Observer Research Foundation Mumbai

Ideas and Action for a Better India

Innovative Entrepreneurship: What India can learn from Israel’s experience

On 20th August, ORF Mumbai along with the Consulate General of Israel, Mumbai and Project Israel organised a talk by Mr. Saul Singer, Co Author of the International Bestseller “Start-up Nation: The Story of Israel’s Economic Miracle” and former editor of The Jerusalem Post. Singer was on his first business trip to India. The programme was part of India-Israel Innovation Initiative or the “Four Eyes Programme” initiated by ORF Mumbai to foster cooperation between Indian and Israeli innovators on the occasion of the 20th year of bilateral relations between India and Israel.

The programme was chaired by Dr. F.C. Kohli, referred to as the founder of the Indian Software Industry, founder of TCS and recipient of the Padma Bushan, amongst other awards. Mr. Kohli is a perfect Indian example of an individual tirelessly committed towards the improvement of India’s socio-economic development through technology. Joining Mr. Saul Singer and Mr. F.C Kohli at the head table was Mr. Sudheendra Kulkarni, Chairman ORF Mumbai and Mr. Mark Soloman representing The Israel Project.

From L to R: Mr. Sudheendra Kulkarni, Mr. Saul Singer, Mr. F. C. Kohli and Mr. Mark Sloman

Ms. Radha Vishwanathan, fellow at Observer Research Foundation, welcomed the guests beginning with her personal experiences in Israel. Her observations included being impressed by the presence of blue chip companies like IBM, Microsoft, Intel and Motorola, and with their extensive research facilities and infrastructure in Israel. She also recounted her personal encounters with the argumentative nature and Chutzpah of the Israeli people. Her visit in Israel coincided with the political turmoil in Egypt and she experienced firsthand the tiny state’s vulnerability as Egypt was unraveling and how instability in the region affected the Israeli people – they dug into their inherent nature of determination, focus and by clinging to the basic tenant of Innovation; transforming a disadvantage into an advantage.

Radha also reintroduced the ‘four eyes’ programme launched by Shri. R. Gopalakrishnan, Director, Tata Sons, Ltd, on 27th January, 2011. She reiterated that a book like Start-up Nation provides further insight into how Israel has used to its advantage its Entrepreneurial nature and innovative genius to make a huge difference in the fields of telecommunication, information technology, medical technology, biotechnology and agriculture.

This was followed by Mr. Singer introducing the audience to the cutting edge innovations in addition to Israel’s entrepreneurship energy through an informative Video presentation.

Mr. Saul Singer’s talk on how Israel has redefined itself as a global innovation hub

He began his talk with a question “Why does Israel have all these start-up companies?” The four main contributing factors which created a start-up environment in Israel, he said, were its unique Culture, History, compulsory military training and a government with a welcoming nature towards immigrants. This accompanied by the Israeli enthusiasm and Chutzpah provides for the entrepreneurial culture. Mr. Singer said that Israel has more start ups than any country, more than there are in the Silicon Valley, attracts 2.5 times more Venture Capital than United States. Most Venture Capital Companies that are looking for the next big thing believe that they will find this in Israel. Apart from numbers we also produce quality innovation, he upheld. He added that the book strives to explain Israel’s innovative success through three magic words – Start-up, Story and Miracle.

The Story of ebay, PayPal and Fraud Sciences: Narrated by Mr. Saul Singer

He narrated to the audience an interesting story about a start-up company in Israel to define the basic theory behind his book the “Start-up Nation”. An Israeli innovator, Shvat Shaked was meeting with Scott Thompson, the President and Chief Technology Officer of PayPal, a subsidiary company of ebay, a $18 billion internet retail company. The innovator said his company ‘Fraud Sciences’ had discovered the secret for beating credit card fraud for a sample case of 40,000 people. When Thompson inquired on their methodology, the young Israeli said his military training enabled him to find terrorists and bad people by tracking their internet activity where they use fictional names or other subversive online techniques. Shaked said a similar theory of good people versus bad people can be used to identify credit card fraud, as the good people use the internet more frequently to make purchases leaving a digital footprint, allowing for easy access to their personal details like an ATM pin, residential address, while the bad people make limited use of such facilities as themselves. Thompson decided to get rid of the young Israeli by giving him a sample clientele of one hundred thousand PayPal transactions to prove their credit card fraud theory by. He assumed that he would never hear from the innovator again.

