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Israel’s economy – half term report, June 2011

26 June 2011
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Categories: Business, Israel, Jerusalem

Israel’s economy continues to bubble along.

Happy times it would seem.

It is the job of the governor of any central bank to point out the potential dangers around the corner. Israel’s Stanley Fischer is in the middle of an apparently successful campaign to dampen the housing bubble. And at the end of last week, in an interview with the Financial Times, Fischer questioned the Finance Minister’s propensity to spend.

Fair enough. Just as worrying is the potential fall out from the Greek financial crisis and, in parallel, from the so-called Arab Spring. If Europe is sucked down by Greece, Portugal et al, Israel’s economy will suffer. For example, the UK alone is one of Israel’s strongest trading partners.

Similarly, once the troubles in Libya, Syria and elsewhere have finally evaporated, the results will necessarily bring stability to the region. We can already see how Egypt will almost certainly raise the price of its gas exports to Israel very sharply. The weakness of the Damascus regime has seen one border incident with Israel, provoked by Iranian revolutionary guards, and we have probably not seen the worst of the violent disorders.

In the words of Niall Ferguson, a leading economic historian:

Beware the economic consequences of the Arab Spring. ….(Once the) euphoria phase” of revolutions is over, economic disaster such as higher prices, greater uncertainty and capital flight always follows. …And the magnitude of capital flight from Egypt right now is roughly 10 times the aid promised to Egypt by the United States and Europe combined.

There is a third issue, ignored by the foreign media, but felt daily by the Israeli public. I am talking about the silent stranglehold of key monopolies.

About two weeks ago, the price of cottage cheese, a staple item for many families, rose yet again. A simple facebook campaign backed by a howling media smelling blood resulted in a backdown. Dominant local manufacturers, protected by tariffs, which were imposed by politicians linked to interest groups, had been free to do what they had wanted for far too long. Amazingly, there has rarely been much variation in price between the “competing” firms.

But it does not stop there. The fruit and veg market is also protected by tariffs. Mobile phone charges are expensive compared to abroad. Petrol and cars are similarly overpriced. It is a rip off, according to one newspaper.

You could ask why nobody has shouted earlier that parts of the economy are simply old-fashioned monoliths, designed for the benefit of a few. For me, a more worrying issue has been the role of the civil service. Why was this huge mass of people not able to teach the politicians how the public had to and still suffers?

So while the stats look rosy, is Israel’s full economy still a story of what could be?

If you are a mentor, what is the client paying for?

25 June 2011
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Categories: Business, Israel

“Why should I pay you just to sit down and listen to me”?

It is the question that all mentors face from time-to-time. And I coped it at the end of last week.

At least I did not have to deal with: “How can you guarantee me success?” This is just another version of “why should I waste my money on you?”.

Alon Gal is one of Israel’s most well-known mentors. Like him or not, he is effective. His television show has resulted in many marriages saved and floundering businesses being turned around.

In a recent newspaper, even he admitted that he cannot work his “magic” every time. He gave some examples of cases, where he had not succeeded, and that included his own marriage.

What has brought all this together is a very cool article, written by Rob Weatherill, titled “What does the patient pay for?” While specifically aimed at the analyst – patient scenario, it is easy to draw comparisons with mentoring.

Would it be true to say that the patient is paying for the genuine professional help that the analyst gives, for the reliable support that the patient experiences in living and being able to continue to live amidst considerable suffering? Yes, this is definitely true, and it often not appreciated just how valuable this long term support really is,……. But this support is ambiguous, because the analyst is not especially helpful in the ordinary sense, and he is only supportive again in quite an unobvious way.  

 Weatherill concludes that the patient is paying for “presence” of the analyst. He feels that even in a silent manner, this presence can be evocative.

I have to agree. Last week, I sat in on a staff meeting between a CEO and a senior employee. I was given a free hand to ask questions. The CEO had set up the company himself and is knowledgable about what goes on, but even he learnt about hands-on issues that he had not reckoned with.

By the end, I took on the silent role. I let the two of them work through the issue together. 48 hours later, duties had been reallocated with smiles on faces. I am waiting to hear of higher output.

Take another client. They run a small theatrical company. I have encouraged them for weeks to start calling, making their own bookings. After a while, our meetings came to a halt. At the beginning of June, I phoned them up to check on the state of play.

The client was apologetic and thrilled in one. They had no time to catch up with me, because they have been rolling in bookings. And when I asked how they were planning for the next month, they explained how they had already factored in my question. I felt like a conscience, sitting on their shoulder, supervising.

Along with Gal, I have my own cases, which did not work out. However, I can be proud of those times, when everything goes right; sales rise, companies are opened, efficiency is driven thorugh an organisation, etc. And if I can do that by “silently” guiding the client to understand their own problems, I am a happy person.

Hitech miracles: IBM, Intel and Microsoft

24 June 2011
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Categories: Business, Israel, Jerusalem

Having the local heads of business development of Intel, IBM, and Microsoft in one room is a major event. And this week, I had the honour to moderate a panel with those people, organised by the Jerusalem Business Networking Forum. 

