In parallel, the chronic weakness of politicians  seems destined to continue, and no more so than in Israel.

It is now firmly accepted that for all of Israel’s great strides in economic development over the past generation, the wealth remains heavily concentrated in the hands of a few. A simple example of this was revealed a few days ago, when the local branch of Intel announced that it had doubled its exports in 2012 to over US$4 billion, around 20% of all high tech exports. It has also been speculated that the company’s effective tax rate remains under 2%.

Vested interests abound in Israel. Farmers are protected from the import of fruit and vegetables, thus ensuring relatively high prices for the consumer. The Ministry of Defence faces annual calls for cutbacks, but rarely has to cope with a real reduction in its budget. The Electricity Company, a government monopoly, refuses to tackle the issues of over staffing and free electricity for employees. And so the list of structural abnomalies extends.

Back in the summer of 2012, as it became increasingly apparent that a general election was in the offering – effectively, the outgoing Prime Minister was duly reelected in January 2013 – I consistently argued that the country required firm economic leadership. Otherwise, it would lose its ability to return high growth figures, so needed for a dynamic and expanding population.

Since then, the government has been forced to admit that there is a gaping additional hole in its budget – around US$3.5 billion. Growth has slowed to its lowest rate in three years. Private consumption dropped over 2% in the second half of 2012, while exports of goods and services have fallen off by around 6.5%.  And, in parallel to all of this, Professor Stanley Fischer, an internationally respected economist and Governor of the Bank of Israel, has announced that he is to leave his position early. Is there anybody in charge?

It is four weeks since the general election. By law, Mr Netanyahu still has an additional four weeks to form his coalition. If these economic and financial pressures are not demanding enough, he has to plan a visit from President Obama in late March. He has to monitor developments in Iran, Syria, Gaza and even in Australia these days. Yet there is no new government in the offering. Minister are forced to carry on ‘as normal’.

Just how long will it be until a proper economic leadership emerges for the benefit of Israel and its economy? More worryingly, what level of damage will been caused by then?

Rules for funding your new business – back to basics

18 February 2013
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Categories: Afternoon Tea in Jerusalem, Business, Israel, Jerusalem

This Tuesday, I will have the honour of moderating the monthly session of the Jerusalem Business Networking Forum (JBNF). The theme will be “loans for small businesses”. A panel of three interesting speakers, promised attendance number doing well, a leading bank that wants to sponsor the event – everything looks set for another fantastic meet-up.

This topic is specifically pertinent to the JBNF, which has been hosting meetings now for over six years. As the name says, the group encourages and facilitates commercial activity in the Jerusalem region, deliberately using English as its primary language of communication. It is not just that many have found employment through our contacts. Businesses have leapt forward. Service providers have found new customers. Investments have been brokered. And all this with an emphasis to help the start up-to-medium sized corporation.

As I was preparing my notes for the event, Sui Ling Hui, a colleague from Australia, drew my attention to an article in Forbes magazine. Entitled “5 things for start ups to do when raising capital“, it was penned by Dave Samuel, who is a serial investor and who has posted at least 10 successful exits – and presumably still counting.

Samuel’s thoughts are those of a person who is involved daily in the decision-making of finding new financial resources. They deserve to be read in full. That said, he is only one player in the field of many. By the law of nature, other investors will take different perspectives, and this will be true if you are involved in high tech or trying to set up a production plant or a non-profit outfit.

I suggest two alternative but generic lines of approach:

1)  In everything you strive for, try to do, present or touch, demand excellence form yourself and those around you. Look to be the best. Do not offer shoddy power point presentations, displays that  do not work and lines of argument that have not been tested in prior debate with colleagues. Bottom line; If you go into a meeting with an investor not as prepared as you can be, the chances are that you will fail in your mission to secure funds.

2) It is crucial that you understand the difference between three financial concepts; budgets, cash flow, and profitability. These are terms that are often loosely banded around. All three are linked, but each has a different meaning an implication. In my experience, two of the most common misunderstandings in business are:

  • Many fail to realise that a budget for a given period of time does not mean that all total income and / or expenses will flow and match the same planned numbers.
  • In parallel, every year many a CEO looks in bewilderment at their accountant, who announces that the company has made a profit (on paper) – even though there is a gaping hole in the current account at the bank. Ouch time!

