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Budgeting disasters – 2 Israeli case studies

8 December 2010
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Categories: Business, Israel

This week, I learnt of two actual stories, where accountants and economists tried to save money, but lost a fortune.

At a macro level, last week Israel needed international help to put out a raging forest fire. Nothing wrong in seeking assistance. However, the need to issue an SOS was sparked (pun intended) by over a decade of de-investment in the country’s fire services.

The Finance Ministry had refused to approve requests. The Ministry of Interior and others had refused to insist on budget approval. Meanwhile as lives and homes were literally burnt away in seconds, the tv cameras filmed fire engines that would not start. It has been exposed that the main training ground cannot run “real” exercises, because neighbours have complained of the danger! Staffing levels are way below international comparisons, and so the list of unbelievables goes on.

How much has been “saved” over the past few years through this false allocation of resources? The starting estimate is around 100m nis or about US$30m, and robbaly several times that amount.

And in today’s Hebrew newspapers, we read that Israel’s budget debt for 2010 will be 40% less than predicted. Whichever currency you choose, that is a saving of billions. In the words of Monty Python, “say no more…”

Shortsighted? Well, how about this one. A specific Israeli company has been gradually losing its dominance. A new marketing strategy is being devised. Great. This involves “getting the word out”. Great. And much focus is being placed on the main annual exhibition in the sector. Fine.

Fine, that is until the overseas head office of the multinational asked for a justification of the exhibition budget. How many deals will be concluded that want to know. To date, the budget request has been rejected by the foreign senior finance staff in their comfortable new offices.

Meanwhile, at a lower level, an economist is demanding that the Israeli subsidiary sends in the final sales expectations for 2011.

I must assume that the numerous members of the planning staff at head office have cut their on-line free subscription to the Harvard Business Review. This magazine published numerous articles during 2009 and 2010, explaining how great companies are born out of recessions, when they SPEND on marketing. 

Why is the obvious so unobvious to those who should know better?

How disaster can reveal the worst form of leadership!

5 December 2010
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Categories: Israel

Israel is coping with forest fires that any country would struggle to handle. Over 40 lives lost; 40,000 dunams of supreme woodlands ruined; an estimated billion shekels  (US$270 m) in various costs.

Exceptionally dry winter weather, some negligent kids and maybe a few arsonists have forced some heroic service staff to be even more heroic than normal. The Prime Minister has spent much of the past 3 days on site, directing operations. And yet……….

Let me clear. By all accounts these fires are extreme, even when compared to disasters in other countries. Again, firemen et al have been working for days with little rest. And yet……..

A country wants to feel safe. A country expects preparedness. A country wants to observe a government taking affirmative action. These fires have shown beyond all doubt just how much Israelis have been short-changed, for years, repeatedly.

First, it has  an established fact, going back to at least the 1998 Ginossar Commission, that the fire services have been poorly supervised at a political level; poor management and negligent budgets. Yup, that takes in several different ministers of alternative political persuasions. They took a chance that nothing serious would happen and ……….got it oh so woefully wrong.

Bottom line: Because nobody could argue for a few tens of millions of shekels every year, we now have a major humanitarian crisis on our hands. What comfort is it to know that the PM has just ordered the Finance Ministry to offer monetary aid without red tape. By the way, one bank has already said that it will delay mortgage repayments (on burnt down housing?)

And whilst the hoped-for fire engines and new equipment remained in the warehouses of manufacturers, how many interest groups received their extra does of expenditure; religious institutions, buildings for specific sectors, budgets for 30 government ministers when less than 20 are needed, etc etc:

Now more than ever we can say that Israel has a set of political leaders who have forgotten that power is not for the sake of power. They have to look after national interests and not just cater for their own private party affairs. This is a generation of talkers that has failed its electorate.

If one person demonstrates this sectorialism more than most, it is Eli Yishai. The Parliamentary leader of the ultraorthodox party, Shas, he is at his loudest when speaking on behalf of his constituency.  Officially, Yishai is in charge of the fire fighting services, as he is the Minister of Interior, a bureaucracy which has responsibility for many aspects of peoples’ daily life.

As the fires raged near Haifa, people were being evacuated from homes, and firemen were being treated for exhaustion, Eli Yishai spent the Sabbath at home in Jerusalem.

How strong is the Israeli economy?

2 December 2010
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Categories: Business, Israel

The IMF has just given the Israeli economy a cautious thumbs up. 