It is no coincidence that these high tech giants have a heavy r&d presence in Israel, the land of miracles. Over the years, Israel has been awarded a number of nicknames, including the “Silicon Valley of the Middle East” or “start-up nation”. Books and theses have been written in quantity to substantiate the point. Korea, Denmark and others all send delegations to Israel to find out how the Holy Land has created such an commercial miracle.

Well here are some pointers as to what’s going on.

First, the panel was hosted by Jerusalem College of Technology. A university dedicated to scientific excellence, the President, Professor Noah Dana-Picard, observed in his opening address how this one small institution alone has fostered 65 start-ups. For example, NDS is a prime supplier of tech for Sky TV. And a new application will allow solar power providers to use heat from direct light from the sun and reflected light from the ground. This creates an additional and significant 25% of output

As for the guest speakers, Michael Oran of IBM noted that barely 20% of his company’s sales today originate from standard hardware. IBM needs to come to countries like Israel, with the biggest lab outside the USA, in order to find and sponsor new commercial ideas. To date, his own global technology unit boasts revenues from over 100 Israeli start-ups.

Shai Tsur at Microsoft told a similar story. He specifically noted that PrimeSense provides the camera technology for XBox game, one of the fastest selling consumer applications in the world. And the next generation will also feature Israeli tech.

Menachem Shoval observed how Intel’s first plant outside the USA was set up in Haifa, Israel. For the past few years and continuing forwards, “Intel inside” means Israeli tech powering your computer.

One of JCT’s senior lecturers in business management, Hillel Bash, stressed how he encourages students “to look for ideas that will be changing”. So no surprise that he pointed out that there is already a strong Israeli presence in the fields of interactive video, cloud computing and nanotech.

But how? Israeli antagonists view the country as segregationist, which they argue should result in a boycott of the country’s products.

So let me return to the development of the solar panels. The team is made up of two scientists from France, another two formerly of America’s NASA programme, and a further two who arrived from Russia. 

Israel’s open society allows for, even encourages, such wonders. Combine this phenomenon with a population which looks for answers to solutions, and you begin to understand why Israel helps conglomerates to change the lives of millions around the world.

“Spy” on yourself – find out what you can truly achieve

19 June 2011
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Categories: Business, Israel

Many people know the biblical story of Moses sending 12 spies to check out the Promised Land. As youngsters, we were taught that 10 of them reported that the land was unfit / dangerous, whereby the Children of Israel received a collective punishment. Cool story.

This week, Jews around the world read this part of the bible. I learnt two fascinating perspectives on life from local religious authorities.

First, ask yourself, why did Moses chose people, who although they were top tribesmen, were ill-equipped individually to carry out the task of spying? Surely, an interesting lesson here for managers of today.

Second, what was the real crime of the spies? After all, they spent more time praising the land than criticising it in their report. And why the collective punishment?

A second look at the texts reveals that what the “ten baddies” said was “no, we can’t”. The task is not possible. (In other words, they had been let down by those who have taken them out of Egypt and that the land is not for them). And 600,000 adults believed them.

The 21st Century is full of mentors and shrinks encouraging us to find the true voice of inner authority. But the fact is that too often we are content to avoid responsibility and tell ourselves that “we cannot” do womething, if only because we have been conditioned that way or that it is an easy option. Sensible, when we are discussing ourselves, yet very disappointing when viewed from the outside.

Well, it would seem that thought this thought process has been around for a lot longer than experts will care to admit. It was nearly 40 years on, when the Children of Israel finally entered Jericho – a different generation, habouring the same basic values. However, this new generation held a deeper belief and understanding of themselves and who was guiding them.

That was a generation that brought down walls of the their enemies. It is time for the rest of us to remove the obstacles from our dreams.

Why do we sell ourselves short in life?

17 June 2011
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Categories: Business

Whenever I bump into – let’s call him Bob, a close acquaintance for years – we talk about his work. And when I ask him if he will move elsewhere, he always quips back with the response: “Who will employ me?”

Aside from his managerial experience, ability to handle employees, training skills, solid purchasing technique, computing capability and much more, I doubt that he is correct. On the other hand, I am not his mentor. And I can but hope that he will realise his strengths another way.

Yet Bob’s self put-me-downs are so evident in many of us. Take three case studies of people I have been dealing with over the past year. (Again, made-up names)

Tony has a great idea for a wellness enterprise. We have worked out a strategy. And he now accepts that it is time to market the concept. “Oh, I can’t do that”, he responds automatically. And it turns out that over a decade back, he had an unsucessful summer job selling appliances on the back of two hours of training.

And from that brief experience, he deduced and sunk into his defence mechanism that he cannot sell. Wrong, matey.

Frank is setting himself up in the service sector. He was faced with a similar dilemma to Tony – how to sell himself, even though he possesses a clear and attrractive market position. When I asked him what he could do to promote his company, I was told that this line of thinking was not his forte.

I bluntly told Frank what he could do with such comments, challenging him if he had been actively involved in sales. You guessed it – another negative answer.

