December 19, 2004

How to transform threats and weaknesses into strengths and opportunity.
Every manager regularly analyzes his or her company’s internal strengths and weaknesses, and the external threats and opportunities that it faces. In business schools, including the Technion Institute of Management, managers are taught to think about how to transform threats and weaknesses into opportunities by leveraging the company’s strengths and confronting its weaknesses. They call this ‘SWOT’ (Strength, Weakness, Opportunity, Threat).

Israel is a country, but it is also a business. So, ask Israel’s political leaders about threats. They will likely tell you about Iran, Hamas, Hizbullah, the Philadelphi arms smuggling tunnels, or about Sharon’s dwindling minority government. Finance Minister Netanyahu will talk only about Israel’s budget deficit.

But I believe the real threats to Israel’s future lie elsewhere. Here is a partial SWOT analysis for Israel, focused on knowledge and intellectual property. There is a huge opportunity here, if only a few political leaders would devote five minutes a day to think about it.

External Threat: ‘The Great Knowledge Robbery’

TIM Chair Lester Thurow recently pointed out that a major disaster occurred around September 11. No, it was not the terror attack on the World Trade Center. Almost unnoticed, between September 11 and 14, 2003, in Cancun, Mexico, the rich and the poor countries failed to agree on a deal in negotiations sponsored by the World Trade Organization that began in Doha in 2001.

The deal was to allow freer access for poor countries’ agricultural exports to rich nations’ markets, in return for poor countries’ agreement to respect patents and intellectual property. In the rich countries, farmers have enormous political power. So the rich countries refused.

The result: The poor countries may in future ignore the intellectual property rights of the rich. In fact, they already do. This is a huge threat to all nations who make their living with their brains, including Israel.

Internal Strength: Israel is one of the world’s great producers of basic research. A Neaman Institute study by Gideon Czapski and Yael Ilan (International Status of Israeli Research: Neaman Institute, Technion, 2004) examines research ‘productivity’ (scientific publications per capita) and ‘quality’ (the frequency with which other scholars cite publications in their own articles) for over 25 countries.

In computer science, Israel ranks second in the world in ‘productivity’ and third in the world in ‘quality’. In chemistry (the field in which two Technion scholars just won the Nobel Prize), Israel ranks 4th and 5th, respectively; in molecular biology, 3rd and 4th; in biology and biochemistry, 5th and 10th; and in physics, 2nd and 9th. In addition, Israel ranks first in research ‘productivity’ in economics and business, mathematics, psychology, and psychiatry!

These outstanding achievements reflect Israel’s investment in basic research and in its top universities in the 1970?s and 1980?s.

Internal Weakness: Research resembles baby elephants it takes years for the embryo or idea to develop and become a full-fledged elephant or product. Female elephants have a two-year pregnancy! World-class research takes far longer.

Former head of Military R&D, Dr. Itzik Ben Yisrael, recently told a Technion R&D conference that it is a huge mistake to lump Research and Development together conceptually as R&D. ?R? is different from ‘D’. And there is no development, he said, without research. If Israel neglects basic research, in 10 or 15 years there will be no development.

On December 5, the head of the Planning and Budget Committee of the Higher Education Council, Prof. Shlomo Grossman, told a Technion conference on higher education that Israeli universities should seek research funds abroad, and that they cannot expect more resources from the government. As a result, when Czapski and Ilan repeat their study in 20 years, the results will be awful. And without research, there will be no development of innovative products, no startups, no exports, and no jobs. Then it will take another 20 years to repair the damage.

Gen. (res.) Amos Horev once told me that in 1953, he wrote down the specifications for a sea-to-sea missile named Gabriel. The missile proved decisive in the 1967 War. It took fully 14 years of basic research, applied research, and engineering development to create an outstanding operational weapons system. Investments in research were made in the 1950s, when Israel was exceedingly poor. Why are we starving research today, when we are relatively rich?

External Opportunity: Israel’s ‘unique global selling proposition’ will become ‘where knowledge thrives’. It will give top priority to its research universities. As Ireland pulls in massive multinational investments to build factories, Israel will become a favored global site for focused research and time-to-market development. Israel will reverse the disastrous collapse of its high school mathematics and benchmark itself by adopting the OECD measurement standards, aiming to be among the top five countries in high school math within a decade. Currently, Hong Kong, Finland, Korea and Netherlands lead, in that order. United States is a miserable 28th. If Israel were included in the study, it would likely be ranked well below 20th.

In Shanghai, I recently spoke with a young mechanical engineer, Zhang Bin. When did you begin studying differential calculus, I asked him. In Grade 7, he said. That is standard in China. In Singapore, when it gained independence in 1965, the legendary Dr. Goh, head of the Economic Development Authority, saw that you cannot produce great engineers if young people do not excel in mathematics in high school. So he told Singaporean mothers to urge their children to study math. They did. Two decades later, Singapore grew wealthy because of its highly skilled engineers.

There’s one thing Israel must do immediately. If Israel is to grow wealthy by producing applied knowledge, and attracting companies who create it, it must be a country where the property rights vested in knowledge are zealously protected. No more illegal copying of software. No more Central Bus Station music theft. We have strong intellectual property laws. Why not begin enforcing them?

And finally, let our voice be heard, telling the US: like us, you too can remain wealthy only through knowledge creation, not by growing cotton at 10 times the cost of Egypt or India. Buy cotton, and create and sell (patented) knowledge.

Go back to Cancun and cut a deal. Now. It’s just, fair, and smart.

(Originally appeared in Globes)

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Jason Harris

Jason Harris

Executive Director

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