We just returned from our annual tour of Israeli innovators and start-ups in Tel Aviv, Haifa, Caesarea, and Jerusalem. This strip of land 30 miles wide and roughly 200 miles long is surrounded by hostile neighbors, a massive desert and no oil reserves (well, except the kind that comes from olive trees) but is nonetheless home to the highest density of start-up companies in the world (3, 850 start-ups, one for every 1, 844 Israelis).
More Israeli companies are on NASDAQ than all companies from the entire European continent. Per capita venture capital investment in Israel is 2.5 times greater than in the United States and 30 times greater than Europe, 80 times greater than China and 350 times greater than India. Israel’s 7 million people attracted nearly $2 billion in VC funds last year and it was the only country to experience an INCREASE in venture spending.
From 2000 to 2006, Israel was hit by the most intense period of terrorist attacks ever, yet its share of global venture capital doubled from 15% to 31%. The Tel Aviv stock exchange was higher on the last day of the Lebanon war than on the first day. Same happened after the three-week Gaza military operation in 2009.
During the last few decades, Israel has doubled its economic situation relative to the United States, multiplied its population fivefold and fought three wars.
Jewish Virtual LibraryTrolling for new technologies in Israeli is like drinking from a massive mazel tov cup of can-do entrepreneurism and mash-up technologies. If Israeli’s entrepreneurs were running the big five orthopedic companies then it’s almost a certainty that we would be inventing our way out of today’s reimbursement, pricing and regulatory conundrum. At the very least, we’d hear a lot less whining and read a lot less anonymous blogging.
The American Ego vs. Get R Done
But why? In serious conversations with Israeli entrepreneurs, this is the single most common phrase and it can drive managers trained in the U.S. style crazy. U.S. management science, as taught in 2, 300 accredited MBA programs in the U.S., is rooted in the military model of a hierarchical command and control system. The CEO is the company’s general, the VP is the colonel, the manager is the platoon leader and so on.
Insubordination in the military or a corporation is grounds for dismissal or censure. Is persistent questioning of one’s superior insubordination? Not in Israel’s corporate culture of innovation.
Israeli company meetings are a mosh pit of debate, self-criticism and critical examination. Rank is not a factor. Many American senior execs would not survive the unrestrained candor of an Israeli debate nor, frankly, should they. Here is a story from the excellent book, “The Start-Up Nation” by Senor and Singer which illustrates this point.
“In the Israeli army, soldiers are divided into those who think with a rosh gadol—literally, a ‘big head’—and those who operate with a rosh katan, or ‘little head’. Rosh katan behavior, which is shunned, means interpreting orders as narrowly as possible to avoid taking responsibility or extra work. Rosh gadol thinking means following orders but doing so in the best possible way, using judgment and investing whatever effort is necessary. It emphasizes improvisation over discipline and challenging the chief over respect for hierarchy. Indeed, ‘challenging the chief’ is an injunction issued to junior Israeli soldiers.”
“In Israel’s elite military units, each day is an experiment. And each day ends with a grueling session whereby everyone in the unit—of all ranks—sits down to deconstruct the day. In these group debriefs, emphasis is put not only on unrestrained candor but on self-criticism as a means of having everyone—peers, subordinates and superiors—learn from every mistake. ‘It’s usually ninety minutes. It’s with everybody. It’s very personal. It’s a very tough experience.’”
Every high school student in Israel is required to serve a minimum of two years in the military. College follows after that.
Every Israeli entrepreneur has been trained by the military in this style of organizational behavior and it infuses the entire culture of innovation.
A Harvard Business School study of organizational systems by author Tal Riesenfeld explains
that organizations were structured under one of two models: a standardized model where routine and systems govern everything, including strict compliance with timelines and budgets, or an experimental model, where every day, every exercise and every piece of new information is evaluated and debated in a culture that resembles an R&D laboratory.
If ever there was a time for the orthopedics industry to engage in an Israeli style rosh gadol thinking, this is it. The orthopedics industry is at a crossroads and it can respond by pulling in its horns and reacting to regulatory, reimbursement and other challenges with thicker, higher walls or it can become more transparent, self-critical and innovative.
The industry needs implants with better functionality and lower prices—across the board. Better fixation at half the price. Trophic implants that are structural and anti-inflammatory, anti-infection, anti-scarring and cheaper. Distribution systems that deliver $6 or $7 for every $1 invested. Cost of goods that are 15% to 20% off a much reduced sale price. The time has come to realize that there are no more sacred cows. The orthopedic industry is at a moment in its development where it must embrace adaption, creativity and complexity—the hallmarks of rosh gadol thinking.
Technological Cross-Fertilization
So, what has rosh gadol thinking and critical reassessment wrought among Israeli orthopedic start-up companies?
Without giving specific names (those you have to go to Israel to get for yourself), here is what we learned from our meetings:
- Generally, many lessons from other medical technology companies plus military technologies are seeping into orthopedic start-up companies in Israel. Those other technologies are being kind of mashed together to create new forms of orthopedic technologies. For example, Israel’s well known success in cardiac stent design and production has been incorporated by one young company to blend with well known orthopedic biomaterials to create interesting forms of implants. The cardiac stent designs, which are very small but durable, convey to biomaterials more structure but also flexibility which, at the point of implant, may give surgeons better handling characteristics and, should studies bear this out, the potential for better post-op outcomes.
- *Following the idea of critical re-examination, other young companies I met with are re-inventing commodity orthopedic implants. Think of those implants that are like air or water in the OR. These are implants that have been around for 40 or 50 years and, we suspect, most surgeons and certainly most orthopedic product managers, if they think of them at all, think in terms of incremental change. But a couple of young Israeli start-ups are developing basic implants with sensors or innovative fixation strategies or with communication abilities that remind me of Given Imaging (the camera, light and transmitter in a pill). My first reaction was that these were overly designed implants but, while studies surely will tell the story, further examination shows them to be highly durable and functional.
Given Imaging Pillcam - One young company I found in a Haifa incubator is surviving on a $250, 000 per year infusion of equity from the office of the Chief Scientist of Israel. These inventors are using a creative form of gear technology to change external fixation devices into internal fixation devices BUT, and this was really fascinating, a mechanical way for the patient to manipulate the level and direction of fixation. No kidding, you’ve got to see this to believe it. If successful, this company could transform external fixation devices while also delivering a much lower cost product with superior functionality, fewer complications and a low implant profile.
- Israel’s startup companies have been among the most aggressive cellular biologic innovators outside of, frankly, either Baltimore or Cleveland. We’ve known for a long time (and featured many Israeli companies at our annual Stem Cell Summit in New York) that Israeli start-up companies are innovating the use of biologics in aesthetic applications. We didn’t spend much time this year visiting with the biomaterials companies but we know that start-ups in Israel are pioneering the use of both placental and umbilical cord blood cells to create therapeutic products for orthopedic surgeons.
In recent months I’ve been surprised at the number of retired orthopedic and spine execs who are, like me, trolling the hallways of the Technion (Israel’s Nobel Prize winning Institute of Technology), the byways of Caesarea’s industrial park and the freeways that pass by Tel Aviv’s VC community. These are the guys who were instrumental in the early development of the orthopedic industry. Some of them left after selling to Medtronic or JNJ or Zimmer or Biomet. Some of them were fired after 20 or 30 years by their new corporate owners. But they like me are encouraged and enthused by the chutzpah of the culture of innovation in Israel. For sure, the future of orthopedics is much brighter with it than without it.