“So, if you have never formulated a  sales campaign, how do you know that you are no good at it?” An embarrassed silence was followed by my client, spurting forth ideas for the next 30 minutes! the damn had been breached.

David disappointed himself, just as the others did. We agreed that it would be necessary for him to speak in front of small groups of potential clients.

  • Can you do that?
  • No.
  • Why not?
  • Don’t know.
  • When was the last time you spoke?
  • Not for years
  • So, who told you cannot speak in public?
  • Back to the world of silence

Each person is an individual, with their own background. Sometimes, because a task appears daunting, we give up too easily. We convince ourselves that we cannot. Sometimes, we have been poorly conditioned by well-meaning parents or teachers.

Whatever, this is all a convenient excuse to pass off responsibility for our actions (or non-actions). So many of us are just missing out on opportunities……. because of ourselves.

Often, the solution is allowing yourself to listen to wake up call from somebody you trust.

Wellness, time management and innovation

8 June 2011
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Categories: Business, Israel

I attended a fascinating lecture this week on “wellness”. This sector has mushroomed in the past decade, seemingly valued at billions in whichever country you are resident.

And in a period, where the “pace of life” is constantly driven faster by new apps and smaller devices, “wellness” devotees correctly pose the question: “Are managers and business owners able to find time for everything they want to do”? What important tasks get ignored at work? And how many of us are guilty of cutting in to family time?

Solutions are not simple. One interesting approach was offered by my IIB colleague, Siu Ling Hui from Melbourne, Australia. Writing in the latest edition of her monthly posting, Ruminations, she questioned if “we are busy with the right stuff”.

And if not? Siu wonders if businesses invest too little time, money and resources in innovation and marketing, activities which create value today and in the future.

…..innovation isn’t just about inventing ground breaking world shattering products. It is equally about harnessing new technologies or new ways of doing things so as to be able to deliver your products or services more effectively to your customers than your competitors………..

 As for marketing,  Siu concludes that you must invest creatively or perish. For example,

Whilst many of the major (Australian) retailers are crying poor and bitching about the competitive threat of internet, there are many new small retail businesses which have harnessed the power of technology to create innovative business models.

Kogan (consumer electronics) and the Shoes of Prey are just two young innovative retailers who are thriving ……

Consider the book retailing industry. The REDGroup, owner of Borders and Angust & Robertson book store chains in Australia, went into administration in February 2011. Price competition from the internet and the protectionist policy that forced local retailers to buy from Australian publishers were blamed for the demise of the chains………Small independent book stores have been able to survive because they offer their customers something extra beyond just books: knowledgeable staff who genuinely engage with the customers. The “soul-less” large chains didn’t provide that to compensate for the higher prices.

Innovation is so often linked to hightech, that we forget how it is relevant for just about every commercial sector and beyond.

Two of my current customers could learn a simple lesson from Siu’s advice. One runs a gift store, which is open long hours. Local competition is fierce, but the owner is reluctant to risk taking on new items in case he will be copied by others. Another is looking for a career change, but will not bring themselves to decide on new opportunities.

In both cases, the client remains (for now) encased in the comfort zone of the past. Yet they are engaged in spending time doing what they do not enjoy. The result? Not a lot of wellness and an unhealthy bank account.

Israeli econmy and its Mediterranean neighbours

31 May 2011
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Categories: Business, Israel

Over the last two years, a revolution has occurred in the way Israel manages its economy, the focus of which is changing over to a bi-annual budget. Within a few years we will see many western countries, including the US, adopting the option of a bi-annual budget.

Thus boasted the Finance Minister of Israel, Dr Yuval Steinitz. He has a point, and I have said as much in some of my previous blogs.

It is interesting to compare Israel’s economic progress to that of the other smaller members in the OECD. For example, a recent analysis of relations with Greece explains that “Sick of their ailing economy and IMF meddling, many Greeks see the Israeli model of economic growth as the one to emulate.”

The situation was eloquently reviewed by Dr. Michel Strawczynski , a senior researcher at the Bank of Israel:

The economy managed to lower the ratio of public debt to GDP during the crisis, at a time when many countries increased their debt, thereby hampering their recovery from the economic crisis.

Time for a few European finance ministers to make a trip to the Holy Land and discover an economic miracle?

“Just do it” ordered the consultant…. but how?

30 May 2011
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Categories: Business, Israel

“Just do it” is a brilliant catch-all phrase, powered by Nike.

So simple. If you want to get on with any task, just go ahead and do it. Succeed with “us”, Nike. And for many people, the slogan is an extension of what they were taught incessantly in the home and at school. Innovators and entrepreneurs clearly see themselves in that bracket. Just do it.

But what if……

What if you cannot “just” do it? For some reason you are stuck. You cannot carry out the nonchalant task, glaring right at you. Shy, scared of failure, scared of succeeding, laziness, or whatever – as a business mentor, these are frequent problems you have to overcome.

Here’s what I mean. I was sitting today in a restaurant in Jerusalem, hosting two separate sessions with very capable individuals.