Israel passed through the global recession swiftly – the fruit of decisive policies – and strengthened macrofinancial policy frameworks. The challenge now is to sustain growth and low inflation while boosting medium-term prospects – in the context of continued global uncertainty, capital outflows from advanced countries, shekel appreciation and a housing market that is overheating.

So where to next? The “PIIGS fallout” does not help. Exports to these countries are down and there is a US$0.8 billion bank exposure to the region.

On the stats side, unemployment rose slightly this week for the first time in nearly 24 months. And the third quarter saw an unusually sharp fall in manufacturing output, particularly in the pharma sector.

The stock market remains one area of tranquility for investors. Over the past year, it has jumped close to 50%. The top leading 25 companies have seen their combined profits leap forward by 17%.

What does all this mean? The basic fundamentals are in place. However, as the IMF and the Bank of Israel’s continue to shout, this platform needs to be protected, constantly. Rule number one – no giving in to economic and politicl interest groups!

Networking – avoid the crowd & get to the top people.

29 November 2010
1 Comment
Categories: Business, Israel

I have just attended a London meet up of hundreds of people, considering business opportunities in Israel. And one of the questions that popped up repeatedly in different forms was how is it possible to seek out decision makers in a foreign country, where English is only the second language.

One answer I threw back was to use a recognised local business mentor. But is that enough, especially if you are in a new environment?

This weekend, I read an article about networking your way to the top, avoiding the traps along the way.

  • Get to be known by being useful
  • Take charge of new situations, without dominating
  • Expand contacts book
  • Research who you are going to meet
  • Sit / stand opposite those you wish to influence

Simple enough if you are in a meeting scenario. But what happens when you are faced with an event of some kind?

  • Prepare some opening lines in advance
  • Avoid taking about yourself too much
  • Step outside your comfort zone and drag others into the conversation.
  • Try to show honest interest, even empathy, in what is being said to you.

If you let a strange language remain as your handicap, you will never move onwards.

When to use a business mentor

25 November 2010
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Categories: Business, Israel

“Business mentoring” is one of those newish fads that has creeped up on the commercial community in the past few years.

In Israel, the Ministry of Industry actively encourages small and medium businesses to use mentors. The cost is subsidised by up to 75% and the paperwork is relatively painless. In the UK, the new government has taken active steps along similar aims. Despite recent initial criticisms, the project is moving forward.

The question is when to turn to a business mentor. Recently, I held a preliminary meeting with a potential client, where I felt the need to be very frank. I asked them to demonstrate their level of future intent to the project discussed. There was a possibility that we would be wasting each other’s time, a precious resource in itself.

The Institute of Independent Business has over 5,000 associates in over 20 countries, many providing direct support for those in need of mentoring. A fellow associate is Bill Cunningham from Shepperton, London. Bill has drawn up a simple check list for mentors to ask before taking on a client.

Many of these issues can be turned on their head and used by the person considering such a service.

  1. Can you provide an agreed statement of requirements?
  2. Do you have a top priority?
  3. What is your timescale and why?
  4. What is your sincere and genuine commitment?

Bill’s longer discussion is worth reading in full.

I would add one other point: “Why are you here”? This seemingly innocuous question tends to prod people towards some very revealing answers.

OECD looks to learn from Israel’s economy

22 November 2010
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Categories: Business, Israel

Israel’s economy has just turned in its 6th successive quarter of growth. While slightly down from earlier stats, the Finance Ministry is looking towards achieving 4% for the year, with a similar target set for 2011.

So the comments of OECD Secretary General, Angel Gurria, will come of no surprise. During his visit to Jerusalem, the international financier noted that Israel’s economy is doing better than others. Earlier Gurria had observed that:

The Israeli economy had grown during a recession, and OECD countries can learn from that. Unemployment is also low than the group’s average.

A compliment indeed, and very encouraging. Gurria did not hide his concerns for the future. He feels that more can be done financially to help the Palestinians. And the minority and poorer sectors must not be ignored.

However, Israel’s economy still faces three key challenges. Fortunately, none are concerned directly with budget deficits.

  • It is faced by a continuing rise in the price of real estate, a rare issue for the rest of the OECD. The government is taking too long to release new land on to the market.
  • The shekel continues to remain strong despite the open and continuing efforts of the Bank of Israel to buy dollars. This is damaging the profitability of exports, a key part of the country’s economic success.
  • And major overseas markets are cramping up, forcing exporters to look for alternatives. Not so easy after a global recession.

Where to next? As the OECD struggles with the Irish crisis, Israel is already looking beyond to a different set of hazards.

