Israel is startup nation due to impatience
Eitan Wertheimer, chairman of Iscar Metalworking, says Israel is a startup nation because it lacks a management culture with an emphasis on international sales, and this blocks the growth of large multinational corporations.
"The difference between a startup and a large company is like the difference between having sex and starting a family," said Eitan Wertheimer, chairman of Iscar Metalworking. "It's pretty similar, it just takes longer to start a family."
Israel is a startup nation because it lacks a management culture with an emphasis on international sales, and this blocks the growth of large multinational corporations, he said.
Iscar went from a local company to an international one by changing its priorities from investing in production to investing in marketing and innovation, he said.
"Israel has amazing technical know-how, but we're a startup nation due to an amazing lack of marketing and limited patience," he said in an interview over the weekend.
The management culture at startups is based on quick profits. There's great pressure to succeed, particularly to succeed quickly, he said. This is partially due to management's insecurity over whether the company can truly succeed on a larger scale. Thus, companies tend to look to be bought out quickly.
"Maybe that's changing now," he added. "You can set up a company that makes 10% to 20% a year. You're not rushing anywhere. The potential here is amazing, but it's surprising that the marketing isn't more developed because we know how to travel. I believe our marketing potential will also emerge at some point."
When Wertheimer took over the company from his father Stef Wertheimer in 1985, manufacturing made up 90% of the company's operations. The younger Wertheimer said he looked into how Japanese companies had managed to go multinational, and found that they invested much more in marketing. He decided to adopt the Japanese model, he said. Nowadays, manufacturing is only 40% of Iscar's operations.
Iscar is now one of the largest toolmaking companies in the world.
It made headlines in 2006 when Warren Buffett's Berkshire Hathaway bought an 80% stake from the Wertheimer family for $4 billion. This was Berkshire's first acquisition outside the United States.
Iscar also invests in technology, said Wertheimer. "There are no high-tech or low-tech companies, there are companies with lots of added value or little added value," he said.
"We have a sign in front of our development center that says 'Innovation never stops.' The moment we finish developing a product, we set up a group to rip it apart. Otherwise our competitors will do it."
Wertheimer said he decided to embrace as a strategy Israelis' tendency to connect to big things. "Everyone with us either does something at Albert Einstein's level or else he doesn't do anything. It's easy to challenge a company when the sky's the limit," he said.
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