Saturday, June 25, 2011
Israel's economic success lies in start-ups, innovation
'Start-Up Nation' co-author Saul Singer says maintaining comparative advantage in innovation is key to Israel’s success.
Rather than worry about establishing big companies, the key to the future of Israel’s economic success lies in safeguarding its comparative advantage in start-ups and innovation, Start-Up Nation coauthor Saul Singer said at the Israeli Presidential Conference in Jerusalem on Wednesday.
“Israelis sometimes underestimate or misunderstand their own comparative advantage in the world,” he said. “And they have a tendency to ask, ‘Where’s our Nokia, where are our big companies?’” After finding that business people in Finland looked to Israel for examples on how to innovate, Singer said he quickly realized “that while Israelis have Nokia envy, in Finland they have start-up envy. And it turns out that in Korea, in Singapore and all around the world, people are trying to figure out how to do start-ups, and they have been traveling here to find out.”
Singer, whose 2009 book is seen as the leading guide on Israel’s hi-tech miracle, was speaking on a panel entitled “The Israeli economy – a small leading market?” He said the Israeli economy would benefit by focusing on what it does best – innovation and start-ups – while synergizing those talents with the management and long-term planning skills of companies from abroad.
“Our competitive advantage is this start-up phase… the premium on innovation is going up and the need for big companies to innovate is going up,” Singer said. “And big companies have their separate problem: They know how to scale things up but don’t know how to innovate,” he said, noting that Apple was the one exception.
“The who’s who of technology – IBM, Cisco, Motorola, you name it – they’re here in a very big way, and what they’re doing here is effectively injecting themselves with innovation by buying up,” he said.
But in Israel “there tends to be not enough emphasis on what the potential is, which is huge and multifaceted.
“I think we have to very careful about not losing our cutting edge…we can’t take for granted start-ups, because if we lose them, we have a problem.”
Finance Ministry director general Haim Shani said government policy was formed upon similar beliefs, with a focus on two major areas: “strengthening the hi-tech and advanced industry sectors.”
“We have launched a program we have branded under the name of competitive advantage, which understands there is no silver bullet for the single success of the hi-tech industry,” he said. “But there are major areas in which the government cannot plan the market but can lay down the tracks for success.”
Shani said as hi-tech constitutes 12 percent of GDP, it is extremely important for Israel’s future, which was one of the reasons the government had invested $500 million in four “excellence centers” that are currently in the works.
Bank Hapoalim chairman Yair Seroussi said the key to the Israeli economy staying relevant was to “keep the strategy we used to have,” which is to focus on development work in Asia, Africa and developing markets.
“Bank Hapoalim [recently] came out with the statement that technology is the way to keep us relevant in the future economy, the creation of know-how and [a presence] in growing emerging markets,” he said.
The six panelists were asked which area of hi-tech held the biggest potential for the future of Israel’s economy.
New York University Prof. Ari Ginsberg and Chief Scientist Avi Hasson said medical devices were one area for huge growth. Jerusalem Global Ventures founder Shlomo Kalish stressed the importance of new media and clean-tech. Most of the panelists agreed that the market will decide the direction and that Israel must