Friday, January 1, 2010

The START UP Nation

Book : START-UP NATION (The story of Israel’s Economic Miracle)
Authors : Dan Senor and Saul Singer




How do we get more out of people?.
Who can object to this? But it is a loaded question with industrial age thinking. Ironically, the management model encapsulated in this question virtually guarantees that company will never get the best out of its people. Vassals and conscripts may work very hard, but they do not do it willingly. This is a crucial difference when the prosperity depends on creativity and an enthusiastic workforce will consistently outperform a group which is merely industrious. Can you remember any instance when the assigned work brought more joy than the one which you choose to do?".



That was the management guru, Gary Hamel when he makes a passionate pitch that volition is better than assigned or forced or “draft” work. But, even he might have to change his mind seeing this country. Israel as a nation does know how to create lots of enthusiastic and ultra creative conscripts.




Let us quickly see how it does that.
Military service is compulsory and they have one of the toughest trainings. Entries in to elite programs like Air Force are even more demanding. The toughest being “Talpiot” which systematically garners the brightest of the bright and they go through longer and intense trainings. They invariably end up in creating some of the most promising startups to lift the industries in to the next plane of contributions. Real life battle hardened, intensely well trained on technology and strategy are ideal qualities for any company or startups and that is what this “draft” does to business.

This new book (released in November-2009) gives a good understanding of Israel as a nation from a startup stand point. It weaves quite a bit of perspectives in a story telling manner.
We will see two more stories, but before that, quick summary of key points.

1. Questioning status-quo approach is inculcated from childhood.
2. “Draft” training brings all strata of society folks to common ground and brings in a sense of identity and purpose in life very early. Many years of experience is compressed into handful of years.
3. Due to lack of resources, they are very resourceful. Runtime improvisations is something taken for granted.
4. Ownership of assignments is 100% - if not more (Example: Intel Israel case study )
5. Because of high interconnections, transparency is very high to the point of making a claim “everyone knows everyone” (being small, there is no place to run away).
6. Immigration as a policy is integrated at a constitutional level and processes & policies are geared toward enhancing the efficacy of it.
7. Israel seems to have a unique reserve system to address the military and safety needs of the country.
8. Inter disciplinary approaches are very common like Biology and Math, Rockets and Drug discovery and delivery.

Now two selected stories (because, I don’t want to rob the suspense of the remaining)

1. “Our Idea is quite simple. We believe the world is divided between good people and bad people and the trick to beating fraud is to distinguish between them on the web” – Imagine this elevator pitch to the e-bay Chief of operation who handles all the pay pal stuff - the largest internet payment service in the world. But, that is exactly what Shvat Shaked did. His small team developed an algorithm that detected fraud far more accurately than the much bigger team which e-bay had. Eventually, his company got acquired by e-bay. The story is fascinating.

2. The startup “Beta-O2” is working on bio-reactor for diabetes patients. Patients suffer from this disorder which causes their beta cells to cease the production of insulin. Transplanted beta cells would do but they need oxygen supply. Beta-O2's solution is to create micro eco system that has oxygen producing algae and a fiber optic light source. The beta cells consume oxygen and produce CO2 and algae do just the opposite thereby creating closed loop. The skin implantable reactor device can be replaced every year with a 15 minute outpatient procedure.

Some of the dialogues are very appealing. For example,
What do you think of hybrid cars?”.
A hybrid car is like mermaid; if you want a fish, you get a woman; if you want a woman, you get a fish”.


In this book, authors do ask a pertinent and a profound question “where is our Nokia?” – implying where are our big corporates. There is no explicit answer for that question. I think, it is very unlikely it would create a big corporation. I surmise it may be more out of conscious strategy and I see a lot of prudence in it. Centralized production may bring economy-of-scale, but I see the price of that as economy-in-innovation & economy-in-initiative - that may be a frightening prospect for Israel. Aside the culture “Why you are my boss and not the other way around” kind of attitude simply does not lend itself to building a corporate behemoth. May be, it is Shinkansen (Japan bullet train) approach – that is, there is no one big engine that pulls the train, but each coach has an engine “embedded” in to it. We all know it is one of the fastest and effective train system in the world since its inception. Add to that, any mammoth would have huge localized risk which is expensive to protect and oversee. Sum of parts would be always greater than the whole in this country.

Finally, the book contains so many inspiring stories on start up, if you are a cat-on-the-wall pondering about getting in to startup, this book can provide the final push in to the startup river.
Thanks for reading this far…..
Regards,
madhu

18 comments:

Ramesh N Raghavan said...