How some socialist kibbutzes are making big bucks

15 November 2010
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Categories: Business, Israel

My latest client is a very decent sized manufacturing concern situated in the heart of an agricultural kibbutz. The members own 50%.

Yup – the remaining shares are in the hands of a private group. Long gone are the days when the kibbutz movement, now celebrating its 100th anniversary, was a bastion of socialism.

I have no intention of knocking kibbutz and what it stands for. Over the past two decades, the 273 communities have evolved. For most, debts have been paid off, the next generation has stopped leaving, European volunteers are returning; etc, etc. Good times are returning.

Commercially, success stories abound. In the past 12 months, there have been at least 3 major “exits”.

  • Materna, baby milk supplement from Kibbutz Ma’aborot, sold to Osem/Nestle for 268m shekels ($70m)
  • Shamir Optical from Kibbutz Shamir, sold to Essilor for 130m shekels ($35m)
  • Tivoll, soya based foods from Kibbutz Lohamei Hagetaot, sold to Osem / Nestle for 500m shekels ($135m) 

Only a few weeks ago, it was announced that the listing of the number of kibbutz owned firms on the Tel Aviv Stock Exchange is set to double. The movement may account for less than 2% of the overall population, but its 127,000 members drive over 8% of Israel’s GNP. Impressive.

And if you think that all I am talking about is a few large factories tagged on to a massive agricultural ego trip, you are wrong. Venture south towards Eilat, and stop off at Ketura. You will find some of the most sophisticated solar power units in the world. No surprise that Siemens has been investing heavily in the venture.

What next? Simple. Raise your glasses to the next 100 years of commercial success for these communities and then join in the boom.

Why no rain in the Holy Land is “good news”

14 November 2010
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Categories: Israel

About 5 years ago, in the midst of the Intifada and suicide bombings, some of the leaders of  main religions of Jerusalem came together for a  very unique press conference.

No, they did not call for peace. Nor did they offer a joint prayer for those who had been injured or killed. They could barely bring themselves to shake hands with each other.

The issue was the proposed march through the holy city by a group of homosexuals, lesbians and their supporters. The leading clerics – Muslim, Christian and Jew – were appalled and demanded the cancellation of the walk.

The calls fell on deaf ears. In fact, the walk has also taken place every year since then. And we all thought that we would not see such a sign of religious unity again, at least until after Israel had won the world cup.

Wrong!

This time, the rallying cry has not been to do with “settlement building”. Nor unsupervised excavations by the Wakf in the Old City. Not even the divisive management of the Church of the Holy Sepulchre. No – we are talking about rain, or rather the lack of it.

It is mid November, and barely a drop of water has fallen in Israel this month. In fact, a heatwave is predicted for the next few days. The Kinneret, a main water resource, is running dry. Desalinization will only become fully effective in about 3 years. The country has a major problem.

So, several religious leaders – Jew, Muslim and Christian – came together last Friday for a joint prayer session. It took place in an Arab village, just outside Jerusalem.

Will it work? Will it be more successful than the previous act of unity? It will take a brave person to predict the future.

However, the event itself can be seen as one small drop in helping to make the garden of coexistence grow, despite the terrible environment. Long may their efforts continue.

How to curtail the risk element in your decisions.

12 November 2010
1 Comment
Categories: Business, Israel

“How do I know it will work? Why should I take on the client?”

As a mentor, I am asked this question repeatedly under different guises, and it came up again twice this week going around Israel. An alternative version to the same problem: “Why should invest valuable resources on this client when I can be looking for others?”

The bland answer is nobody can predict the future. But that is not a response I can offer when faced by a very concerned CEO. Fortunately, there is help at hand with a growing academic literature on the subject.

For example, the latest posting at “Guerrilla Consultant” observes that in managing sales process, there are at least 5 perceived challenges:

  • Handling the perceived risk
  • Responding to new decision makers
  • Creating a persuasive “win theme”
  • Understanding how your clients operate
  • Not making a fool of yourself

The article is definitely worth reading in full. One point stood out for me:

Resist the urge to cover every base. Use your interviews and sales meetings to pinpoint your buyer’s perception of risk. Be candid about your views on the potential risks your buyer faces and, chances are, your buyer will reciprocate.

 Then, create a communication approach that provides compelling evidence for how you will address each specific risk.

That means you have to understand the buyer’s perception of risk, whether you think those views are valid or not.

The theory is great, but what about the practice? Are there any actual tools out there to help our CEOs?

For the past few months, I have been associated with Wyndarra Solutions, a small and growing Australian outfit. Applying knowledge learnt from clients, they have developed a web-based software, which offers practical support to senior decision makers.