The first is young, commercially inexperienced and raring to implement his idea. And he is very focused. “So what’s stopping you”, I asked. “You tell me,” was his response. Playing devil’s advocate, I observed that I did not know what was needed for his business. And he dutifully rattled off a list of equipment.

“And how much does that cost?” I questioned, and followed it with some prodding about marketing.

“So where does that get me?” he pondered. And when I told him that he is now half way to a basic business plan, his eyes lit up. He will spend the next week, confirming the basic facts  and the business model, and then begin to look for a small loan.

Bottom line? For some reason, he cannot motivate himself to move ahead. But once prodded in the right direction, he will “just do it”.

Meeting number two was a different affair. Every question of mine was met with a question. Everything was analysed in detail until the person was sure of what to do next. Fair enough. But what will prompt him to move over from words towards action? He demands to know that he is doing the right thing before he has done it, just like so many of us.

I took a chance and wondered out loud: “How do I motivate you to carry out these tasks?” The reply brought a smile to my face.

“It’s not for you to do anything. I have to do it myself.” By George, he’s got it.

Will it be easy? Possibly not. It will not be a case of “just” getting on with it. But moving ahead is what he will be achieving.

Why innovative managers stop innovating

27 May 2011
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Categories: Business, Israel

Looking back at my mentoring experiences this week, I realise that I have seen quite a few companies being choked of their vibrance and innovation. However, the explanations vary as to why this is happening. Drilling down, the case studies reveal something about the hidden flaws in may of us.

Let’s start with a very simple story that you can find in any town or city around the world. A husband and wife team abandon their comfort zones and known territories in order to set up a small shop in Jerusalem. They have called me in because the set up costs had mushroomed before they realised what had happened. And although sales are now on the up, the cash flow is going “west”.

What can be done, I was asked. To which I promptly asked them:” what can you do?” And once forced into the challenge, there was no shortage of good ideas. Yet, one partner was all for their implementation. The other launched into a mantra of “manjana”. It could all be put off until………well, whenever – another issue, another excuse.

I do not know them well enough. But it was interesting. Here is a business, starved of cash and struggling to save its future. Two young and talented people in charge. But one of them appears so overwhelmed that all suggestions for improvement are smothered. Is that person afraid? Too tired after months of struggling? Do they not want to be there?

Time will tell. I found a similar set up near Tel Aviv. An established family business in the building industry is being threatened by new entrants. The husband wants to carry on as normal, yet the banks are closing in.

I realised that he saw me as a “threat”. What could I know or help, when he had been the CEO for over 20 years? But I understood that his experience was key to the future.

So, I engaged him through his wife. I started to sit down with her, stadily going over the problem areas.  At the end of each meeting, I would leave her “homework”. She began preparing the tasks with her husband. This week, I heard that he is now looking forward to the next assignment.

What has made him wake up? Not sure. Maybe I was able to convey indirectly that his business has a value and is worth saving. That message jolted his ego and the “old him” is coming out of the closet. This bodes well for his company and family.

And finally, I was asked to look at a previously vibrant software firm, where the parent company has become involved in the day-to-day decision-making. Spin letters from the top have been a constant.  Profits have been maintained, as wages have been near frozen. 

And guess what, when the top guys, all smiles, turned up recently for a presentation to the managers, they were greeted with a cold reception. All efforts to rouse the troops ended up …you can guess where.

There comes a time where rhetoric, supported by false empathy and a weak reward system, is seen for waht it is: false. Staff will simply stop going “that extra mile”.

Obvious to my reader? Yes, but not if you have received your own bonus at the expense of those you are trying to encourage. Few new projects are on the horizon at this stage.

Choosing between Assad, Obama or progress – Israel’s economy

22 May 2011
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Categories: Business, Israel

Until recently, the centre of Jerusalem looked like the political map of the Middle East and North Africa. The roads had been ripped up and replaced by a light railway. It was a mess and few are certain that the new train system will improve transportation in the holy city. Confusion.

Meanwhile, shopkeepers have had a rough time. Walking along the pavements has been a nightmare. And yet, the centre of town is rocking along, somehow.

You could say much the same for the whole of the Israeli economy. Goldman Sachs has warned of the aftershocks from Assad’s clampdown. Growth, which has been sailing along at over 4%, may suffer. And there’s the Obama-Netanyahu spat, which could upset investors looking for stability.

Yet the economy continues to progress along towards its next station. Take these three pieces of current news items.

  • Reed Elsevier plc is in talks to buy Israel healthcare software company dbMotion for $250-300 million.
  • Applied Materials Israel Ltd. will hire 100 more employees for its R&D Center
  • The governor of the Bank of Israel, Stanley Fischer, is one of the main candidates to take over at the IMF.

It is now five years since Israel fought Hizbollah in Lebanon. Reservists were called up. The economy in the north of the country almost dryed up for 6 weeks. And yet, by the end of the same year, the country was on an economic high. Why?

Because, as people of Jerusalem have demonstrated, there is something intrinsic in Israel which ensures that hardships do not automatically get in the way of progress. The catch phrase of “thinking outside the box” becomes a subconscious day-to-day reality. I wonder if Moody’s have factored that intangible in to their analysis.