Hi Madhu,
Nice summary as usual. Hope to read it some time soon.
Looking at the rapid progress small nations like this, Singapore are able to achieve, I wonder how we can try to reproduce some of it in a larger country like ours. Or is it the deep survival instinct that propels nations like this to excel?
Thanks and Bye.
Best Regards,
N.R. Ramesh.

Mohanakrishnan said...

When we evaluate systems we have this bad habit of comparing element by element. In my opinion, we should not even ask the question "where is the Israeli Nokia". It's like asking "where is the Israeli reindeer". To me Israel is all about high end and small scale. They create ideas and start up which get bought by some large company somewhere. The team then moves to the next interesting idea.

If there was a Nokia in Israel, most of Israel would have been employed by it, leaving no one to start anything new :-)

I definitely think the small networked nature of Israel has made it what it is today. The contribution of military training is an interesting new angle. I would have thought it counter intuitive to link disciplining and start up culture.

On NRR's question, I don't think we can take Israel's path to success. If smallness and high tech are Israel's strength, ours is scale and size. But some mandatory disciplining while we are young definitely sounds like a thing to learn from Israel.:-)

Mohan

Mukund S said...

Interesting perspectives! The goal of most startup founders is to sell their creation once it reaches critical mass, and move on to the next big idea. In some ways, it is like the role of a strategist - once it reaches implementation phase, they are ready to move on to the next big idea. Not knowing what will happen next can cause one to have a sense of making most of the moment on hand, and more importantly look at change in a totally different light. If anything, this attribute is what differentiates successful start ups from the not so successful ones - ability to anticipate and be flexible enough (in reality) to handle it. Israel culture, for one, inculcates this from a very young age, and reactionary responsiveness is as important as being proactive, to be practical.

MV said...

Having stayed in Jerusalem for a few days here are my thoughts.
Being under constant threat makes them live like there is no tomorrow - meaning there is no time to waste. Communications are direct and contextual. Cannot afford to make mistakes. Many a times are very pragmatic not really decorative.
Having suffered historically has brought them together even though they may not like each other, they know they are in it together.

Surprisingly the society is divided between the liberals and the religious. Many liberal working class crib about the "lazy" half of the society.

Regards
Mohan V.

Balaji said...

Hi Madhu,

I am a strong proponent of Israel model of start-up and at least when it comes to hi-tech space we in India should adapt a part of it in conjunction with US models. While India presents a large economy advantage- the start up process we should look the israeli way. Afterall the amount of start-ups (especially in the hi-tech space) we are way behind. Again on both communication image processing you find israel doing good for the shear reason that their defence community is their first customer. And later you end up commercializing it. I am a fan of israeli start-up culture and the process. Thanks for the review, much enjoyed it. I would pick up this book.
Cheers,

Balaji

Suresh said...

More from a Storage industry perspective but probably true in a general sense as well. This article is harsh, unsparing but probably closer to the truth about Israeli startups:

http://www.thebiggertruth.com/2009/12/fail-factors-why-startups-die-the-israeli-illusion/

Harshad said...

Excellent review, again! Thanks!

While the compulsory drafting is a bit extreme and difficult to implement in India, there was this Short Service Commission initiative from Indian Army which had similar potential. Don't know how it is shaping up now.

Aside, please please switch to wordpress.com for blogs. Blogspot looks ugly, and the commenting system is a pain. Also consider joining Twitter.com. Many of the jujubaks are in there :)

prataprc said...

I haven't read the book, so not sure whether the book does discuss about Zionist movements and kibbutz. Since the notion of "Start-up" is so capitalistic, it could be misleading in Israel's context.

Never the less, Israel seems to be like a diamond, it takes in a small amount of light and glitters like a star. Be it in history or Hollywood, all it takes is one simple story.

Thirukumaran said...

Having been persecuted throughout history, every time they resurrect they emerge stronger than ever before. Probably no ethnic group has such a strong sense of belonging and building defensive mechanisms has gone into Jewish genes. But for the constant threat no one would ever think of machine guns shooting at right angles!

I really awed and wowed how Kibbutz not just ensured food security but so efficient that they had to dump excess production since exporting would be a costly affair! And looks like they have successfully extended this in high-tech and this time no need to worry about wastage. Export everything! If not, it is an investment for future exports.

Napolean once remarked about England that it is a nation of shopkeeper! Israel seems a nation of serial entrepreneurs!

Madhu Parthasarathy said...

Hi Ramesh:

The book discusses about Singapore and Korea and how Israel is different.They also have mandatory "draft".

Hi Mohankrishnan:
"Where is our Nokia?" is not my question :-) it was Author's question. That said, your Israeli Reindeer drove your point.

Element-by-element comparing is not a bad idea. Some of them would be useful and most of it will not be. Trick is figure out which ones!

Hi Suresh:
Thanks. Your link gave a good marketing perspective.