The market for their technology is evident. Wyndarra has now extended its operations into Europe.  A press release explains why. 

Leading market research companies, including Gartner, Forrester and McKinsey all provide coverage of these new Risk Management tools and its International Standards and compliance methodologies.

Using Wyndarra or a similar application, management can now evaluate risk in a more secure manner.

Happy days for Israel’s economy

9 November 2010
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Categories: Business, Israel

What would you do if you woke up in the morning and saw that somebody was offering you US$16 billion – give or take a billion?

Well that is the estimated direct benefit to the Israeli economy years from new energy reserves – around 2 billion shekels per year for the next 25 or 30 years.

It has been established beyond doubt that just off Israel’s shores are commercial supplies of gas. There may even be some oil as well. The government appointed Sheshinski Committee on the future tax structure of these finds is about to report.

The politicians and the groups of vested interest will work out the final details – taxes, dividends and the rest. But the bottom line is lots of extra income for the Finance Ministry. And of course, there will be knock-on effects – new side industries, employment, exports, etc etc.

What to do with this extra cash? Some quick calculations in the newspaper Yediot point to several options:

  • 0.5% reduction in VAT
  • 3 new hospitals
  • A train line from Ashkelon to Beersheba

And what else was in today’s newspaper. 1.7 million citizens now officially live below the poverty line, roughly 23% of the population. Of these, about 50% are children.

Now let’s think again what to do with that money.

What will make people invest in your idea?

5 November 2010
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Categories: Business, Israel

I am asked this repeatedly: “How can I get people to support my idea”?

If there was a magic answer to be found at the back of every text book, just think how many people would have to stop writing their management blog.

Is it luck? The way you speak or look? The potential market or the capability of the team involved? All these and more are relevant. However, I would like to focus on one theme, that I have heard stressed on three separate occasions in the past week alone.

It is a common “fault” of entrepreneurs I meet that as they focus on the wonder of their technology or the huge size of sales to be achieved in 5 years time, they forget to mention the USP.

For those who don’t know USP – unique selling point – is what sets you apart from the pack. Sometimes, there is nothing unique but a strong combination of factors, which makes your project “different”.

I was listening to one Jerusalem industrialist, who has set up 4 cleantech ventures in recent years, and he could not stress this point strongly enough. As soon as you can, in a presentation or in an executive summary, state why you are special. Immediately. that will make you interesting to a prospective investor.

No this is not an isolated thought. A Fox News interview with venture capitalist Randy Komisar of Kleiner Perkins Caufield illustrates the importance of this subject.

Bottom line: If your idea is that good and you are that enthused by it, you will find a way to describe its benefits succinctly in a 15 second elevator speech. If not, you leave yourself open to the accusation that there ain;’t anything too wonderous in what you are doing.

So what can be done about airport security?

31 October 2010
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Categories: Business, Israel

Wednesday afternoon and Colin Matthews, head of British Airports Authority slams “redundant” security measures at airports. 

I am reasonably optimistic that we can make the passenger experience more comfortable while keeping safety as the principal concern.

That’s nice. But three days later, and it appears that bombs have been flying around the world undetected. Matthews and his supporters are shut up.

Ever since the days of the PLO and Baader-Meinhoff, security services have been trying to keep the bad guys away from the pasengers. You have the feeling that they are often chasing the enemy rather than dictating the terms of the game.

Unfortunately, there are too many people out there who value life very differently than most of us. And that value sinks even further (if possible), when they channel their hatred against a religious or political opponent. Terror – yes, murder – is then a very simple step away.

Are we Israelis too security conscious? Well, I will let the shrinks answer that. What can be stated is that for the past two decades or so, Israel has led the field in security products and services; hardware, software, and intelligence.

This week, Israel is hosting a Homeland Security and Technology Conference. Much of the emphasis will focus on airport security. For example, the container code registration system of HTS is but one tech to figure prominently. “It specializes in image processing and computer vision technologies, mechanisms critical for a wide variety of civilian and security applications,” and is clearly a leader in its field.

But here’s a thought: what if you could stop the 9/11 type people before they get anywhere near a plane? What if this could be done without even talking to them – even eliminating the need for ethnic profiling?

The Economist magazine recently commented on the new skills developed by WeCU, located north of Tel Aviv. Their technology “analyses how people react to images (photographs of known terrorists, say) which may provoke a detectable physiological response in miscreants”.