So you’re not motivated..

20 May 2011
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Categories: Business

….a student’s sense of belonging, security, and self-confidence in a classroom provides the scaffolding that bolsters the foundation for enriched learning, intrinsic motivation, more effective coping abilities, self-discipline, and caring.

Thus writes Dr Robert Brooks in his latest monthly posting on empowering children, and regular readers will know that I have referred to this gent in the past.

What I find interesting about this quote is that what applies to the classroom (and, dare I mention it, to homework) also applies to the workplace. We look to our superiors to provide an environment that will help us enjoy our workday. In return, we will want to find a way to add our own positive contribution.

Are we solely talking about money here? Sure, a pay rise helps us to smile. But that’s not all. Here’s a short list of other conditions that are also essential to securing a happy employee: –

  • Encouraging innovation / initiative
  • A manager employing genuine empathy
  • Meaningful channels which allow for discussion (and maybe change)
  • A reward scheme not just based on money

So, if that is so simple to write down, why do so many employers miss “it”? Think how many times in the past month alone that you have heard from colleagues and friends and family who are desperate for a change by the way their comapny is run?

At the end of his article, Brooks quotes David Brooks (no relation), who notes:

Many of our public policies are proposed by experts who are comfortable only with correlations that can be measured, appropriated and quantified, and ignore everything else.

Replace the phrase “experts” with “senior decision makers”, and maybe we have an answer to my question as to why the workplace is often a disaster spot.

What is a business mentor?

17 May 2011
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Categories: Business, Israel

“What does that mean?” is the response I frequently receive when I explain that I am a business mentor. “Is that the same as consultancy”?

If you were to google mentoring, you will come up with numerous different explanations. And some of them are very similar to consultancy. I can only vouch for myself and what works for my clients. 

I see mentoring as a method to help the client attain, or at the very least draw closer to, their vision. The way I do that is to try to understand what makes them tick and, in parallel, to understand what may be holding them back.

A classic situation is the person looking for more sales. How many times do I discover that this is not simply a call for improved use of social media or brighter business cards. A more fundamental issue frequently emerges, such as time management – the CEO is always busy but complains that they never have enough spare hours for their customers. That is a complete misfit.

Drill down, and you might find a casue linked to a problematic parent-child relationship going back decades or a blind fear of handling responsibility. Yup, you start looking for your notes from “shrink 101” lectures, as you abandon your Harvard biz school textbooks.

So the next question I hear is do I have to be an expert to be a mentor. Well, there are specific subjects, where it helps or is even essential: clients who want to set up a facebook marketing campaign or who seek help in running a restaurant. Fair enough.

But take the example of somebody who I spoke to the other day. He imports and distributes mushrooms. He now believes that he can grow them near Jerusalem and export them. How can I help him set up the business?

I explained my experience in small businesses. I told him about my background in international logistics. He heard about my overseas sales contacts. “But what do you know about mushrooms”, he countered. I did not try to hide my zero knowledge, but I encouraged him to accept how that was not the main issue here.

However, for him, it was all about mushrooms and not the business model. I did not hear back from him. And I suppose that he was left in full control of his new business, wondering how to set it up and still drawing no income.

Business mentoring is all about helping people. Mentoring is about listening to people, latching on to what they do not see, and then recreating the issue in a way that they can respond to. It is frequently enjoyable  and usually very rewarding for all parties.

Did Sarah Lacy get it wrong on Israel’s economy?

13 May 2011
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Categories: Business, Israel

Sarah Lacy is a talented journalist on the hightech scene. Look up her writings on TechCrunch et al.

One of Lacy’s pet themes is the Israeli economy, which for nearly three decades has made a name for itself as a “Silicon Valley of the Middle East”. Since the onset of start ups, internets and cleantechs, Israeli companies have been making noises louder and further than may be associated with a country the size of Wales.

The Israeli pavilion at the Barcelona World Mobile Congress this February was not short of impressive. Teva iPharmaceutical Industrie, located outside Tel Aviv, is “the tenth largest firm by market capitalization on the Nasdaq”. Leviathan in wind energy, WeCU in homeland security, BrightSource in delivering solar energy, Better Place powering non-diesel fuel cars, etc etc are leaders in their respective fields.

Lacy will be one of the first to recognise this. Equally, she is very au fait with the nuances of the Israeli society that encourages innovation; government subsidised business mentoring for small enterprises, matching funds for new technology via the Office of the Chief Scientist, a culture that challenges you to think out of the box, and more. 

Where she differs is when she argues that: –

Somehow, as Israel developed more of the ingredients that academics would consider crucial to high-growth company formation, returns from those (early) start-ups have plummeted….The problem is that Israel hasn’t had a lot of home runs……….Israel always outperforms elsewhere. Now, that seems to not be happening…………..

And it is that last phrase that is the key to my questioning of her judgement. “According to Bank of Israel estimates, GDP growth in 2011 will reach 4.5 percent…”, and more of the same is expected in 2012. So what ain’t happening, lady?