Hi Pratap:
There is only passing references to the movements as it is focussed on startup stand point.

regards,madhu

Shai said...

Dear Madhu:
not reading the book yet, i was impressed by the challenging discussion it started. I would like to add my personal perspective here - i differ on some of the commentators saying that Israel and India are that different because what I think is the most important factor is the National DNA - otherwise called "the human factor". In that sense Indians are very similar to Israelis. The long standing culture and tradition and the various critical needs may be different but the fact that they exist create some very similar lines that at least from my very subjective perspective makes me feel like at home whenever I come to India. I think that the proof of concept is really the fact that within 20 years or less these two nations became the leaders in IT industry remote yet complementary in features. I also suggested that the 21st century industry ( the life sciences and biotechnology in particular) may give the two nations a chance to show the world that the IT story was not a coincident and together we might do it even better.

Best regards

Shai

பகலவன் கிருஷ்ணமூர்த்தி said...

Madhu,

Good review that answers the question I had on the secret behind Israel's start-up successes. Training the draftees to become excellent, enthusiastic and innovative individuals seems like a new concept. I agree with NRR and others, this model may not scale well for India. But, I wonder there should be something similar in those lines possible for larger countries as well.

Thanks for the nice review. BTW, the last few books (Napolean's Buttons and Furture of Life) are my latest purchase from Amazon, thanks to your review and recommendation :-))

-Pags

Madhu Parthasarathy said...

Hello Pagz:

I am elated to know that, JuJubax blog could influence some of your book purchase decisions :-)

Infact, there was one interesting suggestion that came along.
" Declare the book which I am about to write next month".
By doing so, the reader felt, the book can also be read by him/her by the time I post the commentary. There are some operational catches here.Still, thinking about that well intented suggestion.

With Regards,
madhu

Madhu Parthasarathy said...

Dear Dr Shai:

As a President and CEO of a Biotech Startup, plus your varied startup and consulting expereinces including India companies, JuJubax is thrilled to see your comments.Many thanks for the same.

As to your comments,it brought a totally different perspective.
Perhaps, building "technology" is not the same as building "business". In that respect, strengths of two countries seems to be complimentary and in future I surmise it would scale to great heights.

With best regards,
madhu

Ronen said...

Dear Madhu,
It was a real pleasure and honor to meet you here in Israel.
It is really interesting to read all the comments in the above discussion. I am a big fan of India and think there are many resemblances between our two countries.
We all know that necessity is the mother of all inventions and I think this is the main reason to all of the innovation activity we see here in Israel.
We have no choice but to use our head and to come up with solutions to problems and solution to situations before they become a problem. The fact that we are surrounded by countries that threaten our being obligates us to think and to succeed.

I look forwards meeting you again and to develop more Biotech connections between our countries.
Best regards and thank you for enlightening me with this,
Ronen

Madhu Parthasarathy said...

Dear Ronen Gruber:
Thanks for your kind words.

Now days, I am curious to know and understand how "biotech", "nanotech" and other emerging sciences play out in future - because "business of science" is lot different the "traditional science" we all know. I am sure it is going to result in different types of business models as well as delivery. I only wish I know in advance .
Gary P Pisano (Harvard Prof who specializes in this area) gives good set observations.
1: Science values openness and sharing with attribution whereas business demands secrecy and propriety.
2: Science demands validity (is it valid? can it stand up against technical scrutiny? etc) whereas business demands utility (is it useful?
While both are incredibly competitive, currency is indeed different. Science keeps score with
-> Intellectual impact
-> Academic standing
-> Peers reviews and so on.
Business keeps score with:
-> Financial performance.
So, "science of business" is nothing short of oxymoron.
Yet, in most of the emerging areas like Genome, that is what we are getting in to.

So we should expect some dramatic changes in business models and delivery. So, you are on "locus-of-transformation". Wishing you all the best !.

With Regards
madhu

jupieee said...

Great post Madhu-san. Israel, as a nation, has always served as a huge inspiration to me in more than one way & it was nice to gain a few more insights in this space :-)

One of the most simple but thought provoking anecdotes I've heard about the entrepreneurial spirit of Israelis is NOT that they do not fear failure but that they are tolerant about it. It seems there is no stigma attached to failing as a result of which it gives them the freedom to 'Just do it'.. That, I think, is the key as negativity is a huge factor in India..A majority of us are risk averse simply coz we think of the cost of failure & how a couple of years lost in a failed venture leaves us 2-3 rungs below our peers in the rat race and lesser in their eyes..

Madhu Parthasarathy said...

Latest update:

Shai has quit :-(

http://www.engadget.com/2012/10/03/better-place-ceo-shai-agassi-steps-down/