To be blunt: If you appreciate these complexities, you will be showing your investor that you are somebody who has the potential to create and develop a sound, cash-rich business.

When to quit at the top – The Warren and Benedict models

16 February 2013
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Categories: Afternoon Tea in Jerusalem, Business

In the past week, two multinational conglomerates with very different business models have been faced with leadership questions.

Warren Buffet, CEO of Berkshire Hathaway Inc, is one of the richest people in the world. His portfolio is probably watched, followed and thus influences millions around the globe, and I declare that this includes my wife.

Given this background and given the fact that modest Mr B is the wrong side of 80 years old, you would have expected him to slow down. But no. After a rumoured two months of haggling, the octogenarian has put together a successful US$23 billion bid to take over Heinz Food. Analysts say this is a vote of confidence in the company, which is expected to bring in more bucks for Berkshire Hathaway shareholders.

For all the large numbers, in the background there was another question. When will Buffet quit? In an interview he stated that for him age is not a factor. He still finds a way to get the most out of people and how to allocate capital. Fair enough. And he added: “If I die tonight, there will be a CEO waiting to replace me. The Board knows who it is.”

Sounds reassuring, as if there is a good contingency plan in place. However, you have to wonder. Why does nobody want to share that info with the rest of us? Why the secrecy?

Thousands of miles away from corporate America lies the heart of business that has been going for over 1,500 years; the Papacy. Pope Benedict XVI has declared that at the age of 85 he no longer has the strength to cope with the rigorous demands of the job. Clearly this is of major concern to the world’s billion strong Catholic community. However, the events in Rome have a far greater effect. After all, the announcement produced 1.5m tweets within 36 hours.

I wonder if popes are more concerned about the theological or financial state of their community. Sky TV has noted that the Vatican Bank has assets of over US$4 billion. I wonder what is the insurance bill for all the art contained in the Bishopric of Rome?

That said and I am not a Catholic, I give the man great credit for quitting at the top. The thrill of the challenge of the job would excite anybody with some breath in their body. As instability and surprise are an anathema to such an organisation, there must have been severe pressures to stay on.

And yet, the Pope was able to find a way to look at the wider community involved. He was not prepared to endanger what he had achieved. It is time to move over for a younger candidate. Assuming those were his motives, I find that commendable.

As for Buffet groupies, your cash is safe for now, but how long can you risk defying the inevitable?

Controlling your finances – a Palestinian perspective

14 February 2013
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Categories: Blog, Business, Israel, Palestinian Society, Palestinians

All finance directors need to control their budgets and cash flows. Otherwise, your shop, your corporation or your country enters the world of bankruptcy.

Palestinian Treasury officials have never been able to plan future positions from a position of stability. Blame Israel, internal politics, donors not fulfilling pledges, etc, but their excel spreadsheets have often lacked substance.

The draft budget for 2013 was presented this week in Ramallah. As noted by Finance Minister, Qassis, Israel has not transferred funds for January. Further, Arab countries have yet again defaulted on promises of support. Palestinian Monetary Authority (PMA) chairman, Jihad Al Wazir, says that from 2008 to 2012, handouts have dropped by two-thirds to a paltry US$600 million.

I am sure that the irony was not lost on the cabinet when a seminar, hosted by Transparency International the previous week, had noted how there was a need to take “measures to improve oversight of PA financial controls at the borders and increase coordination between the border and finance authorities.”  To put it diplomatically, money is simply going astray.

There are clear positives, which give room for cautious optimism. A feature posted on CNBC noted that while the public sector debt was moving dangerously upwards to over 12% of gdp, the PMA has ensured that the banks have been protected from financial harm.

The banking system’s Tier 1 capital, its main benchmark of health, stood at a remarkably robust 24 percent of assets last year, according to the IMF. Struggling European banks’ Tier 1 ratios generally hover between 7 and 10 percent, and at around 8 percent for Israeli banks. Non-performing loans at Palestinian banks stand at less than 3 percent of total loans, and debt-to-deposit ratios remain far healthier than in neighbouring Jordan and Israel.

In parallel to this island of stability has been the slow but detectable rise of a new middle class. Rawabi is a fascinating new town, located near the city of Ramallah. Its development has been encouraged by Israel. Intriguingly, much of the properties are slated for young couples with ‘new money’. And that trend is matched by the growth of Palestinian women in employment, and more specifically as entrepreneurs. Their numbers may now be as high as 30% of the labour force.