Now for me, that is really cool. OK – I am biased, as I have know these guys for some years. But WeCu’s solution will probably resolve a lot of the complaints dished up by BAA and other airport managers interested in their higher profits. It will help to move customers along through the terminals without impairing their safety, allowing them to keep their shoes on and retain their precious bottles of water.

Maybe the solution for Matthews et al is to channel some of their resources from publicity and into further technology testing.

The financial media discovers Gaza

29 October 2010
6 Comments
Categories: Business, Israel, Palestinian Society, Palestinians

Writing 2 weeks ago in the UK newspaper, The Mail on Sunday, Peter Hitchens summarised an extensive visit to Gaza, which he described as “world’s most misrepresented location“.

Hitchens coverage was the first amongst several similar stories in the international, all with a similar theme.

I don’t think it (Gaza) is a paradise, or remotely normal………..There are dispiriting slums that should have been cleared decades ago, people living on the edge of subsistence. There is danger. And most of the people cannot get out. But it is a lot more complicated, and a lot more interesting, than that………

But if you think Israel is the only problem, or that Israelis are the only oppressors hereabouts, think again. Realise, for a start, that Israel no longer rules Gaza. Its (former) settlements are ruins.

Even when, as in Gaza, there is no way out, morality patrols sweep through restaurants in search of illicit beer and women smoking in public, affronting the 14th Century values of Hamas.

Hitchens is going against a decade or so of politically correct wisdom. Two years ago, Time Magazine pleaded: “Please spare a thought for the starving Palestinians of Gaza. There are 1.5 million of them”. In parallel, and industry of NGOs has arisen, although they seem content to criticise Israel but never the excesses of Palestinian rule.

So what is the truth? was there ever hunger? Has Gaza suddenly discovered gold? Has it been wealthy all the time, but nobody really reported the facts? As Hitchens also commented, the truth in the Middle East is rarely what you see on the surface, so let’s dig a bit more.

Go to any IMF or World Bank report on the Palestinian economy  – and Gaza in particular – and you will find a depressing set of economic statistics. Every since September 2000 when Yassir Arafat and the Palestinian Authority launched the Second Intifada, the economy has nose dived.

But if financial growth in Gaza went backwards, then previously it must have achieved a “higher” level from which to fall. And this is where the work of Sebastien Dessus for the World Bank is so valuable. Professionally, he has been tracking the Palestinian economy for over a decade. Note what he says about the period from the onset of Israeli rule to the start of the Intifada.

While real GDP grew by 5.5 percent on average in West Bank and Gaza from 1968 to 2000, it only grew by 4.2 percent in Israel. During the same time, population grew by 2.9 percent in WBG and 2.4 percent in Israel.

Does that put the Palestinians as one of the most successful economies in the last quarter of the twentieth century? Bring on the Intifada, suicide bombings and attacks from Gaza, and the Palestinian population suddenly found themselves without 125,000 jobs in Israel. And these were considered relatively well paid positions. Couple this with Israeli defensive measures – justified and  / or repressive – and you have the recipe for a mega economic dip.

For the Palestinian leadership, the question was did the political uplift justify the financial turmoil, a debate I will not deal with. Certainly, key personalities did not suffer. Fatah strongman, Mohammed Dahlan amassed a personal fortune since his PA career began in the late 1980s, organising youth mobs in Gaza City. Hamas has collected a wealth of taxes from the smuggling industry, leading to “unprecedented social mobility” according to one local source.

And today? As Hitchens writes, life in Gaza is not a picnic, but neither is it a disaster. Further recent evidence?

  • The Financial Times has described the al-Deira luxury hotel, which has remained open despite Israeli measures and the repressive practices of the Hamas government.
  • Mai Yaghi, a local Gaza reporter has detailed how the old smuggling tunnels have a completely new and ironic purpose , because “lifting of restrictions (by Israel) in recent months has seen consumer goods pour into the Hamas-run territory through Israeli crossings, transforming the tunnels that once served as a lifeline for Gaza into its sole export channel.”
  • The EU’s representative to the West Bank, Gaza and UNRWA, Christian Berger, not considered a friend of Israel, has been quoted as saying that the area is “full of consumer goods”. 
  • And if Berger feels that there is not enough ready cash and actual purchases, he should recall that the largest employer in Gaza is the civil service. The Palestinian Authority is still paying the salaries of these 67,000 people, even if many are paid up Hamas officials.

Is Gaza rich? No. It still needs the tons of daily aid, which Israel facilitates. On the other hand, a utube video from an unknown source shows beyond doubt just what multiple resources are available in wide parts of the territory.