Interestingly, two days later, the CEO of paypal received a two word email from the Israeli team that “We’re done”. The CEO immediately ran the methodology through their high profile research team of many PhDs and engineers, who a week later understood the basic idea of the innovative method to catch credit card frauds but still could not grasp the technicalities. The PayPal team was “amazed about how a small team in Israel had produced more accurate results than PayPal, in a shorter amount of time, and with incomplete data”, at 17% or greater accuracy levels. Thompson immediately approached the CEO of ebay, Meg Whitman, to tell her that they cannot just invest in this little Israeli company nor allow the competition to get through to them but they have to buy the entire company to have sole proprietorship over the technology. The Israeli company was acquired by PayPal for $186 million. After the acquisition, Scott Thompson visited Fraud Sciences research team in Israel. He arrived to meet with the team and was thrown back by the number of questions the team had about how his company functioned. They threw out ideas, opinions and feedbacks on PayPal’s strengths, weakness and opportunities, giving Scott Thompson a firsthand experience of Israel Chutzpah, leaving him wondering if he had acquired the company or had they acquired PayPal.

Defining Innovation:

Mr. Singer talked about the Israeli Culture which gives one the freedom to argue and question the way things are done. Israelis generally do not respect authority and like to debate and question everything. Start ups based on radical ideas to do things differently fosters an entire generation where these young people think of doing things in a completely different way expecting that others will adapt to this new way, he said. This allows for individual spark or Chutzpah giving way for the independence to think in radically new ways. He defined Innovation as not being equitable to ideas.

Innovation can be conjured only in an environment providing for a willingness to take risks accompanied by characteristics of being determined and mission oriented. According to Mr. Singer the three contributing factors of Israel transforming itself into a start-up nation and its meteoric economic rise are Immigration, Government’s Research, Development Policies and compulsory military service.

Immigration: Lesson 1- Be inclusive and welcoming

In order to have a society that fosters entrepreneurship, the government should have a flexible immigrant policy. According to Mr. Singer, “Israel may be the only country to increase immigration, and not just of people of narrowly defined origins or economic status. The job of welcoming and encouraging immigration is a cabinet position with a dedicated ministry behind it. The immigrant population with a determination to succeed is willing to take risks by innovating in diverse fields creating a start-up nation of brilliant entrepreneurs.”

Culture of R&D: Lesson 2- The Government helped and got out of the way

Israel was originally a socialist country for over 20 years, dominated by state owned enterprises. In the 1990s, the government began to privatise state enterprises, encouraging competition and making leaps in fields like telecommunications. It funded a programme called Yozma, which invested in technology companies and new venture capital funds.

The programme offered a matching concept that came close to a company’s own contributions. “If the Israeli partners could raise $12 million to invest in new Israeli technologies, the government would give the fund $8 million,” the book Start-up Nation explains.

Military Service: Lesson 3- Creates an environment for character building which translates into Innovative thinking

“What typifies the Israeli military is improvisation and informality. Except in basic training, you hardly ever salute a more senior officer, and ranks here get all mixed up. It reinforces the non-hierarchical nature of the culture,” says Mr. Singer. The Israeli military is small with decentralised distribution of powers downwards resulting in the newer recruits to survive in stressful environments, short of resources, giving way to the saying that “necessity is the mother of invention”. The Israeli society, according to Mr. Singer has learnt to assimilate skills learnt by their youth through their military training as a part of its innovative culture. The book Start-up Nation has concluded that Israel’s military programme is central to the thriving Entrepreneurship society, serving as its building block, imbibing characteristic features essential for the spirit of innovation like the qualities of hard work, focus and determination.

Mr. Singer’s outlook for India-Israeli Collaboration

Mr. Singer outlined the opportunity in larger Indian companies like the Tata Group and pharmaceutical companies with their organisational skills collaborating with Israel’s R&D skills as a great combination for growth. Secondly, he also understood the need for Israeli entrepreneurs and innovators to visit India and understand its problems in order to create or discover tailored solutions to address these problems. He said it was critical for the two countries to leverage on their complimentary skills of Israel’s innovation with India’s strength in managing and scaling up.