Personally, I have found it interesting to read a Palestinian blog describing the “flood of Israeli goods” entering Gaza. While the author clearly believes that this is not a healthy situation, they also failed to note that Egypt has began to waste smuggling tunnels on its border with Gaza. This vital lifeline “brings in an estimated 30 percent of all goods that reach the enclave.”

And of course, if the Palestinians cannot rely on their Arab neighbours for donations, the good news is that the contributions from the relatively affluent EU taxpayer have not seized up. It is difficult to assess accurately the level of payments that the EU devolves to each citizen in Gaza and in the West Bank, as Brussels conceals the statistics. However, the direct directives added up to almost €200 million in 2012. This not only went to financing salaries of civil servants. As confirmed by leading local politicians, the money financed the living standards of convicted terrorists.

For all these positives and their starts, significant change will not come for sometime. The geopolitical dynamics will see to that. In addition, tunnel destruction, rising debt and continuing corruption do not facilitate a mass Palestinian socio-economic revival. As one Palestinian commentator indicated, when the wife of a senior PLO official spends $20,000 for dental treatment in Tel Aviv at a time when there is no shortage of renowned Palestinian dentists in Ramallah, Bethlehem and Nablus, the average citizen is forced to deals with inconvenient truths.

Over the next few months, UN committees, the World Bank, the EU and others are due to release reports blaming continuing Palestinian government poverty on the punishing measures of the Israeli government. There is no space to discuss here what is “punishing”, but even one roadblock has a limiting effect on the surrounding economy.

However, as an economist, I am forced to ask if these international bodies have considered whether the actions of Palestinian leaders are responsible for their own financial mess. Once all the mud-slinging and spin is eliminated from the Palestinian playing field, the regimes in Gaza and in Ramallah are just that – regimes, dictatorships. Historically, these types of government rarely to deliver economic freedom for their voters………….which is why the economists in Ramallah find themsleves ruling over a bankrupt treasury.

Tourism in Israel – it’s boom time

13 February 2013
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Categories: Afternoon Tea in Jerusalem, Business, Israel

There may be an economic global slowdown, but more and more people are travelling to Israel.

Some 3.5 million visitors will have arrived in Israel by the end of 2012, 4% more than in 2011……Total revenue from tourism in 2012 is estimated at about NIS 36 billion (US$9.25billion), 4% more than in 2011.

Compared to many places, these numbers may still be small. However this is an industry on moving forward quickly.

Historically, Israel has been associated with religious tourism. And it has always been difficult for the local industry to shake off the ‘bad news effect’, as Israel has been forced to defend itself from its immediate neighbours. That said, times are a-changing.

For years, the main composition of incoming tourism has not relied on the Jewish market. For example, Russian pilgrims have been flocking to the Holy Land.

Not to miss the opportunity, the Israeli government has been very direct about its efforts to promote changes. A press release from last month referred to grants to the value of 260 million shekels, an approval for over 1,700 new hotel rooms, and a continuation of the policy of tax incentives.

Admittedly, it has been pathetic to watch the bureaucrats drag their feet over final approving for an ‘open skies’ policy for airlines, but even that is gradually altering. There are signs of an agreement with the EU. Arkia and SAS are upping the number of flights to and from Scandinavia. There are plans to increase direct travel from places like Boston. And so the list continues.

What caught my eye today was an article detailing the opening of 12 new top class hotels this coming summer. Several are associated with international chains like the Waldorf Astoria in Jerusalem and Indigo in north Tel Aviv. If these major investments are valued at roughly half a billion shekels, add on to the list the new three-storey wing of the American Colony Hotel in East Jerusalem. This is one of the world’ premier boutique residences.

Israel’s Ministry of Tourism has set an ambitious target of 5 million tourists for 2013. Judging from the loud noise of the crowds in the centre of Jerusalem in this off-season week, this vision is not too wild a dream.

To change or not to change? A question for biz coaches

9 February 2013
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Categories: Afternoon Tea in Jerusalem, Business, Israel

“I do not need to change. The problems lies elsewhere”.