And is there a lesson for the future? Look what is happening in the West Bank. Hatred of Israel may still predominate. But much of the violence has been laid to one side. As Time Magazine now observes.

Ramallah’s first five-star hotel, a Mövenpick, is opening this month. Across the West Bank, similar scenes are unfolding. Building cranes pierce the sky. Outside Nablus, new car dealerships sell everything from BMWs to Hyundais. Inside the ancient city, the first movie house to open in 20 years, Cinema City, is hugely popular. Last year the Hirbawi Home Center, a five-story shopping mall selling luxury items like plasma TVs, opened just outside Jenin.

Indeed, the IMF has reported that the Palestinian economy is on track to grow 8% in 2010.

So, the international media have confirmed that Gaza is not an economic prison. One question remains. As Tom Gross, a leading commentator, pondered; why does the BBC, possibly the world’s largest communicator, seem determined to ignore this story?

The next scientific revolution, in the Holyland?

26 October 2010
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Categories: Business, Israel

“A short history of nearly everything” by Bill Bryson is not just another fun book by the American author. For scientific dummies like me, he somehow manages to explain most simply molecules and rocks and lasers and elements and much more.

For once in my life I have understood these words – all be it briefly, until Bryson starts to develop another new subject. And then I forget what I had just learnt.

But Bryson makes a very interesting point. Many scientists at the beginning of the previous millennium thought that chemistry and physics had reached its limits. One hundred years later – plus an extra atom bomb, moon landing and microelectronics industry later – we have begun to appreciate the meaning of progress.

The past 2 decades have seen amazing changes. Living in Israel, it is a pleasure to be part of the push to achieve more, particularly in communications technology. Just look at 2 “innocent” items in this morning’s economic press.

  • Provigent has been picked as Israel’s most promising start up in 2010. It provides best-of-breed system-on a-chip (SoC) solutions to vendors of broadband wireless equipment. Wireless products will be working quicker very shortly.
  • Modu is to launch the lightest yet mobile phone, which can be customized for personal use.

Go to a mobile conference and Hebrew will be one of the main languages heard.

But where is the next scientific revolution going to come from? Writing in the Harvard Business Review, Tony Hey talks of the “Fourth Paradigm”, following experiment, theory and computation:

….instead of developing programs based on known rules, scientists begin with the data. They direct programs to mine enormous databases looking for relationships and correlations, in essence using the programs to discover the rules. We consider big data part of the solution, not the problem. The fourth paradigm isn’t trying to replace scientists or the other three methodologies, but it does require a different set of skills. Without the ability to harness sophisticated computer tools that manipulate data, even the most highly trained expert would never manage to unearth the insights that are now starting to come into focus.

In the language of a layman, we are talking about predictive models. This can impact on all the sciences; if and when somebody will fall ill, changes in meteorological conditions, money movements, and more.

But there is another factor, which Hey only begins to hint at towards the end of his article. Collaboration; to get the most out of this new approach, the sciences will have to mix, a trend not always present in the twentieth century scientific history

With Google, Siemens, Intel and the like having major r&d centres in countries like Israel and India, that is a step in the right direction. They are looking for a broader (and cheaper) approaches to new issues. As Hey recognizes, sofware powerhouse Microsoft’s health group is another important element in the equation.

For Israel, the encouraging theme is the result of the start up competition mentioned above. The top 10 winners came from a range of new industries – right in to nanotech. This mixing approach – not concentrating on one sector – bodes good news for the future.

Management gurus – bye bye economists?

25 October 2010
1 Comment
Categories: Business, Israel

Last week, I wrote about “growing role of biologists in management”. Citing a senior marketing director, the question is what makes people tick? How do our genes or chemical composition affect the way we reach decisions, specifically in the work environment.

As somebody, who was trained as an economist, I have to feel somewhat “threatened”.

So my heart sank just a bit further when I began to read how about many leading firms in Israel have rethought their recruitment policies. It seems that students of philosophy and anthropology are highly sought after these days. They leave universities with an ability to observe across a broad spectrum. These are the people who are destined to become financial advisors for their employers.

What about some training in pricing policy or understanding accounting management? Well, it turns out that Microsoft, the mobile companies and others now provide in-house crash courses.

To quote a partner of McKinsey in Israel, Dr Jonathan Kolodny: “It does not matter if the candidate studied management or philosophy. We  prefer students that have learnt how to think and how to look at situations differently.”

I can’t see too many economists or accountants emerging with such a skill.

