Israel’s economy has undergone several transformations since its founding. Oranges symbolized the country’s exports until the 1970s. Textiles also played an important role at the time. Now the high-tech boom that Israel has been experimenting for about two decades has the potential to make it one of the best places in the world for the productive sector. As a country so small, smaller than the Brazilian state of Sergipe, in the northeast region, can be benchmarked in innovation, science and technology? And what can you learn from Israel’s management model that can impact the way you run your business overseas?
Israel has managed to double its population in 30 (thirty) years, increase its GDP by 400% (four hundred percent), its foreign currency reserves by 3% (three percent) and, at the same time, reduce public debt by 76% (seventy-six percent). In the world ranking of competitiveness, the country is in the 21st (twenty-first) position, ahead of economies such as Japan, France and South Korea.
The high technology sector accounts for half of Israeli industrial exports. The country leads the world’s high-tech production.
The dichotomy lies in the fact that high technology employs only 9% (nine percent) of the workforce in Israel. Another relevant aspect is the gap between the performance of the high technology industry and the so-called traditional, much less productive, industry.
A government countermeasure was the creation of the Innovation Authority, an agency that supports and monitors the traditional sectors such as food, steel, textiles and plastic, but also follows the service sector, prioritizing the areas of finance (and hence the country’s expressiveness among the Fintechs) and civil construction.
The perspective is that, over time, these segments will gain traction and operate under the same “temperature and pressure” of the high technology industry. The countermeasure is an indication that Israel monitors its inefficiencies and applies corrections so as not to lose sight of its purpose.
Another measurable example points out that, just over ten years ago, Israel was not a major player in the automotive industry. However, now, it is one of the leading developers of technology for autonomous driving.
The fact is that since the car has become digital, connected and autonomous, the country has gained space in the sector because it has the value to aggregate from the scientific and intellectual point of view. This premise is also applied in the area of health and water treatment, segments in which Israel has also become relevant.
Israel devotes a significant part of the budget, about 4% (four percent) to R&D. Only in comparison, countries like Germany, the United States and Japan invest between 2 (two) and 3% (three percent). There are about 350 (three hundred and fifty) multinational R&D centers in Israel, which form an important part of the country’s innovation ecosystem and create significant technological value.
Only 480 (four hundred and eighty) thousand people live in Tel Aviv. When you consider that only half are economically active, one thing is clear: it is not safe to launch a product or service exclusively on Israeli territory. In this scenario, thinking globally is the only choice!
Companies in Israel are very active in international trade and it is very common that, from the outset of operations, they project their business to the world without any borders.
The behavior of the private sector, together with a strong government investment in R&D, and a macroeconomic environment inclined to scientific, technological and intellectual development, have made Israel a global reference when it comes to high technology.
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