The last decade was the golden age of the tycoons, wizards of leveraged takeovers, financial razzle-dazzle and sell-offs/deals/closings/acquisitions/whoops - where did all the money go, magnates like Yitzhak Tshuva, Nochi Dankner, Yosef Maiman and Ilan Ben-Dov. The previous decade belonged to high-tech entrepreneurs who boosted Israel's economy and exports to new heights: Gil Shwed (Check Point), the Zisapel brothers (RAD Group), Kobi Richter (Medinol) and Kobi Alexander (Comverse), among others. To whom will this decade belong?
The downfall of the tycoons leaves us thirsting for a new narrative, preferably revolving around businesspeople starting enterprises from scratch, bringing new life to remote areas and making the most of what the country has to offer. After years of castles in the sky (luftgeschaft ), what the Israeli economy needs more than anything are industrious and creative people with a long-term focus - but such paragons are hard to find.
So for now the outstanding narrative belongs to competition sparkplugs that successfully penetrated and ignited complacent economic sectors, like Rami Levi in food retailing, Michael Golan in the telecom market, and - well, that's about it. Neither philanthropists nor particularly interested in making the economy more competitive, these are just talented businessmen who identified industries with high potential to create value for themselves, as well as for their customers, concentrated industries with high entry barriers.
These people play a double role: proving that profits can be made by charging fair prices and forcing competitors to adapt to the new reality. It requires the new player to take a fresh approach to pricing, distribution channels, service or product concept, and forces the old ones to abandon inefficient habits.
Such changes are too rare in Israel. David Wiessman pulled one off ages ago in the gas station market with Dor-Alon Energy by introducing roadside convenience stores, while Muki Schneidman's Direct Insurance shook up the vehicle and property insurance field by eliminating the middleman.
"Chicken for a shekel" Rami Levi, with his price discounts, is one of several players that have changed supermarket retailing. The others are Hatzi Hinam, with supersized stores and discount prices, and Tiv Taam, which introduced a new line of delicatessen products and unconventional store hours. Supersol and Mega (Blue Square ), the big chains, were forced to respond to such guerrilla tactics with their revised-concept Supersol Deal and Mega Bool stores.
In the cellular phone market, consumers were used to paying a "tax" of hundreds of shekels a month to support Partner Communications (Orange), Cellcom, and Pelephone. That is, until Michael Golan's Golan Telecom and Patrick Drahi's HOT Mobile came on the scene with an offer that could not be refused: unlimited service at a low set price. The Israeli consumer loves "all you can eat" deals and knowing prices in advance, so the newcomers rocked the market while the oldtimers were compelled to adjust very rapidly.
The Israeli economy still needs new players in a number of other markets: life and health insurance, pension fund management, and perhaps in the pricy local tourism and vacation sector too. But above all, the public urgently needs competitive banking services. For the last 20 years, the Bank of Israel has preoccupied itself with making sure banks remained stable and would not fail, although two small ones did collapse. As a result the public is saddled with low interest on deposits, high interest on loans, and a wide range of commissions and fees - some quite questionable.
A team tasked with finding ways to improve banking competition following the public protest announced its interim recommendations in July. These included promoting the establishment of an Internet bank and credit unions, and improving data available on borrowers for a universally accessible personal credit rating system - ostensibly to allow low-risk borrowers to get better loan terms. Some of the proposals herald a somewhat better deal for customers, but nothing revolutionary. Introducing real competition into the system requires banks that operate completely differently than the current ones.
The Rami Levi or Michael Golan of banking will need not only to recognize the banking system's untapped potential but also be capable of navigating the central bank's obstacle course for breaking into the industry. Some obstacles are necessary - equity, credibility, professionalism and a value proposition that's attractive and realistic. Anyone that fits the bill is guaranteed huge potential for success and for changing the banking field, through both better pricing and more efficient resource allocation for developing the economy. In other words, make available more for small businesses, more for start-ups and factories, more for production and creativity - and less for luftgeschaft and useless, unbridled leveraging.
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