Who is right and wrong? Yes, we all know that recruitment is prone to trends. I recall how much used to rest on your answer to the question “where do you see yourself in 5 years time”. Who the xxx knows?

But here is a thought for senior management in the companies mentioned above. If the youngsters are being asked to think, is there a mechanism to listen to, respect and possibly even to accept some of the conclusions of these new members of staff. Or will their thoughts just be rejected by the stuffy voices of experience, seeking to protect their positions in the hierachy?

Maybe the economists will have something to offer here.

FDI and Israel

21 October 2010
1 Comment
Categories: Business, Israel

The Israeli economy is continuing to move forward. Recent figures show that GDP will have risen by around 4% during 2010, one of the best performances within the OECD grouping. 

These “good news” items have been matched in the past month by a string of reports, indicating how investor money is returning to the Holyland. Take a look at this short list of examples:

  • Soda Stream is turning to NASDAQ for US$95m.  Similarly, specialist internet TV supplier PeerTV expects to raise between £4.6 million and £6.2 million on AIM in London.
  • The patient monitor developer, EarlySense Ltd., has raised $7 million in funding, led by a Chicago-based venture capital fund.
  • Oversi, a global leader in OTT Internet Video and P2P caching solutions, has secured US$4.9m in funding from several sources, including Cisco.
  • Axerra Networks, a provider of emulation services, has been picked up by DragonWave, Canada for roughly US$15.0m.

Even the socialists of the kibbutz movement are looking to find a total of US$3 billion in new capital.

Any surprise that the Tel Aviv Stock Exchange is looking towards new highs?

Israel’s new range of exports

18 October 2010
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Categories: Business, Israel

Look closely, and you will find a very new set of Israeli exports floating over to her trading partners.

Sure: For many years, Israel was associated with great agricultural produce and photogenic politicians. Then came the era of hightech, as Intel’s chips are developed in the Holyland and Teva has become one of the globe’s largest generic drug manufacturers.

But the first decade of the new millennium has seen Israeli products become world leaders in many unexpected fields. Just look at the brief list below, based on news items collated over the past few days.

  1. China’s home-electronics giant Haier Group will market Israeli water purification products. With 8,000 shops that should add up to a lot of Yuan changing hands.
  2. MCO Industries in Rehovot has secured a US$50 million deal to sell solar water heaters in America.
  3. And low tech does not get left off the list, as “Israeli falafel chain Falafel Ba’ribua (“square”) aims to follow in the footsteps of Max Brenner and Aroma cafés, and take New York City by storm”.
  4. Staying with the food sector, Israeli startup MySupermarket, UK’s independent grocery shopping and comparison site, has completed a new round of investment of $7.4 million, led by Greylock and Pitango. British internet shoppers will be able to find out on the spot, which supermarket chain offers the best deals.
  5. In Cleantech, Better Places is clearly one of the leading players in developing a non-fuel car.

Etc etc. A series of coincidences? Unlikely. At the end of this month, a large delegation from Korean companies will descend on Tel Aviv, looking for new technologies to purchase. Two of my clients expect to be there. The fields range from internet gaming to biomass.

Meanwhile, Korean steel giant POSCO has just become the 19th multinational to sign an R&D cooperation agreement with the Israeli government. So you could be purchasing something from Merck or Microsoft or Abbott or whoever, but its origins could have been in Jerusalem or Ariel or Eilat.

All amazing stuff. Time to calm down with a juicy piece of fruit….. from your local kibbutz of course.

Why they keep on investing in Israel – the Buffet factor

11 October 2010
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Categories: Business, Israel

Today’s issue of a leading financial paper, Globes, says it all.

  • PMC-Sierra Inc. (Nasdaq: PMCS) is in talks to acquire Israeli fabless semiconductor company Wintegra Inc. for about $250 million.
  • NeuroDerm Ltd, which is developing trans-dermal patches for the treatment of neurological diseases,…..received $1 million from Hollywood actor’s Michael J. Fox Foundation.
  • Stem cell co CellCure raises $7.1m

Add in the overseas investment in property and the Tel Aviv stock market, and that is a lot of money heading towards the Holy Land.

Why? You cannot ignore the fact that Israel has a major short term economic distortion. The Bank of Israel is using the rate of interest to control a very bubbly (too bubbly) real estate market. (The real solution – more land for building – is not being supported by the government with sufficient force.) Thus, the shekel is seen as a strong bet, especially against the weak dollar. In charge the speculators.

As the shekel continues to fall, so do the profits of exporters. This threatens jobs and future growth. Difficult.