India’s Strength/Weakness Israel’s Strength/Weaknesses
Great management skills, process and great technology Impatient and aggressive with innovation
Established soft skills with large evolving global companies Do not know to scale up, low management skills
The local environment does not support entrepreneurship Great technological innovation but minimal application skills

F.C. Kohli’s vision for India-Israel Partnership

Dr. Kohli began by saying that “he was a great admirer of Israel”. He described his experiences of visiting Israel, including spending time at the University of Tel Aviv for over a period of three to four years. He explained that lack of resources need not be a restraint and cited Israel’s agricultural success as a great example of the country’s innovative contribution. “If a small arid country with its deserts, lack of water supply can have such great agricultural produce, four or five times additional productivity per acre of land than India, then just imagine what a country like India can achieve,” he remarked. Mr. Kohli said that with our fertile land, flowing rivers and intelligent people, India can produce a lot more by redefining its agricultural mandate. He surmised the country’s characteristics thus:  “Israel is a small country, with a limited population; somehow every Israeli is a bright person and a thinking person”. His personal observation about the country was that limited energy went into labor intensive projects, humorously saying that “Israel has no labourers, as everything is automated”.

Answering the question about the absence of Indian innovation, he said that “all Indians are born intelligent but it is the circumstances and lack of opportunities which makes them appear less intelligent – not because they do not have a good brain”. He mentioned how microchips were developed in Israel and not in the west coast. The idea of Indians developing a chip for Intel in Bangalore may soon become a reality bringing us closer to Israel in the field of innovation, he said. Mr. Kohli saw huge opportunities for the two countries for working together. The next critical step will involve Israel identifying India’s “encyclopedia of problems” and understanding them before developing tailored solutions to solve them.

Mr. Mark Solomon: “India-Israel relations will define the world in the 21st Century”

Mr. Mark Sloman, director of India operations of The Israel Project, an international not-for-profit NGO based out of the US, focusing on educating a wide platform of people about Israel‘s viewpoint to the press, public officials and the general public, started off by conveying that he is a great admirer of India. As India and China are raising powers, it is essential for Israel to build stronger relations with both countries. According to his perspective, Israel-India is a pivotal relationship, calling for the need to capitalise on each other’s strengths and weaknesses. The Israel Project is committed towards improving Israel-India relations, he said, predicting the tremendous partnership which can be built going forward.

Israeli- India joint ventures: Indians matters to Israel

Agro Excellence Centre: Israel has initiated Agro Excellence Centres in Dhapoli, Rapoli and Nagpur in Maharashtra. As a result of the Indo-Israeli cooperation programme, 27 Indian students will be visiting Israel for over a year, living in a Kibbutz and concurrently attending agro courses in Israel’s premier Agriculture Universities.

Israel Volunteer Peace Corps Initiative: Many Israeli youth come to India after being decommissioned from the military. Through the Volunteer Peace Corps Initiative, formed by some public spirited individuals in Israel, ORF is helping them identify potential avenues of meaningful engagement for these Israeli youth in India. This initiative seeks to make it mutually beneficial for the youth as well as organisations they are going to be working with. This presents the opportunity for further exchange of ideas and creative energy between the people, defining the world in the next generation.

Interactive Discussion with the audience

This was followed by an interactive discussion among the audience and the panelists. Some of the important questions raised and opinions shared were about how Israel has become a cultural melting pot, absorbing and engaging its diverse cultural diaspora. Mr. Raviv Brar, chairman of Indo-Israeli Chamber of Commerce, mentioned that over 150,000 Jews of Indian origin, who came to Israel in the 1950’s, spoke fluent Marathi as their second language. “Despite returning to Israel, second and third generation Jewish people continued to maintain their Maharashtrian heritage, although a more watered down version now”, he pointed out. He mentioned that this was the advantage of Israel, with its unique melting pot culture, allowing for diverse cultures to mix together with mutual respect.

Another interesting question was posed by the team from University of Mumbai who would be visiting Israel to learn more about its agro inventions through an annual exchange program. The visiting professor Mr. Pise wanted to know in return what Israeli students could learn in India. Mr. Kohli’s profound response outlined a possible road map for future agro co-operation. He said that the Israeli agriculture students’ visit will enable them to understand India’s agricultural problems, helping them design solutions for the future. “Triggering the problems results in finding the solutions”, said Mr. Singer, in addition.