Lacy is concerned that few Israeli start ups go on to something mega. Two questions; (1) So what? And (2), Who is to blame?

Let’s be honest, 4% growth these days is pretty damn good. The UK and USA can only dream about such numbers. Unemployment is at a near record low. Exports have continued to zip ahead in 2011, although admittedly the trade gap has extended due to the strength of the shekel.

So based on an immediate statistical argument, Israel is still doing something well according to the textbooks; ensuring that the country’s wealth is being driven by SMEs, small and medium sized enterprises, that make up 95% of many economies.

As for start ups not going on to make a fortune, why blame Israeli macro managers? Simply put; A young firm becomes attractive to an investor or a VC, money pours in, the management board is “upgraded”, and sales are then set to take off. The new decision makers are often located overseas. But if they get it wrong, I suggest to Lacy that she should not look for other scapegoats.

Lacy could adjust her arguments in order to be on firmer ground. For example, Israel is about to benefit from newly discovered offshore gas reserves. Yes, Lacy, that will shift the emphasis of the economy away from hightech. Voters can only hope that the extra tax revenues will be invested wisely in infrastructure.

There is also doubt over some of the support being prepared for 2012 on behalf of small businesses. I have not been too thrilled of the rumours emerging from the Ministry of Industry, as the experts ponder what to do next. If you cannot find anything better, why change established procedures?

That said, Lacy should bear in mind a comment I heard from a London banker back in February 2009. We were sitting in Tel Aviv and he was commenting on the credit crunch. He noted that the same problems were turning in on people, be they in the UK or in the Holy Land. 

The difference is that in Britain, everyone was walking around pessimistic, head down. In Israel, people had the attitude of “OK, so things are tough, but how do we move on and make the next buck.”

That level of  innovation, the route to the next success story, is what Lacy does not see.

Creating an independent economy in the Middle East

9 May 2011
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Categories: Blog, Business, Israel

On May 10th 2011, Israel will celebrate its 63rd Independence Day. Positive growth figures are everywhere. Over the past year, the population increased a further 2% to nearly 7.75 million and the economy moved forward by around 4%.

The economy has come a long way in 6 decades. Back in the 1960s, the country was still securing barter deals with the Soviet Bear, using Jaffa oranges as currency. In the 1970s, the defence budget amounted to a massive third of the GDP. By 1986, Shimon Peres, then Prime Minister and now President, had to freeze wages and prices. An economy that had cowered behind tariffs was about to be exposed to the world.

Leap forward a generation to today, and Israel is an economic success:

  • In 2010, the country was accepted into the OCED and the top rank of stock exchanges
  • It is a leading force in cleantech, particularly solar and biomass techniques
  • For years, Intel computers have been powered by the success of its 3 r&d centres in Israel.
  • The industrial revolution, as driven by the communications industry, continues to feature a massive effort from the Holy Land.

Put it another way, there are not many OECD countries that have emerged from the credit crunch so proficiently. Unemployment is at a near record low and falling.

For international investors, there are large positives to be found. It is not just about VCs or choosing the right share. Large public utilities are being sold off. The Port of Eilat is looking for a new owner form overseas. And a tender has been issued for the new metro in Tel Aviv. The Electricity Corporation could be next.

True. Not everything is perfect. The OECD has yet again warned about the increasing gap between rich and poor. The Bank of Israel has actively warned that the continuous rise in housing prices could threaten the economic stability. There again, of the near 200  countries on the globe, I am not aware of one state without some financial concerns.

And is there a lesson in this for others, especially neighbours in the region? Israel has learnt to forge success, despite on-going threats to its existence. Decision makers in Jerusalem long ago came to realise that an economy based on crying and requiring international loans is not a recipe for success.  

The way to build a better society for all is by creating the conditions to let the nation use its natural skills.

Why we don’t have to be afraid of our bank manager

6 May 2011
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Categories: Business, Israel

My IIB colleague, Siu Ling, has written a great blog on how to get a “yes” from your bank. Her solution – “a well-prepared complete financing proposal package”.

And I am total agreement. But here’s the strange thing. So many of us ignore this excellent advice. To understand why, look at the following typical scenario. I probably have to face it about once a week on average.

When I ask my client what is their situation in the bank account, I am met with a look of pain. Yeah, but how bad, I press. And as I try to drill down, I rarely receive any precise numbers. The client simply does not know, and they do not want to know.

And here in lies the problem. The client begins to lose control. They then become afraid of the bank staff. The next step is simply to try to ignore the bad news. Even less control, and the vicious cycle sets in.

Meanwhile, what is the humble banker thinking? “Please come and talk to me Mr Client and we can sort this out together.”  

As one bank manager once told me, we want people to communicate with us, to tell us of their problems. That way we can resolve issues with minimal pain. Bottom line, we can then ensure that the cash flow of the business will not freeze up!

Surely that’s incentive enough to prepare a financial plan?

