By Theodore Panayotou
Traditionally, the main reason for Cypriots to go to Israel was on a pilgrimage to the holy places. In recent years, Israel has become the destination of politicians and government officials seeking Israel’s collaboration in exploiting our newly found natural gas reserves and in beefing up our defence.
There has been much less interest in learning from and collaborating with Israel on a far more important and promising front for the future of Cyprus: innovation and entrepreneurship, the only reliable defence against the onslaught of global competition on our business and economy. The twin forces of innovation and entrepreneurship are arguably the only tools to get us out of the economic doldrums and set us on the road to economic recovery and sustainable growth.
Technological and business innovation is the ultimate source of productivity growth and competitiveness. Entrepreneurship for the global market is a solid foundation for a new economic model for Cyprus, if we don’t want to live a life of bubbles and bursts. But the new economic model for Cyprus has become like the weather: “Everybody complains about the weather, but nobody does anything about it” as Mark Twain (and Charles Dudley Warner before him) said.
To change things, Cyprus International Institute of Management (CIIM) has decided to act. In a week’s time, CIIM faculty and a group of 25 MBA and MSc Management students and alumni will go on an entrepreneurial pilgrimage to Israel. They will visit business incubators, accelerators, start-ups, angel funds, venture capital funds, entrepreneurial clusters and tech cities. They will become immersed in the entrepreneurial spirit and creative culture of the “Mecca” of innovative entrepreneurship, the start-up nation of the world.
Israel, with fewer resources than almost any other country in the world, has managed to become to become the global model for innovation and entrepreneurship, thriving in the midst of global economic crises while other countries, with many times its resources, are still searching for a viable economic model. Lack of resources and an uncertain future, instead of being barriers, have been the main drivers to innovation and entrepreneurship.
Israel with its technological sophistication and business acumen has managed not only to survive in an area surrounded by enemies but also to become the envy of even the developed countries of Europe and America. Israel has more companies listed on the stock exchange of NASDAQ, the second largest in the world. In per capita terms, Israel has more startups than any other country in the world and attracts 30 times more venture capital than the whole of Europe.
I got my first taste of Israel’s different approach to problems when I first started visiting the country in the early 1990s, as a member of the Harvard-MIT team which for almost a decade studied the use of water resources by the Israeli National Water Carrier and the West Bank aquifers and making policy proposals for the Middle East peace process. In Israel, the approach to water scarcity has been mainly one of institutional and technological innovation for demand management, efficient resource use and re-use. In Cyprus, where we face similar water scarcity problems, our approach has been mainly one of supply expansion through building of dams and desalination and water subsidies for farmers.
More recently, teaching at the University of Tel Aviv, and having the opportunity to interact with Israeli entrepreneurs, innovators, venture capitalists, professors and students and visiting technology clusters and start-up accelerators, I got to appreciate how much we stand to learn from the Israeli approach and experience to solving problems and exploiting opportunities through innovation.
Israeli professors have being teaching at CIIM since its inception more than 20 years ago, but it was only recently that we established the Center for Entrepreneurship and Innovation (ENTICE) at CIIM in cooperation with Israeli experts to assist our students and others in Cyprus start their own innovative business. ENTICE’s mission is to contribute, through the provision of specialised consulting services, education and guidance, to creating new innovative business ventures and improve the competitiveness of existing enterprises.
There are many lessons for us all to learn from the Israeli start up experience. First, there is the Israelis’ insatiable questioning of authority and anti-hierarchical ethos, so fundamental to innovation that dominates political and economic life. In Israel, a man is defined by what he can do and how well he does it. In Cyprus, where hierarchy dominates all aspects of life, a man is defined by title or position, and based on whom he knows rather than what he knows.
Second, the Israelis from infancy are trained to challenge the obvious, to ask many questions, and to debate and criticise everything, to think creatively and to innovate. In Cyprus, children are trained to accept what the grown-ups (parents and teachers) say and not to question it.
Third, unlike Cyprus where authority is imposed through hierarchy and discipline, in Israel it is earned through performance: if you’re the manager, your authority will be constantly challenged: “why should you be the manager of me and not me the manager of you”. You must constantly prove by your decisions and actions that you deserve the position you hold.
Fourth, in contrast to the usual practice in Cyprus, in Israel subordinates do not run to their superiors to solve problems, but they assume the risk and the responsibility to invent imaginative solutions in real time and on the go. Textbook answers are discouraged and imaginative solutions are sought. Thus, most innovations are bottom-up, not top-down.
An important factor in creating innovative enterprises in Israel is the willingness to take risks and an accepting attitude towards failure which entices failed entrepreneurs to use their experience and try again instead of stigmatising and marginalising them. Without tolerating a large number of failures it is impossible to achieve real innovation.
But the failures should be “smart failures”. We must distinguish between a well-planned experiment and Russian roulette. Risks undertaken intelligently and not recklessly result in useful lessons even if the enterprise fails.
Studies have shown that entrepreneurs who failed in their previous company are twice as likely to succeed the next time around compared to those who are starting their first business, and almost the same chance with those who succeeded the first time. Whether they succeed or fail, entrepreneurs make their contribution to the economy. If they succeed, they create new valuable products and services; if they fail, they keep the established entrepreneurs under constant pressure to innovate.
Unfortunately, in many countries, and Cyprus is no exception, failure is stigmatised and the unsuccessful businessman is marginalised. The bankruptcy law is unforgiving and works proactively as a deterrent against any attempt for innovation and entrepreneurship. When profit from success is demonised and failure stigmatised, it is not surprising that high-risk, high-return innovative entrepreneurship is rare in Cyprus while in Israel it is commonplace and produces miracles. Yet, bad laws and bad policies should never be an excuse for inaction or giving up the effort to build a more sustainable economic model. Bad laws can be changed and bad policies circumvented by ingenuity.
Whenever I suggest Israel could be a model for Cyprus in building a new economic model, I am told a thousand reasons why this cannot happen: from lack of resources to lack of enemies (sic), from lack of entrepreneurial spirit to lack of government support, from lack of technological infrastructure to lack of innovation culture. Certainly there is no scarcity of excuses for mediocrity and underperformance; and, if we ever run out of excuses, only a theoretical possibility, we can always refer to www.excuses.com for more.
Commenting on an earlier article comparing Cyprus and Israel on the subject of innovative entrepreneurship some readers complained that this is like comparing David and Goliath. This might be true, but don’t forget who won at the end with only weapons his ingenuity and a slingshot.
*Dr Theodore Panayotou is director of the Cyprus International Institute of Management (CIIM) and ex-Professor of Economics and the Environment at Harvard University. He has served as consultant to the UN and to governments in the US, China, Russia, Brazil, Mexico and Cyprus. He has published extensively and was recognised for his contribution to the work of the Intergovernmental Panel on Climate Change won the Nobel Peace Prize in 2007. Contact: [email protected]