Most other signs are stable. The budget is solid. Unemployment is down to around 6.3%. The stock market is close to a record high. Many of the hopes are pinned on Stanley Fischer, the governor of the Bank, who has just picked up the award as the best Middle East central banker for 2010.

Kudos, but investors look for something more. They look for somebody to start the game off.

A true sign of confidence comes from the octogenarian Warren Buffet. Back in 2006, he sunk US$4 billion into purchasing Iscar. It is rumoured that the deal took a mere 10 days to conclude. And there was no turning back, when a war broke out shortly afterwards with Lebanon, whose border is close by.

In today’s Hebrew press, Buffet granted an interview. He observed that the intellectual capacity of the country gives it a clear economic advantage over competitors. “We are always looking for new investments in Israel”.

Who’s next?

Noah’s ark, Moshe Dayan and your typical business leader

10 October 2010
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Categories: Business, Israel

Yesterday, Jews around the world read Chapter 6 of Genesis, which describes Noah as a righteous man of his generation. He got the ark job done and saved the human race.

Many commentators probe deeper. When you think about his struggles with booze afterwards or compare him to Abraham, the man’s star is suddenly not so bright. He is not a shining example to others. is he? 

I wonder how Noah would fare in today’s Western society. Consider how he took on board the warnings of doom, how he prepared as he was instructed and how he survived pretty well. That points to a lot of different skills as well as self motivation. Admirable characteristics in any leader.

And whilst reading about Noah in the Synagogue, I found myself thinking about Moshe Dayan. If anybody represents the early successes of Israel, it is this former chief of staff, Minister of Defence and Minister of Foreign Affairs. A hero figure, yes?

In the past few days, official documents have been released, which appear to show that in the run up to the 1973 Yom Kippur war, he and Prime Minister Golda Meir badly misjudged the intentions of the Arab countries, almost to the point of defeat.

We have to be careful. Not all the evidence is available, but it does seem he performed very poorly at the worst moment. There again, the military battle was eventually won, as he achieved on many previous occasions. He went on to prepare the peace treaty with Egypt, and without American prior knowledge. Was he really such a disappointment?

My point is this. In today’s immediate society, we are quick to condemn those that fail or do not perform up to expectations. We hack them down like wilted flowers. In politics that may be an unwritten rule of the game.

In business, that attitude can be disastrous. Experience is so important when trying to create a successful hierarchy of decision makers. Few will succeed all the time, especially when you have need to take unorthodox decisions in order to reach your vision.

In other words, it is easy to destroy business leaders. It is a rare skill that appreciates their talents for the long term.

Those obvious mistakes in business

5 October 2010
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Categories: Business, Israel

A few days ago, I came across an article titled: 7 Common Sales Mistakes, and How to Avoid Them.

While the article concentrates mainly on technical or procedural aspects facing a company, I decided to run a check on google. Amazing – similar titles brought up a whole library of articles. It would seem that the world over, experienced or clever or respected leaders of commerce are making basic and simple mistakes.

Well, this just happens to others, doesn’t it? No! Brain storming for 15 seconds, I wrote down 4 examples of “unbelievables” that I had come across just recently.

The wrong business card: Last night, I was shown a business card from an international company that specialises in creative products. They employ specialists to highlight special and wonderful features of their latest inventions. But their card….

The font and graphics were so jumbled that I could not read the name of the firm, with or without glasses. And the paper had been laminated, Thus you could not scribble initial notes on it. I wonder how many opportunities they will miss for not getting the basics correct.

How not to approach strategic partners:  It has happened to me twice in recent weeks, once re exports contacts overseas and a second time re potential investors, who I had been asked to approach on behalf of young Israeli companies. “You speak English good. You tell them about us.”  

And then came the reality check, as I explained that life ain’t that simple and explained: “Even if they like the concept, the potential target will want to see a basic website. You do not have one. They will want to see a sample or pilot project. Again, no evidence. So, what do you want me to say?”

After the silence, the response was” “You mean; we have to invest time and in preparing a serious package for a partner?” Er, yes!

Not following up: I have met two companies who have not followed up delivered quotes or sample requests. They have simply let the opportunities float on by. And then they wonder why revenues are in the dumps.

Unnecessary credit crunches: Even financial controllers are not blameless. How many of them fail to deal with bad debts or customers that fail to pay on time? The money wizards are prepared to increase the strain on company finances rather than be bothered to take affirmative action. Well, at least  they have protected their comfort zone.

Are these stories funny or worrying? Either way, it just goes to show that no decision maker is immune to such silly actions and needs to find checks to prevent them happening.

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