Thus says many a CEO to the business coach. And the only reason that the coach does not groan with disappointment is because they know that ironically, the CEO is admitting to the core of the problem facing the company – himself. He is stuck in his own mud.

The fact of the matter is that we all need to change. Just look at your own skin – it is peeling away as you read this. You are changing at this very moment.

In parallel, your work environment changes – maybe new competitors come on the scene with different business models to steal your clients. Technology is a great game-changer; ignore it at your peril. And of course people change their views as they are exposed to new influences.

So when a company manager ignores the dynamic environment around him (or her), there is a reasonable possibility that his business will suffer, and sooner rather than later.

In my view, it is the task of the business coach or mentor to point out the impossibility of blocking change. The client may not realise it initially, but the coach is usually engaged to try to ensure that the client takes increased responsibility for his decisions and actions.

I have recently been involved with two contrary cases, which illustrate this point.

Mr Entrepreneur had been looking to set up a hightech biz for some time. The ideas, the partner, the tech, the market – many of the fundamentals were in place. However, after a while, it became evident to me that the market was to be secured by the partner. And gradually, I realised that the discussions were not moving forward, as the entrepreneur was always waiting for “somebody to just finish something”….which never happened.

I realised that the ‘other somebody’ was a euphemism for the entrepreneur himself. The problem had been transposed in order to duck responsibility. Any talk from me along the lines of ‘what are you doing to …….’ was rejected repeatedly. So when I last heard, the project was waiting for somebody……………

Mr CEO has been running his operation for years. Around twelve months ago, sales plummeted. He wanted to blame the market, competition, staff and more. While later analysis showed that he may have had a point, the immediate issue lay elsewhere; new revenue, and immediately.

So my CEO decided not to going round muttering “j’accuse”, but came up with a new business strategy. Today, sales are up. Additional work flow is being generated. Measures are in process to find more appropriate staff. While the jury is still evaluating the ultimate success of the changes, for now the company is very much afloat.

Change is not always so easy to understand nor embrace nor internalise. If you ignore or reject it, the pain could be even greater.

Why the interenet has not killed the retail business

6 February 2013
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Categories: Afternoon Tea in Jerusalem, Business, Israel

I was posed the question: “Should I open a shop? After all, margins are being squeezed as economies are tight and as internet shopping becomes increasingly popular.”

In Britain, three mega chains – Jessops (cameras), HMV (CDs) and Blockbuster (DVDs) – have folded in recent weeks. Parts of some inner city retail centres look like ghost towns. Sky TV has been running an item on how Obama’s America has still to recover from the credit crisis. In my country, “a quarter of Israel’s clothing and shoe stores are in danger of going out of business.”

So why should anybody want to enter the retail business, this apparent jungle of doom? How can you do battle with a virtual enemy, the internet, which allows people to browse with a tasty mug of coffee in their hands and to find the best price from a source that does not even have a shop? To start up or not?

I read a great article on the subject, mainly referring to the chronic problem in the UK. As Graham Ruddick observed: “….retailers have been adapting and investing to meet the demands of the modern consumer.”

There appears to be five key tips for turning your shop into a success in the current commercial climate:

1) If you develop an online presence, allow the customer the option to pick up the valuable booty. It will ensure greater communication and maybe even lead to an extra sale in passing.

2) Identify your threats and do not ignore their challenges. Steimatzky, Israel’s leading book seller for years, had a dominant position in the market. It nearly killed off the little shop. However, as if to be predicted, they did find new ways to help people buy books, which can easily be purchased over the web via Amazon. For example, there was rarely a corner to sit down and read a chapter in a store.

3) Know your customer. Provide a niche product. People are people and we all have needs that must be serviced. As HMV closes down, I know of several record shops that have sprouted  up in different countries. These are shops that have adapted with the times and thrive, despite lowish margins.

4) Partner up. There is no global law of commerce that says a shop front of 50 sq m has to be occupied by the same owner. Why not put two or three vendors under the same roof, offering tasters of a larger range, which would be available on-line or at larger outlet away from town centres?

5) Simply make your shop look attractive. Invest in appearance. Two years ago, the City of Jerusalem heavily subsidised shops in the heart of the city which modernised signs and shop fronts. The results have helped to make a difference in the atmosphere, encouraging more visitors.

As Ruddick observed: “With investment and the right strategy, therefore, it is still possible to thrive on the high street.”

