Notes from Start Up Nat

1. SagaciousThink: sage ideas| fresh perspective | sustained success
Innovation + Culture
Notes from Start-Up Nation – the Story of Israel’s
Economic Miracle by Dan Senor&Saul Singer (2009)
www.sagaciousthink.com

2. Examples of Israeli Companies +
Practices
• Better Place – car, battery
• Intel Israel
• Netafim – drip irrigation company
www.sagaciousthink.com

3. Interesting Figures
• Israel has the highest density of start-ups in
the world (3,850 start-ups, or 1:1,844 Israeli’s)
• More Israeli companies are listed on NASDAQ
than all the companies from the entire
European continent
• In 2008, VC investment per capita was 2.5x
greater than in the US, 30x greater than
Europe, 80x greater than China, and 350x
greater than India.
www.sagaciousthink.com

4. Figures, continued
• Israel leads the world in the percentage of the
economy that is spent on R&D
• Entrepreneurs that have failed in their
previous enterprise have an almost 1:5 chance
of success in their next start-up, which is
higher than first time entrepreneurs and close
to entrepreneurs with prior success. (2006
Harvard study) p. 32
www.sagaciousthink.com

5. Figures, continued
• Between 1980 and 2000 the number of
patents in Saudi Arabia was 171, from Egypt
77, from Kuwait 52, from the UAE 32, from
Syria 20, from Jordan 15 – compared to 7,652
from Israel.
www.sagaciousthink.com

6. Observations
• Singapore lags in entrepreneurship as they fail to
keep up with a world that puts a high premium
on attributes historically alien to their culture:
initiative, risk-taking and agility.
• In Korea it is the fear of loosing face and the
internet bubble of 2000, where public failure left
a scar on entrepreneurship, Laurent Haug (Lift
Conferences) Compared to Israelis, “They do not
care about the social price of failure and they
develop their projects regardless of the economic
and political situation.
www.sagaciousthink.com

7. More Observations
• HBS case study on Apollo 13 and Columbia
• “Defending stuff that you’ve done is just not
popular. If you screwed up, your job is to show
the lessons you’ve learned. No one learns from
someone who is being defensive.” – YovalDotan,
p. 94
• The emphasis is on useful, applicable lessons over
creating new formal doctrines, the focus is to be
tradition-less, and not to be wedded to an idea
because it worked in the past. (best practices)
www.sagaciousthink.com

8. Apollo – what worked
• What worked in the Apollo case is that the team
had met previously in a myriad of configurations
with practice drills each day to get the
accustomed to responding to emergencies of all
shapes and sizes. He [Kranz] obsessed with
maximizing interactions not only within teams
but between teams and outside contractors. He
did not want there to be any lack of familiarity
between team members who one day might have
to deal with a crisis together. P. 90
www.sagaciousthink.com

9. Columbia – what didn’t
• Engineers sounded warned but were not
heeded. They were overruled by
management.
• Theirs was a standardized model where
routine and systems ruled, including strict
compliance with timelines and budgets. They
had a “stubborn attachment to existing
beliefs.” p. 92
www.sagaciousthink.com

10. Ongoing Observations
• Singapore tries to replicate the success of Israel, but
the culture gets in the way. In Singapore, public dissent
has been discouraged, if not suppressed outright.
• “Large organizations, whether military or corporate
must be constantly wary of kowtowing and groupthink,
or the entire apparatus can rush headlong into terrible
mistakes. Yet most militaries, and many corporations
seem willing to sacrifice flexibility for discipline,
initiative for organization and innovation for
predictability.” p 98
www.sagaciousthink.com

11. Ideas Expressed
• “Fluidity according to a new school of
economics studying key ingredients for
entrepreneurialism, is produced when people
can cross boundaries, turn societal norms
upside down, and agitate in a free-market
economy, all to catalyze radical ideas.
• Different types of “asynchrony… such as a lack
of fit, an unusual patter, or an irregularity have
the power to stimulate economic activity. P.99
www.sagaciousthink.com