Economic wars in the Middle East

29 April 2011
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Categories: Business, Israel

So there is fighting in Libya, one of the largest oil producers in the world. Bahrain’s reserves are expected to last for another 15 years or so. Yemen and Syria also have a few barrels of the black gold. And the list goes on.

So, while all the leaders of these countries are under threat, the dollar revenues keep flooding in. The more they fight, the more they profit. Brent Crude his risen 25% in the past quarter alone.

But what goes for the top brass is not necessarily true for the rest of the folk in the Middle East. A report from The Economist notes that of the countries surveyed “real GDP growth outlook for 2011 has worsened in nine between December and April, improved in eight and remained the same in three”….

Most of the countries registering higher growth forecasts are oil exporters, but Israel and Turkey are both in this group by virtue of better than expected actual performances last year and as a reflection of our modest upgrade of our global economic forecast.

It is somewhat ironic that Israel was given a positive citing. When oil prices first surged back in 1973, it was an aftershock of the Yom Kippur war. Blame Israel for the instability all those years ago? Debatable, but that is certainly not the case with the current violence in the region.

A few days ago, Moody’s issued its annual report on Israel.

The Israeli economy is resilient and dynamic, and the macroeconomic policy framework is coherent. Having eased fiscal and monetary policy to support activity and avoid a pronounced recession during the global crisis, the Bank of Israel is rapidly removing its monetary stimulus in order to ensure the recovery is sustainable and inflationary pressures remain in check.

And here’s another irony. Israel is one of the world leaders in pioneering alternative energy sources, such as solar energy. I wonder why that is?

Leadership courses – something for Middle East leaders?

20 April 2011
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Categories: Business

Imagine gathering the leaders of Syria, Libya, Iran and Yemen, taking them up in a helicopter, dropping them off two miles from the coast in the dark of night and giving them one order: “Swim for it”!

This is how former navy SEAL officer, Rob Roy, operates. He runs an intensive leadership training course for CEOs.

The purpose is to tell them that they can walk into any situation and come out ahead…Motivation is not leadership—real leaders inspire, guide and give hope.

Now I accept that politicians, and especially brutal autocrats, do not possess the same characteristics as business executives. However, neither group can afford to fail. And they are all leaders of complex organisations.

Roy’s programme makes for interesting reading. There is a great deal of ‘extreme’ physical content. Distractions and sub plots are thrown out at all angles. And the reason why?

  • Roy’s extreme training conditions force people to work by themselves. They are deprived the luxury of customary support systems. In contrast, CEOs (and dictators) often have other people do their dirty work for them.
  • In parallel, the course participants do have to support each other in order to survive. If you ditch somebody, you will not succeed. How often do we hear of those leaders dumping those who are considered redundant?
  • The demands of the exercise ensure that decisions are made under pressure. Filibustering, spin and delaying tactics are out of bounds. Nowhere to hide.

The article on Roy poses a challenging question: “What does this teach people?”

Military people know that if something happens to you, someone will come and get you no matter the cost. And if you want my loyalty as an employee, I have to know that no matter what, you’re going to save me. That’s what this drill is for. It’s a defining moment of loyalty and integrity. It’s not about skill, it’s about knowing that they’ll be there for me when the company goes to crap. 

And who are the people protesting in Syria, Libya, Iran and Yemen? Those various different parts of the societies, who know that their leadership does nothing and will do nothing for them.

Time for some Middle Eastern rulers to put on their swimming trunks?

Business mentors, exodus from Egypt & managers

17 April 2011
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Categories: Business, Israel

It is mid April and Jews around the world are getting ready to celebrate the festival of Passover. The main event is where the exodus from Egypt is recalled by the family, and even the youngest participants are giving a part in the proceedings.

The story is told through a book called the Hagaddah – a Hebrew word, which means to explain. And from the earliest years, Jews are encouraged to learn more about what happened and why by asking questions, just as a business mentor probes their clients.

You see by asking questions, both sides become engaged with each other. Accepted norms are challenged and evaluated. You discover things about yourself or your business that you did not realise were there, often in front of your very nose all the time.

Going back to the Hagaddah, and early on in the proceedings, the book describes four types of sons. Two are considered positive influences; the clever one and the one who tries to learn but does not have the ability.

Two others are placed on the other side of the spectrum; the evil one who simply makes arrogant statements and the one who sits passively without comment. And the same characters can often be found in companies, acting negatively on their departments’ activities. How so?

Somebody, who just issues statements without checking facts nor allowing for discourse, will sooner or later not progress nor meet targets. Steganation if not worse. Similarly, the person, who just lets things drift, thus assuming that others can pick up the slack or that nothing bad will happen, are simply irresponsible. Life is not static. Situations change, especially when you think that all is tranquil.

So where does this leave us?

The Exodus took place over 4,000 years ago. Few commercial activities survive from that time. But sages have shown how we can learn from history and in what manner in order to make our present lives more fruitful. These are the decisions we then make in order to shape the history of the future.

Pls sir, can I have another US$5 billion?

14 April 2011
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Categories: Business, Israel, Palestinians

Palestinian Prime Minister, Salim Fayyad, is canvassing Western support for a US$5 billion investment package spread over three years.