An Inconvenient Truth – USA & Israel

4 February 2013
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Categories: Afternoon Tea in Jerusalem, Business, Israel

A staggering piece of information:

Researchers have found two peak years when the richest 1% (in America) earned nearly a quarter of the nation’s total income; 1928 and 2007.

And we all know what happened to the global economy in the years following on from these points in time. Disaster!

I garnered the facts from a review of a new film “Inequality For All“, which is fascinating, if not bizarre. How can a 90 minute documentary on income inequality become a commercial hit? And it intends to do just that by launching as its star a 66 year old diminutive ex-politician, Robert Reich, who was Bill Clinton’s Secretary of Labour.

The figures that Reich supplies are simply gobsmacking. In 1978, the typical male US worker was making $48,000 a year (adjusted for inflation). Meanwhile the average person in the top 1% was making $390, 000. By 2010, the median wage had plummeted to $33,000, but at the top it had nearly trebled, to $1,100,000…….Reich’s thesis is that since the 1970s a combination of anti-union legislation and deregulation of the markets contrived to create a situation in which the economy boomed but less of the wealth trickled down.

Reich has strong words of warning for policy makers in America, in the UK and elsewhere. As somebody living in Israel, his words have special meaning. This is the country where many analysts argue that the significant change in the recent general election was that the middle classes refused to ‘buy the arguments’ of the outgoing government. People swopped parties. Jerusalem will have a new coalition, where at least initially economic issues will count for more.

So what social miracle happened in the Holy Land?

It is easy to dwell on the social protests of two summers ago. The 25-40 year old bracket took to the streets, moaning that the cost of raising a young family in Israel is prohibitive. For decades, many parents have run away from the work market as child care has remained exorbitant. And the list of complaints is long.

Back in December 2011, the OECD summed up the position very clearly.  “….the gap between the average income of the richest 10% of earners in Israel and the United States was 14 times that of the bottom decile, compared to 10 times in Britain and six times in Germany and Denmark.”

Barely four months later, the Bank of Israel confirmed the problem. “Income inequality grew faster in Israel than in other developed countries………. adding that over the last 20 years, the salary gaps between educated and uneducated workers grew while salary gaps between men and women narrowed.”

Since 2002, Israel has seen average annual economic growth of 3-5% almose every year. Tel Aviv is full of tall buildings. Despite warnings of a bubble and despite a global dowturn, the price of new housing continues to rise. The stats for internal tourism remain firm. Money is available,………. but for whom?

There is a growing impression in Israel that just as “the Bush crowd” blossomed just before the 2008 credit crisis, Bibi Netanyahu’s friends are in a similar position today. In parallel, there is no shortage of charities in Israel that collect means and money for the less well-off. This misfit is a red warning sign in any society, and that is an inconvenient truth that needs to be addressed right now.

Moses and his father-in-law: First business coach relationship in history?

3 February 2013
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Categories: Afternoon Tea in Jerusalem, Business, Israel

In the bible, we learn that Jethro was the father-in-law of Moses. Shortly before the story of the Ten Commandments in Exodus, Jethro cautions Moses that he cannot be the permanent judge to hundreds of thousands of wandering people. The solution would be to appoint a council of seventy wise elders.

There is an old Jewish joke – if there are two Jews in a room, you will receive three opinions. Yup, Moses had to put up with a cantankerous lot, never ready to take criticism.

So, how did Jethro manage to ensure that his suggestion was accepted? Why was Moses so appreciative that he asked the old man to stay with the wandering tribes?

Teh truth is that Jethro came with several core qualities:

  • He was recognised as a judge, a Midianite priest.
  • He was an outsider. Thus he had no ‘axe to grind’. He was not out to prove a point.
  • He was experienced

In addition, it was worth noting how Jethro conveyed his message. He explained and cajoled rather than dictated and demanded. Modern studies show that under such circumstances, people are more likely to retain the instructions and to take on new responsibility.

That said, a successful coaching pattern also demands something from the client. As Moses demonstrated, you need an open-mind, one that is prepared to accept and embrace change.

While Joseph is often considered the world’s first accountant or economist, Jethro blazed a trail for modern-day coaches or mentors. And thousands of years later, we are still trying to comprehend fully the simple and practical lessons of millenia gone by.

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