12. Still more
• The most formidable obstacle to fluidity is
order. A bit of mayhem is not only healthy but
critical.
• The ideal environment is best described by as
the “edge of chaos” where rigid order and
random chaos meet and generate high levels
of adaptation, complexity and creativity.
www.sagaciousthink.com

13. Techniques
• BIRD grants: acted as a dating service
between Israeli knowhow and US companies.
It was very successful at matching and with a
$250M invested in 780 projects, resulted in
$8B in sales. Critical: taught Israeli tech
companies how to do business in the US.
www.sagaciousthink.com

14. Clusters
• Michael Porter, “geographic concentrations” in
interconnected institutions, businesses, government
agencies, universities – in a specific field. P. 196
Obvious example, Silicon Valley, Napa/UC Davis for
viniculture, Germany – automobiles, Hollywood -
movies.
• Porter offers that intense concentrations of people
working in and talking about the same industry
provides companies with better access to employees,
suppliers and specialized information. It extends
beyond the workplace and is part of the daily life. It is
a “social glue” that facilitates access to critical
information.
www.sagaciousthink.com

15. Dubai, Inc.
• Created clusters around a variety of verticals
such as education, IT, medicine, journalism
• Brought in key tenants such as Microsoft,
Oracle, HP, IBM.
• However, there is no innovation or R&D hubs,
rather large scale service hubs.
• Vast physical infrastructure, but not the
culture to support it. Not necessarily a
sustainable model, p. 201
www.sagaciousthink.com

16. Dubai, Inc. – what doesn’t work
• Foreign nationals come to make money, once
the mission is accomplished they return home
as they do not feel a connection.
• Lack of path towards citizenship
• Wife looses citizenship and benefits if she
marries “outside”
• Limited amount of time to stay – 3 years. No
connection with place, nor desire to uproot
family especially if forced to live on outskirts.
www.sagaciousthink.com

17. Education
• Focus on rote memorization – no
experimentation
• Define success by measuring inputs (teacher class
ratio, infrastructure investment) rather than
outcomes
• Because of segregation by sex, and sense
teaching in Arab countries is traditionally less
appealing for men, schools must employee lower
quality teachers thereby widening the education
gap.
www.sagaciousthink.com

18. General Cultural Challenges
• Lack of freedom of expression
• Lack of tolerance of experimentation and
failure
• Failure to reward merit, initiative and results
rather than status
• Lack of social and cultural institutions. Books
translated into Arabic in all Arab countries was
only 20% of the books translated into Greek in
Greece between 2002 and 2005. p. 209
www.sagaciousthink.com

19. Expressions of Note
• Bitzu’ist a Hebrew word that loosely translates to a
“pragmatist”, but with a more activist quality. This is a
person who just gets things done.
• Rosh gadol– “big head” literally following order, but
doing so in the best possible way, using judgment, and
investing whatever effort is necessary. It emphasizes
improvisation over discipline.
• Rosh katan- “little head” means interpreting orders as
narrowly as possible to avoid taking on responsibility or
additional work.
• Davka – “despite, with a “rub their nose in it it” twist
www.sagaciousthink.com

20. Words to Live By
• “When [entrepreneurs] succeed, they revolutionize
markets. When they fail, they still [keep] incumbents
under constant competitive pressure and thus
stimulate progress.” p.20 via report from Monitor
Group
• “The goal of the leader should be to maximize
resistance – in the sense of encouraging disagreement
and dissent. When an organization is in crisis, lack of
resistance can itself be a big problem… If you are not
even aware that the people in the organization
disagree with you, then you are in trouble.” Dov
Frohman, Intel Israel
www.sagaciousthink.com

21. More Quotes
• James Collins, from his book Built to Last,
“Core purpose is the organization’s
fundamental reason for being. It reflects the
importance people tie to the company’s work
beyond just making money”.
• Barbara Tuchman, Affluence tends to smother
motivation.
www.sagaciousthink.com