Compared to the needs of Portugal ($113b) or Ireland ($50b), that ain’t so much. And nobody can argue that the Palestinian economy is one of the richest in the world. So, in the context of an era when despite open persecutions in Syria, Yemen, Iran or wherever, the Palestinian issue is still considered the cause of unrest in the Middle East, Fayyad’s plan has a real chance of going through.

In my private capacity, I deal with small investors, who always have questions before they throw their money at a new project. So here are my three questions, under the bold assumption that a Western taxpayer might be interested.

1) Is so much money needed?

The World Bank report, “Building the Palestinian State” from 13th April 2011, is highly informative. The press release implies that future growth via overseas help will depend on the relaxation of Israeli restrictions.

Well, nobody can deny that. Before the violence of the second Intifada and the ensuing clampdown, World Bank researchers showed that the economy grew under Israeli governanceby over 5% annually since 1968 . Yet just two weeks ago, a British tourist was killed by a Palestinian bomb in Jerusalem, not allowing a removal of all security measures. 

Yet in parallel, there are signs that the Palestinian economy is actually doing very well. In the executive summary on page 5, the report notes:

Education and health in the West Bank and Gaza (WB&G) are highly developed, comparing favorably to the performance of countries in the region as well as globally. For example, enrollment in secondary education is roughly 20 percentage points higher than the rate in the average middle income country, and levels of malnutrition are 7 times lower.

A week previously, Reuters had described how:

The hilly city of Ramallah, which lies just to the north of Jerusalem, has undergone a massive boom in recent years on the back of Western donor support, with new smart eateries and bars mushrooming alongside a plethora of pristine office blocks.

Significant is the contradiction in the World Bank report, which concentrates on the importance of donor aid. However, as the IMF noted and then cited by Forbes, the need for donor aid is dropping all the time, down to under US$1 billion for 2011.

2) Where is the accountability and transparency?

If the aid or investment is to be given, who will track that it is to be put to correct use? Despite the best efforts of the World Bank and the use of interim mechanisms, money is still transferred via Ramallah to pay for the salaries of thousands of Hamas supporters and operatives in Gaza.

Of equal concern is the opinion of Palestinian President, Mahmoud Abbas. Back in January, he was quoted in Al Hayat al Jadida that “the US is assisting us in the amount of $460 million annually. This does not mean that they dictate to us whatever they want, because we do what we view as beneficial to our cause.”

In a period of international economic instability, with governments cutting billions from their budgets, US$5 billion is no small sum to let go of and wander off on its ownsome.

3) What about other countries?

Fayyad’s appeal is to the West. He specifically started the ball rolling at a conference in Brussels. Yet, in the past month alone, the price of crude oil has jumped by around 20% or US$20 per barrel. Now that is one heck of a lot of extra revenue, which sure ain’t going to the protesters on the streets in Bahrain or Damascus.

So tell me again; just why are Western governments going to accept the brunt of this call from Fayyad? Is anyone going to challenge the figures?

Will my business be a success: 2 helpful guidelines

13 April 2011
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Categories: Business, Israel, Jerusalem

I often find that in many of my discussions with clients there is an unspoken question, lurking in the shadows of the conversation. “Will my business be a success?”

As a mentor, it is not my job to predict or to guess. However, I can prod around two pertinent themes, which pop up continuously.

Belief in yourself and in your product

For all the problems of cash shortage, lack of trained staff or whatever, you have to believe in yourself. It is one of those secrets that they do not teach you at Harvard Business School. This belief contains a massive passion and drive that often helps people overcome enormous hurdles.

Paul Green, an IIB colleague, directed me towards a fascinating utube clip. It is 15 minutes of inspiring viewing, where Caroline Casey’s personal determination allowed her to “look past conventional limits”.

I recalled this to some people this week. Late last year, they had established a service business in Jerusalem and they admitted that it was not easy to wake up every day and “go to war”. The are times when they have to dig deep in order to carry on, and yes the first clients are now coming in the door.

Another client told me how he is no good at selling. So I challenged him and asked: “How come that when you talk about what you want to do, everybody becomes interested in the subject and wants more info.” By the time we meet again, he should have a drawn up an initial marketing campaign.

The importance of the client

A recent posting of mine referred to “putting your audience first”. Remember that it is your customers who keep you in business.

Siu Ling’s latest feature in Ruminations echoes the same point. Servicing customers is all about providing them with value.

Here is a simple example of what I mean. Israel currently has 3 providers of mobile telephones. Annual profits repeatedly hit mega numbers. And yet, those figures seem to be matched by a similar amount of customer complaints. I personally simply do no trust my provider, Orange, and cannot wait to change.

Yesterday, the government of Israel announced that within 12 months there will be two additional companies on the market. Prices will drop, while services should improve all round. 

In the past, I heard one senior sales macho argue that his mobile company invests millions in training. I believe him. The question is not the amount, but where it went.  They probably have not invested enough time and resources into helping the customer and ensuring that they were happy.

Two simple rules of thumb to drive the success of many a business.

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