Mr. Singer was posed a question by a young executive from the Bombay Stock Exchange on how the government whetted an entrepreneurial environment and how Israel has managed to catch the international attention for investing and listing. Mr. Singer reiterated that the government helped not only by moving out of the way, but it engaged in a healthy Venture Capital system which resulted in miraculous long-term economic results. He mentioned that Israel needs to build itself into a financial centre through learning from other countries. The recent deregulation of financial services will be conducive towards this end, he remarked.

Mr. Sudheendra Kulkarni, Chairman, ORF Mumbai introduced Dr. Bhide who has created an artificial heart and in the process has experienced numerous problems in commercialising it for the Indian population. It is public knowledge that heart disease is an increasing problem in India. Dr. Bhide said that the British government funded their earlier research in creating an artificial heart but the device produced was for the British population. Subsequently, he has developing a device suitable for the India but faces significant hurdles. He was very eager to understand how Israel guided their innovators. Mr. Singer answered that each university in Israel has a technology transfer department lisoning between academic and business worlds providing for the interface leading to commercialisation. Mr. Kohli highlighted the urgent need for the Indian government to foster an environment for its innovators and their innovations.

Students from IIT Bombay’s, Entrepreneurship Cell enquired on how Israel’s academic institutions created an environment for innovators to thrive. Mr. Singer said that entrepreneurship education is given prime importance in Israel and many leading universities offer excellent entrepreneurship education. Most education comes from doing or through firsthand experiences. Apart from students obtaining an education in computer science and engineering the local opportunities to participate in research is high. In addition, they have tailored entrepreneurship programmes, Israel’s biggest export to the world could be entrepreneurship itself, replied Mr. Singer.

Look East Initiative

Why does Israel collaborate only with the U.S., should it start looking east beyond their comfort zone? Mr. Singer said it is an education process about understanding India, which should involve exposing more Israelis to India. To maintain an overall balance, Israelis should look more towards the east.

Mr. Sudheendra Kulkarni concluded the talk by saying, that the world is changing and for Israel, India has become more important ally in the changing context of the world economy. India–Israel collaboration is going to be the most important relationship in the 21st century, he emphasised.  Israel is becoming more important for India as well, as India has begun to realise the importance of innovation, especially innovation aimed at solving our innumerable problems. He also mentioned that we cannot depend on someone else to perpetually innovate for us in the long run; we have to foster internally an environment for encouraging our own innovators. In this proposition too, we can learn valuable lesson from Israel. As a point for future advocacy, Mr. Kulkarni outlined that the Indian government has to learn to be nice to our own innovators and foster them.  He made a commitment that the India Israel Innovative Initiative will foster an environment for stronger student and academic interactions between the two countries in the future.

About ORF Mumbai’s India-Israel Innovation Initiative:

Israel has emerged as a powerhouse in innovation and hi-tech industries in the recent past. India, on the other hand, is growing steadily at around 8%, and together with China, has become an engine for global economic growth. India and Israel share common values of democracy and entrepreneurship. Both are knowledge-driven societies. The economies of both are complementary to each other. In the last decades, Indo-Israel cooperation has grown exponentially, with bilateral trade expected to soon cross USD 5 million. This special relationship has a long way to go, particularly in the field of joint R&D and innovation. Against this backdrop, and to mark the beginning of the 20th year of diplomatic relations between our two countries, ORF Mumbai has established the India-Israel Innovation Initiative. This will be an alliance comprising academia, public and private sector companies, and think tanks from India and Israel, for a deeper engagement with the subject of innovation-led cooperation between the two countries.

About THE ISRAEL PROJECT:

The Israel Project (TIP) is a non-profit, non-governmental educational organisation that gets facts about Israel and the Middle East to press, public officials and the public. Its team comprises multi-lingual experts from West Asia and former reporters, who provide journalists and leaders with fact sheets, backgrounders and sources. TIP regularly hosts press briefings featuring leading Israeli spokespeople and analysts that give journalists an opportunity to get information and answers to their questions face-to-face. By providing the facts, context and visuals to global journalists, TIP causes hundreds of millions of people around the world to see a more positive public face of Israel.

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This entry was posted on 20/08/2011 by in ORF Mumbai.
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